Silicon Valley Bank depositors will have access to ‘all their money’, regulators announced

Federal regulators stepped in on Sunday to back all Silicon Valley Bank deposits, resolving a key uncertainty surrounding the second-biggest bank failure in US history just hours before global stock markets resumed trading.

The US Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. said the government would subsidize Silicon Valley Bank deposits beyond the federally insured cap of $250,000. The decision addressed concerns about the fate of uninsured funds at the Santa Clara, Calif.-based bank — the nation’s 16th largest — which had $209 billion in assets and more than $175 billion in deposits.

“Depositors will have access to all their money from Monday 13 March,” the agencies said in a joint statement on Sunday evening. “No losses associated with the resolution of Silicon Valley Bank will be borne by taxpayers.”

The senior management in SVB will be removed, the statement states.

The announcement marks an extraordinary step by federal regulators to calm financial markets before trading resumed on Monday in Asia and Europe, followed by North America. Dow futures jumped more than 400 points on news of the backstop plan.

Hours later, British bank HSBC said it would buy the bank’s British assets for just £1 ($1.21), in a deal facilitated by the British government and the Central Bank of England. As of Friday, SVB UK had loans worth about £5.5 billion ($6.66 billion) and deposits of about £6.7 billion ($8.11 billion).

“This ensures that customers’ deposits are protected and can bank as normal without taxpayer support,” British Chancellor of the Exchequer Jeremy Hunt said in a statement. “I am pleased that we have reached a solution in such a short time.”

Major markets in the Asia-Pacific region were mixed on Monday morning, with Japan’s benchmark Nikkei 225 down 1.1% at the close, although the Shanghai Composite rose 1.2%, as Chinese stocks tracked gains in US futures.

President Joe Biden said late Sunday that he was pleased after the US move.

“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” he said in a statement. “I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen supervision and regulation of major banks so we are not in this position again.”

He said he would talk more about bank security on Monday morning.

Some Silicon Valley Bank customers and employees breathed a sigh of relief after the regulators’ announcement.

Vanessa Pham said she was preparing for the possibility that Omsom, the Asian food company she co-founded and which banks with SVB, could run out of cash within anywhere from two weeks to three months.

“I will patiently and anxiously await the actual deposit into our bank and our access to it,” Pham said.

A Silicon Valley Bank source who worked as a managing director in a regional office before Friday’s shutdown said he was happy for his customers. He welcomed what he called a “favorable decision”, adding that he feared tens of thousands of jobs could have been lost if uninsured deposits were not covered.

Another SVB employee said on Sunday: “The feeling that customers were going to lose money and that they faced all this disruption on our behalf, I think devastated people. So now at least they will be made whole for their deposits, which is a huge relief.”

The employee added that while depositors are guaranteed, the bank’s employees – which SVB has said number more than 8,500 – are in doubt about their jobs: “There is still a lot of uncertainty. The management was just fired as part of it and we may still be bought.”

Federal regulators also said Sunday they took control of another bank, New York’s Signature Bank, which is about half the size of SVB and had become a hub for cryptocurrency financing. They said a similar guarantee for Signature Bank depositors would be introduced in the process of shutting it down.

A senior Treasury official told reporters on Sunday that regulators are keeping an eye on other banks that may have similar problems. As part of a coordinated interagency effort to stop further bank failures, the Fed created an emergency lending program to provide banks with expanded and quick access to funds “in times of stress.”

The official also did not rule out the possibility of finding a buyer for either SVB or Signature Bank.

A federal guarantee for SVB depositors was the hoped-for solution among tech industry players and experts calling for a bailout of the bank’s corporate and startup customers, many of whom had nearly frozen their operations in anticipation of what would come next for a bank that held a large portion of their assets.

The crackdown forced Washington officials to invoke a “systemic risk exception,” an extraordinary measure that allows financial regulators to step in without congressional action. The move required joint approval from the Federal Reserve, the FDIC and the Treasury Department in consultation with Biden.

The UK deal is likely to calm the markets and the nerves of start-ups and their backers. Around 250 UK tech CEOs warned on Sunday that SVB’s failure would pose an existential threat to the sector.

“You know, there’s been a lot of concern because Silicon Valley Bank in the U.K., like in the U.S., is very important to a large number of technology companies, which obviously employ a lot of people in highly skilled jobs,” British Prime Minister Rishi Sunak told NBC News’ Lester Holt Sunday night.

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