ETF Summary

Federal officials have announced they are guaranteeing all deposits at Silicon Valley Bank, the tech-focused lender that U.S. authorities shut down Friday in one of the biggest bank collapses in years.

In a joint statement Sunday, the U.S. Treasury, the Federal Reserve and the Federal Deposit Insurance Corp. said the extraordinary measures they were taking to shore up SVB deposits would not come at taxpayers’ expense. Asked whether the actions constituted a “bailout,” a senior Treasury Department official emphasized that point Sunday night.

The government also reiterated that only SVB depositors, as well as those at New York-based Signature Bank — a second institution it took over and shut down — would be made whole. Shareholders of the failed banks, as well as some bondholders, will “not be protected” by the actions, the agencies’ statement noted.

“Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out, and the reforms that have been put in place means that we’re not going to do that again,” Treasury Secretary Janet Yellen said on CBS’ “Face the Nation” on Sunday, before the emergency measures were announced.

“But we are concerned about depositors and are focused on trying to meet their needs,” she said.

The cost of covering the deposits, including uninsured amounts in excess of the FDIC’s $250,000 limit, will be paid for in part out of the agency’s Deposit Insurance Fund — a reserve that is paid for by a quarterly fee on banks.

In remarks Monday morning, President Joe Biden said taxpayers would not be on the hook for losses suffered as a result of the backstop measure. Instead, he said, losses would be borne by fees paid by banks.

Funding for the emergency measures will also come from selling off SVB’s assets, said Morgan Ricks, a banking professor at Vanderbilt Law School. As a result, he said, taxpayer dollars will not be directly implicated in the backstop measure.

That is a key difference from the congressionally approved bailout of the U.S. financial system authorities approved in the fall of 2008. That legislation, called the Emergency Economic Stabilization Act, earmarked $700 billion to create the Troubled Asset Relief Program to purchase toxic assets from banks.

By designating their backstop measures as a ‘systemic risk exception’ event, Washington regulators sidestepped a vote that would otherwise be required in Congress on whether to backstop the banks’ depositors.

The ‘exception’ designation required the approval of two-thirds of the Federal Reserve Board of Governors, two-thirds of the board of the FDIC and the Treasury Department in consultation with the president, Ricks said.

The agencies’ joint statement Sunday said any losses the Deposit Insurance Fund ultimately incurs to support depositors will be recovered by ongoing fees on banks.

Assuming there are losses, Ricks said, the costs of the guarantee of all depositors will be borne by banking customers — in other words, the wider public.

In such a scenario, he said, ‘part of it should be expected to fall on bank customers indirectly.’

The Deposit Insurance Fund’s balance was $128.2 billion as of Dec. 31. According to filings, 89% of SVB’s $175 billion in deposits, or about $156 billion, were uninsured.

Ricks said there is no way to know yet how much the federal backstop measure will ultimately cost, adding that it would depend in part on how much regulators can recover from selling the banks’ assets.

‘It’s entirely possible it will cost zero,’ he said, ‘meaning it’s entirely possible the recovery from selling the failed banks’ assets will be enough to fully cover the insured and uninsured deposits.’

Time will tell whether that bears out.

Federal regulators stepped in Sunday to back all Silicon Valley Bank deposits, resolving a key uncertainty surrounding the second-largest bank failure in U.S. history hours before global stock markets resumed trading.

The U.S. Treasury, the Federal Reserve and the Federal Deposit Insurance Corp. said the government would back Silicon Valley Bank deposits beyond the federally insured ceiling of $250,000. The decision addressed concerns around the fate of uninsured funds held at the Santa Clara, California-based bank — the country’s 16th largest — which had $209 billion in assets and more than $175 billion in deposits.

“Depositors will have access to all of their money starting Monday, March 13,” the agencies said in a joint statement Sunday evening. “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

Senior management of SVB will be removed, the statement said.

The announcement marks an extraordinary step by federal regulators to calm financial markets before Monday trading resumed in Asia and Europe, followed by North America. Dow futures jumped Sunday evening following news of the backstop plan, only to fall 200 points Monday morning amid a selloff in bank stocks.

Hours after the federal intervention Sunday, the British bank HSBC said it would buy the SVB’s British assets for just £1 ($1.21), in a deal facilitated by the British government and the central Bank of England. As of Friday, SVB U.K. had loans worth around £5.5 billion ($6.66 billion) and deposits of around £6.7 billion ($8.11 billion).

