Fed, Treasury, and FDIC Take Action to Safeguard US Banking System after Closure of Signature Bank
The Federal Reserve, the Treasury, and the FDIC have announced a joint decision to protect the US economy by strengthening public confidence in the banking system.
The statement, released on March 12, explains that the decision was made in consultation with the United States Federal Deposit Insurance Corporation (FDIC) and the President.
The action taken by the government is aimed at ensuring that the US 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 Federal Reserve Board Chair, Jerome H. Powell, Treasury Secretary, Janet L. Yellen, and FDIC Chairman, Martin J. Gruenberg, have all stressed the importance of taking decisive actions to protect the US economy.
The government has approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors of Silicon Valley Bank will have access to all of their money starting on Monday, March 13. The resolution of Silicon Valley Bank will not result in losses borne by taxpayers.
The government has also announced a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole, and as with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.
However, shareholders and certain unsecured debtholders will not be protected. 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.
Finally, the Federal Reserve Board has announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.
The statement emphasized that the US banking system remains resilient and on a solid foundation, in large part due to reforms made after the financial crisis that ensured better safeguards for the banking industry. These reforms, combined with the government’s actions, demonstrate their commitment to take the necessary steps to ensure that depositors’ savings remain safe.
The joint statement by the Treasury, Federal Reserve, and FDIC has helped to ease concerns regarding the safety of the US banking system, and the government’s swift action is expected to strengthen public confidence in the system.
- SVB Bank Collapse: Treasury Secretary Yellen Working With Regulators On Appropriate Policies
- SVB’s Collapse Highlights Limits Of Easy Money Policies, Warns Telegraph Report
- Fed Announces $25 Billion Bank Term Funding Program