Silicon Valley Bank: Regulators offer plan to 'ensure U.S. banking system continues to perform its vital roles'

Federal regulators said Sunday they were taking steps to ensure that depositors of the failed Silicon Valley Bank will have access to all their money on Monday.

The Federal Reserve, the Treasury Department and the Federal Deposit Insurance Corporation announced that the bank’s troubles posed a systemic risk to the financial system, allowing regulators to take the unusual step of guaranteeing the deposits.

“This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the agencies said in a joint statement.

How it all went down: Silicon Valley Bank collapse explained in graphics

The regulators also said they were taking over a second failing financial institution, Signature Bank of New York, and similarly designating it as posing a systemic risk and stating the federal agencies would backstop its deposits.

The actions came after a run on Silicon Valley Bank last week threatened to prevent most depositors from having access to savings over $250,000, which typically are not insured by the FDIC, and only hours before trading began in Asia.  

The near-financial crisis that U.S. regulators had to intervene to prevent left Asian markets jittery as trading began Monday. Japan’s benchmark Nikkei 225 slipped about 1.2% in morning trading. Australia’s S&P/ASX 200 shed 0.6% to 7,104.30. South Korea’s Kospi, though, was little changed.

Live updates:After Silicon Valley Bank, Signature Bank, fears of more banks collapsing grow

The bank's failure marks the second largest in U.S. history after the 2008 demise of Washington Mutual. It came because tech companies struggled to get financing as venture capital funding dried up and began withdrawing their cash from SVB. To cover the withdrawals, the bank was forced to sell bonds at a loss because of rapidly rising interest rates over the past year.  

Separately, the Fed said it will provide financing by offering loans of up to a year to eligible banks and other financial institutions. The move is intended to prevent a wave of bank runs that would threaten the stability of the banking system and the economy as a whole.

What happened?:Silicon Valley Bank assets seized by FDIC in largest bank failure since 2008

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The Treasury has set aside $25 billion to offset any losses incurred under the Fed’s emergency lending facility. 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.

Analysts said the Fed’s program should be enough to calm financial markets on Monday.

“Monday will surely be a stressful day for many in the regional banking sector, but today’s action dramatically reduces the risk of further contagion,” economists at Jefferies, an investment bank, said in a research note.

Is this the same as the 2008 financial crisis?

These actions are relatively limited compared with what was done 15 years ago. The two failed banks themselves have not been rescued, and taxpayer money has not been provided to the banks.

President Joe Biden said Sunday evening as he boarded Air Force One back to Washington that he would speak about the bank situation on Monday. In a statement, Biden also said he was “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.”

FDIC puts Silicon Valley Bank up for auction 

The Federal Deposit Insurance Corporation began entertaining bids for Silicon Valley Bank on Saturday evening, according to Bloomberg News, who first broke the story.

Bids were due by Sunday afternoon.

The Bank of London confirmed that they had submitted a bid for the failed bank, which was closed on Friday, March 10, by the California Department of Financial Protection & Innovation.

FDIC's role: Silicon Valley Bank assets seized by FDIC in largest bank failure since 2008

"Silicon Valley cannot be allowed to fail given the vital community it serves," said Anthony Watson, group chief executive at The Bank of London. "This is a unique opportunity to ensure the UK has a more diversified banking sector, whilst allowing continuity of service to SVB UK's client base. It would be deeply disappointing for this moment to lead to further consolidation of the power of legacy old US banks."

The FDIC has created and transferred receivership to Deposit Insurance National Bank of Santa Clara, according to a press release.

A notice posed to SVB's website reads that depositors can access their insured deposits, of which $250,000 per depositor is insured by the FDIC.

Silicon Valley Bank's Twitter and Facebook profiles were shut down, and its website has a notice from FDIC and DINB of Santa Clara. It is the first FDIC-insured bank to fail this year.

Associated Press contributed to this report