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The Treasury Department, Federal Reserve Board, and Federal Deposit Insurance Corporation issued a joint statement on Sunday confirming that all Silicon Valley Bank uninsured deposits will be fully covered. The same announcement confirmed similar protections for deposits held by Signature Bank, which regulators closed over the weekend.
The regulators noted that their use of these systemic risk exceptions is necessary to maintain confidence in the nation’s financial system:
“Today 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.”
According to the statement, the decision came as the result of recommendations from the Fed and FDIC, and after consultations with the White House. Treasury Secretary Janet Yellen gave final approval to the FDIC’s plan for fully protecting depositors. Bank customers have been promised full access to all of their money, as of Monday, March 13.
In addition, the Federal Reserve revealed its plans to ensure that eligible depository institutions have the additional funds they may need to meet their depositors’ needs.
The statement stressed that taxpayers will not bear the cost of any losses involved in the deposit backstop effort. Instead, those losses will reportedly be offset through a “special assignment on banks, as required by law.”
The joint statement also confirmed that senior management at the banks have been removed. And though uninsured deposits that exceed the FDIC-insured maximum of $250,000 will now be secured, bank shareholders and “certain unsecured debtholders” will not receive the same sort of protections.