Federal officials launched emergency measures Sunday to shore up confidence in the banking system after Silicon Valley Bank failed on Friday and a second bank was closed Sunday.
Signature Bank, a financial institution whose customers include some of the country’s largest law firms, was seized by bank regulators over the weekend. The bank, which accepted deposits of cryptocurrency assets, began to see a run on deposits following the failure of Silicon Valley Bank on Friday.
Regulators seized the bank saying that if it didn’t and it failed, it could threaten the stability of the entire financial system, The New York Times reported. Signature Bank had more than $110 billion in assets, making its closure the third-largest bank failure in U.S. history.
President Joe Biden will speak to the nation Monday morning about the bank closures.
On Sunday, bank regulators said Silicon Valley Bank’s customers will have access to all their deposits starting Monday. According to the statement, the FDIC will cover up to $250,000 of deposits per customer, then the Treasury will pay for the rest of the deposits under the new plan.
The Federal Reserve, Treasury and Federal Deposit Insurance Corporation announced in a joint statement that while “depositors 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.”
In a separate announcement, the Fed late Sunday said the new emergency program will lend money to the banking system so that customers would be confident that they could access their accounts whenever needed.
“The additional funding 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,” the statement read.
The program will have up to $25 billion from the Exchange Stabilization Fund as a backstop the Fed said, though it does not anticipate that it will be necessary to draw on these backstop funds, according to the statement.
“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 joint statement read.
Silicon Valley Bank had $1.9 billion in cash with companies such as streaming device maker Roku, online gaming platform Roblox and online marketplace Etsy as customers. Its collapse was the second-largest bank failure in history.
The U.K. Treasury and the Bank of England announced early Monday the sale of Silicon Valley Bank’s U.K. deposits to HSBC, Europe’s biggest bank. The move secured around 6.7 billion pounds ($8.1 billion) in deposits, The Associated Press reported.
Also Sunday, First Republic Bank announced that had gained access to funding from the Fed and JPMorgan Chase.