Silicon Valley Bank customers will have access to their deposits, US officials say, as the federal government announces actions to shore up deposits and stem any broader financial fallout from the collapse of the tech startup-focused lender.
The boards of the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve, in consultation with President Joe Biden, approved the FDIC’s resolution of SVB, according to a joint statement from US Treasury Secretary Janet Yellen, Fed Chair Jerome Powell and FDIC Chairman Martin Gruenberg on Sunday evening.
The move will not lead to losses by American taxpayers and all depositors will be made whole, the statement said.
“Today we are taking decisive actions to protect the US economy by strengthening public confidence in our banking system,” the statement said.
“This step will ensure that the US 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.”
S&P500 futures rose 1.4 per cent after the announcement.
A senior US Treasury official said the firms were not being bailed out, but depositors were being protected.
SVB equity and bondholders would be wiped out, said the official, who briefed reporters after the announcement.
The Biden administration will work with Congress and financial regulators to consider additional actions to further strengthen the financial system, the official said.
The official said the economy remains in good shape but officials would continue to take steps to ensure the financial system remains strong.
The Federal Reserve also said on Sunday it would make additional funding available through a new Bank Term Funding Program, which would offer loans up to one year to depository institutions, backed by Treasuries and other assets these institutions hold.
The officials also said that depositors of New York’s Signature Bank, which was closed Sunday by the New York state financial regulator, would be made whole at no loss to the taxpayer.
Signature’s shareholders and unsecured debtors will not be protected, and management has been removed, the officials said.
Earlier, Yellen had said she was working with banking regulators to respond after SVB became the largest bank to fail since the 2008 financial crisis.
In March 2020 when the COVID-19 pandemic and lockdowns triggered financial panic, the Federal Reserve announced a series of measures to keep credit flowing by lowering borrowing costs and lengthening the terms of its direct loans.
By the end of that month, use of the Fed’s discount window facility shot up to more than $US50 billion ($75 billion).
Through the middle of last week, before SVB’s collapse, there had been no indications of usage picking up, with Fed data showing weekly outstanding balances of $US4 billion ($6 billion) to $US5 billion ($7.5 billion) since the start of the year.
