In abrupt reversal, regulators to cover Silicon Valley Bank, Signature uninsured deposits

By  Kyle Campbell Claire Williams

In a stunning decision, federal regulators issued a systemic risk exception to protect uninsured customer deposits at Silicon Valley Bank of Santa Clara, California, in the wake of the bank’s sudden failure on Friday, and the Federal Reserve announced the creation of a lending facility large enough to cover all the insured deposits in the banking system….Karen Petrou, managing partner at Federal Financial Analytics, said there were likely to be lasting implications for the agencies’ moves, but the agencies are rightly concerned about the immediate risk of failing to do enough early enough to allow depositors all over the country regain confidence in the banking system. This decision has major long term policy implications, but the simple fact that money is safe will stem the kinds of runs that seem to be brewing all over the country,” Petrou said. “Most people don’t understand if their banks have a complex business model or not. I’ve talked to lots of regular people who are frightened, and that’s exactly why the Fed, FDIC and Treasury think there was significant risk.”  When asked whether the moves would be sufficient to meet that need, Petrou was cautiously optimistic. “I would think so, but we won’t know until the banks open in the morning,” Petrou said. “That’s why regulators threw everything they could at this fire.”