The US is considering a new fund to stop deposits if more banks go bankrupt, says Bloomberg News

March 11 (Reuters) – The U.S. central bank and Federal Deposit Insurance Corp are weighing the creation of a fund that would allow regulators to freeze more deposits at banks running into trouble in the wake of the collapse of Silicon Valley Bank, reported Bloomberg News on Saturday.

Regulators discussed the new special vehicle in talks with bank executives and hope such a measure would reassure depositors and help limit any panic, the report said, citing people familiar with the matter.

The new vehicle is part of the agency’s contingency planning as panic spreads over the health of banks that focus on the venture capital and startup communities, the report added.

The US Federal Reserve building is pictured in Washington March 18, 2008. REUTERS/Jason Reed

The U.S. central bank declined to comment on the report, while the FDIC did not immediately respond to a Reuters request for comment.

Earlier Saturday, US President Joe Biden spoke with California Governor Gavin Newsom about the SVB failure and efforts to resolve the situation.

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Silicon Valley Bank imploded after depositors, worried about the lender’s financial health, rushed to withdraw their deposits. The frantic two-day run on the bank blindsided observers and stunned markets, wiping out more than $100 billion in market value for US banks.

Reporting by Jose Joseph in Bengaluru; Editing by Paul Simao

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