WASHINGTON: In an extraordinary action to restore confidence in the US' banking system, President Joe Biden's administration guaranteed that customers of the failed Silicon Valley Bank (SVB) will have access to all their money starting on Monday.
In a related action, the government shut down Signature Bank, a regional bank that was teetering on the brink of collapse in recent days, CNN reported.
Signature's customers will receive a similar deal, ensuring that even uninsured deposits will be returned to them on Monday.
In a joint statement, Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and Federal Deposit Insurance Corporation Chairman Martin J. Gruenberg said the FDIC will make SVB and Signature's customers whole.
By guaranteeing all deposits, even the uninsured money that customers kept with the failed banks, the government aimed to prevent more bank runs and to help companies that deposited large sums with the banks to continue to make payroll and fund their operations, CNN reported.
The Fed will also make additional funding available for eligible financial institutions to prevent runs on similar banks in the future.
"Monday will surely be a stressful day for many in the regional banking sector, but today's action dramatically reduces the risk of further contagion," Jefferies analysts Thomas Simons and Aneta Markowska said in a note to clients Sunday evening.
Wall Street investors were relieved that the government intervened.
Dow futures were up nearly 300 points, or 0.9 per cent late Sunday. S&P 500 and Nasdaq futures were both up 1.3 per cent. Markets had tumbled more than 3 per cent Thursday and Friday as investors feared more bank failures and systemic risk for the tech sector, CNN reported.
"The US banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the (2008) financial crisis that ensured better safeguards for the banking industry," the regulators said.
"Those reforms combined with today's actions demonstrate our commitment to take the necessary steps to ensure that depositors' savings remain safe."
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