Both Silicon Valley Bank and Signature Bank depositors will be made whole. This is the decision of relevant U.S regulators in a joint statement they issued on 12 March 2023. The Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg issued the joint statement in a press release.
According to the joint statement, the US is “taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system”. The idea is to “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”.
Depositors of Silicon Valley Bank and Signature Bank
Specifically, concerning the protection of Silicon Valley Bank depositors, the Secretary of the Treasury “approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors”. According to the statement, “[d]epositors will have access to all of their money starting Monday, March 13”. Notably, no losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.
Similarly, all depositors of Signature Bank, New York depositors will also be made whole and no losses will be borne by the taxpayer.
Persons Not Covered
According to the joint statement, shareholders and certain unsecured debtholders will not be protected.
Also, 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.
US putting the protection of depositors funds first in order to boost confidence and trust in the US banking and financial system
By putting the depositors first, the US government and regulators are demonstrating that the US banking system has become more resilient after the 2008 global financial crisis.
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.Joint Statement by Treasury, Federal Reserve, and FDIC, 12 March 2023
According to the joint statement, this is “in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry”. It added: “Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe”.
The regulators reached the decision above after receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Joe Biden.
This must be good news to the banking and financial industry, as well as crypto companies including Circle, with deposits amounting to billions of dollars on both crypto-friendly banks, Silicon Valley Bank and Signature Bank.