International regulators also had to step in to ease investor fears. The Bank of England and UK Treasury said they had facilitated the sale of a Silicon Valley Bank subsidiary in London to HSBC, Europe’s biggest bank. The deal protected 6.7 billion pounds ($12.2 billion) of deposits.
Under the plan announced by US regulators, depositors at Silicon Valley Bank and Signature Bank, including those whose holdings exceed the $250,000 insurance limit, will be able to access their money on Monday. Under a new Fed program, banks can post those securities as collateral and borrow from the emergency facility.
The Treasury has set aside $25 billion to offset any losses incurred. Fed officials said, however, that they do not expect to have to use any of that money, given that the securities posted as collateral have a very low risk of default.
New York bank regulators took possession of Signature Bank on Sunday, ousting its leaders and handing day-to-day control over to the FDIC as part of a move in which the federal government agreed to guarantee full deposits — even those over the $250,000 threshold.
New York Governor Kathy Hochul described the decision by the state Department of Financial Services as aimed at holding off a bigger crisis involving more banks.
“Our view was to make sure that the entire banking community here in New York was stable, that we can project calm,” Hochul said in a news conference Monday.
She said a high volume of withdrawals that began last week continued with online transactions through the weekend. The bank remained open Monday.
Signature, which was founded more than two decades ago, has about 40 offices across the country and says it focuses on banking for privately owned businesses, their owners and senior managers.
Though Sunday’s steps marked the most extensive government intervention in the banking system since the 2008 financial crisis, the actions were relatively limited compared with 15 years ago.
The two failed banks themselves have not been rescued, and taxpayer money has not been provided to them.
Some prominent Silicon Valley executives feared that if Washington did not rescue their failed bank, customers would make runs on other financial institutions in the coming days. Stock prices plunged over the last few days at other banks that cater to technology companies, such as First Republic and PacWest Bank.
Among the bank’s customers are a range of companies, including many California wineries that rely on Silicon Valley Bank for loans, and technology startups devoted to combating climate change.
Tiffany Dufu, founder and CEO of The Cru, a New York-based career coaching platform and community for women, posted a video Sunday on LinkedIn from an airport bathroom, saying the bank crisis was testing her resiliency.
Given that her money was tied up at Silicon Valley Bank, she had to pay her employees out of her personal bank account. With two teenagers to support who will be heading to college, she said she was relieved to hear that the government’s intent is to make depositors whole.
“Small businesses and early-stage startups don’t have a lot of access to leverage in a situation like this, and we’re often in a very vulnerable position, particularly when we have to fight so hard to get the wires into your bank account to begin with, particularly for me, as a black female founder,” Dufu said.
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