The banking system has been shaken up by a number of high-profile bank failures, a volatile stock market and global banking concerns over the past two weeks. The catalyst was the abrupt closure of Silicon Valley Bank (SVB), which was the first FDIC-insured bank to fail in two years.

SVB was previously one of the largest banks serving the tech startup industry — and the 16th largest bank in the U.S. overall. After the bank was forced to sell bonds at a loss, its stock price plummeted and depositors panicked, leading to a classic bank run. This was the second-largest bank failure in U.S. history. The third-largest came just days later when Signature Bank ceased operations.

The FDIC has since taken control of the bank’s branches and deposits as it awaits the results of a bank bid. Moreover, SVB’s parent company, Silicon Valley Bank Financial Group, filed for bankruptcy, seeking protection as it determines how creditors are repaid. Meanwhile, a significant portion of Signature Bank’s assets have been acquired by New York Community Bancorp.

Fed Chairman Jerome Powell indicated the banking system is safe (as did U.S. Treasury Secretary Janet Yellen) but noted that there’s much uncertainty ahead as current conditions play out.

This is a developing situation with possible implications for the stability of the banking system as a whole, both in the U.S. and abroad. Here’s the breakdown of the latest news.

Latest updates on the bank failure fallout

FDIC will reportedly announce SVB sale over the weekend — March 24

The FDIC expects to announce the sale of failed SVB before stock markets open on Monday, March 27, and after the bid closes on Friday, March 24, according to a report from Barron’s Advisor.

Two institutions that are allegedly considering the bid for SVB are Citizens Financial Group and First Citizens BancShares.

On Monday, March 20, the FDIC announced that it had extended the bidding window for Silicon Valley Bridge Bank (the temporary FDIC-managed takeover of SVB) to 8 p.m. on Friday, March 24. Once the purchase of SVB is finalized, it will be the third bank acquisition made during the banking crisis, following NYCB’s purchase of Signature Bank and UBS’ purchase of Credit Suisse.

Banking turmoil could cause recession, Europe’s bank stocks slide, Yellen holds closed-door meeting — March 24

Talks of an incoming recession have been alive for well over a year now — but the banking crisis could be the spark that actually makes it happen, according to a report from Fannie Mae, a government-chartered entity with a mission to provide a stable source of liquidity in the U.S. housing market.

While the report noted that “Bank failures are often part of recessions,” Fannie Mae highlighted that it does “not see many parallels between the current turmoil and what preceded the 2008 crisis.”

The current economic climate and the issues the banking system faces today are much different than they were in 2008.

Nonetheless, as a result of the recent turmoil, Fannie Mae estimates that a recession will happen in the second half of the year, meaning an economic downturn could ensue as early as this summer.

Fears concerning Europe’s banking sector are spreading after European bank shares fell. The German central bank — Deutsche Bank — is seeing a particularly pronounced drop in share price, which is further spreading concern on Wall Street. But German Chancellor Olaf Scholz played down those fears.

“There is no reason to worry,” Scholz said Friday at a European Union summit in Brussels. “Deutsche Bank has thoroughly modernized and reorganized its business and is a very profitable bank.”

Meanwhile, Yellen called an unscheduled, closed-door meeting of the Financial Stability Oversight Council, according to a daily media advisory for the department. The FSOC, which Yellen chairs, is made up of top financial regulators, including members of the Federal Reserve and the FDIC. It’s unclear whether the meeting will result in a statement.

Swiss National Bank raises rates, another bank closes — March 23

Although the Federal Reserve raised rates for the ninth consecutive time, Powell indicated that the Fed will temper its hawkish stance as uncertainty about future conditions muddies the central bank’s outlook. In other words, the Fed may need to slow the rollout of rate hikes depending on how the economy and banking conditions are looking the next time it meets.

Though many worried the move would put further stress on the ongoing banking crisis, the stock market has remained surprisingly resilient, indicating that fears are subsiding after Powell and Yellen reassured the public in the same week that the banking system is healthy and stable.

Meanwhile, at least one other FDIC-insured institution has closed post-SVB failure. PurePoint, the savings-only division of MUFG Union Bank, is set to close in late April. At this point, it’s unclear whether the bank’s closure is the result of the ongoing banking crisis.

