(How the FDIC's Deposit Insurance Fund Will Cover Depositors After the Bank Failures)
Signature Bank is a commercial bank headquartered in New York City. It was founded in 2001 and primarily serves clients in the metropolitan New York area. Signature Bank provides a range of commercial banking services, including business loans, commercial real estate financing, and cash management.
Silicon Valley Bank (SVB) is a technology-focused bank based in Santa Clara, California. It was founded in 1983 and primarily serves clients in the technology, life sciences, and venture capital industries. SVB offers a range of financial services, including commercial banking, investment banking, and asset management.
According to recent news reports, both Silicon Valley Bank and Signature Bank have been shut down by regulators in a bid to prevent a banking crisis.
New York state regulators shut down Signature Bank, a major lender in the crypto industry, on Sunday.
Signature Bank is one of the main banks to the cryptocurrency industry, and had a market value of $4.4 billion as of Friday. The bank had $110.4 billion in total assets and $88.6 billion in total deposits as of December 31, 2022.
Meanwhile, Silicon Valley Bank was shut down on Friday, making it the largest U.S. banking failure since the 2008 financial crisis and the second-largest ever.
The bank had $209 billion in assets at the end of 2022, and was struggling after a run on deposits and a precipitous decline in the value of its investment holdings.
To prevent depositors from losing their money, regulators have stated that depositors at both Signature Bank and Silicon Valley Bank will have full access to their deposits, and that no losses will be borne by taxpayers.
The Federal Reserve and Treasury have created an emergency program to backstop all deposits at both banks using the Fed's emergency lending authority.
The FDIC's deposit insurance fund will be used to cover depositors, many of whom were uninsured due to the $250,000 cap on guaranteed deposits. However, equity and bondholders at both banks are being wiped out.
The moves to shut down these banks and safeguard depositors have raised concerns that other banks could face similar problems in the future.
However, most consumers don't need to worry about their bank deposits, as the standard coverage from the Federal Deposit Insurance Corporation is $250,000 per depositor, per bank, for each account ownership category.
Consumers can split their cash among ownership categories and banks to avoid exceeding the limits.
In summary, both Silicon Valley Bank and Signature Bank have been shut down in a bid to prevent a banking crisis.
Depositors at both banks will have full access to their deposits, but equity and bondholders are being wiped out.
The moves to safeguard depositors have raised concerns about the stability of the banking industry, but most consumers don't need to worry about their bank deposits as long as they stay within the FDIC's insurance limits.
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