Joint Statement by Treasury, Federal Reserve, and FDIC Regarding Silicon Valley Bank and Signature Bank

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March 12, 2023

Joint Statement by Treasury, Federal Reserve, and FDIC

Department of the Treasury

Board of Governors of the Federal Reserve System

Federal Deposit Insurance Corporation

For release at 6:15 p.m. EDT

“Washington, DC — The following statement was released by Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg:

Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. 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.

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 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 on Sunday 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 U.S. 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.”

*updated* 1933 EST March 12th I miss stated that there wasn’t an explanation as to the funding mechanism that was being used to pay for the bridge between assets vs deposits. There is but I missed it initially. It is using the Deposit Insurance Fund, which per the statement any losses suffered from that fund will be raised from the banking institutions via a one time payment. Here is a twitter thread where the poster had suggested the use of this fund previous to this announcement with some explanation as far as how it’d work.

https://twitter.com/JoshuaSteinman/status/1634982768655613953?s=20

I apologize for missing it earlier, I appreciate those that helped explain it. As I understand it, the agencies/businesses involved had to agree that these banking failures represented a “systemic” risk in order to bring this fund into play.

https://www.federalreserve.gov/newsevents/pressreleases/monetary20230312b.htm

Trevor