The U.S. government said on Sunday that all clients from Silicon Valley Bank will be protected and will have access to their money, The Associated Press reported.
The Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation announced the move late Sunday afternoon in an effort to prevent more runs on banks.
Breaking News: Federal officials closed a second bank and said it would bail out all depositors in the wake of Silicon Valley Bank’s collapse. https://t.co/Iqd0rly4c6
— The New York Times (@nytimes) March 12, 2023
“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 agencies said in a joint statement, according to the AP.
“No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer,” the joint statement added.
The agencies also said that they would use a similar program for New York-based Signature Bank, which the government said was closed on Sunday by its state chartering authority, according to The New York Times.
Signature Bank, based in New York, has long specialized in providing banking services to law firms, providing everything from cash management services to escrow accounts for holding client money.
The announcement came hours after it was reported that federal regulators were conducting an auction for the failed bank, which was shut down by the FDIC on Friday.
The shutdown of Silicon Valley Bank, the largest bank failure since Washington Mutual was closed during the recession crisis in 2008, concerned analysts who fretted that other financial firms could suffer similar closures due to rising interest rates and jittery depositors considering the withdrawal of their money, the Times reported.
The FDIC created a new bank, the National Bank of Santa Clara, to hold the deposits and other assets of Silicon Valley Bank, according to the newspaper. The FDIC has said that it will make 100% of protected deposits available on Monday, when branches reopen, Bloomberg reported.
Sunday’s latest development came after Treasury Secretary Janet Yellen said early Sunday that there were no plans for the federal government to bail out the Santa Clara, California-based bank.