US government guarantees all Silicon Valley bank deposits, money available on Monday

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Depositors of the failed Silicon Valley bank will have access to all their funds starting Monday, March 13, financial regulators said, while halting deposit withdrawals into the banking system amid fears of contagion following last week’s shock failure of SVB. New features were announced for.

one in joint statementThe heads of the Federal Reserve, the Treasury Department, and the FDIC said: “After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and after consulting with the President, Secretary Yellen has been able to make the FDIC meet its resolution of silicon.” Valley Bank, Santa Clara, Calif., in a manner that fully protects all depositors.”

“Depositors will have access to all their money from Monday, March 13,” the statement said. “No damages associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

federal Reserve also said will offer banks funds through a new facility to help ensure that banks can meet all depositor withdrawals, essentially backstopping all deposits – both insured and uninsured – US Financial in the system.

The Fed’s funding will be made available through the creation of a new Bank Term Funding Program (BTFP), which provides loans of up to one year to banks, savings associations and credit unions holding U.S. Treasuries, agency loans and mortgage-backed securities. shall offer, and other eligible assets as collateral.

According to the Fed, BTFPs will be an additional source of liquidity against high-quality securities, eliminating the institution’s need to quickly sell those securities in times of stress.

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The Fed said is carefully monitoring developments in the financial markets.

The sign of Silicon Valley Bank is shown at the company’s headquarters in Santa Clara, Calif., Friday, March 10, 2023. (AP Photo/Jeff Chiu)

“The Federal Reserve stands ready to relieve any liquidity pressures that may arise,” the central bank said in a release. “This action will enhance the ability of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy.”

The Fed’s lending facility is designed to cover all insured deposits in the US banking system and will be backed by the $25 billion Exchange Stabilization Fund in Treasury, which officials do not expect to tap.

Fed officials told media on a call on Sunday evening that these actions were designed to provide more liquidity and reduce contagion and should help small to medium large banks prevent contagion.

The Fed is not buying securities in banks, only lending against their book value. Fed officials stressed that no banks were being bailed out, but rather banks were getting long-term liquidity at high valuations and low risk.

Auction delayed, Signature Bank seized

On a call with the media late Sunday, a Treasury official said the government had sought bids for the Silicon Valley bank’s assets, but officials opted not to go ahead with the auction given the liquidity of the position.

With the government aiming to open banks on Monday morning, regulators determined would be better to rely on the Deposit Insurance Fund to provide money to depositors.

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Treasury officials noted that there are some institutions that have similarities to Silicon Valley banks, and that concerns about depositors at those institutions remain.

Similar to the Fed’s position, Treasury officials insisted that these actions protect depositors, not investors, and pushed back on the notion that these actions warrant a bailout and wipe out bondholders at Silicon Valley Bank. Will be done.

In their joint statement, the regulators also announced a similar systemic risk exception for Signature Bank (SBNY), which was struck off by its state chartering authority on Sunday. All the depositors of this institution will be made whole. As per the resolution of Silicon Valley Bank, no loss will be borne by the taxpayer.

America’s third largest bank has failed due to the closure of Signature Bank.

On Friday, the Silicon Valley bank became the largest bank to fail during the height of the 2008 financial crisis, following Seattle’s Washington Mutual and behind Washington Mutual, and the second largest bank failure in US history. was also the first bank to fail after 2020.

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