The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and the U.S. Treasury all declared on Sunday that they will take “decisive actions” to boost public trust in the nation’s banking sector. The FDIC and Federal Reserve came to this decision after recommending that Silicon Valley Bank (SVB) and Signature Bank be placed under systemic risk exceptions.

With this action, the California-based Silicon Valley Bank is stated to be resolved by the FDIC in a way that “fully protects” depositors’ funds and ensures their access to credit. The same would hold true for New York-based Signature Bank, which was shut down by its state chartering authority.

The Federal Reserve Board Chair Jerome H. Powell, Secretary of the Treasury Janet L. Yellen, and FDIC Chairman Martin J. Gruenberg said in a joint statement that taking this action will guarantee that the U.S. banking system continues to fulfill its crucial responsibilities of safeguarding deposits and granting access to credit to individuals and businesses in a way that supports robust and long-term economic growth.

The banks’ senior management has been removed while there will be no protection for shareholders and some holders of unsecured debt. However, beginning on March 13th, depositors will have access to all of their funds, and taxpayers will not be responsible for any losses. A special assessment on banks will be used to recoup any losses incurred to support uninsured depositors, as required by law.

An additional announcement made by the Federal Reserve Board on Sunday stated that it will provide additional funds for qualifying depository institutions in order to ensure that banks have the resources necessary to satisfy the needs of all of its depositors. The statement noted that the U.S. banking system is still stable and resilient. 

“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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