VIDEO: How Big is the Banking Crisis — Fed Stabilizes SVB, Second Bank Seized, Biden Speaks
Monday, March 13, 2023
An emerging banking crisis is now sending shockwaves across the financial markets in the U.S. and globally.GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST
President Joe Biden gave remarks on Monday in an effort to comfort the country and global markets -- SEE VIDEO ABOVE.
The Federal Reserve, Treasury and Federal Deposit Insurance Corporation announced in a joint statement that “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.”
READ THE FULL STATEMENT BELOW
SVB, the tech-focused bank, was seized by the feds on Friday.
According to Reuters, interest in SVB by PNC Financial Group Inc and Royal Bank of Canada had cooled on Sunday, as U.S. regulators invited bids for the failed lender, according to sources familiar with the matter. The Federal Deposit Insurance Corporation (FDIC) had given a Sunday afternoon deadline for bids for the failed bank, one of the sources said. Reuters could not determine which banks had bid.
By Monday morning, new names of potential suitors were swirling. And it was announced that “HSBC will buy the U.K. subsidiary of Silicon Valley Bank for just over $1, after a frantic weekend for regulators who tried to find a way to protect the bank’s depositors after its U.S. parent collapsed,” according to the Wall Street Journal.
“The deal meant the bank avoided being placed into insolvency, which the Bank of England had planned to impose if it couldn’t find a buyer. The central bank said the sale would support confidence in the U.K.’s financial system,” reports WSJ.
New York Bank Seized
The agencies also said that they would enact a similar takeover program for Signature Bank, which the government disclosed was closed on Sunday by its state chartering authority.
Signature Bank, based in New York is not a tech-focused bank, but an institution specializing in providing banking services to law firms, providing everything from cash management services to escrow accounts for holding client money.
Third Bank in Flux
CNBC reports that "First Republic Bank led a decline in bank shares Monday that came even after regulators’ extraordinary actions Sunday evening to backstop all depositors in failed Silicon Valley Bank and Signature Bank and offer additional funding to other troubled institutions." The stock is off more than 60% in overnight trading.
Yellen Calls Emergency Meeting
On Sunday, U.S. Secretary of the Treasury Janet L. Yellen convened a meeting of the Financial Stability Oversight Council (Council) in executive session by videoconference.
According to Treasury in a statement, "during the meeting, the Council heard updates from the Federal Deposit Insurance Corporation (FDIC), Board of Governors of the Federal Reserve System (Federal Reserve Board), and U.S. Treasury Department on actions they were taking to stabilize the financial system and protect depositors. The agencies described their actions to help ensure all of the depositors of Silicon Valley Bank and Signature Bank would be made whole. It was noted that no losses associated with the resolution of these banks would be borne by taxpayers and that shareholders and certain unsecured debtholders would not be protected."
"The Council also discussed the funding the Federal Reserve Board was making available to eligible depository institutions to ensure that banks, saving associations, and credit unions have the ability to meet the needs of all of their depositors. The new facility will be a significant source of liquidity, collateralized by high-quality securities, to eliminate a banking institution's need to quickly sell those securities in times of stress. This will bolster the capacity of the banking system to safeguard deposits," said Treasury.
In attendance at the Council meeting by videoconference were the following members:
Janet L. Yellen, Secretary of the Treasury (Chairperson of the Council)
Jerome H. Powell, Chair, Board of Governors of the Federal Reserve System
Michael J. Hsu, Acting Comptroller of the Currency
Rohit Chopra, Director, Consumer Financial Protection Bureau
Gary Gensler, Chair, Securities and Exchange Commission
Martin Gruenberg, Chairman, Federal Deposit Insurance Corporation
Rostin Behnam, Chairman, Commodity Futures Trading Commission
Todd M. Harper, Chairman, National Credit Union Administration
James Martin, Acting Director, Office of Financial Research (non-voting member)
Steven Seitz, Director, Federal Insurance Office (non-voting member)
Adrienne Harris, Superintendent, New York State Department of Financial Services (non-voting member)
Joint Statement by the Department of the Treasury, Federal Reserve, and FDIC
The following statement was released by Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg:
[Sunday] we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.
After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary 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. 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.
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. 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. 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.
Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.
The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.
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