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US marshalling ‘material action’ to stem SVB fallout: Report


US authorities were preparing “material action” on Sunday to shore up deposits in Silicon Valley Bank (SVB) and try to stem any broader financial fallout from the sudden collapse of the tech startup-focused lender, sources familiar with the matter told Reuters.

Biden administration officials worked through the weekend to assess the impact of SVB Financial Group's Friday failure, with a particular eye on the venture capital sector and regional banks, the sources said.

Details of an announcement expected on Sunday were not immediately available, but one of the sources said the Federal Reserve could take action similar to what it did to keep banks operating during the COVID-19 pandemic.

“This will be a material action, not just words,” one said.

US authorities are considering safeguarding all uninsured deposits at SVB, weighing an intervention to prevent what they fear would be panic in the country's financial system, the Washington Post reported, citing three people with knowledge of the matter.

Officials at the Treasury Department, Federal Reserve and Federal Deposit Insurance Corporation discussed the idea this weekend, the report said.

CNBC reported that the Fed and the FDIC are discussing two different facilities to manage the fallout from the closure of SVB if no buyer materializes.

SVB's collapse has also sent reverberations around the world, with the British government racing to limit any fallout stemming from the bank's UK subsidiary and worries in countries like Israel and India where tech firms have relied on the bank.

Earlier, US Treasury Secretary Janet Yellen said she was working with banking regulators to respond after SVB became the largest bank to fail since the 2008 financial crisis.

As fears deepened of a broader fallout across the US regional banking sector and beyond, Yellen said she was working to protect depositors, but ruled out a bailout.

“We want to make sure that the troubles that exist at one bank don't create contagion to others that are sound,” Yellen told CBS's “Face the Nation.”

“During the financial crisis, there were investors and owners of systemic large banks that were bailed out … and the reforms that have been put in place means we are not going to do that again,” Yellen added.

In March 2020 when the coronavirus pandemic and lockdowns triggered financial panic, the Federal Reserve announced a series of measures to keep credit flowing by lowering borrowing costs and lengthening the terms of its direct loans.

By the end of that month, use of the Fed's discount window facility shot up to more than $50 billion.

Through the middle of last week, before SVB's collapse, there had been no indications of usage picking up, with Fed data showing weekly outstanding balances of $4 billion to $5 billion since the start of the year.

Finding a buyer

Although the Federal Deposit Insurance Corporation (FDIC) protects deposits of up to $250,000, there are worries about SVB deposits above that level, one source said, adding that many smaller businesses were at risk of being unable to pay staff.

US officials are also keeping close watch amid increased withdrawals from other regional banks.

The FDIC, which was appointed SVB's receiver, was trying to find another bank willing to merge with it, people familiar with the matter said on Friday.

But with $209 billion in assets, Santa Clara, California-based SVB was the 16th largest US bank, and some industry executives said such a deal would likely require regulators to give special guarantees and make other allowances.

US House of Representatives Speaker Kevin McCarthy told Fox News' Sunday Morning Futures program that President Joe Biden's administration and the Federal Reserve were working to come up with announcement before markets open on Monday.

The Fed and FDIC did not respond to requests for comment.

Community banks

Some analysts and prominent investors warned that without a resolution by Monday, other banks could come under pressure.

The FDIC kicked off an auction process late on Saturday, Bloomberg reported, citing people familiar with the matter, with final bids due by Sunday afternoon.

The report added that the FDIC was rushing to sell SVB assets and make a portion of its uninsured deposits available as soon as Monday.

Shockwaves from SVB's collapse were evident in the S&P 500 regional banks index which dropped 4.3 percent on Friday to end the week down 18 percent, its worst week since 2009.

Signature Bank dropped about 23 percent, while San Francisco-based First Republic Bank fell 15 percent. Western Alliance Bancorp dropped 21 percent and PacWest Bancorp slid 38 percent. Charles Schwab fell more than 11 percent.

Signature Bank, First Republic Bank, PacWest Bank and Charles Schwab did not immediately respond to requests for comment. Western Alliance Bank declined to comment.

Some banks could look to preemptively raise capital to fortify their balance sheets or try to strike deals of their own, industry executives said.

When IndyMac and Washington Mutual collapsed in 2008, the FDIC found other firms to take on the assets and keep deposits intact. If no buyer is found for SVB, uninsured depositors will probably be left with a portion of whatever funds the FDIC can raise selling off the bank's assets.

Global dominoes

In Britain, where SVB has a local subsidiary, finance minister Jeremy Hunt said on Sunday he was working with Prime Minister Rishi Sunak and the Bank of England to “avoid or minimize damage” resulting from the chaos.

