US regulators have announced that they are taking steps to “fully” protect all deposits at Silicon Valley Bank (SVB), CNBC has reported. The institution is home to a host of startups and established companies like Roku and Etsy, who will have full access to its funds starting today. At the same time, officials said “there will be no bailouts” and that shareholders and unsecured creditors will not be protected.
“Today we are taking decisive action to protect the US economy by strengthening public confidence in our banking system,” the FDIC, the Treasury Department and the Federal Reserve said in a joint statement. “Depositors will have access to all their money starting Monday, March 13. The taxpayer will not bear the losses associated with the resolution of Silicon Valley Bank.”
In addition, HSBC UK has agreed to buy the UK arm of Silicon Valley Bank for a token pound to prevent the company’s collapse in that region, the UK government has announced. As in the US, both deposits and public funds are protected. “Today, the government and the Bank of England have facilitated a private sale of Silicon Valley Bank UK,” the press release reads. “This ensures that customer deposits are protected and they can bank as normal, without taxpayer support.”
The FDIC took over SVB on Friday following the biggest US banking collapse in nearly 15 years. There were concerns that many companies and tech startups would be unable to pay their salaries, and Etsy said yesterday that payments to merchants could be delayed. On Friday, Roku announced that it could lose up to 26 percent of its cash reserves, or more than $487 million, due to the collapse.
In addition to SVB, regulators shut down Signature Banks over the weekend. It is one of the largest banks used by cryptocurrency companies, as the Coinbase exchange, for example, had $240 million in deposits with the bank. In the same joint statement, federal regulators said that “all depositors of this institution [also] be healed.”
Silvergate, another popular institution among cryptocurrency exchanges (and known for buying Diem, the ambitious Facebook-funded cryptocurrency project), collapsed on March 8. That marks a streak of three key banks with ties to technology companies going out of business in the space of a week.
To reassure depositors, no doubt nervous about these events, the government said it will make additional funds available to other eligible institutions. The new program will allow banks to present Treasury bonds and other safe government securities as collateral in exchange for central bank loans of up to one year. It is designed to fix a key problem that led to SVB’s failure: unrealized losses on government securities caused by rapidly rising interest rates.
“The US banking system remains resilient and on solid footing, largely due to post-financial crisis reforms that ensured better safeguards for the banking industry,” the joint statement read. “Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.”
Update March 13, 2023 at 4:18 am ET: The post has been updated to include news that HSBC UK has bought Silicon Valley Bank UK and that UK deposits and taxpayers will be fully protected.
