All Silicon Valley Bank customers will have free access to their funds to U.S. taxpayers starting Monday, federal regulators announced as a second bank shut down.
Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell and FDIC Chair Martin Gruenberg released a joint statement Sunday night outlining what they see as critical measures to protect the US economy and strengthen the economy denote public confidence in the banking system.
“Upon receiving a recommendation from the boards of directors of the FDIC and the Federal Reserve, and after consultation with the President, Secretary Yellen approved actions that will enable the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that will satisfy all fully protects depositors,” the statement said.
“Depositors will have access to all their money from Monday March 13th. No losses related to the dissolution of Silicon Valley Bank will be borne by the taxpayer.”
A similar systemic risk exception was also introduced for Signature Bank of New York, which was shut down today by the state’s Board of Incorporation.
All depositors of this institution will be healed. As with the dissolution of Silicon Valley Bank, no losses will be borne by the taxpayer.
Shareholders and certain holders of unsecured debt will not be protected. Management was also dismissed. Any losses incurred by the Deposit Insurance Fund to support uninsured depositors will be reimbursed through a special assessment of the banks in accordance with the law.
The Federal Reserve Board also said it will provide additional funding to eligible depository institutions to ensure banks are able to meet the needs of all of their depositors.
“The US banking system remains resilient and is on solid foundations, thanks in large part to post-financial crisis reforms that provided better protection for the banking industry. These reforms, coupled with today’s actions, demonstrate our commitment to taking the necessary steps to ensure depositors’ savings remain safe,” the statement added.
The Silicon Valley bank failed on Friday as fearful depositors withdrew billions of dollars from the bank in a matter of hours, forcing regulators to urgently close the bank in the middle of the workday to halt the bank run.
It is the second largest bank failure in US history, after 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 clientele were tech startups, venture capital firms and, as the name suggests, well-paid tech workers.
The vast majority of deposits at the bank were in business accounts with balances well above the FDIC insurance limit of $250,000.
Its failure meant more than $150 billion in receivership deposits had to be frozen pending government action late Sunday.
Some prominent Silicon Valley executives feared that unless the government intervened, customers would attack other financial institutions.
Share prices at other banks that supply tech companies, including First Republic Bank and PacWest Bank, have plummeted in recent days.
Signature Bank specializes in providing banking services to law firms, from cash management services to escrow accounts for holding client funds.
Regulators in New York 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” to protect both consumers and the financial system.
With additional coverage from The Associated Press