- The regulators assured that the taxpayer will bear no losses over the bank’s failure.
- The protection does not cover shareholders and certain unsecured debtholders.
The Department of Treasury, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) have released a joint statement reassuring customers of the safety of their funds in the aftermath of the Silicon Valley Bank (SIVB) collapse. The group emphasized it will ensure that the taxpayer will bear no losses over the bank’s failure.
According to the press release, the financial regulators are taking decisive actions to protect the U.S. economy and strengthen public confidence in the banking system.
The statement read in part: “Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system 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.”
The group announced the protection of all depositors of SIVB following recommendations by the FDIC and the Federal Reserve and consultation with the President. As a result, depositors will have access to all their money starting today, March 13, 2023.
The group used the same opportunity to announce the implementation of a similar systemic risk exception for Signature Bank, New York. A bank reported having also been closed by its state chartering authority. Like depositors with SIVB, Signature Bank customers will be protected, and the taxpayer will bear no losses.
The protection offered by the financial authorities does not cover shareholders and certain unsecured debtholders. According to the announcement, the senior management of the bank has been removed, and any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment of banks, as required by law. The Federal Reserve also promised to make available additional funding to eligible depository institutions. That will give banks the ability to meet depositors’ needs.
In conclusion, the group reassured the public of its resilience to sustain the stability of the banks. It noted that reforms made in the past after the financial crisis ensured better safeguards for the banking industry. It claimed that combining those reforms with today’s action demonstrates the regulators’ commitment to ensuring that depositors’ savings remain safe.