People and businesses who have money deposited with the failed US bank Sillicon Valley Bank (SVB) will be able to access all of their funds beginning Monday, according to the US government.
Depositors would be fully protected, according to a statement issued by the US Treasury, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC).
According to the statement, the taxpayer will incur no losses as a result of the move.
On Friday, regulators seized SVB’s assets and shut it down.
It was the largest bank failure in the United States since the 2008 financial crisis.
The move came as the company, a major tech lender, was scrambling to raise funds to cover a loss from the sale of assets impacted by higher interest rates.
“The US banking system remains resilient and on a solid foundation, in large part due to post-financial-crisis reforms that ensured better safeguards for the banking industry,” the authorities said in a joint statement.
“Those reforms, together with today’s actions, demonstrate our commitment to taking the necessary steps to protect depositors’ savings.”
These actions also apply to Signature Bank of New York, which is considered the most vulnerable institution after SVB, which was taken over by regulators on Sunday.
As part of their efforts to restore trust, regulators unveiled a new method for banks to access emergency funds.
The Federal Reserve announced a new Bank Term Funding Program that will make it easier for banks to borrow from it during a crisis.
President Joe Biden said the American people could have “confidence that their bank deposits will be there when they need them”.
SVB was regarded as a critical lender for early-stage tech companies. It was a banking partner for nearly half of the venture-backed technology and healthcare companies that went public in the United States last year.
The company, which began as a California bank in 1983, has grown rapidly over the last decade.
However, it came under strain as higher interest rates made it more difficult for start-ups to raise funds through private fundraising or share sales.
The repercussions of the collapse have been felt widely in Silicon Valley, as companies wonder what it means for their finances.
Paul Ashworth, chief North America economist at Capital Economics, said the US authorities had “acted aggressively to prevent a contagion developing”.
“Rationally, this should be enough to prevent any contagion from spreading and bringing down more banks, which in the digital age can happen in the blink of an eye. However, because contagion has always been about irrational fear, we would emphasize that there is no guarantee that this will work “He went on to say.
Meanwhile, SVB’s UK arm has received an offer. The Bank of London, a UK clearing bank, led a consortium of investors that submitted a formal bid to the UK Treasury.
The British government has been working on a plan to assist UK tech firms affected by SVB’s demise.