Lastly, the Swiss National Bank also moved forward with its fourth rate hikes despite the turmoil created by troubled lender Credit Suisse, which UBS acquired earlier this month.

“The measures announced at the weekend by the federal government, FINMA and the SNB have put a halt to the crisis,” the Swiss central bank said in a statement. “The SNB is providing large amounts of liquidity assistance in Swiss francs and foreign currencies.”

Yellen says FDIC is not considering “blanket insurance” for depositors — March 22

In a Senate hearing, Treasury Secretary Janet Yellen stated that the FDIC is not considering “blanket insurance,” which would insure deposits beyond the standard $250,000 limit.

After the failures of SVB and Signature Bank, the FDIC stepped in to protect funds and guaranteed that all deposits from the banks would be made whole, regardless of whether they were within insurance limitations. But Yellen said this was a “systemic risk exception.” In other words, the FDIC protected the extra deposits in this case to intercept the potential spread of bank runs.

Yellen’s comments come two days after reports indicated that U.S. officials were studying how to guarantee all deposits. Her remarks confirm that the FDIC will only insure excess deposits in the case of systemic risk.

Yellen also noted that the Treasury Department is working with the Financial Stability Oversight Council (FSOC) to restore its ability to designate non-bank financial institutions as systemically important. The designation would allow for greater supervision of these institutions by the Federal Reserve.

Fed raises interest rates despite banking crisis concerns, Powell comments on internal review of SVB collapse — March 22

Despite some concerns that another rate hike from the Federal Reserve could intensify the banking crisis, the Fed announced that it would raise rates by 0.25 percent. The Fed states that the banking system is “sound and resilient,” a sentiment repeatedly expressed by Fed Chair Jerome Powell in Wednesday’s press conference.

“We took powerful actions with the Treasury and the FDIC which demonstrate that all depositors’ savings are safe and the banking system is safe,” Powell said. “Deposit flows in the banking system have stabilized over the last week.”

The rate hike comes as the ninth-straight increase as part of the Fed’s attempt to fight a high inflation rate and bring it down to a 2 percent target.

Beyond the 25 basis point increase, the Fed is closely monitoring how the banking crisis will affect the economy and no longer cites “ongoing rate increases” as its policy. Instead, the Fed anticipates that “some” additional rate changes “may be appropriate” depending on how much the banking crisis tightens credit conditions, according to Powell — somewhat softening the Fed’s stance on the need for rate hikes.

To support the banking system, the Fed will focus on its lending tools — namely, the discount window and the newly created Bank Term Funding Program (BTFP), which are temporary measures to provide additional liquidity to banks if needed.

Powell also addressed the internal review by federal officials of the SVB failure. He said that “SVB experienced an unprecedentedly rapid and massive bank run” that requires a “review of supervision and regulation,” which is being led by Vice Chair for Supervision Michael Barr. Two aspects of SVB’s business that are under investigation include its significant share of uninsured deposits and its “holdings of duration risk,” or holdings at risk of a negative impact from interest rate changes.

The internal review could lead to changes in federal supervision and regulation, which Powell expressed support for.

PacWest raises capital as deposits diminish, First Republic looks to government to back sale — March 22

Pacific Western Bank (PacWest) raised $1.4 billion from investment firm Atlas SP Partners in an effort to shore up its liquidity after the bank saw a 20 percent deposit outflow since the start of the year. The announcement caused a sharp dip in its stock price, which plunged more than 10 percent Wednesday morning.

The West Coast bank also reported that over 65 percent of its deposits are insured, leaving $9.5 billion of its deposits uninsured by the FDIC.

PacWest’s moves are emblematic of the challenges regional banks are facing in the wake of SVB’s collapse. Regional banks, which tend to have large amounts of uninsured deposits, are seeing significant deposit outflows, which is putting stress on their liquidity.

First Republic, perhaps the foremost regional bank teetering on the brink of these issues, is now looking for a potential sale despite a $30 billion injection by large U.S. banks earlier this month. The deal may hinge on backing from the U.S. government in an effort to make the bank more attractive to potential buyers, according to a Bloomberg report.

First Republic, stock market rebound ahead of Fed meeting — March 21

The stock market closed on the upswing Tuesday as regional bank stocks rebounded from a slump that has lasted most of the month. The Dow Jones Industrial Average lifted 0.98 percent, the S&P 500 was up 1.3 percent and the Nasdaq Composite jumped 1.58 percent.

