US weighs new fund to backstop deposits as more banks fail, Bloomberg News says

March 11 (Reuters) – The U.S. Federal Reserve and Federal Deposit Insurance Corp are weighing the creation of a fund that would allow regulators to curb excessive deposits at troubled banks in the wake of the collapse of Silicon Valley Bank, Bloomberg News reported. reported on Saturday.

Regulators have discussed the new special vehicle in conversations with bank officials and hope such a move would reassure depositors and help curb any panic, the report said, citing people familiar with the matter.

The new vehicle is part of the agency’s contingency planning as panic spreads about the health of banks focused on venture capital and startup communities, the report added.

The US Federal Reserve Building is pictured in Washington on March 18, 2008. REUTERS/Jason Reed

The US Federal Reserve declined to comment on the report, while the FDIC did not immediately respond to a Reuters request for comment.

Earlier on Saturday, US President Joe Biden spoke with California Governor Gavin Newsom about the SVB failure and efforts to address the situation.

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Silicon Valley Bank imploded after depositors, worried about the lender’s financial health, rushed to withdraw their deposits. A frantic two-day run on banks blindsided observers and stunned markets, wiping out more than $100 billion in the market value of U.S. banks.

Reporting by Jose Joseph in Bangalore; Editing by Paul Simao

Our Standards: Thomson Reuters Trust Principles.

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