The New York Department of Financial Services, or DFS, seized control of Signature Bank on Sunday. In a joint statement, the U.S. Federal Reserve, Treasury Department, and FDIC revealed that all Signature depositors would be made whole, similar to the federal government’s decision to bail out California’s Silicon Valley Bank (SVB).
Government Takes Action to Protect Depositors and Reassure the Public of U.S. Banking System
Financial regulators have taken over Signature Bank, the crypto-friendly bank based in New York. Superintendent Adrienne Harris of the DFS announced the decision in a press release published on Sunday evening. Harris mentioned that Signature had approximately $110.36 billion in assets and total deposits of about $88.59 billion as of December 31, 2022.
This news follows the collapse of Silvergate Bank and the failure of Silicon Valley Bank, or SVB, which was the second-largest bank failure in the U.S. since Washington Mutual’s, or Wamu’s, bankruptcy in 2008. While many market observers had to wait the whole weekend to hear what would happen with SVB, the public didn’t have to wait very long, as the U.S. Federal Reserve, Treasury Department, and FDIC released an update.
The joint statement, released at 6:15 p.m. ET, explained that the U.S. government had undertaken “decisive actions to protect the U.S. economy” and restore “public confidence in our banking system.” Following consultation with secretary of the Treasury Janet Yellen, the FDIC and Federal Reserve approved a plan that fully secures all depositors. The government clarified that funds will be available for all depositors on March 13 and the resolution will “not be borne by the taxpayer.” The same resolution of protecting all depositors will also be applied to Signature Bank.
@federalreserve announces Bank Term Funding Program (BTFP) to support American businesses and households, assure banks have ability to meet needs of all their depositors: https://t.co/JIMjkooIDV
— Federal Reserve (@federalreserve) March 12, 2023
The Federal Reserve also announced the Bank Term Funding Program, or BTFP, to assist failed banks and their depositors. “The Department of the Treasury will make available up to $25 billion from the Exchange Stabilization Fund as a backstop for the BTFP. The Federal Reserve does not anticipate that it will be necessary to draw on these backstop funds,” the U.S. central bank declared.
The Board is closely monitoring developments in financial markets. The capital and liquidity positions of the U.S. banking system are strong and the U.S. financial system is resilient.
How do you think the government’s measures to protect depositors in the cases of Silicon Valley Bank and Signature Bank will affect the banking industry and public trust in financial institutions? Share your thoughts in the comments section below.
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