A man walks by the headquarters of Silicon Valley Bank in Santa Clara, California, March 10, 2023.
Liu Guan Guan | Getty Images
Bank regulators devised a plan to help depositors with their money on Sunday Silicon Valley Bankan important step in staving off the feared panic surrounding a collapsing technology-focused organization.
Regulators have declared bankrupt SVB and signature bank In New York, which was also closed, they have full access to their deposits. Signatures have been a popular source of funding for cryptocurrency companies.
The Treasury Department said it had approved plans to release both institutions “in a manner that fully protects all depositors.” Those with money in the bank will have full access starting Monday.
The Fed also said it was creating a new Bank Term Funding Program aimed at protecting financial institutions affected by the market instability caused by the SVB failure.
The joint statement also said there would be no relief or taxpayer costs associated with any of the new plans. Shareholders and some unsecured creditors will not be protected and will lose their investment.
“Today, we are taking decisive action to protect the American economy by strengthening public confidence in the banking system,” Fed Chairman Powell, Treasury Secretary Janet Yellen and FDIC Chairman Martin Gruenberg said in a joint statement. There are,” he said.
The Fed’s facility provides loans for up to one year to banks, savings unions, credit unions, and other institutions. Persons using the facility are asked to provide high-quality collateral such as Treasury, agency debt, and mortgage-backed securities.
“This measure will strengthen the banking system’s ability to protect deposits and ensure the continued supply of money and credit to the economy,” the Fed said in a statement. , we stand ready to deal with liquidity pressures that may arise.”
The Treasury has provided up to $25 billion from the Exchange Stabilization Fund as a backstop to the funding program. A senior Fed official said the Treasury program would likely be unnecessary and existed as a safeguard.
In addition to the facility, the Fed said it would ease terms with a discount window that uses the same terms as BTFP.
The market reacted positively to the development, with Dow Jones Industrial Average futures jumping more than 250 points in early trading. Cryptocurrency prices have also risen significantly, with Bitcoin up more than 7% of his.
The news came after Treasury Secretary Janet Yellen said on Sunday morning that there would be no SVB bailout.
“We’re never going to do the same thing again, but we care about our depositors and are focused on meeting their needs,” Yellen told CBS’s “Face the Nation.” Told.
SVB’s failure was the nation’s largest financial institution failure since Washington Mutual’s failure in 2008.
The dramatic move comes days after SVB, a major funding hub for tech companies, reported that it was struggling, sparking a drawdown of bank deposits.
Officials were looking for a large agency to buy the SVB last weekend, but without success. PNC was one of the interested buyers, but he pulled out, a source told her CNBC’s Sarah Aisen.
A senior Treasury official said the sale of Silicon Valley Bank is still possible. Sunday’s initiative was taken to avoid further potential problems.
This scenario is reminiscent of investment banking giant Lehman Brothers on September 15, 2008. Lehman Brothers also went bankrupt and was looking for a buyer. The government also failed on that case after a weekend of altercations, sparking the worst of the crisis.
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