TFP File Photo Regulators approved plans Sunday to backstop both depositors and financial institutions associated with Silicon Valley Bank, accord
Regulators approved plans Sunday to backstop both depositors and financial institutions associated with Silicon Valley Bank, according to the Associated Press.
All deposit accounts at both institutions, Silicon Valley Bank (SVB) and Signature Bank in New York, will be guaranteed, according to a joint statement released by the Federal Reserve, the Department of the Treasury and Federal Deposit Insurance Corporation (FDIC).
Depositors with SVB “will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer,” the statement said.
“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” leading regulators said in a joint statement.
The Fed facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions. Those taking advantage of the facility will be asked to pledge high-quality collateral such as Treasurys, agency debt and mortgage-backed securities.
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“This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy,” the Fed said in a statement. “The Federal Reserve is prepared to address any liquidity pressures that may arise.”
The Treasury Department is providing up to $25 billion from its Exchange Stabilization Fund as a backstop for any potential losses from the funding program.
The announcement came amid fears that the factors that caused the Santa Clara, California-based bank to fail could spread, and only hours before trading began in Asia. Regulators had worked all weekend to try and come up with a buyer for the bank, which was the second-largest bank failure in history.
Those efforts appeared to have failed as of Sunday, according to the AP.
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Some prominent Silicon Valley executives feared that if Washington didn’t rescue the failed bank, customers would make runs on other financial institutions in the coming days. Stock prices plunged over the last few days at other banks that cater to technology companies, including First Republic Bank and PacWest Bank.
Among the bank’s customers are a range of companies from California’s wine industry, where many wineries rely on Silicon Valley Bank for loans, and technology startups devoted to combating climate change.
The Executives
The CEO of Silicon Valley Bank (SVB) sold more than $3.5 million in stocks weeks before the tech lender collapsed on Friday morning, federal filings show.
A February 27 filing with the U.S. Securities and Exchange Commission (SEC) shows that SVB President and CEO Greg Becker sold $3,578,652.31 in common stock two weeks before federal regulators shut down SVB on Friday morning.
The $3.5 million accounted for 10 percent of his stocks since he sold 12,451 of his roughly 98,000 shares.
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A separate SEC filing shows that the bank’s Chief Financial Officer, Daniel Beck, sold $575,180 in stocks on the same February day.
Federal regulators took over SVB after the financial institution’s second-largest bank failure in U.S. history, the biggest since Washington Mutual in 2008.
SVB announced Thursday it had suffered a tax loss of roughly $1.8 billion, after it sold approximately $21 billion of securities to raise cash quickly amid challenging market conditions.
It also announced plans to raise $2.25 billion by selling common and preferred stock.
Hours later, venture capital firm Founders Fund advised companies it backed to withdraw money from SVB, Bloomberg reported. At the same time, some founders moved their money from SVB to other firms, including Brex and First Republic, according to Barrons.
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SVB Financial shares were halted Friday morning following a massive pre-market selloff, resulting in shares plunging 64% in pre-market trading by 8 a.m., hitting a low of $34.
News of the sale was first broken by Barrons Friday afternoon, just hours after California’s financial regulator closed the bank, telling insured depositors they will have full access to their deposits by Monday morning.
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