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Federal regulators stepped in to back all Silicon Valley Bank deposits, resolving a key uncertainty surrounding the second-largest bank failure in U.S. history hours before global stock markets resume trading.
The U.S. Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation said Sunday that the government would back Silicon Valley Bank deposits beyond the federally insured ceiling of $250,000. The decision addressed concerns around the fate of uninsured funds held at the Santa Clara, California-based bank — the nation’s 16th largest — which had $209 billion in assets and more than $175 billion in deposits.
“Depositors will have access to all of their money starting Monday, March 13,” the agencies said in a joint statement. “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”
Senior management of SVB would be removed, the statement said.
The announcement marks an extraordinary step by federal regulators to calm financial markets in advance of Monday’s market open. Dow futures jumped more than 150 points following news of the backstop plan.
The regulators also said they took control of a second bank, New York’s Signature Bank, which is roughly half the size of SVB and had become a hub for cryptocurrency financing. They said a similar guarantee for Signature Bank depositors would be instituted in the process of shutting it down.
A senior Treasury official told reporters Sunday night that regulators are watching other banks that may have similar issues. As part of coordinated interagency efforts to backstop any further bank failures, the Federal Reserve set up an emergency lending program to give banks expanded and quick access to funds “in times of stress.”
A federal guarantee for SVB depositors was the hoped-for solution among tech-industry players and pundits calling for a rescue of the bank’s corporate and startup clients, many of which had all but frozen their operations in anticipation of what would come next for a bank that held much of their assets.
The intervention forced Washington officials to invoke a “systemic risk exception,” an extraordinary measure allowing the regulators to step in without congressional action, requiring approval from the Federal Reserve, the FDIC and the Treasury in consultation with President Biden.
SVB was shut down Friday by the California Department of Financial Protection and Innovation to protect deposits. As part of that move, the FDIC said it had formed a separate entity where SVB deposits would be available by Monday.
Gretchen Morgenson, Allie Raffa and Dennis Romero contributed.
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