“We will bring forward very soon plans to make sure people are able to meet their cash flow requirements to pay their staff,” Hunt told Sky News.

More than 250 British tech firm executives signed a letter calling for state intervention, a copy seen by Reuters shows.

Advisory firm Rothschild & Co is exploring options for Silicon Valley Bank UK Limited, two people familiar with the talks told Reuters on Saturday. The BoE has said it is seeking a court order to place the UK arm into an insolvency procedure.

In Israel, shares on the Tel Aviv Stock Exchange slid more than 4 percent on Sunday, led by financial firms. Israel's tech sector is the country's main growth engine, and its relationship with the Silicon Valley region is strong. Many Israeli startups had accounts at SVB, although the amounts are not fully known.

In India, the state minister for technology said on Sunday he will meet with start-ups this week to assess the impact from the lender's collapse.

For the latest headlines, follow our Google News channel online or via the app.

Read more:

US Secretary Yellen says working to address SVB collapse, but not looking at bailout

Silicon Valley Bank staff offered 45 days of work at 1.5 times salary: FDIC email

Silicon Valley Bank failed – here’s why it’s not 2008 again

SVB deep dive: Why is everyone talking about the bank now?

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Abu Dhabi Overtakes Oslo for Sovereign Wealth Fund Capital in Global SWF’s First City Ranking

Today, industry specialist Global SWF published a special report announcing a new global ranking of cities according to the capital managed by their Sovereign Wealth Funds (SWFs). The findings show that Abu Dhabi is the leading city that manages the most SWF capital globally, thanks to the US$ 1.7 trillion in assets managed by its various SWFs headquartered in the capital of the UAE. These include the Abu Dhabi Investment Authority (ADIA), Mubadala Investment Company (MIC), Abu Dhabi Developmental
Holding Company (ADQ), and the Emirates Investment Authority (EIA). Abu Dhabi now ranks slightly above Oslo, home to the world’s largest SWF, the Government Pension Fund (GPF), which manages over US$ 1.6 trillion in assets. Abu Dhabi and Oslo are followed by Beijing (headquarters of the China Investment Corporation), Singapore (with GIC Private and Temasek Holdings), Riyadh (home to the
Public Investment Fund), and Hong Kong (where China’s second SWF, SAFE
Investment Corporation, operates from). Together, these six cities represent two thirds
of the capital managed by SWFs globally, i.e., US$ 12.5 trillion as of October 1, 2024.
For the past few decades, Abu Dhabi has grown an impressive portfolio of institutional
investors, which are among the world’s largest and most active dealmakers. In addition
to its SWFs, the emirate is home to several other asset owners, including central banks,
pension funds, and family offices linked to member of the Royal Family. Altogether, Abu
Dhabi’s public capital is estimated at US$ 2.3 trillion and is projected to reach US$ 3.4
trillion by 2030, according to Global SWF estimates.
Abu Dhabi, often referred to as the “Capital of Capital,” also leads when it comes to
human capital i.e., the number of personnel employed by SWFs of that jurisdiction, with
3,107 staff working for funds based in the city.
Diego López, Founder and Managing Director of Global SWF, said: “The world ranking
confirms the concentration of Sovereign Wealth Funds in a select number of cities,
underscoring the significance of these financial hubs on the global stage. This report
offers valuable insights into the landscape of SWF-managed capital and shows how it is
shifting and expanding in certain cities in the world.”

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AM Best Briefing in Dubai to Explore State of MENA Insurance Markets; Panel to Feature CEOs From Leading UAE Insurance Companies

AM Best will host a briefing focused on the insurance markets of the Middle East and North Africa (MENA) on 20 November 2024, at Kempinski Central Avenue in Dubai.
At this annual regional market event, senior AM Best analysts and leading executives
from the (re)insurance industry will discuss recent developments in the MENA region’s
markets and anticipate their implications in the short-to-medium term. Included in the
programme will be a panel of chief executive officers at key insurance companies in the
United Arab Emirates: Abdellatif Abuqurah of Dubai Insurance; Jason Light of Emirates
Insurance; Charalampos Mylonas (Haris) of Abu Dhabi National Insurance Company
(ADNIC); and Dr. Ali Abdul Zahra of National General Insurance (NGI).
Shivash Bhagaloo, managing partner of Lux Actuaries & Consultants, will his present
his observations in an additional session regarding implementation of IFRS 17 in the
region. The event also will highlight the state of the global and MENA region
reinsurance sectors, as well as a talk on insurance ramifications stemming from the
major United Arab Emirates floods of April 2024. The programme will be followed by a
networking lunch.
Registration for the market briefing, which will take place in the Diamond Ballroom at the
Kempinski hotel, begins at 9:00 a.m. GST with introductory comments at 9:30 a.m.
Please visit www.ambest.com/conference/IMBMENA2024 for more information or to
register.
AM Best is a global credit rating agency, news publisher and data analytics
provider specialising in the insurance industry. Headquartered in the United
States, the company does business in over 100 countries with regional offices in
London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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Future of Automotive Mobility 2024: UAE Leads the Charge in Embracing Digital Car Purchases and Alternative Drivetrains

