Published , by Sam Chandler
Published , by Sam Chandler
The ongoing story regarding Silicon Valley Bank reaches a bright note today as the Federal Reserve, FDIC, and U.S. Treasury announce that they will protect depositors that banked with SVB. The Treasury is making $25 billion available, with depositors able to have full access to funds starting Monday.
As reported by CNBC on March 12, 2023, the Federal Reserve, FDIC & U.S. Treasury have come together to protect those depositors who had funds within Silicon Valley Bank and Signature Bank. There had been concerns regarding uninsured funds due to the $250,000 insured amount, but this backstop will “fully protect all depositors” according to the Treasury Department.
The Treasury Department will utilize $25 billion from its Exchange Stabilization Fund to aid with funding this protection. CNBC notes a senior Fed official said this fund may not be needed but will exist as a safeguard.
The Fed provided a statement regarding the backstop:
This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy. The Federal Reserve is prepared to address any liquidity pressures that may arise.
A joint statement was released by Fed Chair Jerome Powell, Treasury Secretary Janet Yellen and FDIC Chair Martin Gruenberg:
Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system.
It was on March 10 that SVB was closed by regulators with insured deposits to be protected by the FDIC. The concern was for those companies that had funds that exceeded this $250,000 limit and that had done nothing wrong. Today’s news ensures that those depositors are made whole.
In order to offer further guarantees, CNBC writes that the Fed facility is offering loans up to one year to banks and other credit agencies. Those that do utilize this will need to provide collateral.
For those companies that were concerned about their funds that fell outside of the $250,000 insured amount, this should be a bit of good news. Additionally, Treasury Secretary Janet Yellen said there would be no bailout for SVB. On top of this, Dow Jones futures are up over 200 points at the time of writing.