(Bloomberg) — U.S. financial regulators took action on Sunday to protect depositors’ funds following the collapse of Silicon Valley Bank and created a new financial backstop to allay fears that households and businesses would flee smaller lenders.
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The Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. jointly announced efforts on Sunday to bolster confidence in the banking system after the SVB’s failure on Friday raised concerns about spillovers.
Treasury Secretary Janet Yellen said the actions will protect “all depositors,” signaling help to those whose bills exceed the typical $250,000 threshold for FDIC insurance.
SVB depositors “will have access to all their funds from Monday, March 13,” the government said in a statement, adding that taxpayers will not be responsible for any losses related to SVB’s resolution.
In a sign that the situation had worsened, the government also said Signature Bank was closed on Sunday by New York State financial regulators and all depositors there will also have access to their money on Monday.
The Fed said in a separate statement that it is establishing a new “Bank Term Funding Program” that offers loans to banks on easier terms than those typically provided by the central bank.
The Treasury will provide “up to $25 billion from the Exchange Stabilization Fund as a backstop” for the bank’s financing program, but the Fed does not expect to call on the funds, it said.
Under the new program, which provides loans for up to one year, collateral is valued at par, or 100 cents on the dollar. That means banks can get larger loans than usual for securities worth less, such as government bonds that fell in value when the Fed raised interest rates.
Normally, under the Fed’s main lending program, known as the discount window, the Fed typically borrows money at a discount to the assets it pledges as collateral, a practice known as haircuts. The Fed said overnight loans under the rebate window will now be subject to the same collateral margins as the new bank financing facility.
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