All depositors, including businesses like Roku and Etsy, will have instant access to their money.
According to CNBC, US regulators have declared that they are taking steps to "completely" secure every deposit made to Silicon Valley Bank (SVB). Several startups and well-known businesses, including Roku and Etsy, call this institution home; starting today, they will have complete access to their capital. Officials also stated there would be "no bailouts" and that shareholders and unsecured creditors would not be protected.
In a joint statement, the FDIC, Treasury Department, and Federal Reserve said: "Today we are taking bold steps to defend the U.S. economy by increasing public trust in our banking system. "Beginning on Monday, March 13, depositors will have access to all of their funds. The taxpayer won't incur any damages as a result of Silicon Valley Bank's bankruptcy."
The UK government also said that HSBC UK had agreed to buy Silicon Valley Bank's UK subsidiary for a symbolic £1 in order to save the company from failing there. Deposits and public monies are safeguarded, much like in the US. With today's private sale of Silicon Valley Bank UK, the government and the Bank of England assisted it, according to the press statement. This makes sure that client deposits are safe and that they may bank normally without any help from the government.
After the worst US bank failure in almost 15 years, the FDIC assumed control of SVB on Friday. Several software startups and businesses were worried that they wouldn't be able to pay their employees, and Etsy warned yesterday that payments to merchants would be delayed. Roku warned on Friday that the decline may cause company to lose up to $487 million, or 26%, of its cash on hand.
In addition to SVB, officials shut down Signature Banks over the weekend. As one of the biggest banks utilised by bitcoin businesses, it had $240 million in deposits from the Coinbase exchange alone. Federal authorities stated in the same joint statement that "all depositors of this institution will [also] be paid whole."
On March 8th, Silvergate, a different company well-known to cryptocurrency exchanges (and notorious for acquiring Diem, the ambitious cryptocurrency project backed by Facebook), failed. Three significant banks with connections to internet companies have now closed in a row, all inside a week.
The government assured depositors who are undoubtedly alarmed by these occurrences that it will provide additional funds to other qualifying institutions. In exchange for central bank loans of up to one year, the new scheme will allow banks to pledge treasuries and other secure government securities as collateral. It is intended to address an important problem that contributed to SVB's failure: unrealized losses on government securities brought on by quickly rising interest rates.
"The U.S. banking system is resilient and on a stable foundation, in large part thanks to changes that were undertaken during the financial crisis that secured improved protections for the banking industry," the joint statement adds. "Those changes, together with the ones we've made today, show our dedication to making the required preparations to protect depositors' funds."
March 13, 2023, 4:18 AM ET, update: The article has been updated to reflect the latest information on the acquisition of Silicon Valley Bank UK by HSBC UK and the complete protection of UK depositors and taxpayers.
Follow Us