Dead banks may lead economy to recession

Governments and central bankers have been actively contributing over the past two weeks to prevent problems at banks from escalating into a financial crisis. The new support operations have raised the necessary questions, especially with regard to policy in the US.

For example, as in the case of the toppled Silicon Valley Bank, will the US government fully guarantee all deposits from bank account holders from now on? And what about the tightening monetary policy of the US central bank?

To start with the first point: in principle, account holders of US banks up to an amount of $ 250,000 are covered by a government guarantee. But in the bailouts of the past few weeks, the government has gone much further in guaranteeing customer balances at toppled banks.

On the one hand, the US Congress is discussing whether the standard deposit guarantee should be further extended, but at the same time, Treasury Secretary Janet Yellen already indicated this week that the government is ready for new emergency interventions that will cover depositors much more broadly, if necessary.

This issue is currently of particular concern to small and medium-sized banks in the US, which are afraid of capital flight. In the chart below from the US regional banking index, you can see that the turmoil is not gone yet and that, despite all efforts, there is still a lot of uncertainty.

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