All depositors in Silicon Valley Bank will have access to their funds starting Monday—as well as depositors of Signature Bank, which was also shut down Sunday by New York’s state chartering authority.
The notice came in a joint statement delivered by U.S. Federal Reserve Chairman Jerome Powell, U.S. Treasury Secretary Janet Yellen, and Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg.
The decision was made in consultation with President Joe Biden, according to a press release, which emphasized that the U.S. taxpayer will not bear any losses as a result of the resolution.
“The U.S. banking system remains resilient and on a solid foundation,” the joint statement said, citing banking regulations established after the 2008 global financial crisis that “ensured better safeguards for the banking industry.”
The closure of Signature Bank represents the third U.S. bank failure to take place within the past week, and the second financial institution to fall that’s central to the digital assets industry.
Silvergate said it would voluntarily wind down operations and liquidate last Wednesday, vouching to pay back its depositors in full. Previously, the bank said that it would also discontinue the Silvergate Exchange Network (SEN).
The SEN played a crucial role for crypto-native firms as a round-the-clock payment service for Silvergate’s clients. Signature Bank operates a similar service called Signet, a digital payments platform used for real-time payments by the institutions’ clients.
Though Silvergate and Signature were both popular institutions among crypto-native firms, Signature’s total assets of around $110 billion made the bank much bigger than Silvergate, which reported a total of $11 billion in assets as of the end of last year.
Cryptocurrency prices increased following the joint statements release. Bitcoin and Ethereum had risen 7.2% and 8.2% over the past day to around $21,850 and $1,580, respectively, according to CoinGecko.
Stablecoin USDC also swelled towards its peg to the U.S. dollar, which it previously lost amid the collapse of Silicon Valley Bank. The price of USDC—the second-largest stablecoin by market capitalization—fell to $0.87 after its issuer Circle said $3.3 billion of the token’s reserves were held with the failed bank.
Though depositors who held funds with Signature Bank will be protected when the institution reopens Monday, shareholders and “certain unsecured debtholders” will not be, the statement said, adding that the crypto-friendly bank’s senior management has been removed.
The Federal Reserve Board said Sunday that additional funds will be made available to depository institutions that are eligible in order to assure they’re able to meet the needs of their depositors.
“The Federal Reserve is prepared to address any liquidity pressures that may arise,” the organization stated in a press release, adding that the measures will eliminate “an institution’s need to quickly sell [high-quality] securities in times of stress.”
In a separate statement, the Federal Reserve Board released details about its so-called Bank Term Funding Program (BTFP), which offers bank loans of up to one year, where eligible institutions pledge U.S. Treasuries and other assets as collateral in exchange for loans in the amount of the assets’ face value.
“These actions will reduce stress across the financial system, support financial stability and minimize any impact on businesses, households, taxpayers, and the broader economy,” the statement said.
