A man walks past the headquarters of Silicon Valley Bank on March 10, 2023 in Santa Clara, California.
Liu Guanguan | Getty Images
Banking regulators laid out a plan on Sunday to prop up deposits at Silicon Valley Bank, a crucial step to stem a feared panic over the collapsed tech-focused institution.
In a long-awaited announcement by the Federal Reserve, the central bank said it is creating a new Bank Term Funding Program aimed at protecting deposits at the failed institution.
The facility will offer loans of up to one year to banks, savings associations, credit unions and other institutions. Beneficiaries of the facility will be asked to post high-quality collateral such as Treasurys, agency debt and mortgage-backed securities.
“This action will strengthen the banking system’s ability to protect deposits and ensure the ongoing supply 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 the financing program.
Along with the facility, the Fed said it will ease terms at its discount window, which will use the same terms as the BTFP.
The news came after Treasury Secretary Janet Yellen said on Sunday morning that there would be no bailout from SVB.
“We won’t do it again. But we are concerned about depositors and are focused on trying to meet their needs,” Yellen said on CBS’ “Face the Nation.”
The SVB failure was the nation’s largest collapse of a financial institution since Washington Mutual went under in 2008.
There has also been talk of the Fed stepping in to ease the terms of its discount window so that affected institutions have easy access to liquidity. In the concept, banks could pledge bonds to get cash to pay nervous depositors.
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