“This ensures customer deposits are protected and can bank as normal, with no taxpayer support,” British finance minister Jeremy Hunt said in a statement. “I am pleased we have reached a resolution in such short order.”

European markets reacted badly to the SVB saga, with the FTSE 100 index of the United Kingdom’s most valuable public companies down 2.4% by mid-morning Monday, a two-month low.

The fallout was particularly felt by European lenders: Swiss bank Credit Suisse and Germany’s Commerzbank both saw their share prices fall more than 10% on the Stoxx 600 index of European companies, with the index down 2.5% overall.

Major markets in the Asia-Pacific region had been mixed Monday morning, with Japan’s benchmark Nikkei 225 slipping 1.1% at finish, though the Shanghai Composite rose 1.2% as Chinese shares tracked the gains in U.S. futures.

President Joe Biden said late Sunday that he was pleased after the U.S. move.

“The American people and American businesses can have confidence that their bank deposits will be there when they need them,” he said in a statement. “I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again.”

He said he would speak more about banking security Monday morning.

Some SVB customers and staffers breathed sighs of relief after the regulators’ announcement.

Vanessa Pham said she was preparing for the possibility that Omsom, the Asian food products business she co-founded that banks with SVB, might run out of money within anywhere from two weeks to three months.

“I will be patiently, eagerly waiting the actual deposit in our bank and our access with it,” she said.

A source inside SVB who worked as a managing director in a regional office before Friday’s shutdown said he was happy for his clients. He welcomed what he called a “favorable resolution,” adding that he feared tens of thousands of jobs could have been lost if uninsured deposits were not covered.

A second SVB employee said Sunday, “The feeling that clients were going to lose money and that they were facing all this disruption on our behalf I think crushed people. So now they’re at least going to be made whole for their deposits, which is a huge sense of relief.”

The employee added that while depositors have been guaranteed, the bank’s employees — who SVB has said number more than 8,500 — face doubts about their jobs: “There’s still a lot of uncertainty. Management was just fired as a part of that, and we still might get bought.”

Federal regulators also said Sunday that they took control of a second bank, New York’s Signature Bank, which is roughly half the size of SVB and had become a hub for cryptocurrency financing. They said a similar guarantee for Signature Bank depositors would be instituted in the process of shutting it down.

A senior Treasury official told reporters Sunday that regulators are watching other banks that may have similar issues. As part of coordinated interagency efforts to backstop any further bank failures, the federal government has set up an emergency lending program to give banks expanded and quick access to funds “in times of stress.”

The official also did not rule out the possibility of finding a buyer for either SVB or Signature Bank.

A federal guarantee for SVB depositors was the hoped-for solution among tech industry players and pundits calling for a rescue of the bank’s corporate and startup clients, many of whom had all but frozen their operations in anticipation of what would come next for a bank that held much of their assets.

The intervention forced Washington officials to invoke a “systemic risk exception,” an extraordinary measure allowing financial regulators to step in without congressional action. The move required joint approval from the Federal Reserve, the FDIC and the Treasury Department in consultation with Biden.

The U.K. deal will likely calm markets and nerves of start-ups and their backers. Some 250 British tech CEOs warned Sunday that SVB’s failure would present an existential threat to the sector.

“You know, there’s been a lot of concern because Silicon Valley Bank in the U.K., like in the U.S., is very important to a large number of technology companies, which obviously employ many people in high skilled jobs,” British Prime Minister Rishi Sunak told NBC News’ Lester Holt on Sunday evening.

On Friday, Signature Bank customers spooked by the sudden collapse of Silicon Valley Bank withdrew more than $10 billion in deposits, a board member told CNBC.

That run on deposits quickly led to the third-largest bank failure in U.S. history. Regulators announced late Sunday that Signature was being taken over to protect its depositors and the stability of the U.S. financial system.

The sudden move shocked executives of Signature Bank, a New York-based institution with deep ties to the real estate and legal industries, said board member and former U.S. Rep. Barney Frank. Signature had 40 branches, assets of $110.36 billion and deposits of $88.59 billion at the end of 2022, according to a regulatory filing.

“We had no indication of problems until we got a deposit run late Friday, which was purely contagion from SVB,” Frank told CNBC in a phone interview.

Problems for U.S. banks with exposure to the frothiest asset classes of the Covid pandemic — crypto and tech startups — boiled over last week with the wind down of crypto-centric Silvergate Bank. While that firm’s demise had been long expected, it helped ignite a panic about banks with high levels of uninsured deposits. Venture capital investors and founders drained their Silicon Valley Bank accounts Thursday, leading to its seizure by midday Friday.

