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US regulators willing to share losses for sale of Silicon Valley Bank and Signature Bank - reports

US regulators are willing to consider the prospect of the government backstopping losses at Silicon Valley Bank (SVB) and Signature Bank if it helps push through a sale, the Financial Times newspaper reported on Friday, citing people briefed on the matter.

Sources told Reuters on Wednesday that regulators at the US Federal Deposit Insurance Corp (FDIC) have asked banks interested in acquiring failed lenders SVB and Signature Bank to submit bids by March 17.

However, the FDIC has not given bidders any indication of the size of losses it would be willing to backstop or any sense of how the arrangement would be structured, the people told the Financial Times.

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The FDIC did not comment on the Financial Times report.

A weekend action launched by the FDIC to sell SVB failed on Sunday after major banks balked at carrying out such a risky deal in a short amount of time.

The lack of interest was in part because the agency was unwilling to discuss the possibility of shouldering any losses on the lenders' assets, one of the people told the Financial Times.

A sale of either SVB or Signature could trigger immediate losses because the new buyer would have to mark down the price of some assets to reflect their current market value, the report said.

The Financial Times said Blackstone Group and Apollo Global Management have expressed interest in buying parts of SVB's loan book.

However, the FDIC is only willing to take bids from banks for the whole SVB commercial bank, including loans and deposits, the report added, citing people involved in the process.

SVB Financial Group, the parent company of Silicon Valley Bank, earlier on Friday filed for a court-supervised reorganisation under Chapter 11 bankruptcy protection.

US President Joe Biden. Photo: Getty Images / TNS alt=US President Joe Biden. Photo: Getty Images / TNS>

US President Joe Biden on Friday called on Congress to allow regulators to impose tougher penalties on the executives of failed banks, including clawing back compensation and making it easier to bar them from working in the industry.

Biden called on Congress to grant the FDIC the powers to be able to force the return of compensation paid to executives at a broader range of banks should they fail, and to lower the threshold for the regulator to impose fines and bar executives from working at another bank.

"Strengthening accountability is an important deterrent to prevent mismanagement in the future," Biden said in a statement. "Congress must act to impose tougher penalties for senior bank executives whose mismanagement contributed to their institutions failing."

Currently the FDIC can only take back the compensation of executives at the largest banks in the nation, and other penalties on executives require "recklessness" or acting with "wilful or continuing disregard" for their bank's health. Biden wants Congress to allow the regulator to impose penalties for "negligent" executives - a lower legal threshold.

The White House highlighted reports that Silicon Valley Bank CEO Gregory Becker sold US$3 million worth of shares in the bank in the days before its collapse, saying Biden wants the FDIC to have the authority to go after that compensation.

The collapse of Silicon Valley Bank last Friday and of New York's Signature Bank two days later has revived bad memories of the financial crisis that plunged the US into the Great Recession about 15 years ago.

Over the weekend the federal government, determined to restore public confidence in the banking system, moved to protect all the banks' deposits, even those that exceeded the FDIC's US$250,000 limit per individual account.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2023. South China Morning Post Publishers Ltd. All rights reserved.