First Republic led the charge in surging bank stocks, increasing nearly 30% by the time markets closed. Other regional bank stocks riding the upswing include Zions Bancorp (up 7%), Comerica Inc. (up 9%), PacWest Bancorp (up 19%) and Western Alliance (up 7%).

The rebound of regional bank stocks comes just hours after U.S. Treasury Secretary Yellen assured the public that deposit outflows have stabilized, indicating that investors’ fears may finally be subsiding as U.S. banks and the federal government continue containing the damage of SVB’s collapse.

Treasury looks into insuring all bank deposits, Yellen says banks are stabilizing — March 21

Standard FDIC insurance covers up to $250,000 per depositor, but that limit was bypassed with the failures of SVB and Signature Bank as the FDIC guaranteed that all deposits from the two banks would be made whole. Now, U.S. Treasury officials are studying whether regulators can insure deposits beyond the standard limit for all banks, according to a Bloomberg News report.

One possibility for expanding FDIC insurance would be to draw from the Exchange Stabilization Fund (the emergency reserve account the Treasury uses to mitigate instability) in emergencies. Another idea that’s circulating is having a tiered price system, in which depositors with funds that exceed the insurance limit can pay to guarantee their extra deposits.

Despite talks of insurance revisions, Treasury Secretary Janet Yellen assured that the bank “situation is stabilizing,” specifically noting that outflows from regional banks have stabilized, in a speech to the American Bankers Association.

The Fed made two big moves following the SVB and Signature failures to prevent further banking turmoil: It created the Bank Term Funding Program (BTFP) to provide additional liquidity through one-year loans, and it expanded the discount window. Yellen expressed confidence that these actions are protecting the broader banking system.

In her speech, Yellen indicated that the government could intervene again if necessary, particularly if smaller banks face liquidity challenges that “pose a risk of contagion.”

Expanding insurance beyond the FDIC limit is one action the government could potentially take in that situation.

UBS outlook downgraded to negative by S&P Global, U.S. bank stocks recover — March 20

S&P Global Ratings changed its outlook on UBS — the largest Swiss bank — from stable to negative. The revision is linked to UBS’s acquisition of Credit Suisse, which UBS announced on March 19 in an effort to rescue the latter bank from collapse.

“We see material execution risk in integrating CS into UBS given the size and weaker credit profile of CS,” S&P Global stated in its update. The agency also cited winding down Credit Suisse’s investment banking operations as a concern for UBS.

The future creditworthiness of UBS will largely depend on how it fares post-merger. The bank has the backing of the Swiss government, which will provide CHF9 billion of protection in case UBS incurs significant losses from the merger. Still, the integration could weaken UBS’s financial profile.

Despite this news, U.S. markets closed higher Monday as investor confidence in the financial system increases. The S&P 500 rose about 0.9 percent as several bank stocks — which tumbled over the last week as regional banks faced increased liquidity pressures — also recovered, including PacWest Bancorp, KeyCorp, Zions Bancorp and Western Alliance Bancorp.

First Republic credit rating downgraded, stock price worsens — March 20

Despite a $30 billion rescue last week, First Republic Bank’s credit rating was cut further by S&P Global on Sunday from “BB+” to “B+,” pushing the regional bank deeper into junk status. The rating agency said another downgrade could be possible as the $30 billion injection may not solve the challenges First Republic faces.

Credit downgrade aside, First Republic’s stock isn’t faring well either. Its stock was down more than 18 percent in premarket trading Monday before taking another nosedive as markets closed. First Republic shares plunged 47 percent on the day.

Regional banks have faced increased pressure over the last week, with First Republic leading the price decline in bank stocks. Since they have narrower customer bases and large amounts of uninsured deposits, regional banks have been under increased liquidity stress following the collapse of SVB and Signature Bank.

Global central banks cooperate to fortify banking system, FDIC extends SVB bidding — March 20

Central banks from around the world came together on March 19 to enhance the liquidity of U.S. dollars and ease global market strains. The effort was jointly announced by the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, U.S. Federal Reserve and Swiss National Bank.

Swap lines have historically been used in times of crisis to keep U.S. dollars circulating through the global market. With a swap line, the Fed provides U.S. dollar funding to foreign banks, which then lends out U.S. dollars to their domestic banks, serving as a liquidity backstop. During the 2008 financial crisis, swap lines were established between the Fed and 14 foreign banks.

