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Silicon Valley Bank collapse: Treasury, Fed and FDIC announce steps to ensure deposits will be paid in full
The Fed also announced it will make additional funding available.

ByElizabeth Schulze and Molly Nagle
March 12, 2023, 7:25 PM





2:32
Silicon Valley bank fallout

The Northern California bank has been shutdown by the FDIC as customers are left without access to their money for now.
The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation announced Sunday that they will make additional funding available to ensure all Silicon Valley Bank deposits, both insured and uninsured, will be paid in full.

"After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary [Janet] 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," the said in a joint statement. "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."

MORE: Senator says 'see what happens' before considering Silicon Valley Bank bailout
PHOTO: Treasury Secretary Janet Yellen attends a U.S. House Ways and Means Committee hearing in Washington, Mar. 10, 2023.
Treasury Secretary Janet Yellen attends a U.S. House Ways and Means Committee hearing in Washington, Mar. 10, 2023.
Evelyn Hockstein/Reuters
The Fed also announced it will make additional funding available to "to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors."

Silicon Valley Bank, the 16th largest bank in the country, failed on Friday and was taken over by the FDIC, after a run on the bank Wednesday and customers withdrew $42 billion of deposits by the end of Thursday.

SVB mostly served technology workers and startups, including some of Silicon Valley's biggest names, such as Roku.

PHOTO: Chairman Mark Warner speaks during a Senate Intelligence Committee hearing to examine worldwide threats at the U.S. Capitol in Washington, D.C., on March 8, 2023.
Chairman Mark Warner speaks during a Senate Intelligence Committee hearing to examine worldwide threats at the U.S. Capitol in Washington, D.C., on March 8, 2023.
Amanda Andrade-Rhoades/AP
The trio also announced Sunday a "similar systemic risk exception" for New York-based Signature Bank, "which was closed today by its state chartering authority," according to the joint statement. "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," the statement read. "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."

"I'm grateful that the Federal regulators have taken steps to do just that, and I hope that these actions will provide increased confidence in the stability of our banking system," New York Gov. Kathy Hochul said in a statement. "Many depositors at these banks are small businesses, including those driving the innovation economy, and their success is key to New York's robust economy."

Sen. Mark Warner, D-Va., told told "This Week" co-anchor Martha Raddatz earlier Sunday, "Let's see what happens today," pumping the breaks on a potential SVB bailout.

"I know I've been in conversations with the regulators, the administration, the Fed; the best outcome will be can they find a buyer for this SVB bank today before the markets open in Asia later in the day. That would be the best making sure that depositors -- remember that shareholders in the bank are going to lose their money, let's be clear about that -- but the depositors can be taken care of. And the best outcome will be an acquisition of SVB," he said.


"Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and we're certainly not looking. And the reforms that have been put in place mean that we're not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs," Treasury Secretary Janet Yellen said on CBS' "Face the Nation" Sunday.

ABC News' Zunaira Zaki and Tal Axelrod contributed to this report.

Another one tonight.....


Regulators close crypto-focused Signature Bank, citing systemic risk
PUBLISHED SUN, MAR 12 20236:24 PM EDTUPDATED 9 MIN AGO
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Yun Li
@YUNLI626

U.S. regulators on Sunday shut down New York-based Signature Bank
, a big lender in the crypto industry, in a bid to prevent the spreading banking crisis.

“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,” Treasury, Federal Reserve, and FDIC said in a joint statement Sunday evening.


The banking regulators said depositors at Signature Bank will have full access to their deposits, a similar move to ensure depositors at the failed Silicon Valley Bank
will get their money back.

“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,” the regulators said.

The regulators shuttered Silicon Valley Bank on Friday and seized its deposits in the largest U.S. banking failure since the 2008 financial crisis — and the second-largest ever. The dramatic moves come just days after the tech-focused institution reported that it was struggling, triggering a run on the bank’s deposits.

Signature is one of the main banks to the cryptocurrency industry, the biggest one next to Silvergate, which announced its impending liquidation last week. It had a market value of $4.4 billion as of Friday after a 40% sell-off this year, according to FactSet.

As of Dec. 31, Signature had $110.4 billion in total assets and $88.6 billion in total deposits, according to a securities filing.

