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The resolution of the Silicon Valley Bank (SVB) will be done in a manner that “fully protects all depositors” of the bank, a statement released by Secretary of the Treasury Janet Yellen, Federal Reserve Board Chair Jerome Powell, and FDIC Chairman Martin Gruenberg said.
Yellen also said that the depositors will get access to their money from Monday.
The collapse of the SVB is the biggest such collapse since the 2008 crisis. It has sent shockwaves across the tech and startup sector as the bank served thousands of startups and several venture capitalist (VC) funds.
The depositors are worried about getting back their deposits in the bank as 93 per cent of deposits are reportedly uninsured by the FDIC.
To allay the fears, a joint statement was issued by the Joe Biden administration stating that “no losses will be borne by the taxpayer”.
SVB crisis: Here is the full statement
Today we are taking decisive actions to protect the US economy by strengthening public confidence in our banking system. This step will ensure 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.
After receiving a recommendation from the boards of the FDIC and the Federal Reserve and consulting with the President, Secretary Yellen 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 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.
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. 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.
Shareholders and certain unsecured debt holders 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 on Sunday announced it would make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.
The US banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms, combined with today’s actions, demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.
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