On Sunday, the New York Department of Financial Services, or DFS, announced that it had taken possession of Signature Bank. The DFS appointed the Federal Deposit Insurance Corporation, or FDIC, as the receiver of the bank. In a joint statement, the U.S. Federal Reserve, Treasury Department, and FDIC explained that all Signature depositors would be made whole, similar to a decision made by the federal government to bail out California’s Silicon Valley Bank (SVB).
Government Takes Decisive Action to Protect Depositors and Boost Public Confidence in U.S. Banking System
The crypto-friendly bank Signature Bank has been shut down by financial regulators, and the FDIC is now in control of the New York-based financial institution. In a press release published on Sunday evening, superintendent Adrienne Harris of the New York Department of Financial Services, or DFS, announced the decision. Harris detailed that Signature had approximately $110.36 billion in assets and total deposits of approximately $88.59 billion as of December 31, 2022.
The news follows the collapse of Silvergate Bank and the failure of Silicon Valley Bank, or SVB, which was the second-largest bank collapse in the U.S. since Washington Mutual’s, or Wamu’s, bankruptcy in 2008. While many market observers had to wait the entire weekend to hear about what would happen with SVB, the public doesn’t have to wait any longer, as the U.S. Federal Reserve, Treasury Department, and FDIC addressed the situation in a press statement.
The update, published at 6:15 p.m. ET, explains that the U.S. government is taking “decisive actions to protect the U.S. economy” and bolstering “public confidence in our banking system.” After consulting with secretary of the Treasury Janet Yellen, the FDIC and Federal Reserve approved a plan that fully protects all depositors. The government says that funds will be available for all depositors on March 13 and the resolution will “not be borne by the taxpayer.” In addition to applying this plan to SVB, the resolution of making all depositors whole 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
At the same time the joint statement came out, another update explained that the Federal Reserve had created a Bank Term Funding Program, or BTFP, to help failed banks and their depositors. “With the approval of the Treasury Secretary, 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 U.S. central bank added:
The Board is carefully 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.
What impact do you think the government’s actions to protect depositors in the cases of Silicon Valley Bank and Signature Bank will have on the overall banking industry and public trust in financial institutions? Share your thoughts about this subject in the comments section below.
Image Credits: Shutterstock, Pixabay, Wiki Commons
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.