The recent coordinated announcement states that maturity operations will increase from weekly to daily, starting Monday, March 20, to improve swap lines’ effectiveness.

Meanwhile, the FDIC is still seeking a resolution to the closure of Silicon Valley Bank — the first bank closure of the year that set off global banking concerns. The FDIC has extended the bidding window for Silicon Valley Bridge Bank and its subsidiary, Silicon Valley Private Bank, “to explore all options in order to maximize value and achieve an optimal outcome.”

Silicon Valley Bridge Bank is the temporary bank created by the FDIC to operate SVB’s branches and control its deposits. It will continue to operate as Silicon Valley Bridge Bank until the bid closes. The extended deadline for the bank’s bid is 8 p.m. ET on Wednesday, March 22, while the bid for Silicon Valley Private Bank closes at 8 p.m. ET on Friday, March 24.

NYCB to acquire Signature Bank deposits — March 19

After the failure of Signature Bank on March 12, the FDIC temporarily took over the bank’s deposits and worked to find a new institution to acquire it. The FDIC announced today that Flagstar Bank, a subsidiary of New York Community Bancorp., will acquire Signature’s deposits and branches.

The transition to Flagstar Bank will take place on Monday, March 20. The FDIC had created a temporary bridge bank — Signature Bridge Bank — to ensure that depositors could access their money and to carry on branch operations until a formal acquisition.

Flagstar Bank will acquire nearly all of Signature’s deposits and a portion of its loan portfolios for a total transfer of about $38.4 billion in assets. About $4 billion of deposits from Signature’s digital banking business were not part of Flagstar’s bid. Instead, the FDIC will pay out those extra deposits directly to customers.

Signature’s 40 branches will also operate under Flagstar Bank starting on Monday, March 20. The FDIC notes that the branches will open during normal business hours, and former Signature customers should continue visiting their local branch until they receive notice from Flagstar that full-service banking is available to them at the acquiring bank’s other branches.

UBS to buy Credit Suisse — March 19

UBS, the largest bank in Switzerland, reportedly will purchase struggling rival Credit Suisse for $2 billion, according to the Financial Times. The news outlet reported the sale will be made possible thanks to Swiss authorities’ plans to change the country’s laws so a shareholder vote is not required.

The purchase reportedly will be paid for in shares and priced at just a fraction of Credit Suisse’s price when markets closed on Friday, March 17. Amid mounting concerns of its demise, the bank saw its stock plummet Friday as depositors rushed to withdraw their funds.

Credit Suisse has been in business for 67 years, and it has tried to spin off its investment banking arm as well as a local retail bank in recent years. The bank’s assets fell from $1.2 trillion in 2008 to $576 billion at the end of 2022. Over the years, the troubled bank has paid billions of dollars in trading losses and legal fines.

SVB Financial files for bankruptcy, Biden calls for accountability — March 17

Silicon Valley Bank Financial Group, parent company of collapsed Silicon Valley Bank, filed for Chapter 11 bankruptcy on Friday, kickstarting a court-led process to liquidate its assets and pay creditors back.

SVB Financial Group said Friday it has approximately $2.2 billion of liquidity and $3.3 billion in unsecured debt.

The filing doesn’t include SVB Capital or SVB securities — its venture capital firm and broker-dealer business, respectively — as these are separate legal entities from SVB Financial Group. Both entities will remain operational. Moreover, the filing doesn’t include Silicon Valley Bank or the bank’s successor created by the FDIC.

“The Chapter 11 process will allow SVB Financial Group to preserve value as it evaluates strategic alternatives for its prized businesses and assets, especially SVB Capital and SVB Securities,” said William Kosturos, Chief Restructuring Officer for SVB Financial Group, in Friday’s press release.

President Joe Biden commented on holding bank executives accountable in a new statement.

In addition to reaffirming that taxpayers will not bear any losses from bank failures, Biden stated that he’s “firmly committed to accountability” for senior executives implicated in recent bank failures. “Congress must act to impose tougher penalties for senior bank executives whose mismanagement contributed to their institutions failing,” he said.

SVB executives are currently under investigation by the U.S. government for large stock sales made before the bank’s closure.

