The Federal Reserve (FED) is creating a special funding program for banks. The U.S. Department of the Treasury allocated $25 billion to support the banking system to avoid further liquidity problems.
The Federal Reserve will provide additional funding to depository institutions to help banks meet the needs of their depositors. According to a press release, the Department of the Treasury will provide $25 billion to support “American businesses and households.”
The Bank Term Funding Program (BTFP) will distribute funds to “banks, savings associations, credit unions, and other eligible depository institutions” to support bank liquidity “in times of stress.”
An official statement from U.S. Treasury Secretary Janet Yellen said the FED and FDIC’s “decisive actions” in closing Silicon Valley Bank were intended to “strengthen public confidence in the banking system,” despite the potential consequences.
Yellen noted that the Department of the Treasury didn’t rule out that other regional U.S. banks would suffer from the collapse of SVB. However, the government is prepared to protect investors. Yellen also said that the FDIC was considering a “wide range of available options” for doing so, including allowing a foreign bank to acquire SVB.
After the liquidation of Silvergate Bank, crypto enthusiasts accused the U.S. government of attacking banks that work closely with cryptocurrency companies, calling the actions of government officials “a crackdown against the crypto industry.”
Thus, “to protect depositors,” the U.S. government shut down another crypto-friendly bank. Superintendent Adrienne A. Harris announced that Signature Bank was shut down by the New York Department of Financial Services (NYDFS). According to a report in The Business Times, the regulator’s actions are aimed at limiting “the depositor outflows” and preventing additional bank runs following SVB’s bankruptcy.
Signature Bank had $88.6 billion in deposits in its accounts, according to a recent reserves report. The bank’s diversified depository base allowed it to survive the FTX collapse, and during Silvergate Bank’s destabilization, some cryptocurrency companies resorted to its services.
