Silicon Valley Bank's "Asian customers" lost their deposits to zero overnight

At the beginning of the collapse of Silicon Valley Bank, regulators such as the US Federal Deposit Insurance Corporation (FDIC) vowed to "protect the deposits of all depositors" and "the US banking system is very strong".

But the FDIC reneged.

The Wall Street Journal reported recently. On March 31, depositors of the Cayman Islands branch of Silicon Valley Bank received a notice from the FDIC stating that foreign deposits are not protected by the FDIC and they will be regarded as "general unsecured creditors."

**Most of the deposits in the Cayman Islands branch of Silicon Valley Bank come from Asia, including deposits from investment institutions in many countries such as China. Now, this part of the deposit has been zeroed overnight. **

Foreign deposits are not FDIC insured

The Cayman Islands is a British overseas territory and a world-renowned tax haven. Silicon Valley Bank has previously stated that the opening of a branch in the Cayman Islands is mainly to support its Asian business.

As of the end of 2022, Silicon Valley Bank has about $13.9 billion in foreign deposits on its books. In addition to the United States and the Cayman Islands, the UK subsidiary of Silicon Valley Bank also operates depository business. On March 10, when its UK subsidiary was acquired by HSBC, remaining deposits totaled about $8.5 billion. Neither Silicon Valley Bank nor the FDIC disclosed the amount of deposits at the Cayman Islands branch.

Previously, when Silicon Valley Bank collapsed and was acquired by First Citizens Bank, the Cayman Islands branch was excluded and remained under FDIC control.

Some depositors at the Cayman Islands branch told the Wall Street Journal that they had previously assumed that the FDIC’s claim to protect all depositors’ deposits also applied to them. But since the collapse of Silicon Valley Bank, those depositors have been unable to access their deposits. Institutional depositors said their bank statements showed zero balances at Silicon Valley Bank and that their deposits had been seized by the FDIC.

Financial blog Zerohedge believes that the FDIC’s approach is tantamount to telling all foreign depositors that they should immediately withdraw their money from small and medium-sized banks and deposit it in those banks that are too big to fail. set off a market panic.

Weaponization of the dollar threatens US national credibility

The deposits seized due to the Cayman Islands branch were mainly from Asia. Some market analysts pointed out that this move is another example of the "weaponization of the dollar".

When the Russia-Ukraine conflict broke out last year, the Federal Reserve froze about $100 billion in Russian foreign exchange reserves. In addition, the overseas assets of more than 1,500 Russians were confiscated, with a total value of over $330 billion.

Financial blog Zerohedge pointed out that legally speaking, neither the Federal Reserve nor other regulators have the power to confiscate sovereign state assets.

Kenneth Rogoff, a professor of economics at Harvard University and former chief economist of the IMF, has previously warned that the wanton weaponization of the dollar will end the international dominance of the dollar early. It would take 50 years, but now it may only take 20 years.