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

(Reuters) – The U.S. 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.

The report stated that regulators discussed the special vehicle with bank executives. They hope this measure will reassure depositors, and reduce panic, according to people familiar with the matter.

According to the report, the new vehicle is part the agency’s contingency plan in case of panic about banks that focus on venture capital and startups.

The U.S. Federal Reserve declined comments on the report. FDIC, however, did not immediately respond when Reuters asked for comment.

On Saturday, U.S. President Joe Biden talked to Governor Gavin Newsom in California about the SVB failures and the efforts to rectify the situation.

Silicon Valley Bank collapsed after depositors were concerned about the bank’s financial health and ran to withdraw their money. The panicked run on Silicon Valley Bank over the next two days stunned markets and blindsided observers.

(Reporting by Jose Joseph at Bengaluru; Editing By Paul Simao