The fallout from the collapse of Silicon Valley Bank continues to ripple across the globe after the second-largest banking failure in history and the largest since the 2008 financial meltdown.
California regulators shut down the bank on Friday to help calm the fears of investors and customers, some of whom were unable to withdraw their funds, CNN reported.
Customers of failed banks will be protected, Biden says
Update 9:10 a.m. EDT March 13: Speaking Monday at the White House, President Joe Biden reiterated that “Americans can have confidence that the banking system is safe” following the second- and third-largest bank failures in U.S. history.
“Your deposits will be there when you need them,” the president said. “Small deposit businesses across the country that deposit ... at these banks can breathe easier knowing that they’ll be able to pay their workers and pay their bills, and the hard-working employees can breathe easier as well.”
He said customers of Silicon Valley Bank and Signature Bank “can rest assured they’ll be protected, and they’ll have access to their money as of today.”
“No losses will be borne by the taxpayers,” he said. “Instead, the money will come from the fees that banks pay into the deposit insurance fund.”
— Theresa Seiger, Cox Media Group National Content Desk
Sen. Elizabeth Warren: Bank failures caused by federal leaders
Update 8:55 a.m. EDT March 13: Sen. Elizabeth Warren, D-Mass., said in an opinion piece published Monday by The New York Times that the recently announced bank failures “are the direct result of leaders in Washington weakening the financial rules” in 2018.
“Had Congress and the Federal Reserve not rolled back the stricter oversight, S.V.B. and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks,” she wrote.
“They would have been required to conduct regular stress tests to expose their vulnerabilities and shore up their businesses. But because those requirements were repealed, when an old-fashioned bank run hit S.V.B., the bank couldn’t withstand the pressure — and Signature’s collapse was close behind.”
— Theresa Seiger, Cox Media Group National Content Desk
Signature Bank closure 3rd-largest bank failure in US history
Update 8:30 a.m. EDT March 13: The closure Sunday of Signature Bank, whose customers include some of the nation’s largest law firms, marked the third-largest bank failure in history days after the collapse of Silicon Valley Bank become the second-largest bank failure in history.
On Sunday, regulators began emergency measures aimed at bolstering confidence in the U.S. banking system.
Original report: Silicon Valley Bank was one of the top 20 largest commercial banks and, as of Friday, was under the control of the U.S. Federal Deposit Insurance Corporation (FDIC). It served almost half of the venture capital-backed technology and life-science companies in the U.S., according to The New York Times.
The FDIC is considered a receiver and has been trying to find a buyer for Silicon Valley Bank so the government can turn around and pay back the bank’s depositors and creditors. The FDIC held an auction over the weekend, but eventually decided to pay back depositors without finding a buyer because it would be difficult to go over the bank’s ledgers by Monday morning, The New York Times reported.
The FDIC said that all insured depositors would have access to their money by Monday morning, and uninsured depositors would get an “advance dividend within the next week,” CNN reported. According to Silicon Valley Bank’s latest annual report, customers based in the U.S. had at least $151.5 billion in uninsured deposits at the end of 2022 while there were at least $13.9 billion in foreign, uninsured deposits.
Meanwhile, HSBC announced it will be buying a British subsidiary of Silicon Valley Bank, with the bank operating as normal under the new owner as regulators there said that all deposits at the bank are “safe and secure as a result of this transaction,” the Times reported.
A second bank, Signature Bank, which is based in New York and deals with real estate, shut down on Sunday. The Times reported that if the bank would have continued operating, it could have brought down the country’s financial system.
Silvergate, which focuses on cryptocurrency, is also starting the process of shutting down and is planning to liquidate the bank, CNN reported.