Tag Archives: FDIC

Department of Treasury, Federal Reserve, and FDIC Post Release About SVB

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The Department of the Treasury, Federal Reserve, and FDIC posted a joint statement in the form of a press release. It was posted on March 12, 2023, and is in regards to SVB and Signature Bank. From the press release:

“The following statement was released by Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin Gruenberg:

“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to preform it’s vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.

“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 all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.

“We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.

“Shareholders and certain unsecured debt holders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be removed by a special assessment on banks, as required by law.

“Finally, the Federal Reserve Board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.

“The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.”

CNBC reported that U.S. regulators on Sunday shut down New York-based Signature Bank, a big lender in the crypto industry, in a bid to prevent the spreading banking crisis.

The banking regulators said depositors at Signature Bank will have full access to their deposits, a similar move to ensure depositors at the failed Silicon Valley Bank will get their money back.

The regulators shuttered Silicon Valley Bank on Friday and seized its deposits in the largest U.S. banking failure since the 2008 financial crisis – and the second-largest ever. The dramatic moves come just days after the tech-focused institution reported that it was struggling, triggering a run on the bank’s deposits.

Signature is one of the main banks to the cryptocurrency industry, the biggest one next to Silvergate, which announced its impending liquidation last week. It had a market value of $4.4 billion as of Friday after a 40% sell-off this year, according to FactSet.

To stem the damage and stave off a bigger crisis, the Fed and Treasury created an emergency program to backstop deposits at both Signature Bank and Silicon Valley Bank 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 guarantee on deposits. While depositors will have access to their money, equity and bondholders at both banks are being wiped out, a senior Treasury official said.

Overall, I think the decisions outlined in the press release will be a relief to people who otherwise might have lost their savings in SVB or Signature Bank. It is good that this group of people won’t have to lose their entire savings just because their bank failed.

California Regulators Close SVB And Name FDIC As Receiver

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Financial regulators have closed Silicon Valley Bank and taken control of its deposits, the Federal Deposit Insurance Corp. announced Friday, in what is the largest U.S. bank failure since the global financial crisis more than a decade ago, CNBC reported.

The collapse of SVB, a key player in the tech and venture capital community, leaves companies and wealthy individuals largely unsure of what will happen to their money.

According to press releases from regulators, the California Department of Financial Protection and Innovation closed SVB and and named FDIC as the receiver. The FDIC in turn has created the Deposit Insurance National Bank of Santa Clara, which now holds insured deposits from SVB.

The FDIC said in the announcement that insured depositors will have access to their deposits no later than Monday morning. SVB’s branch offices will also reopen at that time, under control of the regulator.

The Federal Deposit Insurance Corporation (FDIC) posted a press release titled: “FDIC Creates a Deposit Insurance National Bank of Santa Clara to Protect Insured Depositors of Silicon Valley Bank, Santa Clara, California” From the press release:

“Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as the receiver. To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB). At the time of closing, the FDIC as receiver immediately transferred to the DINB all insured deposits of Silicon Valley Bank.

“All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay uninsured depositors an advanced dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.

“Silicon Valley Bank had 17 branches in California and Massachusetts. The main office and all branches of Silicon Valley Bank will reopen on Monday, March 13, 2023. The DINB will maintain Silicon Valley Bank’s normal business hours. Banking activities will resume no later than Monday, March 13, including on-line banking and other services. Silicon Valley Bank’s official checks will continue to clear. Under the Federal Deposit Insurance Act, the FDIC may create a DINB to ensure that customers have continued access to their insured funds…

“…Customers with accounts in excess of $250,000 should contact the FDIC toll-free at 1-866-799-0959…

The Wall Street Journal reported that the bank is the 16th largest in the U.S., with some $209 billion in assets as of Dec. 31, according to the Federal Reserve. It is by far the biggest bank to fail since the near collapse of the financial system in 2008, second only to the crisis-era collapse of Washington Mutual Inc.

