Developments related to the failure of two large banks two weeks ago continued to emerge this week, with regulators promising a complete review of regulation and supervision, and even action for smaller banks should the need arise.
Here’s a timeline of dates of selected significant developments that have occurred in the wake of the failures of Silicon Valley Bank (SVB) of Santa Clara, Calif., and Signature Bank of New York, N.Y., on March 10 and March 12, respectively:
April 3: $60 billion in loans from Signature Bank up for sale this summer
A $60 billion portfolio containing largely commercial real estate (CRE) loans of the failed Signature Bank will soon be up for sale, the federal insurer of bank deposits said today. According to the Federal Deposit Insurance Corp. (FDIC), the portfolio of the bank – closed in March by state regulators and put under the receivership of the FDIC – also includes commercial loans and a smaller pool of single-family residential loans. The CRE loans, however, include a concentration of multifamily properties, primarily located in New York City, the FDIC said in a release. The agency said it expects to begin marketing the Signature loans later this summer.
March 26: North Carolina bank to take over SVB bridge bank deposits, loans
First-Citizens Bank & Trust Co. of Raleigh, N.C., will will assume all deposits and loans from the bridge bank that took over for the closed Silicon Valley Bank (SVB), the Federal Deposit Insurance Corp. (FDIC). On March 27, in testimony before the Senate Banking Committee, FDIC Chairman Martin Gruenberg said his agency, as receiver for SVB, and First-Citizens will share in the losses and potential recoveries on the loans covered by the loss-share agreement.
March 22: Powell says bank regulation, supervision must be strengthened
Supervision and regulation of large banks will need to be strengthened in the wake of the recent failure of two institutions, Federal Reserve Board Chair Jerome H. (“Jay”) Powell said, responding to a reporter’s question. Speaking to the press following a meeting of the interest-rate setting Federal Open Market Committee (FOMC), said he would not offer his own views on what changes should be considered by his agency or other federal financial institution regulators. However, he did say “we do need to strengthen supervision and regulation.” Powell indicated any changes would be recommended by Fed Board Vice Chair for Supervision Michael Barr, who is leading a review of the Fed’s supervisory role in the failures of the two banks.
Transcript of Chair Powell’s Press Conference Opening Statement March 22, 2023
March 21: Treasury’s Yellen tells bankers smaller banks could face similar actions
Speaking to a conference of the American Bankers Association (ABA) in Washington, Treasury Secretary Janet Yellen said similar actions taken to those with SVB and Signature banks “could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.” She also indicated that the Treasury and regulators “will need to reexamine our current regulatory and supervisory regimes and consider whether they are appropriate for the risks that banksface today.”
March 20: OCC gives green light to bank purchase, assumption of Signature Bridge Bank deposits
Flagstar Bank, N.A., of Hicksville, N.Y., was “conditionally approved” to purchase assets and assume certain liabilities of the bridge bank that took over the operations for Signature Bank after it was shut down, the OCC announced. The agency said the transaction includes the purchase by Flagstar Bank of certain loan portfolios that total $12.9 billion and the assumption of $34 billion in deposits.
March 20: FDIC extends bid window for Silicon Valley Bridge Bank
The agency said that although there had been “substantial interest from multiple parties” in purchasing the bridge bank set up after SVB failed, the agency and the bidders “need more time to explore all options in order to maximize value and achieve an optimal outcome.” In the meantime, the agency said, it would “continue to operate the bridge bank while exploring strategic options.”
FDIC Extends Bid Window For Silicon Valley Bridge Bank, N.A.
March 19: FDIC enters into purchase/assumption deal for Signature Bank deposits
The agency announced it entered into a purchase and assumption agreement for substantially all deposits and certain loan portfolios of Signature Bridge Bank, N.A., by Flagstar Bank, National Association, Hicksville, N.Y., a wholly owned subsidiary of New York Community Bancorp, Inc., Westbury, New York. The 40 former branches of Signature Bank would now operate under New York Community Bancorp’s Flagstar Bank, N.A., as of March 20.
March 19: Fed, five other central banks jointly act to enhance position of U.S. dollar liquidity
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank jointly announced coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements. “To improve the swap lines’ effectiveness in providing U.S. dollar funding, the central banks currently offering U.S. dollar operations have agreed to increase the frequency of 7-day maturity operations from weekly to daily,” the banks announced. “These daily operations will commence on Monday, March 20, 2023, and will continue at least through the end of April.”
Coordinated central bank action to enhance the provision of U.S. dollar liquidity
March 19: Treasury, Fed give approving nod to action shoring up Swiss banks
Treasury Secretary Janet Yellen and Fed Board Chair Jerome H. Powell issued a joint statement over Swiss regulators taking action to shore up shaky Credit Suisse bank (which was ultimately purchased by UBS Corp.): “We welcome the announcements by the Swiss authorities today to support financial stability. The capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient. We have been in close contact with our international counterparts to support their implementation.”
March 16: Regulators unite to applaud joint bank action to shore up regional First Republic Bank
Treasury Secretary Janet Yellen, Fed Chair Jerome Powell, FDIC Chairman Martin Gruenberg and Acting Comptroller of the Currency Michael J. Hsu jointly said: “Today, 11 banks announced $30 billion in deposits into First Republic Bank. This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system.”
