Image Source: Flickr user Isriya Paireepairit // CC 2.0 License

The sudden collapse of Silicon Valley Bank (SVB) last week ensured that billions of dollars were left stranded. Now, in a bid to protect the larger US economy and restore public confidence amidst the current banking turmoil, the Biden administration announced that all depositors of SVB will be “fully protected” and that their money will be made available on Monday, March 13.

“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,” read a statement by Janet L. Yellen (Secretary of the Treasury), Jerome H. Powell (Federal Reserve Board Chair), and Martin J. Gruenberg (FDIC Chairman).

The statement added, “After receiving a recommendation from the boards of the FDIC and the Federal Reserve and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to their money starting Monday, March 13.” It added that the taxpayer would not have to bear the losses that are associated with the resolution of SVB.

According to the statement, the financing will only be made available through the creation of a new Bank Term Funding Program, which is set to offer loans (for the period of a year) to banks, savings associations, credit unions, and other depository institutions. It added that they were “closely monitoring conditions across the financial system and is prepared to use its full range of tools to support households and businesses, and will take additional steps as appropriate.”

The development comes on the heels of the FDIC initiating an auction late Saturday for SVB and racing to sell the assets of the now-collapsed startup-focused bank. The final bids were due by Sunday afternoon, and the FDIC hopes to make a portion of the uninsured deposits of clients available with the proceeds of the auction.

Despite being the 16th-largest bank in the US, SVB collapsed dramatically last week due to an overwhelming number of consumer withdrawals. As Wall Street grew nervous and banks feared incurring losses on their bond portfolios, firms withdrew their funds from the bank, which (when combined with other factors) accelerated the collapse of the bank and marked the largest bank failure since the financial crisis in 2008.

However, the banking turmoil (and the SVB contagion) was not so swiftly dispersed, as state regulators closed New York-based Signature Bank on Sunday in what marked the latest and third-largest failure in the banking history of the US. As of the end of the previous year, Signature had $110.36 billion in assets and $88.59 in deposits (which is all in the control of the FDIC now). Signature Bank’s depositors and borrowers will automatically become customers of the bridge successor bank that has been set up by the FDIC. They will be able to access their funds via this successor bank on Monday. The insurance fund will cover all deposits at the two banks, rather than the standard $250,000, and any losses would be recovered in a special assessment on banks.

The instances of Signature and SVB are now keeping other banks on their toes. First Republic Bank announced on Sunday that it has bolstered its finances with a fresh dose of funding from JPMorgan Chase & Co, thus increasing its unused liquidity to $70 billion. Its shares had fallen about 30% since Wednesday. “I am 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,” President Biden said in an official statement.