-UAE scores show highest percentage among the region in willingness to purchase a car
completely online
– Openness to fully autonomous cars has grown to 60% vs previous 32%.
– More than half of UAE respondents in the survey intend to move to hybrid cars during
next car purchase, while less than 15% intend to move to fully electric car.
– UAE sees strong use of new mobility services such as ride-hailing (Uber, Careem, Hala
Taxi)
– The perceived future importance of having a car is not only increasing in UAE but is
higher than any other major region globally, even China

Arthur D. Little (ADL) has released the fourth edition of its influential Future of Automotive Mobility (FOAM) report, presenting a detailed analysis of current and future trends in the automotive industry. This year’s study, with insights from over 16,000 respondents across 25 countries, includes a comprehensive focus on the United Arab Emirates (UAE). The report examines car ownership, electric vehicles,
autonomous driving, and new mobility services within the UAE.

“The UAE is at the forefront of automotive innovation and consumer readiness for new mobility
solutions,” said Alan Martinovich, Partner and Head of Automotive Practice in the Middle East
and India at Arthur D. Little. “Our findings highlight the UAE’s significant interest in
transitioning to electric vehicles, favorable attitudes towards autonomous driving technologies,
and a strong inclination towards digital transactions in car purchases. These insights are critical
for automotive manufacturers and policymakers navigating the evolving landscape of the UAE
automotive market.”
Key Findings for the UAE:
1. Car Ownership:
o Over half of UAE respondents perceive that the importance of owning a car is
increasing, with the study showing the increase higher than any other major
region, including China.
o Approximately 80% of UAE respondents expressed interest in buying new (as
opposed to used) cars, above Europe and the USA which have mature used
vehicle markets

2. Shift to Electric and Hybrid Vehicles:
o While a high number of UAE respondents currently own internal combustion
engine (ICE) vehicles, more than half intend that their next vehicle have an
alternative powertrain, with significant interest in electric and plug-in hybrid
(PHEV) options. Less than 15% plan to opt for pure battery electric vehicles
(BEVs).

3. Emerging Mobility Trends:

o Ride-hailing services are the most popular new mobility option among UAE
residents, with higher usage rates than traditional car sharing and ride sharing.
The study indicates a strong openness to switching to alternative transport modes
given the quality and service levels available today.

4. Autonomous Vehicles:
o UAE consumers are among the most open globally to adopting autonomous
vehicles, with a significant increase in favorable attitudes from 32% in previous
years to 60% this year versus approximately 30% in mature markets. Safety
concerns, both human and machine-related, remain the primary obstacles to
broader adoption.

5. Car Purchasing Behavior and Sustainability:
o The internet has become a dominant channel for UAE residents throughout the car
buying process, from finding the right vehicle to arranging test drives and closing
deals. UAE car buyers visit dealerships an average of 3.9 times before making a
purchase, higher than any other region in the world, emphasizing the need for
efficient integration of online and offline experiences.
o Upwards of 53% of respondents from the region would prefer to ‘close the deal’
and complete the purchase of their car online, which is the highest for any region
in the world.
o Sustainability is a key factor cited by UAE consumers as influencing car choice.
The UAE scored among the top half of regions, highlighting the importance of
environmental considerations.

“Our study confirms the promising market opportunities for car manufacturers (OEMs) and
distributors in the UAE” commented Philipp Seidel, Principal at Arthur D. Little and co-Author
of the Global Study. “Consumers in the Emirates show a great and increasing appetite for cars
while being among the most demanding globally when it comes to latest vehicle technologies
and a seamless purchase and service experience.”
The comprehensive report, “The Future of Automotive Mobility 2024” by Richard Parkin and
Philipp Seidel, delves into global automotive trends and their impact on various regions,
including the UAE. This study is an invaluable tool for industry stakeholders seeking to navigate
and leverage the dynamic changes driving the future of mobility.

 

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