March 14: FDIC warns contracts still in force at failed banks
Contracts previously entered into with the failed SVB and Signature must still be honored, the agency said in a letter to insured institutions. In a financial institution letter (FIL-10-2023), the FDIC said all contracts in effect with the banks before they failed (along with their counterparties) were transferred to the two bridge banks the agency created when the banks failed on Friday, March 10, and Sunday, March 12, respectively. Those bridge banks are Silicon Valley Bridge Bank, N.A., and Signature Bridge Bank, N.A.
Financial Institutions are Required to Meet Contractual Obligations with Bridge Banks
March 13: Fed top supervisor to lead review of regulation, supervision
The Fed Board announced that Vice Chair for Supervision Michael S. Barr is leading a review of the supervision and regulation of Silicon Valley Bank in light of its failure. The review will be publicly released by May 1, the Fed said. (The Fed, in subsequent statements, extended the review to all other large banks.) “The events surrounding Silicon Valley Bank demand a thorough, transparent, and swift review by the Federal Reserve,” said Chair Jerome H. Powell. “We need to have humility, and conduct a careful and thorough review of how we supervised and regulated this firm, and what we should learn from this experience,” said Vice Chair Barr.
March 13: FDIC creates bridge bank for SVB, transfers all deposits
All deposits—both insured and uninsured—and substantially all assets of the former SVB were moved to a newly created, full-service FDIC-operated “bridge bank” in an action designed to protect all depositors, the FDIC said. Depositors would have full access to their money beginning that morning, the agency said. The transfer of all the deposits was completed under the systemic risk exception approved the previous day, FDIC said. “All depositors of the institution will be made whole,” FDIC said in a statement.
FDIC Acts to Protect All Depositors of the former Silicon Valley Bank, Santa Clara, California
March 12: FSOC meets, discusses SVB, Signature, new lending facility
Meeting in executive session via videoconference, the pan-regulatory body (which includes all federal financial institution regulators) heard updates from the FDIC, Federal Reserve and Treasury Department on actions the agencies were taking to stabilize the financial system and protect depositors. According to the Treasury Department, the agencies described their actions to help ensure all of the depositors of SVB and Signature would be made whole. It was also noted, Treasury said, that no losses associated with the resolution of these banks would be borne by taxpayers and that shareholders and certain unsecured debtholders would not be protected. The FSOC members also discussed the funding the Fed was making available to eligible depository institutions to ensure that banks, saving associations, and credit unions “have the ability to meet the needs of all of their depositors.” The new facility would be a “significant source of liquidity, collateralized by high-quality securities, to eliminate a banking institution’s need to quickly sell those securities in times of stress,” the Treasury said, intended to “bolster the capacity of the banking system to safeguard deposits.”
READOUT: Financial Stability Oversight Council Meeting on March 12, 2023
March 12: Fed announces creation of Bank Term Funding Program (BTFP) to address any liquidity pressures
Saying it is prepared to address any liquidity pressures that may arise from the fallout of the failure of the two banks, the Fed announced the new “Bank Term Funding Program (BTFP),” which is designed to make additional funding to eligible depository institutions (including banks, savings institutions and credit unions) to help assure they have the ability to meet the needs of all their depositors, the Fed said. The BTFP, the Fed said, would offer loans of up to one year in length to all eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. These assets will be valued at par, the Fed said. The Treasury said it made available up to $25 billion from the Exchange Stabilization Fund as a backstop for the BTFP. However, the Fed said it does not anticipate that it will be necessary to draw on these backstop funds.
March 12: Regulators issue statement on “systemic risk exception” for depositors at SVB, Signature insuring all deposits
Treasury Secretary Janet Yellen, Fed Board Chair Jerome Powell and FDIC Board Chairman Martin Gruenberg issued a joint statement that all deposits in both SVB and Signature would be granted federal deposit insurance coverage. The joint statement noted that the action would “ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.” Depositors would have access to all of their money, the statement read, and all depositors would be made whole. However: Shareholders and certain unsecured debtholders would not be protected. Further, the statement noted, any losses to the FDIC’s Deposit Insurance Fund (DIF) to support uninsured depositors would be recovered by a special assessment on banks, as required by law.
Joint Statement by the Department of the Treasury, Federal Reserve, and FDIC
March 12: New York regulator closes Signature, appoints FDIC receiver
The $110.4 billion Signature Bank of New York (with total deposits of $82.6 billion) was shuttered by the New York State Department of Financial Services (NYDFS), which immediately named the FDIC receiver. The FDIC, in turn, transferred all the deposits and substantially all the assets of Signature Bank to Signature Bridge Bank, N.A., a full-service bank that would be operated by the FDIC as it attempted to sell the bridge bank to potential bidders. The transfer of deposits was completed under the “systemic risk exception.”
FDIC Establishes Signature Bridge Bank, N.A., as Successor to Signature Bank, New York, NY
March 10: California regulator closes SVB, FDIC appointed receiver
The $209 billion Silicon Valley Bank (SVB) of Santa Clara, Calif. (with about $175.4 billion in total deposits) was closed by the California Department of Financial Protection and Innovation (CDFPI), which named the FDIC as receiver. The FDIC created the Deposit Insurance National Bank of Santa Clara (DINB), and then transferred all insured deposits from SVB to the new bank. Initially, the FDIC said it would cover insured deposits, but was less clear about uninsured deposits (which the agency said the amount of which would be “determined once the FDIC obtains additional information from the bank and customers”). It also noted that, for customers with accounts in excess of $250,000 should contact the FDIC directly.