The British newspaper reports that regional banks in the United States are still struggling to escape the "respirator". Silicon Valley Bank | Bank | United States
Beijing, August 8th (Xinhua) - According to the Financial Times on August 7th, it has been nearly four months since the sudden collapse of Silicon Valley Bank and Signature Bank at the beginning of the year, and regional banks in the United States are still relying on billions of dollars in government financing to sustain their lives.
On March 13th, customers queued up outside the headquarters of Silicon Valley Bank in Santa Clara, California, USA to process their business. Shen Jizhong
One of the funding sources is the Federal Housing Loan Bank, a regional lending institution supported by the government.
According to data from the FHLB Finance Office last week, as of the end of June, the total amount of loans issued by FHLB to US banks and credit cooperatives reached $880 billion.
This number is slightly lower than the peak of FHLB's total lending at the end of the first quarter of this year, which was over $100 billion, but compared to the loan level at the end of 2021, it still rises by more than 150%.
![The British newspaper reports that regional banks in the United States are still struggling to escape the "respirator". Silicon Valley Bank | Bank | United States](https://a5qu.com/upload/images/ccfb1749488f4904e47b9ac7e5cdf9b5.jpg)
According to Theresa Bezmore, the head of FHLB San Francisco, their role is to stabilize the banking system, "as long as interest rates remain at the current level, you will see FHLB lending heavily to banks.".
According to its official website, FHLB is an independent operating institution authorized by the government, adopting a membership system, mainly providing members with loans guaranteed by housing mortgage loans, government and institutional securities, etc. The Financial Times reported that if FHLB faces bankruptcy, the US federal government is likely to step in to rescue it.
On March 13th, the customer was waiting for the transaction to be processed at the signing bank branch in New York City, USA. Shen Jizhong
Critics have long believed that FHLB, supported by the US government, would encourage the institution to take on excessive risks and should be regulated by this mechanism. Silicon Valley Bank and Signature Bank both borrowed from FHLB before their sudden closure.
However, Bezmore believes that although FHLB is nominally backed by the government, the likelihood of the government ultimately investing in it is quite low. FHLB has maintained a low level of loan losses for a long time and is financially abundant.
![The British newspaper reports that regional banks in the United States are still struggling to escape the "respirator". Silicon Valley Bank | Bank | United States](https://a5qu.com/upload/images/6602ca3aa168aff2097fa39c6437f2bd.jpg)
According to reports, Bank of America does not need to inform investors whether to borrow from FHLB or the size of the loan. But according to recent financial reports, some banks consider repaying FHLB loans as a sign of good financial condition.
Kenneth Vecchione, CEO of Western Union Bank, stated in July that the bank has the ability to "quickly reduce its reliance on higher cost FHLB loans." As of the end of the second quarter, Western Union Bank's FHLB loans had decreased from $11 billion at the end of the first quarter to $5 billion.
This is a photo taken on May 1st at a First Republic Bank in New York, USA. Shen Jizhong
Bruce Van Savain, CEO of Citizen Financial Group in the United States, stated in July that even if banks have to pay higher interest rates for interest bearing deposits, the interest rate is generally lower than the FHLB loan rate. If the FHLB loan can be fully or partially repaid and replaced with a deposit, it will produce a good substitution effect. Citizen Financial Group repaid nearly 60% of the total FHLB loan amount in the second quarter of this year.
However, according to reports, there are still many banks struggling to break free from their dependence on FHLB loans. For example, at the end of the second quarter, Citibank still owed $13.5 billion in FHLB loans, slightly lower than the over $15 billion at the end of March, but higher than the $10 billion in cash held by the bank. According to the "Bank Registration Data" agency, at the end of the second quarter, FHLB loans accounted for approximately 15% of the total assets of CITIC Bank, which is three times that of other banks of the same size.
![The British newspaper reports that regional banks in the United States are still struggling to escape the "respirator". Silicon Valley Bank | Bank | United States](https://a5qu.com/upload/images/2ff9c656dde721443baf3b2d6fd026eb.jpg)
Another source of funds is the regular bank financing plan launched by the Federal Reserve in March this year, which allows eligible banks and other savings institutions to obtain loans of up to one year by mortgaging U.S. government bonds, institutional bonds, mortgage-backed securities and other eligible assets, to ensure that the latter is able to meet the needs of depositors.
According to reports, the utilization rate of the loan mechanism continues to rise. As of July 26th, banks have borrowed $105 billion, an increase of $2 billion from the previous week, reaching a new high.
Alexander Yokum, a banking analyst at the Center for Financial Research and Analysis in the United States, said he was somewhat surprised that "the balance of the Federal Reserve's special assistance program has not yet decreased," which may not be in line with some people's expectations given that the panic in the banking industry has stabilized.
Affected by factors such as the Federal Reserve's aggressive interest rate hikes, Silicon Valley Bank, Signature Bank, and First Republic Bank in the United States have been hit and closed one after another since early March this year, causing a shock in the US banking industry, with spillover effects affecting European banks at one point.