Fed offers $25B to help troubled U.S. banks, FDIC to cover large accounts in SVB, Signature Bank failures

The Federal Reserve is offering $25 billion to help troubled banks after the failures of Silicon Valley Bank in California on Friday and Signature Bank in New York Sunday.

The New York Department of Financial Services said Signature had total assets of $110.4 billion and deposits of $88.6 billion at the end of the 2022. That makes it the third largest U.S. bank failure ever.

The failure of Silicon Valley Bank, which has $309 billion in assets, is the second largest U.S. history behind only Washington Mutual ($307 billion).

The central bank effort aims to stave off a wider financial crisis and worries about potential runs on more smaller, regional and business-oriented banks.

The U.S. government also said Sunday depositors at SVB and Signature with accounts of more than $250,000 will have access to their all their funds on Monday.

"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," the U.S. financial agencies said in a statement Sunday

The Federal Deposit Insurance Corp., U.S. Treasury Department and Fed said they would take the same approach with Signature.

"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," the agencies said.

There were concerns that if the FDIC did not cover larger accounts at SVB and then Signature that could spark more business and wealthy customers to move their money to larger, 'systemically important banks (SIBs) who have to go through more financial stress tests and have more reserves in place in case of financial and economic distress.

The U.S. move to cover larger accounts above the usual $250,000 FDIC insurance aimed to ease worries about more bank runs and wider troubles for the financial sectors and stock markets.

"The Board is carefully monitoring developments in financial markets. The capital and liquidity positions of the U.S. banking system are strong and the U.S. financial system is resilient, " the Fed said in its release on the new $25 billion bank "backstop" effort.