As stocks slump, experts disagree on whether banking crisis is over — March 17

The recent failures of Silicon Valley Bank and Signature Bank, followed by a multi-continental fall in bank shares, led many to fear that a global banking crisis would persist. But some are saying that the worst is done.

“I think that the near-term banking crisis is definitely over,” Dick Bove, banking analyst for Odeon Capital Group, told Yahoo Finance Live.

Bove’s claim follows from the joint effort of 11 large U.S. banks to bail out First Republic Bank by contributing a total of $30 billion in deposits. Historically, including during the 1907 Bankers’ Panic, financial stability has been maintained by banks sharing funds to keep one another afloat.

Other moves have been made on national and international levels to assuage banking turmoil: The Federal Reserve announced an emergency lending program to address banks’ liquidity pressures on March 12, and the Swiss National Bank provided over $50 billion in loans to Credit Suisse to stave off financial worries.

Still, others are less sure that the crisis has been averted. Markets have not recovered — the Dow Jones is down about 400 points, as of this writing. And while Credit Suisse shares saw a brief surge after the Swiss bank announced it would shore up its liquidity, right now it’s back down about 5 percent. Meanwhile, Wells Fargo is down about 4 percent, and JPMorgan Chase and Bank of America are both down over 3 percent.

Largest U.S. banks join forces to save First Republic Bank — March 16

Eleven U.S. banks came together to bail out First Republic, depositing $30 billion into the bank to keep it afloat, according to a joint statement from the U.S. Treasury, Federal Reserve, FDIC and the Office of the Comptroller of the Currency.

The banks coalescing are some of the largest in the U.S., including JPMorgan Chase, Citigroup, Bank of America and Wells Fargo, according to a report from Reuters.

First Republic Bank faced mounting pressure all week and has been in serious danger of collapsing in the wake of SVB’s failure. Its solvency was threatened as depositors started withdrawing their funds in the wake of the recent bank failures and the bank saw its credit ratings drop, which would make it that much more expensive to raise more funds.

“This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system,” the joint statement said.

Treasury Secretary Yellen reassures Congress the U.S. banking system “remains sound” — March 16

Treasury Secretary Janet Yellen testified before the Senate Finance Committee Thursday morning, seeking to soothe consumer and Congressional fears about the current state of the nation’s financial system.

“I can reassure the members of the Committee that our banking system remains sound,” Yellen said at Thursday’s hearing, “and that Americans can feel confident that their deposits will be there when they need them.”

Yellen reemphasized the federal government’s commitment to containing the damage from SVB’s and Signature’s failures, touting the Treasury’s work with the FDIC and the Federal Reserve to ensure that depositors were paid back — and they were, according to Yellen.

Depositors had access to their funds Monday morning, “so they could make payroll and pay the bills,” Yellen said, highlighting that taxpayer money wouldn’t be used in paying back depositors. Moreover, Yellen repeated the federal government’s position that investors are not being protected from the collapses of SVB and Signature Bank.

The Treasury Secretary also defended federal regulators’ actions over the past week, saying that the moves were not about nationalizing the banking system but to avert contagion that could come from the collapse of large banks “that would place community banks across the country at risk of runs.”

First Republic Bank losses persist, Credit Suisse gets lifeline — March 16

Since the SVB failure, First Republic Bank has stood out as one of the more prominent regional banks that could face a crisis as well. As of this writing, the bank’s stock is down over 30 percent. The bank is also still being reviewed by Moody’s for a downgrade.

There is talk that First Republic Bank is considering a sale to stave off the worst possible outcome, according to a report from Bloomberg late March 15.

Meanwhile, Credit Suisse has responded promptly to its losses from yesterday by borrowing over $50 billion from the Swiss National Bank. The Swiss global investment bank also announced it would repurchase certain debt securities for cash of up to about $3 billion. These moves are intended to help the bank maintain adequate liquidity and allay fears of a banking crisis across the European market. Following this announcement, Credit Suisse’s stock has been trending upward.

