U.S. regulators took control of a second bank Sunday and announced emergency measures to ease fears depositors might pull their money from smaller lenders after the swift collapse late last week of Silicon Valley Bank, the Wall Street Journal reported. The measures, which include guaranteeing all deposits of SVB, were designed to shore up wavering confidence in the banking system. They were jointly announced Sunday night by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. Regulators announced they had taken control of Signature Bank, one of the main banks for cryptocurrency companies, on Sunday. The New York bank’s depositors will be made whole, officials said. A senior Treasury official said that the steps didn’t constitute a bailout because stock and bondholders in SVB and Signature wouldn’t be protected. The Fed and Treasury separately said they would use emergency-lending authorities to make more funds available to meet demands for bank withdrawals, an additional effort to prevent runs on other banks. Read more. (Subscription required.)
In related news, bankrupt crypto lender BlockFi Inc. faces risks of having its funds locked up at Silicon Valley Bank, which collapsed Friday after a run on deposits doomed the bank’s plans to raise fresh capital, WSJ Pro Bankruptcy reported. BlockFi, which filed for bankruptcy in November, had roughly $227 million in unprotected funds at the bank, the U.S. Trustee, a unit at the Justice Department overseeing bankruptcies, said in a court filing Friday. The federal watchdog said Silicon Valley Bank documents clearly show the BlockFi account isn’t considered a deposit, isn’t insured by the Federal Deposit Insurance Corp., and might lose value. BlockFi ignored warnings earlier this month about the dangers of the uninsured account, the federal watchdog said. The watchdog said it had urged BlockFi to show that it has taken steps to safeguard the money that was held in the unprotected money-market mutual fund at the bank. Silicon Valley Bank is a popular bank for deposits, lending and other services for businesses in chapter 11, court documents show, adding another dimension to the bank’s collapse that marks the second-biggest failure in a financial services firm in U.S. history. Read more.
