The second bank has closed as regulators scramble to protect Silicon Valley Bank deposits

All Silicon Valley Bank customers will have access to their funds starting Monday at no cost to U.S. taxpayers, federal regulators announced as a second bank was closed.

Treasury Secretary Janet Yellen, Federal Reserve Board Chairman Jerome Powell, and FDIC Chairman Martin Gruenberg released a joint statement late Sunday outlining what they see as decisive actions to protect the U.S. economy and boost confidence. of the public in the banking system.

“After receiving a recommendation from the FDIC and Federal Reserve Boards of Directors, and consulting with the President, Secretary Yellen has approved actions allowing the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors,” the statement read.

“Depositors will have access to all of their money beginning Monday, March 13. Any losses associated with the Silicon Valley Bank resolution will not be borne by the taxpayer.”

A similar systemic risk exception has also been put in place for Signature Bank of New York, which was shut down today by the state chartering authority.

All depositors of this institution will be made whole. As with the Silicon Valley Bank resolution, no loss will be borne by the taxpayer.

Shareholders and certain unsecured creditors will not be protected. Senior management was also removed. Any loss incurred by the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment from the banks, as required by law.

The Federal Reserve Board also said it will make additional funds available to eligible depository institutions to help ensure banks have the capacity to meet the needs of all of their depositors.

“The U.S. banking system remains resilient and on solid foundations, thanks in large part to reforms undertaken after the financial crisis that provided better safeguards for the banking sector. These reforms combined with today’s actions demonstrate our commitment to taking the necessary steps to ensure the safety of depositors’ savings,” the statement added.

Silicon Valley Bank collapsed on Friday as fearful depositors withdrew billions of dollars from the bank in hours, forcing regulators to urgently shut down the bank in the middle of the workday to stop the bank run.

It is the second largest bank failure in US history, behind the collapse of Washington Mutual at the height of the 2008 financial crisis.

Silicon Valley Bank was the 16th largest bank in the country, and its predominant customer base consisted of tech startups, venture capitalists, and well-paid tech workers, as the name suggests.

The vast majority of deposits at the bank were in business accounts with balances well above the $250,000 limit insured by the FDIC.

Its failure meant more than $150 billion in deposits had to be placed in receivership until the government intervened late on Sunday.

Some prominent Silicon Valley executives feared that if the government did not intervene, customers would run to other financial institutions.

Share prices have plunged in recent days at other banks that cater to tech companies, including First Republic Bank and PacWest Bank.

Signature Bank specializes in providing banking services to law firms, ranging from cash management services to escrow accounts to hold client money.

New York regulators said the decision to close the bank was made “in light of market events, monitoring market trends and working closely with other state and federal regulators” in an effort to protect both consumers and the financial system.

With additional reporting from The Associated Press

Leave a Comment