U.S. government guarantees Silicon Valley Bank customers will have access to all their deposits starting Monday
Daniel Levi
Posted On March 12, 2023
As the Silicon Valley Bank situation unravels by the hour, the US financial regulators announced Sunday night that depositors of the failed Silicon Valley Bank will have access to all of their money starting Monday, March 13
In a joint statement, the heads of the Federal Reserve, Treasury Department, and FDIC said:
“After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors.”
“Depositors will have access to all of their money starting Monday, March 13,” the statement added. “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”
The Federal Reserve has announced a new initiative to assist banks in meeting all depositor withdrawals and providing a safety net for both insured and uninsured deposits in the U.S. financial system. To achieve this, the Federal Reserve has established a Bank Term Funding Program (BTFP) that will offer loans to banks, savings associations, and credit unions for up to one year.
“With approval of the Treasury Secretary, the Department of the Treasury will make available up to $25 billion from the Exchange Stabilization Fund as a backstop for the BTFP.”
These loans will be secured by collateral such as U.S. Treasuries, agency debt, mortgage-backed securities, and other qualifying assets.
The BTFP will serve as an additional source of liquidity for high-quality securities, eliminating the need for institutions to sell these securities quickly during times of stress. This move aims to ensure that banks have the necessary resources to meet depositor demands, providing a safety net for the financial system in the United States.
The sudden collapse of Silicon Valley Bank (SVB) has sent panic waves to thousands of startups and venture capital firms. Within 48 hours, a panic induced by the very venture capital community that SVB was created to serve and cared for ended the bank’s40-year run.
After a 40-year run, the bank ceased operations on Friday, making it the largest banking failure since the 2008 financial crisis and the second-largest ever. On the same day, the US regulators seized control of the bank. The unraveling at SVB will have far-reaching implications for U.S. venture-backed startups, half of which did business at the bank, and also for the broader tech ecosystem.
On Friday, venture capital firms urged tech startups and companies in their portfolio companies to move money out of embattled lender Silicon Valley Bank. On Friday, the trading of SVB Financial Group’s shares, the holding company of Silicon Valley Bank, was suspended due to a significant drop in the pre-market session. The bank was in a rush to raise new funds amid this steep decline.
Founded in 1983 and headquartered in Santa Clara, California, Silicon Valley Bank (SVB) was a commercial bank that primarily serves the technology, life science, and venture capital industries. The bank offers a range of financial services, including commercial banking, investment banking, and asset management to companies in the innovation sector.
Below is a video explaining the collapse of Silicon Valley Bank.
WASHINGTON, DC — The following statement was released by Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg:
Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.
After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.
We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.
Shareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.
Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.
The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.
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