FDIC Grants Systemic Risk Exception to Guarantee All Deposits at Silicon Valley Bank and Signature Bank

The U.S. government announced Sunday that it is deploying emergency measures to shore up the banking system and backstop deposits at two banks that failed within a matter of days. The Federal Reserve, the Department of the Treasury and Federal Deposit Insurance Corporation (FDIC) have jointly stated that all deposit accounts at both institutions, Silicon Valley Bank and Signature Bank in New York, will be guaranteed.

The collapse of Silicon Valley Bank (SVB) has sparked a debate among the public, with many demanding that the FDIC backstop all the bank’s deposits rather than simply those up to $250,000. This is due to the number of startups which could quickly go under without money to make payroll and cover other on-going costs of doing business.

The FDIC has granted a systemic risk exception for SVB’s deposits, roughly 95% of which are uninsured, as they are heavily concentrated in the tech start-up ecosystem. This exception allows the FDIC to backstop all deposits at the bank, regardless of the amount.

The FDIC has also announced a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering. This exception allows the FDIC to backstop all deposits at the bank, regardless of the amount.

The collapse of Silicon Valley Bank has caused a stir among the public, with many libertarians and anti-regulation voices in Silicon Valley suddenly demanding a bailout. The FDIC’s systemic risk exception is a measure to ensure that all deposits at both banks are guaranteed, regardless of the amount. This will help to protect the tech start-up ecosystem, which could be greatly affected by the collapse of the banks.