On Sunday, the US government announced that it was implementing emergency measures to support the banking system and boost deposits at two banks that failed within days.
All deposit accounts at both institutions, Silicon Valley Bank and Signature Bank of New Yorkaccording to a joint statement from the Federal Reserve, the Treasury Department, and the Federal Deposit Insurance Corporation (FDIC).
Depositors with SVB “will have access to all of their funds beginning Monday, March 13. No losses associated with Silicon Valley Bank’s decision will be incurred by the taxpayer,” the statement said.
“We are also announcing a similar systemic exception for risks for Signature Bank, New York, NY, which was closed today by the state charter issuing authority,” the statement continued. “All depositors of this institution will be made whole. As with the Silicon Valley bank’s decision, the taxpayer will not suffer any losses.”
The statement indicates that the auction process to find a buyer for SVB is likely dead. It was the federal regulators Work to find a buyer As for the Silicon Valley bank, Treasury Secretary Janet Yellen told Face the Nation on Sunday that the FDIC is considering “a range of available options” to stabilize the situation, including an acquisition by a foreign bank.
California regulators shut down a Silicon Valley bank on Friday after depositors rushed to withdraw funds amid concerns about the bank’s balance sheet. The FDIC was appointed as the recipient and established the National Deposit Insurance Bank of Santa Clara, which transferred all Silicon Valley Bank’s insured deposits.
The 40-year-old bank ranked as the 16th largest bank in the United States before its failure, and is the largest financial institution to fail since Washington Mutual at the height of the financial crisis in 2008. The Signature Bank failure marks the third largest bank collapse in US history, according to the agency. Associated Press.
The New York Department of Financial Services said in a statement that Signature Bank is FDIC-insured and had assets of approximately $110.36 billion, with total deposits of approximately $88.59 billion as of December 31, 2022. Both numbers were about half of what it had. SVB at the end of 2022 – $209 billion in total assets and about $174.5 billion in total deposits, according to the agency. According to the FDIC.
The emergency measures followed Yellen on Sunday Rule out the federal bailout to Silicon Valley Bank investors after it was the bank suddenly shut down. But she expressed concern about the impact on depositors.
“During the financial crisis, there were investors and owners of large, systemic banks who were bailed out,” Yellen said in an interview with “Face the Nation” Sunday. “And the reforms that have been put in place mean we won’t do that again. But we are worried about our depositors and we are focused on trying to meet their needs.”
During a call with reporters Sunday, a senior Treasury official said “no other depositors need to worry about the future of their banks.”
The official said the FDIC will use the money from the Depositors’ Insurance Fund to ensure that depositors are complete and that the Dubai Investment Fund bears the risk, not the taxpayer.
“The situation is not in 2008,” the official added. “There are a lot of reforms that have been put in place and we are trying to help the institutional depositors. The rights of shareholders and bondholders of the bank are being eliminated. They, as the owners of these securities, have taken a risk; they will bear the losses.”
The Fed also said Sunday that it will provide additional funding “to eligible depository institutions to help ensure that banks are able to meet the needs of all depositors,” according to a press release.
Funding will be provided through the creation of a new Bank Term Financing Program (BTFP), which “provides loans of up to one year to banks, savings societies, credit unions, and other qualified depository institutions that pledge U.S. Treasury bills, agency debt, mortgage-backed securities, and other eligible assets as collateral,” As stated in the statement.
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