In a move aimed at protecting the US economy by strengthening public confidence in the country’s banking system, the Biden administration has announced that depositors of the failed Silicon Valley bank will have access to their money starting Monday.
After receiving recommendations from the boards of the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve and consulting with the President, Treasury Secretary Janet Yellen on Sunday issued an order enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara. Actions approved. An official statement said that California fully protects all depositors.
California-based Silicon Valley Bank, the 16th largest bank in the United States, was shut down on Friday by the California Department of Financial Protection and Innovation, which subsequently appointed the FDIC as its receiver.
SVB was deeply entrenched in the tech startup ecosystem and the default bank for many high-flying startups; Its sudden downfall is one of the biggest bank failures since the global financial crisis of 2008.
The bank failed after clients – among them many venture capital firms and VC-backed companies that the bank had cultivated over time – began withdrawing their deposits, creating a run on the bank (most runs in more than one One of the big US bank) decade).
Bank runs occur when customers or investors begin withdrawing their money in a panic, leaving the bank unable to pay its obligations when due.
A joint statement issued by the department of finance said, “From Monday i.e. March 13, depositors will have access to all their money. Any loss related to the resolution of Silicon Valley Bank (SVB) will not be borne by the taxpayer.” ” Treasury, Federal Reserve, and the FDIC.
“We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole,” it said.
Shareholders and holders of certain unsecured debt, however, would not be protected, according to the interagency federal statement.
“Senior management has also been superseded. Any loss to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on the banks, as required by law,” it said.
Finally, the Federal Reserve Board announced on Sunday that it would make additional funding available to eligible depository institutions to help ensure banks’ ability to meet the needs of all their depositors.
“This step will ensure that the US banking system continues to play its important role of protecting deposits and providing households and businesses with access to the credit that fuels strong and sustainable economic growth,” the statement said.
According to statements released by Yellen, Federal Reserve Board Chairman Jerome Powell, and FDIC Chairman Martin Gruenberg, the United States’ banking system remains resilient and on solid ground in large part due to reforms undertaken following the financial crisis, which have better ensured Security measures taken for the banking industry
“The reforms combined with today’s action demonstrate our commitment to take necessary steps to ensure that depositors’ savings are protected,” he added.
The sudden collapse of SVB has left Silicon Valley entrepreneurs restless and perplexed.
That has prompted tech investors and startups to scramble to figure out the impact on their financial exposure and ability to operate, at a time when many businesses were already teetering on the edge from widespread layoffs.
To minimize the impact on Indian enterprises, Minister of State for Electronics and IT Rajeev Chandrasekhar said on Sunday that he would meet representatives of start-ups this week to assess the impact of their exposure to Silicon Valley Bank, which specializes in technology. Was deeply confused. startup ecosystem.
According to various industry players and experts, most Indian software-as-a-service startups with a presence in the US and firms linked to incubator Y Combinator are among the entities that will feel the heat of the Silicon Valley Bank collapse but will not see much of the impact. Likely to be short lived.
Rajeev Chandrasekhar tweeted, “SVB_The financial shutdown is definitely disrupting startups across the world. Startups are an important part of the NewIndia economy. I will be meeting with Indian startups this week to understand how they are being impacted @ narendramodi government can help during this crisis.” on Sunday.
(Except for the headline, this story has not been edited by Our Source staff and is published from a syndicated feed.)
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