US weighs new fund to backstop deposits if more banks fail

The US Federal Reserve and the Federal Deposit Insurance Corp are weighing the creation of a fund that would allow regulators to backstop more deposits at banks that run into trouble in the wake of Silicon Valley Bank’s collapse, Bloomberg News reported on Saturday.

Regulators discussed the new special vehicle in conversations with banking executives and hope such a measure would reassure depositors and help contain 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 the venture capital and startup communities, the report added.

The US Federal Reserve declined to comment on the report, while 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 the efforts to address the situation.

Silicon Valley Bank imploded after depositors, concerned about the lender’s financial health, rushed to withdraw their deposits. The frenetic two-day run on the bank blindsided observers and stunned markets, wiping out more than $100 billion in market value for US banks.