Worries spread

That led to pressure on Signature, First Republic and other names late last week on fears that uninsured deposits could be locked up or lose value, either of which could be fatal to startups. 

Signature Bank was founded in 2001 as a more business-friendly alternative to the big banks. It expanded to the West Coast and then opened itself to the crypto industry in 2018, which helped turbocharge deposit growth in recent years. The bank created a 24/7 payments network for crypto clients and had $16.5 billion in deposits from digital-asset-related customers.

But as waves of concern spread late last week, Signature customers moved deposits to bigger banks including JPMorgan Chase and Citigroup, Frank said.

According to Frank, Signature executives explored “all avenues” to shore up its situation, including finding more capital and gauging interest from potential acquirers. The deposit exodus had slowed by Sunday, he said, and executives believed they had stabilized the situation.

Instead, Signature’s top managers have been summarily removed and the bank was shuttered Sunday. Regulators are now conducting a sales process for the bank, while guaranteeing that customers will have access to deposits and service will continue uninterrupted.

Poster child

The move raised some eyebrows among observers. In the same Sunday announcement that identified SVB and Signature Bank as risks to financial stability, regulators announced new facilities to shore up confidence in the country’s other banks.

Another bank that had been under pressure in recent days, First Republic declared that it had more than $70 billion in untapped funding from the Federal Reserve and JPMorgan Chase.

For his part, Frank, who helped draft the landmark Dodd-Frank Act after the 2008 financial crisis, said there was “no real objective reason” that Signature had to be seized.

“I think part of what happened was that regulators wanted to send a very strong anti-crypto message,” Frank said. “We became the poster boy because there was no insolvency based on the fundamentals.”

Etsy has begun processing payments to some of the sellers on its platform who were impacted by the collapse of Silicon Valley Bank, the tech company said Monday.

‘Approximately 0.5% of our active seller base had their payments delayed on Friday,’ an Etsy spokesperson said. ‘We are working to pay these sellers today, and we’ve already started processing payments via another payment partner this morning.”

Etsy declined to identify the payment partner it is using to help clear up the disruptions.

The steps toward a resolution came after Etsy warned some sellers about delayed payment processing as a result of the bank’s seizure by regulators on Friday, according to an email from the company shared with NBC News.

The online crafts marketplace said it used SVB to facilitate disbursement to some sellers, and that it was working with other payment partners to issue deposits.

‘We wanted to let you know that there is a delay with your deposit that was scheduled for today,’ the email from Etsy said.

‘We know that you count on us to help run your business and we understand how important it is for you to receive your funds when you need them,’ the email continued. ‘Please know that our teams are working hard to resolve this issue and send you your funds as quickly as possible.’

In a written statement Saturday, an Etsy spokesperson said the issue was related to ‘the unexpected collapse of Silicon Valley Bank.’

The company said in the statement it has been working on a solution, ‘and we expect to pay sellers via our other payment partners within the next several business days.’

Etsy claims 7.5 million sellers worldwide. Regulators placed SVB into receivership around noon Friday to end a bank run on the tech lender that had begun Wednesday after it said it was seeking to raise more than $2 billion.

Etsy seller Owen McKinney said the deposits delay would have a ‘catastrophic’ effect on his business.

McKinney, who runs Kentucky Country Home laser engraving business, said in an email that he relies on the deposits to pay for items like shipping costs and materials. He said he had already reached out to one of his suppliers to delay an order for materials that he needed for next week.

‘At this time, Etsy has not provided a time frame for the funds to be deposited,’ McKinney said. ‘While I do have a website, Etsy remains a huge part of my business.’

Another Etsy seller, Rachel Briggs, has been on Etsy since 2010 selling her designs: enamel pins, keychains, and handmade art dolls. Briggs quit her office job in 2020 and has since been a freelance artist. She said her business on Etsy, in addition to her work as an illustrator, is a “huge part” of her household’s income.

Recently, Briggs paid for an “expensive” tax appointment with a professional to handle the documentation now that her income is less traditional. She expected her Etsy deposit would cover the cost.

“Getting the email that one of my most anticipated deposits is being delayed was not really a good thing to wake up to,” Briggs said. Part of her Etsy sales occurred before the deposit was held up, she added, allowing her to pay for the tax services.

Nina Bissett, another Etsy seller, has relied on the platform as her primary source of income since being laid off. Her business is a curated selection of vintage home goods, handmade, disco balls, and accessories.

