The U.S. government announced Sunday that it is deploying emergency measures to shore up the banking system and backstop deposits at two banks that failed within a matter of days.
All deposit accounts at both institutions, Silicon Valley Bank and Signature Bank in New York, will be guaranteed, according to a joint statement released by the Federal Reserve, the Department of the Treasury and Federal Deposit Insurance Corporation (FDIC).
Depositors with SVB “will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer,” the statement said.
“We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority,” the statement continued. “All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.”
The statement indicates that the auction process to find a buyer for SVB is likely dead. Federal regulators were working to find a buyer for Silicon Valley Bank, and Treasury Secretary Janet Yellen told “Face the Nation” on Sunday that the FDIC was considering a “range of available options” to stabilize the situation, including an acquisition by a foreign bank.
President Biden said in a statement on Sunday that he was “firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.” He will address the situation during remarks on Monday morning, the statement said.
Silicon Valley Bank was shut down by California regulators on Friday after depositors rushed to withdraw funds amid concerns about the bank’s balance sheet. The (FDIC) was appointed receiver and created the Deposit Insurance National Bank of Santa Clara, to which all insured deposits of Silicon Valley Bank were transferred.
The 40-year-old bank ranked as the 16th-largest in the U.S. before its failure and is the largest financial institution to collapse since Washington Mutual at the height of the financial crisis in 2008. Signature Bank’s failure marks the third-largest bank collapse in U.S. history, according to The Associated Press.
Signature Bank is FDIC-insured and had assets of around $110.36 billion, with total deposits of about $88.59 billion as of Dec. 31, 2022, The New York Department of Financial Services said in a statement. Both figures were roughly half of what SVB had at the end of 2022 — $209 billion in total assets and about $174.5 billion in total deposits, according to the agency. according to the FDIC.
The emergency measures came after Yellen on Sunday ruled out a federal bailout for Silicon Valley Bank’s investors after the bank was abruptly shuttered. But she did express concern about the impact to depositors.
“During the financial crisis, there were investors and owners of systemic large banks that were bailed out,” Yellen said in an interview with “Face the Nation” on Sunday. “And the reforms that have been put in place means that we’re not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs.”
During a call with reporters on Sunday, a senior Treasury official said “no other depositors need to worry about the future of their banks.”
The official said the FDIC will use funds from the Depositor Insurance Fund to ensure that depositors are made whole and that the DIF is bearing the risk, not the taxpayer.
“The situation is not 2008,” the official added. “There are lot of reforms that have been put in place and we are trying to help depositors of institutions. The bank’s equity and bondholders are being wiped out. They took a risk, as owners of these securities; they will take the losses.”
The Federal Reserve also said Sunday that it will make additional funding available “to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors,” according to a press release.
The financing will be made available through the creation of a new Bank Term Funding Program (BTFP), “offering loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral,” the statement reads.
This article was originally published by CBS News.