The Treasury Department announced in a joint statement Sunday evening with the Federal Reserve and FDIC that all deposits at Silicon Valle...
The Treasury Department announced in a joint statement Sunday evening with the Federal Reserve and FDIC that all deposits at Silicon Valley bank will be made available on Monday–with the same for Signature Bank which was taken over Sunday by New York state regulators.
The statement says a special assessment will be made on FDIC member banks to cover any losses and that taxpayers will not bear the cost of any losses. FDIC will also make additional funds available to member banks (in case of more runs).
The move to backstop the banks is being made to stave off runs on banks Monday morning and to prevent systemic failure of businesses with funds in the banks.
Joint Statement by the Department of the Treasury, Federal Reserve, and FDIC
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.
Former Trump National Security Council staffer Joshua Steinman posted a thread on why the backstop was needed:
Key points:
“Many are saying “NO BAILOUTS.” Agree. Thankfully, the FDIC was BUILT TO HANDLE BANK RUNDS. They’re sitting on a $100+ BILLION DOLLAR rainy day fund, paid for by the banks themselves, that they can use to stop the madness. NO TAXPAYER DOLLARS. But HOW would it happen? nce the Treasury and Federal Reserve determine that SVB represents a SYSTEMIC risk, FDIC can use THEIR $100bn rainy day fund, PAID FOR BY THE BANKS, to make the depositors whole. This fund is DESIGNED to prevents bank runs from cascading. Which might happen MONDAY.”
UPDATE: Statement by the New York Department of Financial Services
Superintendent Adrienne A. Harris announced today that the New York Department of Financial Services (DFS) has taken possession of Signature Bank, pursuant to Section 606 of New York Banking Law, in order to protect depositors. DFS appointed the Federal Deposit Insurance Corporation (FDIC) as receiver of the bank.
Signature Bank is a New York state-chartered commercial bank and is FDIC-insured, with total assets of approximately $110.36 billion and total deposits of approximately $88.59 billion as of December 31, 2022.
DFS is in close contact with all regulated entities in light of market events, monitoring market trends, and collaborating closely with other state and federal regulators to protect consumers, ensure the health of the entities we regulate, and preserve the stability of the global financial system.
No comments