Federal regulators said Sunday they were taking steps to ensure that depositors of the failed Silicon Valley Bank will have access to all their money on Monday.
The Federal Reserve, the Treasury Department and the Federal Deposit Insurance Corporation announced that the bank’s problems posed a systemic risk to the financial system, allowing regulators to take the unusual step of guaranteeing deposits.
“This step will ensure that the U.S. banking system continues to play its vital role of protecting deposits and providing access to credit to households and businesses in a way that supports strong and sustainable economic growth,” the agencies said. in a joint statement.
how it all went: The collapse of Silicon Valley Bank explained in graphs
Regulators also said they were taking over a failing second financial institution, Signature Bank of New York, and similarly designating it as posing systemic risk and saying federal agencies would back its deposits.
Stocks came later a run to Silicon Valley Bank last week threatened to block most depositors from accessing savings of more than $250,000, which are usually not insured by the FDIC, and only hours before trading begins in Asia.
The near-financial crisis that U.S. regulators had to step in to prevent left Asian markets jittery as trading began on Monday. Japan’s benchmark Nikkei 225 slipped about 1.2% in morning trading. Australia’s S&P/ASX 200 fell 0.6% to 7,104.30. South Korea’s Kospi, however, was little changed.
Live updates:After Silicon Valley Bank, Signature Bank, fears of new bank collapses grow
The bank’s failure is the second largest in US history after the disappearance in 2008 of the Washington Mutual. This came because tech companies struggled to secure funding as venture capital funding dried up and began pulling their money out of SVB. To cover the withdrawals, the bank was forced to sell bonds at a loss due to rapidly rising interest rates over the past year.
Separately, the Fed said it would provide funding by offering loans for up to one year to banks and other eligible financial institutions. This decision aims to prevent a wave of bank runs that would threaten the stability of the banking system and the economy as a whole.
What happened?:Silicon Valley Bank assets seized by FDIC in largest bank failure since 2008
“A Brutal Day”:How the Silicon Valley Bank failure rocked businesses in London’s wine country
The Treasury has set aside $25 billion to offset losses incurred under the Fed’s emergency lending facility. Fed officials have said, however, that they do not expect to have to use any of this money, given that the securities deposited as collateral have a very low risk of default.
Analysts said the Fed’s program should be enough to calm financial markets on Monday.
“Monday is sure to be a stressful day for many in the regional banking industry, but today’s action significantly reduces the risk of contagion,” economists at Jefferies, an investment bank, said in a research note. .
Is this the same as the 2008 financial crisis?
These actions are relatively limited compared to what was done 15 years ago. The two failed banks themselves were not rescued, and taxpayers’ money was not provided to the banks.
President Joe Biden said Sunday night as he boarded Air Force One for Washington that he would address the banking situation on Monday. In a statement, Biden also said he was “firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of big banks so that we are no longer in this position.”
FDIC puts Silicon Valley Bank up for auction
The Federal Deposit Insurance Corporation launched entertaining deals on Silicon Valley Bank on Saturday night, according to Bloomberg Newswho was the first to tell the story.
Tenders were due Sunday afternoon.
The Bank of London confirmed it had submitted a bid for the bankrupt bank, which was closed on Friday March 10 by the California Department of Financial Protection & Innovation.
Role of the FDIC: Silicon Valley Bank assets seized by FDIC in largest bank failure since 2008
“Silicon Valley cannot be allowed to fail given the vital community it serves,” said Anthony Watson, group chief executive at Bank of London. “This is a unique opportunity to ensure a more diversified banking industry in the UK, while enabling continuity of service to SVB UK customers. It would be deeply disappointing at this time to lead to further consolidation of the power of the old inherited US banks.”
The FDIC created and transferred the receivership to the National Deposit Insurance Bank of Santa Clara, according to a press release.
A notice posted on SVB’s website says depositors can access their insured deposits, of which $250,000 per depositor is FDIC insured.
Silicon Valley Bank’s Twitter and Facebook profiles have been taken down and its website contains an FDIC and Santa Clara DINB notice. It is the first FDIC-insured bank to fail this year.
Associated Press contributed to this report