To stem the damage and stave off a bigger crisis, the Fed and Treasury created an emergency program to backstop deposits at both Signature Bank and Silicon Valley Bank using the Fed’s emergency lending authority.

The FDIC’s deposit insurance fund will be used to cover depositors, many of whom were uninsured due to the $250,000 guarantee on deposits.

While depositors will have access to their money, equity and bondholders at both banks are being wiped out, a senior Treasury official said.

This is getting really scary. The govt wont be returning peoples money in full if a large bank fails

US banks sitting on unrealized losses of $620 billion
Nicole Goodkind
By Nicole Goodkind, CNN
Updated 8:23 AM EDT, Sun March 12, 2023







New York
CNN
—
Silicon Valley Bank’s collapse last week sent tingles of panic down investors’ spines as it highlighted a larger problem across the banking sector: The widening gap between the value large lenders place on the bonds they hold and what they’re actually worth on the market.

SVB’s downfall was tied, in part, to the plunge in the value of bonds it acquired during boom times, when it had a lot of customer deposits coming in and needed somewhere to park the cash.

But SVB isn’t the only institution with that issue. US banks were sitting on $620 billion in unrealized losses (assets that have decreased in price but haven’t been sold yet) at the end of 2022, according to the FDIC.


What’s happening: Back when interest rates were near zero, US banks scooped up lots of Treasuries and bonds. Now, as the Federal Reserve hikes rates to fight inflation, those bonds have declined in value.

When interest rates rise, newly issued bonds start paying higher rates to investors, which makes the older bonds with lower rates less attractive and less valuable.

The result is that most banks have some amount of unrealized losses on their books.

“The current interest rate environment has had dramatic effects on the profitability and risk profile of banks’ funding and investment strategies,” said FDIC Chairman Martin Gruenberg in prepared remarks at the Institute of International Bankers last week.

“Unrealized losses weaken a bank’s future ability to meet unexpected liquidity needs,” he added.

In other words, banks might find they have less cash on hand than they thought — especially when they need it — because their securities are worth less than they expected.

“Many institutions — from central banks, commercial banks and pension funds — sit on assets that are worth significantly less than reported in their financial statements,” said Jens Hagendorff, a finance professor at King’s College London. “The resulting losses will be large and need to be financed somehow. The scale of the problem is starting to cause concern.”

Still, there’s no need to panic yet, say analysts.

“[Falling bond prices are] only really a problem in a situation where your balance sheet is sinking quite quickly… [and you] have to sell assets that you wouldn’t ordinarily have to sell,” said Luc Plouvier, senior portfolio manager at Van Lanschot Kempen, a Dutch wealth management firm.

Most large US banks are in good financial condition and won’t find themselves in a situation where they’re forced to realize bond losses, said Gruenberg.

Shares of larger banks stabilized Friday after plunging to their worst day in nearly three years on Thursday.

— Julia Horowitz and Anna Coobin contributed reporting.

They need to put back in place the regulations that have been rolled back, before it is too late.




https://www.wsj.com/articles/federa...sures-to-prevent-banking-crisis-ba4d7f98


U.S. regulators took control of a second bank Sunday and raced to roll out emergency measures to stem potential spillovers from Friday’s swift collapse of Silicon Valley Bank, backstopping both firms’ uninsured depositors and making more funding available to the banking system.

Regulators announced Signature Bank, one of the main banks for cryptocurrency companies, was closed Sunday. The New York bank’s depositors will be made whole, officials said.

Officials took the extraordinary step of designating SVB and Signature Bank as a systemic risk to the financial system, which gives regulators flexibility to guarantee uninsured deposits. The Federal Reserve and the Treasury Department also used emergency lending authorities to establish a new facility to help meet demands for withdrawals.

Regulators announced the action in a joint statement from Treasury Secretary Janet Yellen, Fed Chair Jerome Powell and Federal Deposit Insurance Corp. Chair Martin Gruenberg. The group said that depositors at SVB will have access to all of their money on Monday.

Live Q&A
What Does the Silicon Valley Bank Failure Mean?
Silicon Valley Bank collapsed on Friday, becoming the largest bank to fail since the 2008 financial crisis. On Monday, March 13, at 3:00 p.m. ET, join the Journal’s Wall Street and Financial Industry Bureau Chief Dana Cimilluca and reporter Rolfe Winkler for a conversation about the bank failure, subsequent regulatory action and what this all means for the tech sector and the overall health of the U.S. economy.

