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US guarantees Silicon Valley Bank deposits amid bank crisis fears

US regulators are taking steps to protect depositors amid concerns about wider fallout from the second-biggest bank failure in history.

The United States government has announced it will guarantee deposits at the bankrupt Silicon Valley Bank (SVB) as financial regulators scramble to allay fears that the tech-focused lender’s collapse could spark a wider financial crisis .

In a statement on Sunday, the U.S. Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) said all customers would be protected and have full access to their funds following the bank’s implosion.

“Today, we are taking decisive action to protect the U.S. economy by strengthening public confidence in our banking system,” the agencies said in a joint statement.

“This move will ensure that the U.S. banking system continues to fulfill its vital role of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.”

The statement said savers would have access to all their money from Monday and no losses would be borne by the taxpayer.

US regulators have been looking for a buyer for the Santa Clara-based Silicon Valley Bank since seizing the bank’s assets on Friday following the massive withdrawal of money by depositors.

The bank’s financial health came under scrutiny after announcing plans to raise $1.75 billion in capital following its loss-making bond sales.

SVB, whose business focused heavily on tech workers and venture-backed companies, had about $200 billion in assets at the time of the collapse. The bank’s failure is the second largest banking collapse in U.S. history after the 2008 implosion of Washington Mutual.

In an indication of mounting financial fallout, regulators said New York-based Signature Bank had also gone bankrupt and seized, marking the third-largest bank failure in US history.

Regulators said a “similar systemic risk exception” would be extended to Signature Bank to guarantee all deposits with the lender.

Financial markets rallied during early Asian trading after the announcement, although questions about potential buyers for the banks went unanswered.

Some observers had warned that bank customers could make a run on other financial institutions and potentially trigger a wider financial crisis if the government did not step in to protect depositors.

However, Campbell R Harvey, a professor at Duke University’s Fuqua School of Business, cautioned against drawing comparisons between the collapse of SVB and the bankruptcy of Lehman Brothers before the financial crisis of 2007-2008.

“When you think about the global financial crisis, there were a number of banks that were at risk at the same time and we started to get to know them and these weren’t small players – these were big players and they were all highly correlated,” Harvey told Al Jazeera.

“This sofa is different. It’s not in the top layer. Most people have never heard of it, but it’s aimed at technology investors in Silicon Valley… so I don’t see any similarities to 2007 at all.”

Harvey said that while several banks were extremely heavily indebted leading up to the 2007-2008 crisis, SVB had failed because of its overreliance on the technology sector, which has lost trillions of dollars in value over the past year.

“SVP is a story about an undiversified loan portfolio,” he said. “That is different.”