In a statement, the Fed said that “This action will strengthen the banking system’s ability to safeguard deposits and ensure the continued supply of money and credit to the economy, with the goal of supporting American businesses and households”.
Meanwhile, in a joint resolution, the Secretary of the Treasury, Janet Yellen, the chairman of the Federal Reserve Board, Jerome Powell, and the President of the Deposit Insurance Fund Company (FDIC), Martin J. Gruenberg, resolved that “depositors will have access to all their money starting Monday, March 13, and that the taxpayer will not bear the losses associated with the resolution of Silicon Valley Bank”while clarifying that “shareholders and certain unsecured debt holders will not be protected, senior management has also been eliminated and any loss from the Deposit Insurance Fund to support uninsured depositors will be recovered through a special assessment of banks, as required by law.
“The Federal Reserve is prepared to deal with any liquidity pressure that may arise”emphasized the official part published on its website.
The FED remarked that “financing will be available through the creation of a new Bank Term Financing Program (BTFP), which offers loans of up to one year to banks, savings associations, credit unions and other credit unions. eligible deposit pledging US Treasury bonds, agency debt and mortgage-backed securities, and other qualified assets as collateral These assets will be valued at par The BTFP will be an additional source of liquidity against high-quality securities, eliminating the need for an institution to quickly sell those securities in times of stress”.
Later, the monetary body stressed that “with the approval of the Secretary of the Treasury, the Department will make available up to $25 billion, from the Exchange Stabilization Fund in support of the BTFP”while indicating that “it will not be necessary to resort to these support funds.”
The Fed also noted that “Treasury Secretary Janet Yellen, after consultation with the President, has approved actions to allow the FDIC to complete its resolution of Silicon Valley Bank in a manner that protects all depositors, both insured and uninsured.” and after receiving a recommendation from the boards of the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve.”
For the monetary agency, “these actions will reduce stress throughout the financial system, support financial stability and minimize any impact on businesses, households, taxpayers and the economy in general.”
At the same time, he emphasized that “the Board is carefully monitoring developments in the financial markets. The banking system’s capital and liquidity positions are strong and the US financial system is resilient.”
The FED stated that “deposit takers can obtain liquidity against a wide range of collateral through the discount window, which remains open and available. In addition, the discount window will apply the same margins used for BTFP-eligible securities.” , further increasing the loanable value at the window”.
Finally, the agency said that “the Board is closely monitoring conditions throughout the financial system and is prepared to use its full range of tools to support households and businesses, and will take additional measures as appropriate.”
Source: Ambito
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