  • Banking crisis reaches Europe as Credit Suisse shares plummet — March 15

    Credit Suisse, a global investment bank based in Switzerland, lost about 25 percent of its share value. Trading of the bank’s shares was automatically paused on the Swiss market as a result.Meanwhile, the Saudi National Bank — Credit Suisse’s top shareholder — has ruled out the possibility of providing further investments. The Saudi bank’s chairman told Reuters that its stake in the Swiss bank cannot go above 10 percent due to regulations.Other European banks have seen stocks drop, too. UBS Group AG, a rival Swiss bank, fell more than 10 percent, as did France’s Societe Generale SA, and Germany’s Deutsche Bank was down about 8 percent Wednesday morning.American banks and financial services companies aren’t fairing too much better. Morgan Stanley, and Citigroup have both fallen more than 5 percent as of this writing, and Wells Fargo has fallen more than 9 percent.As Europe begins to reel from SVB and Signature’s collapse, U.S. markets continue tumbling. The Dow and S&P 500 were down by approximately 0.9 and 0.7 percent, respectively, when the market closed on Wednesday. The Nasdaq Composite saw a minor lift, however, with a 0.05 percent gain.

    Warren and Porter unveil bill to strengthen bank regulations — March 14

    Led by Sen. Elizabeth Warren and Rep. Katie Porter, a group of Democrats have proposed legislation that would repeal part of a Trump-era law that eased bank regulations, NBC first reported.This move from the Democrats comes a day after President Joe Biden’s speech addressing the SVB and Signature Bank failures, in which he called for Congress to bolster regulations of banks.The proposed Warren-Porter bill would restore part of the Dodd-Frank Act created after the 2008 financial crisis, which was rolled back under the Trump administration.

    Moody’s downgrades banking system to negative — March 14

    Moody’s Investors Service, a leading global provider of credit ratings, changed its outlook on the U.S. banking system from stable to negative, citing a “rapidly deteriorating operating environment.” The cut in outlook comes in the wake of the SVB and Signature collapses.Moody’s has also placed six other banks under review for a downgrade: First Republic Bank, Western Alliance Bancorp, Comerica Inc., Intrust Financial Corporation, UMB Financial Corp and Zions Bancorporation. These banks are among those seeing the sharpest decline in their stock price.Most of these banks are regional banks that’ve been facing increased pressure following the collapses of SVB and Signature, as they raise much of the same liquidity concerns that led to SVB’s demise.As a result, the credit ratings firm’s report outlined that banks with “substantial” amounts of Treasury bonds (which have lost their value from the Fed’s rate hikes) and uninsured deposits will be among those facing the most pressure.

    Government launches investigation of Silicon Valley Bank failure — March 14

    Following the collapse of SVB, both the U.S. Department of Justice and the Securities and Exchange Commission are conducting separate investigations into the failure and stock sales made by the bank’s financial officers the day before, according to a report from the Wall Street Journal.The report notes that the investigations may not lead to any charges and are not unusual following a big loss.One of the focuses of the investigation is the large sale of stocks that came before the bank’s collapse. SVB’s Chief Executive Officer Greg Becker sold $3.6 million of company stock just under two weeks before the failure, Bloomberg reports. This was one of several insider sales since the start of 2023.

    Several regional banks see stocks decline before trading is halted — March 13

    A number of regional banks have had a volatile run in the stock market in the aftermath of the SVB collapse.Western Alliance Bank, based in Phoenix, Arizona, faced a significant drop in the stock market Monday morning. The bank’s CEO, Kenneth Vecchione, issued a statement assuring that the bank can meet all of its clients’ funding needs. He also claimed that cash outflows have been moderate.Meanwhile, Comerica, PacWest Bancorp and East West Bancorp were down between 17 percent and 28 percent on March 13. Zions Bancorporation, another regional bank, was down 26 percent.Trading for a number of bank stocks, including First Republic Bank, Western Alliance Bank and PacWest Bancorp, was briefly halted Monday morning.

    First Republic Bank leads plummeting bank stocks, CEO affirms stability — March 13

    Shares for First Republic Bank fell more than 60 percent before trading was halted.“First Republic’s capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks,” said Jim Herbert, CEO and President of First Republic Bank, in a press release on Sunday, March 12. “As we have done since 1985, we operate with an emphasis on safety and stability at all times, while maintaining a well-diversified deposit base.”The San Francisco-based bank is under scrutiny, as concerns about its liquidity were raised recently over the same financial woes as SVB. First Republic received additional liquidity from the Federal Reserve and JPMorgan Chase.

