On Sunday, the United States Treasury Department, the Federal Reserve, and U.S. banking regulator the Federal Deposit Insurance Corporation (FDIC) issued a joint statement hoping to calm fears surrounding the collapse and subsequent takeover of Silicon Valley Bank on Friday.
In a joint statement attributed to Secretary of the Treasury Janet Yellen, Federal Reserve Board Chair Jerome Powell, and FDIC Chairman Martin Gruenberg, the government agencies said that they were taking “decisive action: to protect the U.S. economy from banking contagion as fears that the SVB situation might have a ripple effect on both the economy and the banking system.
Those decisive actions (in consultation with President Joe Biden) included approval from the Treasury to take “actions enabling the FDIC to complete its resolution of Silicon Valley Bank,” and New York-based Signature Bank which was also taken over this weekend.
“Depositors will have access to all of their money starting Monday, March 13,” the statement read. “ No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.” A similar “systemic risk exception for Signature Bank” was also being initiated and losses associated with that institution will also not be borne by taxpayers, according to the statement.
But the statement included a major caveat for shareholders and uninsured depositors of these banks: “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.”
The Federal Reserve Board also announced on Sunday that 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.”