The government’s bank-deposit insurance fund will cover all deposits at the two banks, rather than the standard $250,000. Federal regulators said any losses to the government’s fund would be recovered in a special assessment on banks and that the U.S. taxpayers wouldn’t bear any losses.

In a separate statement Sunday night, the Fed said it “is closely monitoring conditions across the financial system and is prepared to use its full range of tools to support households and businesses, and will take additional steps as appropriate.”

The central bank said it would make additional funding available to banks to ensure they have “the ability to meet the needs of all depositors” through a new “Bank Term Funding Program,” which will offer loans of up to one year to banks that pledge U.S. Treasury securities, mortgage-backed securities and other collateral. Up to $25 billion from the Treasury’s exchange-stabilization fund will backstop the Fed lending program.

Many of those securities have fallen in value as the Fed has raised interest rates, and the Fed said those securities would be valued at their original value.

Sunday evening’s announcement capped a frantic weekend during which regulators were auctioning the failed Silicon Valley Bank, according to people familiar with the matter. Regulators struggled to find a buyer on Sunday and pivoted to backstopping the deposits, according to a senior Treasury official, as they sought to announce a resolution to depositors by Monday morning.

Mr. Powell scrapped plans to attend a regular meeting of central bankers in Basel, Switzerland, on Sunday and instead stayed in Washington to manage the crisis response.

A U.S. plan that soothes nerves about access to uninsured deposits—most of the bank’s deposits are sizable enough that they exceeded limits on FDIC protection—could tamp down the crisis and limit any impact on the economy as the Fed has focused on combating inflation by raising interest rates.

At the same time, heavy-handed federal interventions could amount to an embarrassing coda for a rollback of post-financial-crisis regulations on small and midsize banks undertaken in recent years. Officials on Sunday signaled they were weighing tougher capital requirements and liquidity rules, reversing at least some of the steps taken during the Trump administration to ease restrictions on smaller banks.

Federal regulators are trying to balance their desire to prevent broader financial contagion while avoiding the damaging political optics of bailing out financial institutions at taxpayer expense.

Biden administration officials said repeatedly on Sunday that their moves were aimed at protecting depositors, allowing them to make payroll this week, and would come at no cost to taxpayers. A senior Treasury official said the Fed’s lending program would prevent further bank runs.


Nicholas Donahue, the co-founder of real-estate startup Atmos, said he was set to finalize a loan from Khosla Ventures to help make payroll payments for the coming week when he heard the news.

“I’m feeling relieved, the fact that I can go back to my team tonight and say the business will be fine,” Mr. Donahue said. “There’s just a lot of weight off of my shoulders.”

Signature and SVB are the highest-profile casualties of the Fed’s campaign to slow the economy and bring inflation down. The central bank has raised interest rates by 4.5 percentage points over the past year, the most rapid run-up since the early 1980s, and officials have signaled more increases are likely.

Pretty much everything I've been saying is staying to happen..





Hopefully, people don't panic and pull their money from other banks. The economy will collapse.

250k FDIC Insured accounts get their money from the government, but anything over that is at risk.

Remember when the guarantee was $100k.. Obama raised it in response to the crisis in 2009.

I'm not sure or maybe I just don't remember, but didn't the Obama Admin put in some regulations to stop this kinda thing?

250k FDIC Insured accounts get their money from the government, but anything over that is at riskit takes?


Do you know what the process is and how long it takes? I imagine it would make for a stressful time making a claim, if that isn't automatically done, and waiting for resolution.

Investors of these banks won’t be reimbursed. They knowingly took that risk. Depositors will be made whole. This is not a bank bailout.

this is inaccurate.

Bush raised the limit in October 2008.

https://www.investors.com/market-tr...first-republic-crashes-65-on-bank-fears/

The Dow Jones Industrial Average reversed higher Monday morning, as global markets grappled with the ongoing crisis among U.S. banks. The FDIC and other financial regulators guaranteed all deposits of SVB Financial (SIVB). Regulators on Sunday also took control of Signature Bank (SBNY). Meanwhile, San Francisco's First Republic (FRC) crashed 69% in morning trade, despite receiving additional funding from the Federal Reserve and JPMorgan (JPM). Finally, Charles Schwab (SCHW) plunged 16% amid ongoing banking fears.