The bank’s parent company, SVB Financial Group, was racing to find a buyer after scrapping a planned $2.25 billion share sale Friday morning. Regulators weren’t willing to wait. The California Department of Financial Protection and Innovation closed the bank Friday within hours and put it under the control of the FDIC.

According to the Wall Street Journal, the bank’s troubles have dragged down the entire industry. The four largest U.S. banks lost some $52 billion in market value Thursday, and a broader index of bank stocks had its worst day in nearly three years. Bank stocks continue to plunge Friday with a number halted for volatility.

Overall, I find this situation to be disturbing. Bank failures are serious situations. This one in particular seems to be primarily affecting extremely wealthy people, who will very likely get their money back – eventually.

FDIC Sent Cease and Desist Letters to Crypto Companies

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The Federal Deposit Insurance Corporation (FDIC) issued letters demanding five companies and their officers, directors, and employees cease and desist from making false and misleading statements about FDIC deposit insurance and take immediate corrective action to address these false or misleading claims.

Here is more information from the FDIC’s post:

Based upon evidence collected by the FDIC, each of these companies made false representations – including on their websites and social media accounts – stating or suggesting that certain crypto-related products are FDIC-insured or the stocks held in brokerage accounts are FDIC-insurance. In one case, a company offering a so-called cryptocurrency also registered a domain name that suggests affiliation with or endorsement by the FDIC. These representations are false and misleading.

The Federal Deposit Insurance Act (FDI Act) prohibits any person from representing or implying that an uninsured product is FDIC-issued or from knowingly misrepresenting the extent and manner of deposit insurance. The FDI Act further prohibits companies from implying that their products are FDIC-insured by using “FDIC” in the company’s name, advertisements, or other documents. The FDIC is authorized by the FDI Act to enforce this prohibition against any person.

The FDIC sent cease and desist letters to the following crypto-companies: Cryptonews.com, Cryptosec.info, SmartAsset.com, FTX US, and FDICCrypto.com.

The FDIC provided examples of the misinformation posted by Cryptonews:

“Coinbase is one of a few exchanges which is actually regulated and insured by FDIC”

“Coinbase is FDIC insured exchange, meaning that all the funds are kept online (remaining 2%) are protected against theft.”

“eToro’s US users will be glad to know that their cash funds up to USD 250,000 are FDIC-insured, meaning you are guaranteed to get your funds back even in the event of eToro’s failure.”

“Gemini is described as “one of the biggest regulated crypto exchanges with the FDIC insurance for USD deposits, a user-friendly platform, and zero publicly known large scale hacks”

The FDIC also wrote the following in the letter to SmartAsset:

“Among other false and misleading statements, SmartAsset published an article on its website entitled, “List of FDIC-Insured Crypto Exchanges”… “This article includes, among other statements, the claim that “[w]ith those [purportedly insured] exchanges, if you lose your money on deposit the FDIC will reimburse those losses up to the program’s cap.” The article also includes a list of cryptocurrency exchanges that it claims offer FDIC insurance.”

The FDIC also wrote the following in the letter to FDICCrypto.com:

“The FDIC demand that you cease use of the domain name www.fdiccrypto.com, as well as any similar website domain names, immediately. This demand applies to the use of the website with the domain name www.fdiccrypto.com as well as advertising or consumer-facing documenting referencing fdiccrypto. The FDIC further demands that, within fifteen (15) business days of receipt of this letter, you provide written confirmation to the undersigned that you have complied with this demand.”

CNBC reported that in a letter specifically sent to FTX US, the FDIC said it appeared that on July 20, Brett Harrison, the president of FTX.US, published a tweet stating that direct deposits from employers are stored in FDIC-insured accounts in the user’s name.

According to CNBC, Harrison tweeted on Friday that he deleted the post and didn’t mean to indicate that crypto assets stored in FTX are insured by the FDIC, but rather “USD deposits from employers were held at insured banks.”

In my opinion, it is incredibly unwise to make it sound as though the FDIC has endorsed, or will pay back losses of cryptocurrency, when it is abundantly clear that the FDIC wants no part of that. These types of shenanigans are deceitful and potentially harmful to those who engage with disingenuous crypto companies.