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Signature Bank failure, Silicon Valley Bank failure overview:
- Who: The Federal Reserve, Federal Deposit Insurance Corp. (FDIC), and U.S. Treasury Department have said depositors of Signature Bank and Silicon Valley Bank will be made whole, following the banks’ failures earlier this month.
- Why: The federal agencies said they were taking the steps to protect the ability of the US banking systems.
- Where: Nationwide.
The Federal Reserve, Federal Deposit Insurance Corp. (FDIC), and the U.S. Treasury Department have assured Signature Bank and Silicon Valley Bank (SVB) depositors that they will be made whole, following the banks’ recent failures.
The failures of California-based SVB and New York-based Signature Bank — which were each shut down by regulators earlier this month — were respectively the second and third largest bank failures of all-time in the US, reports Law360.
Regulators, meanwhile, have reportedly invoked a systemic risk provision found in federal law to assure both insured and uninsured SVB and Signature depositors that they will be made entirely whole.
A bank depositor would generally only be insured up to $250,000 for each account they hold, reports Law360.
The Fed has reportedly said that it will also be unveiling an emergency lending facility — called the Bank Term Funding Program — aimed to help ease liquidity concerns for banks facing high deposit withdrawal requests.
The Bank Term Funding Program will be able to make loans with a length of a maximum of one year against high-quality securities promised by banks as collateral, reports Law360.
Federal agencies say actions taken to ‘ensure’ US banking system continues to be able to perform its ‘vital role’
“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” the agencies said, in a joint statement.
The agencies said the actions were taken to “ensure” the US banking system would be able to continue to perform its “vital role” of protecting deposits and “providing access to credit to households and businesses” in a way that “promotes strong and sustainable economic growth.”
“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,” the agencies said.
Signature and SVB — which had around $110.4 billion in total assets at the end of 2022 — both had a good amount of uninsured depositors, according to regulatory filings made by the banks, reports Law360.
Federal regulators, meanwhile, have reportedly said that while the uninsured depositors will now be protected, stockholders and some unsecured depositors will not be.
Multiple banks were targeted with and/or settled class action lawsuits last year, including Citibank, Bank of America, JPMorgan Chase, Wells Fargo.
The financial institutions faced claims revolving around allegations of misconduct regarding overdraft fees, account management, and data protection, among other things.
Have you been impacted by the recent SVB and Signature bank failures? Let us know in the comments!
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