First Republic stock down 65% amid fears of regional bank contagion


First Republic Bank’s (FRC) shares tanked a record 67% and were halted for volatility, leading regional lenders lower, despite measures by U.S. regulators to shore up confidence in the banking system following the collapse of Silicon Valley Bank.

Western Alliance's (WAL) stock fell 74%, while PacWest Bancorp (PACW) and Zions Bank Corporation (ZION) declined more than 40% as regional banks were hammered over concerns of a contagion.

Over the weekend First Republic assured it had accessed additional liquidity from the Federal Reserve Bank and JPMorgan Chase.

“The total available, unused liquidity to fund operations is now more than $70 billion,” said First Republic.

The bank's uninsured deposits at the end of 2022 totaled $119.5 billion, or 67% of its total deposits, according to its financial statements.

First Republic's liquidity shore-up came after San Francisco-based peer SVB, owned by Silicon Valley Financial (SIVB), was shut down by regulators last Friday as depositors flocked to get their money out of the bank. Many of Silicon Valley Bank’s clients were startups and venture capital firms, with accounts which far exceeded $250,000, the amount normally insured by the Federal Deposit Insurance Corporation, or FDCI.

On Sunday, financial regulators said depositors of SVB would be made whole, and announced new facilities to backstop deposit withdrawals across the banking system.

“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” said the joint statement by U.S. Treasury Secretary Janet Yellen, Fed chief Jerome Powell, and FDIC Chair Martin Gruenberg.

Regulators also announced a systemic risk exception for Signature Bank (SBNY), which was closed on Sunday by its state chartering authority.

The measure may not be enough to calm concerns of liquidity for all the banks, especially regional ones which do not have to undergo the same stress tests and regulations as the country's largest lenders.

“Risk and fear are still very much alive in this market place,” David Ellison of Hennessy Large Cap Financial told Yahoo Finance Live. “The electronic nature of the banking system now, people can move money out very rapidly.”

“This isn’t people lined outside looking to get 20 dollars out,” he said.” “his is people calling, going on the Internet, and pulling out millions of dollars very quickly. So this liquidity issue is bigger than the Fed ever expected. And I think it’s going to be a struggle going forward here to kind of establish a sense of liquidity in the system.”

https://finance.yahoo.com/news/firs...f-regional-bank-contagion-131701732.html

“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,” the regulators said.

and

"Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law."



Not directly, but we will pay as "consumers."

j/c

From January 13, 2017 through October 23 of 2020 a total of 15 banks failed.

https://www.fdic.gov/resources/reso...htoG7lwIHSJynwPKQ-Dl3z8Hr8bo5jP-iqMF5d6Q

Signature Bank has officially failed as of yesterday.



the money losses are brutal

yikes. sounds like another one is in line going to fail.

JFC the stock market cannot close soon enough!

9 banks taking massive stock losses + 2 (Signatures & SVB) already failed.

Once again the trump administration rolled back banking regulations Obama put in place to help prevent this. Pffft.

Which ones?

The banking regulations trump rolled back? All of them.

Which ones caused this? Try to be specific as I don't follow banking regulations and would like to read up on them.

Really why do you always want others to do simple research for you. So you can cherry pick…you know Trump rolled back Obama era banking regulations in 2018. Do your own research for specifics. And besides I never said those regulations he rolled back caused this. But it didn’t help to prevent it.

You were the one that said it was regulations Trump rolled back. Since you already know which ones it isn't really doing research is it? Was it something that OCC progulamated or was it something legislative?

Or is it you just want to blame Trump and really have no idea what the regulations are?

I know what the regulations were and are now. It’s up to you to find out for yourself. I already know.

Ok here’s a link. Geeez. https://www.newsweek.com/trump-era-...d-svb-collapse-1787112#slideshow/2207572

In the fallout of Friday's run on the bank, some reports noted that a rollback of banking regulations by former President Donald Trump might have weakened SVB's ability to manage risks associated with interest rates. In 2018, according to The New York Times, Trump signed a bill that axed regulatory requirements for regional banks with less than $250 billion in assets.

