The US Federal Deposit Insurance Corporation (FDIC) announced that Silicon Valley Bank (SVB) and Signature Bank (SBNY) customers can access their funds during normal banking hours on Monday, March 13, 2023. The FDIC stated that the deposits from both banks were completed under the “systemic risk exception” approved by the Federal Reserve and the US Treasury Department.
Details on the creation of full-service bridge banks operated by the FDIC
Customers who used Silicon Valley Bank (SVB) and Signature Bank (SBNY) will have access to their funds on Monday, following FDIC action to transform both banks into newly created FDIC-operated full-service bridge banks. SVB will now be known as “Bank of Silicon Valley NA”, while the new name of Signature is “Signature Bridge Bank NABoth bridge banks are chartered domestic banks operated by the FDIC with the goal of stabilizing the institutions and implementing orderly resolution.
With respect to US banks, depositors and borrowers will be able to use ATMs, debit cards, online banking and write checks as they could before bank failures. The FDIC is advising loan customers to “continue making loan payments as usual.” While Silicon Valley Bank, or SVB, was the second largest bank failure in the United States after the collapse of Washington Mutual (Wamu) in 2008, Signature Bank of New York was the third largest bank failure in the United States. While there is a lot of information about why SVB failed, very little information is provided about why Signature failed.
Signature was reported to pose “systemic risk” and New York regulators closed the bank “pursuant to Section 606 of the New York Banking Law, to protect depositors.” Section 606, however, deals with getting New York’s approval to relocate or close the bank and ensure that depositors still have access to their funds. Signature will operate to maximize the eventual sale of the bank, and the FDIC appointed Greg Carmichael as CEO of Signature Bridge Bank, NA Additionally, the US bank appointed Tim Mayopoulos as CEO of Silicon Valley Bank, NA
In addition, banking giant HSBC (LSE: HSBA) has agreed to buy Silicon Valley Bank’s UK subsidiary for £1. “This acquisition makes excellent strategic sense for our UK business,” HSBC Chief Executive Noel Quinn said in a statement.
What do you think about what happened with these two banks? Do you think this is an effective solution to stabilize and resolve failing banks? Let us know your thoughts in the comments section below.
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