Federal bank regulators promised Sunday to cover uninsured deposits at Silicon Valley Bank, and took steps to protect other regional banks, including San Francisco’s First Republic, from a potential systematic crisis.
After a dramatic weekend, officials said customers of the failed Silicon Valley Bank will have access to all their deposits starting Monday, and the regulator gave other banks access to emergency funds. The Federal Reserve also made it easier for banks to borrow from it in emergencies.
“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” said President Biden on Sunday .
“I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.”
All depositors at Silicon Valley Bank, including those whose funds exceed the maximum government-insured level, will be made whole, according to a joint statement by Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and Federal Deposit Insurance Corp. Chair Martin Gruenberg.
A sense of relief swept through Silicon Valley and global markets as the regulators’ announcement came just after U.S. stock futures started trading in Asia. Investors sent U.S. S&P 500 stock futures up 1.2%, while Nasdaq futures rose 1.3%.
The crisis began in San Diego a week ago with the closing of Silvergate Bank, a relatively small institution focused on cryptocurrency. Then on Friday regulators closed tech-focused Silicon Valley Bank, the nation’s 16th largest, and on Sunday closed New York-based Signature Bank, which was focused on the tech sector and cryptocurrency.
Later on Sunday, private bank First Republic said it had secured additional financing through JPMorgan Chase & Co., giving it access to a total of $70 billion in funds through various sources. First Republic’s announcement came after its share price was hit in the aftermath of the run on Silicon Valley Bank
The stress on the banking industry is an indication that the campaign by the Fed and other major central banks to beat back inflation is putting stress in the financial system and global markets.
Silicon Valley Bank’s collapse – the largest bank failure since 2008 – sparked concerns over whether startup clients would be able to pay their staffs, with the FDIC only protecting deposits of up to $250,000.
Some 89% of the bank’s $175 billion in deposits were uninsured at the end of 2022, according to the FDIC.
A senior U.S. Treasury official said the actions taken Sunday would protect depositors, while providing additional support to the broader banking system, but that regulators and others were continuing to monitor the health and stability of the financial system.
“The firms are not being bailed out. The depositors are being protected,” the official said.
The risk would be borne by the Deposit Insurance Fund, which has sufficient funds to do so.
Reuters contributed to this article.