US Regulators Announce Resolution of Silicon Valley Bank and Signature Bank with Full Depositor Protection

The Treasury Department, Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) announced that they will protect depositors of Silicon Valley Bank (SVB) and Signature Bank, who were closed by their state chartering authority, following their failure on Friday. These actions aim to strengthen public confidence in the U.S. banking system and ensure that it 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.

According to a joint statement released by the Treasury Department, FDIC, and Federal Reserve, Treasury Secretary Janet L. Yellen approved actions that enabled the FDIC to complete its resolution of Silicon Valley Bank “in a manner that fully protects all depositors.” The statement noted that depositors will have access to all of their money starting March 13, and the taxpayer will bear no losses associated with the resolution of SVB.

Silicon Valley Bank was the nation’s 16th-largest bank and failed on Friday after depositors hurried to withdraw money this week amid anxiety over the bank’s health. The bank’s collapse was the second-largest bank failure in U.S. history after the collapse of Washington Mutual in 2008. The joint statement also announced the shutdown of New York-based Signature Bank. All depositors of this institution will be made whole, and no losses will be borne by the taxpayer.

Shareholders and certain unsecured debtholders will not be protected, and 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.

In addition, the Federal Reserve Board 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 regulators stated 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. Those reforms combined with today’s actions demonstrate our commitment to taking the necessary steps to ensure that depositors’ savings remain safe.

These actions are necessary to protect the U.S. economy and the stability of the financial system. Banks are critical to the functioning of the economy, as they facilitate the flow of funds between savers and borrowers. A failure of a bank can lead to a loss of confidence in the financial system, which can lead to a credit crunch, a decline in economic activity, and job losses.

The regulators’ announcement reflects the strength of the U.S. financial system, which has been built over many years through careful regulation and oversight. The FDIC was created in 1933 to restore public confidence in the banking system and to prevent bank runs. Since then, the FDIC has played a critical role in ensuring the safety and soundness of the U.S. banking system.

In conclusion, the actions taken by the Treasury Department, Federal Reserve, and FDIC to protect depositors of Silicon Valley Bank and Signature Bank demonstrate their commitment to maintaining a safe and stable financial system. These actions will help ensure that the U.S. banking system continues to perform its vital role of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth. The regulators’ statement also serves as a reminder of the importance of prudent regulation and oversight in maintaining the strength of the U.S. financial system.