When she got the email about the delay in payment, she felt worried for herself and the thousands of other sellers.

“My customers are still expecting their orders, and I won’t be able to use the funds I was expecting to use to pay for shipping and materials,” Bissett said.

“It will effectively limit how much extra inventory I can hold and sell,” she added.

She said she’s hopeful the issue will be resolved soon.

The drama with SVB started earlier this week when the bank disclosed that it sold about $21 billion of securities and proposed to offer over $1 billion in shares, all to fundraise for “general corporate purposes.”

That move raised eyebrows among investors who pondered why SVB would need to raise so much money abruptly. It also worried depositors, many of whom suddenly wondered whether their money was safe and began pulling funds out.

On Friday, the California Department of Financial Protection and Innovation said that it was taking over and closing SVB to protect deposits, naming the Federal Deposit Insurance Corporation as its receiver. The FDIC has formed a separate entity where all insured SVB deposits — up to $250,000 per depositor — will be available by Monday morning.

The shutdown came after a tumultuous morning for SVB, during which trading of its shares was halted after they fell by double-digits before markets opened. That downslide came on the heels of a more than 60% decline Thursday.

The closure marks the biggest bank failure since the 2008 financial crisis and the second-largest in U.S. history after Washington Mutual collapsed during that industry-wide meltdown, according to FDIC data.

Shares of U.S. regional banks slumped on Monday, led by sharp losses in First Republic Bank as news of fresh financing failed to assuage fears of possible bank contagion following the collapse of SVB Financial Group and Signature Bank.

San Francisco-based First Republic has been able to meet withdrawal demands with the help of additional funding from JPMorgan Chase, the mid-cap lender’s executive chair, Jim Herbert, told CNBC.

His reassurance did little to keep the stock afloat. There were multiple trading halts as shares tumbled, last down 67% at $28.05.

In response to Reuters queries, a bank spokesperson said the bank is “continuing to fully serve the needs of our clients … at our offices and online.”

A pedestrian walks past a First Republic Bank branch on Barclay Street, in New York City, on Monday.Michael M. Santiago / Getty Images

Other regional lenders also tumbled, with Western Alliance, KeyCorp, Comerica, Huntington Bancshares and PacWest Bancorp down between 16% and 29%.

There were multiple trading halts on bank shares as the KBW regional banking index fell 5.4%, and the S&P 500 banking index dropped 6%.

“The real issue for the industry is that there is a crisis of confidence in the stickiness of deposits and when that becomes dislocated, things can move very quickly,” said Christopher McGratty, head of U.S. Bank Research at investment bank KBW.

U.S. President Joe Biden vowed to do whatever was needed to address a potential banking crisis. On Sunday, national regulators took emergency measures, and First Republic secured additional financing through JPMorgan and the U.S. Federal Reserve, gaining access to a total of $70 billion in funds.

Despite the cash infusion, Raymond James double downgraded the bank’s stock, highlighting the risk of deposit outflows from panicked large depositors after the bank run at SVB.

Founded in 1985, First Republic had $212 billion in assets and $176.4 billion in deposits as of the end of last year, according to its annual report.

About 70% of its deposits are uninsured, above the median of 55% for medium-sized banks and the third highest in the group after Silicon Valley Bank and Signature Bank, according to a Bank of America note.

Bank of America slashed its price target on the stock to $90 from $140.

The banking rout, which follows several Fed interest rate hikes over the past year, has pushed down yields on the 2-year Treasury note by the most since the financial crisis of 2008.

Art Hogan, chief market strategist at B. Riley Wealth, said the market is “finding out in real time what the risk of rising interest rates at such a fast pace can do to the balance sheets of some of the regional banks.”

Hogan said each regional bank has its own exposure to different parts of the market. He added the fate of regional bank stocks will be “case by case” as investors look to see which ones could have the most negative exposure.

Brian Levitt, global strategist at Invesco, said the market is focusing on smaller banks with specialty lending businesses. After Silicon Valley Bank, investors turn their attention to the next bank exposed to interest rate and specific credit risks. “First Republic Bank, which has significant exposure to the coastal real estate markets appears to be next on the list,” he said.

Among Wall Street lenders, Bank of America dropped 3.3%, Citigroup and Wells Fargo slid about 6% each, while lenders in Asia and Europe plunged too.

The U.S. system of Federal Home Loan Banks (FHLB), which lends to banks and other member financial institutions primarily to help them make mortgages to consumers, is seeking to raise about $64 billion by selling short-term notes, Bloomberg News reported.