People and businesses who have money deposited with failed US bank Sillicon Valley Bank (SVB) will be able to access all their cash from Monday, the US government has said.
A statement from the US Treasury, the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) said depositors would be fully protected. The taxpayer will not bear any losses from the move, the statement said.
SVB was shut down by regulators who seized its assets on Friday. It was the largest failure of a US bank since the financial crisis in 2008.
The move came as the firm, a key tech lender, was scrambling to raise money to plug a loss from the sale of assets affected by higher interest rates.
“The US 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,” the authorities’ joint statement said.
“Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.” Those actions also apply to Signature Bank of New York, seen as the most vulnerable institution after SVB, which came under regulatory control on Sunday.
As part of their moves to restore confidence, regulators also unveiled a new way to give banks access to emergency funds. The Federal Reserve said it would offer assistance through a new Bank Term Funding Program, making it easier for banks to borrow from it in a crisis.
President Joe Biden said the American people could have “confidence that their bank deposits will be there when they need them”.
SVB was seen as a crucial lender for early-stage businesses in the tech sector. It was the banking partner for nearly half of US venture-backed technology and healthcare companies that listed on stock markets last year.
SVB started as a California bank in 1983 and expanded rapidly over the last decade. But it came under pressure as higher interest rates made it harder for start-ups to raise money through private fundraising or share sales.
In Silicon Valley, the reverberations from the collapse have been widespread as companies face questions about what it means for their finances. Meanwhile, an offer has been made for SVB’s UK arm. A consortium of investors led by the Bank of London, a UK clearing bank, has submitted a formal bid to the UK Treasury.
The British government has been working on a plan to support UK tech firms affected by the collapse of SVB.