The FDIC accounts were supposed to be available today. But some confusion over the weekend had them second-guessing that deadline.

Probably because he is accustomed to you making crap up.

Wow, the stock market is eating banks this week. It's like we've let addicted gamblers manage our national finances. But somehow, it's the working class who always pays the losses for all the gambling.

Yea, my parents are down $100,000.00 in the last 4 or so months - probably less. I'm down 2 grand. Stocks in a local bank, with no fear of failing. I'm of the 'working class'. It'll come back for me. My parents? Who knows. Luckily they are very diversified.

So Trump signed a bipartisan bill (the HOR was Dem and the Senate had to overcome cloiter). The Bank itself lobbied for these changes and these changes "might" have had something to do with it.

You want to blame Trump but there is a lot more in play than just him on this one.

Greed by a bank might have been involved too.

Thanks.

I cannot imagine sitting and wondering what I am going to do about buying some groceries tonight because the bank failed like that. It has to be a devastating thing to wake up to.

Off to put all my shekels in my mattress.

Trump changed the Dodd-Frank regulations.

This was changed by Congress and signed by Trump. They all had complicity in it.

here is the list of the roll-backs -

Not sure which one of these changes (5 years later) is causing the 11-13 banks to get steam-rolled on the stock market/fail today.


https://corpgov.law.harvard.edu/2018/06/13/rolling-back-the-dodd-frank-reforms/

Some of the Act’s more noteworthy changes include removal of certain Volcker Rule limitations on hedge fund and private equity fund naming conventions, the exemption of most small banks from the purview of the Volcker Rule, reduced regulatory burdens for small and medium-sized bank holding companies, changes favorably affecting custodial banks’ supplementary leverage ratio calculations, expansion of public securities offering rules to closed-end exchange listed funds, and beneficial capital treatment of certain real estate exposures and municipal obligations that make investments in such assets more attractive to banks under bank capital rules.

1. Limited Removal of Volcker Rule Naming Restrictions. The Act removes a Volcker Rule limitation that prohibited a bank-affiliated investment adviser from using its name on hedge funds and private equity funds, provided that: (i) the adviser’s name does not include the word “bank”; and (ii) the adviser is not an insured depository institution, a company that controls an insured depository institution, or a foreign banking entity subject to U.S. banking laws (or does not share the same or a variation of the same name with those types of banking organizations).

2. Exemption of Small Banks from the Volcker Rule. Banks with less than $10 billion in assets that have total trading assets and trading liabilities accounting for 5% or less of total assets, and affiliates of such banks, will be exempt from the Volcker Rule, significantly reducing their compliance burdens.

3. Reduced Regulatory Burdens for All but the Largest Bank Holding Companies. The Act eliminates the need for bank holding companies with less than $250 billion in assets to comply with most aspects of “enhanced prudential standards,” including resolution planning, stress testing, and single-counterparty credit limits.

4. Favorable Custodial Bank Treatment of Riskless Assets for Calculating Supplementary Leverage Ratios. The Act allows custodial banks—bank holding companies and insured depository institution subsidiaries of bank holding companies predominantly engaged in custody, safekeeping, and asset servicing activities—to exclude from the denominator of their supplementary leverage ratio the following types of assets: central bank reserves from the Federal Reserve System, the European Central Bank, and non-defaulting OECD-member central banks. These assets are now excluded because Congress has deemed such assets to have zero risk. In effect, those changes mean that custodial banks will now need to hold less Tier 1 Capital (e.g., common equity).

5. Parity for Closed-End Funds Regarding Offering and Proxy Rules. The Act instructs the SEC to, within two years, finalize rules to allow a closed-end investment company that is registered under the Investment Company Act of 1940 and is listed on a national securities exchange, or an investment company that makes periodic repurchase offers pursuant to Investment Company Rule 23c-3 (commonly known as interval funds), to follow the same securities offering and proxy rules that are available to operating companies.

6. Beneficial Treatment of Certain Securities for All Banking Organizations. The Act makes adjustments to the capital rules treatment of some high volatility commercial real estate exposures and improves the treatment of municipal obligations under the Basel III liquidity coverage ratio, regardless of size and activities of the banking organization. The changes make ownership of such assets modestly less burdensome under the capital rules.

Thank you.