Silicon Valley Bank, Signature Bank closed by regulators; all depositors protected
After two bank failures on Friday and Sunday, the first since 2020, federal regulators today announced actions to support bank liquidity and address consumer confidence in deposits not subject to FDIC insurance. Treasury Secretary Janet Yellen approved policy actions that the Treasury Department said would “enabl[e]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.”
The agencies announced “a similar systemic risk exception” for New York-based Signature Bank, which was closed today by state regulators. “All depositors of this institution will be made whole,” the agencies said. “As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.” At the end of 2022, SVB had approximately $209 billion in total assets and about $175.4 billion in total deposits, while Signature Bank had assets of $110.4 billion and deposits of $88.6 billion.
Both failures appeared to be idiosyncratic events related to the specific banks’ circumstances. Overall, the agencies reinforced their view that “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.”
The Federal Reserve said it would create a new Bank Term Funding Program. The program will offer loans of up to one year to eligible depository institutions, with U.S. Treasuries, agency debt and mortgage-backed securities and other qualifying assets posted as collateral and valued at par. “The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress,” the Fed said. “The Federal Reserve is prepared to address any liquidity pressures that may arise.”
The banking agencies announced that “any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.” ABA is closely monitoring the situation and will provide further information as it becomes available.