On Sunday, the New York Department of Financial Services (DFS) announced that it has taken Signature Bank into its hands; the DFS has appointed the Federal Deposit Insurance Corporation (FDIC) as the bank’s conservator. In a joint statement, the Federal Reserve, Treasury, and FDIC explained that all Signature depositors will be bailed out, similar to the federal government’s decision to bail out Silicon Valley Bank (SVB) in California.
The government will act decisively to protect depositors and increase public confidence in the U.S. banking system
Crypto-friendly bank Signature Bank has been shut down by financial regulators, leaving the FDIC to manage the New York institution. In apress releaseissued Sunday evening, Adrienne Harris, administrator of the New York Department of Financial Services (DFS), announced the decision. Harris detailed that Signature’s total assets as of December 31, 2022 were approximately $11.36 billion and total deposits were approximately $88.59 billion.
The news follows the collapse of Silvergate Bank and Silicon Valley Bank (SVB), the second largest bank failure in the United States since the 2008 collapse of Washington Mutual (Wamu). Many market participants had to wait all weekend to see what would happen to SVB, but the public will not have to wait any longer as the Federal Reserve, Treasury, and FDIC addressed the situation in apress release.
The update, issued at 6:15 p.m. EDT, explained that the U.S. government is taking “decisive action to protect the U.S. economy” and strengthen “public confidence in the banking system.” After consulting with Treasury Secretary Janet Yellen, the FDIC and the Federal Reserve approved a plan to fully protect all depositors. The government states that all depositors will be funded on March 13 and that the resolution will be “at no cost to the taxpayer.” In addition to applying the plan to SVB, the resolution to fully protect all depositors will also apply to Signature Bank.
@federalreserve Announced the Bank Term Funding Program (BTFP) to support American businesses and households and ensure that banks have the ability to meet the needs of all depositors. https://t.co/JIMjkooIDV
– Federal Reserve (@federalreserve) is March 12, 2023
As the joint statement was released, another updateexplained that the Federal Reserve created the Bank Term Funding Program (BTFP) to assist failed banks and their depositors. With the approval of the Secretary of the Treasury, the Treasury will make available up to $25 billion from the Exchange Stabilization Fund as backstops to the BTFP.” The Federal Reserve does not anticipate the need to withdraw these backstops,” the U.S. central bank declared.
The U.S. central bank added:
The Board is closely monitoring developments in financial markets. Capital and liquidity conditions in the U.S. banking system are strong and the U.S. financial system is resilient.
How do you think the actions taken by the government to protect depositors in the cases of Silicon Valley Bank and Signature Bank will affect the overall banking industry and public confidence in financial institutions? Share your thoughts on this topic in the comments section below.
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