US regulators bail out Silicon Valley Bank customers
- Federal regulators announced that depositors of Silicon Valley Bank will be paid in full
- In a statement released Sunday, the Treasury, Federal Reserve and the FDIC said they would "fully protect" depositors with funds in the bank.
In a Sunday announcement, the US Treasury, Federal Reserve Board, and the Financial Deposit Insurance Corporation announced they would "fully protect" all depositors who had funds in Silicon Valley Bank, just days after regulators took control of the institution.
"After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary (Janet) 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," the Sunday evening statement said.
"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."
In addition, Signature Bank, a New York bank, was also closed by regulators over the weekend. Signature depositors will also be made whole.
When SVB's closure was announced, the FDIC said that the first $250,000 of customers' deposits would be accessible no later than Monday, but any amount above that limit would be returned over time. In addition, there was a possibility that customers might lose some of the money they had deposited with SVB, as the FDIC normally only guarantees the first $250,000 of a customer's deposit.
That left hundreds of startups that banked with SVB in turmoil. As Insider reported, many startup founders worried they wouldn't be able to make payroll in the coming weeks. In announcing that depositors will be made whole and that they'll have access to their funds starting Monday, US regulators have removed that risk.
"The Federal Reserve, FDIC, and Treasury have taken action to prevent broader contagion throughout the banking system due to the failure of Silicon Valley Bank on Friday and the closing of Signature Bank announced today," Greg McBride, chief financial analyst at Bankrate, said in a statement.
On Sunday, Bloomberg reported that the FDIC started accepting bids on Saturday to find a buyer for SVB. The bids closed Sunday afternoon with the aim of finding a willing bid ahead of the market open in Asia, Bloomberg reported, citing sources.
"Still to be determined is the fate of the assets of Silicon Valley Bank. Whether one buyer, or multiple buyers, emerge is still to be determined as of the moment," McBride said.
Here's the full statement:
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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