    Signature Bank becomes third-largest bank to fail — March 12

    Signature Bank, a New York-based commercial bank, was closed by New York regulators, citing the bank as a systemic risk to the financial system’s stability. Signature Bank is the third-largest bank failure in U.S. history, with SVB coming in second and Washington Mutual, which failed in 2008, coming in first.Signature Bank’s sudden closure is at least partly due to SVB’s collapse. The New York-based bank was previously one of the main banks in the cryptocurrency industry, which was already reeling from the liquidation of Silvergate, previously the largest crypto bank.With the crypto market already fumbling and investors withdrawing funds ever since the collapse of FTX in late 2022, SVB’s closure incited a bank run at Signature Bank, which had a significant amount of large, uninsured deposits. This prompted regulators to intervene, attempting to stave off a larger financial meltdown.Signature Bank depositors are receiving the same treatment as SVB depositors: The FDIC said it will attempt to make all depositors whole, regardless of whether their funds were all insured or not.

Silicon Valley Bank collapses after over two years without a bank failure

Silicon Valley Bank (SVB) is the first bank to fail since late 2020. Some of the major companies that had funds in SVB — and that have been affected by the bank’s collapse — include Vox Media, Roku, Etsy and Roblox.

News of the bank’s collapse came all at once, but there were a number of forces brewing that led up to its demise.

Over the past year, the Federal Reserve has hiked interest rates to combat high inflation. Increased rates mean higher borrowing costs, which puts a strain on companies, especially venture-backed startups that need funds — and venture-backed startups were some of SVB’s main customers. At the same time, increased interest rates reduced the value of the bonds in which banks like SVB invested their customers’ deposits when rates were lower.

On March 8, two days before the collapse, SVB sold a $21 billion bond portfolio at a $1.8 billion loss. The bank also announced it would sell $2.25 billion of common equity and depository shares to compensate for its customers’ withdrawals, but the bank was unable to complete this equity offering before being shuttered. By the end of March 9, the bank’s stock fell 60 percent to a drastic loss of over $80 billion in bank shares.

This sent depositors rushing to withdraw their funds.

On March 13, the FDIC announced it transferred all insured and uninsured deposits to Silicon Valley Bank, N.A., a newly created bridge bank. It reported customers can access their funds through debit cards, ATMs and check writing in the same manner as before.

The Fed released a statement ensuring that no taxpayers will face any losses from the bank’s closure. While depositors are protected, the Fed states that “shareholders and certain unsecured debtholders will not be protected.”

The Fed responds to ongoing banking failures, assures deposits are safe

Federal officials assured taxpayers that they would not face any losses as a result of recent bank closures, according to the joint statement by Secretary of the Treasury Janet Yellen, Federal Reserve Board Chair Jerome Powell and FDIC Chairman Martin Gruenberg.

One way that the Federal Reserve is safeguarding deposits and fortifying the banking system is by making additional funding available to banks through a newly created Bank Term Funding Program (BTFP). The Fed announced it was creating this emergency program that would provide loans as an additional source of liquidity, so that institutions are less likely to quickly sell high-quality securities (such as Treasuries) to meet withdrawal needs.

President Joe Biden commented on March 13 on the recent bank failures and the Fed’s response, noting that he instructed the agency to take swift action to protect the interests of “jobs, some small businesses, and the banking system overall.”

“Americans can rest assured that our banking system is safe,” President Biden said. “Your deposits are safe.”

The president warned, however, that investors will not be protected: “They took a risk and when the risk didn’t pay off, investors lose their money.”

The president said he plans to ask Congress to strengthen bank regulations as a way to prevent further bank failures.

Some banking regulations put in place following the 2008 financial crisis, including the Dodd-Frank Act, were rolled back during the Trump administration. Biden criticized this rollback in his speech and suggested that greater regulation of banks is needed to keep the banking system secure.

The Fed says that its response to the closures of Silicon Valley Bank and Signature Bank will fully protect all deposits, regardless of whether they’re insured. Still, it’s a good idea to check your insurance coverage as the banking system endures rocky conditions so your funds will be safe. The FDIC guarantees that up to $250,000 per depositor, per account ownership type and per FDIC-insured bank are protected. You can use the FDIC’s estimator to find out if your deposits fall within FDIC limits. Otherwise, consider moving some funds around to insure excess deposits.


Bankrate’s Karen Bennett also contributed to this article.