Since Silicon Valley Bank (SVB) was closed by the California Department of Financial Protection and Innovation on Friday, March 10, 2023, and the FDIC was appointed as receiver, several developments have occurred. In a surprising and welcome announcement, on Sunday March 12, 2023, regulators advised that all depositors of SVB will have access to their money beginning on March 13, 2023.
More specifically, in a Joint Statement by the Department of Treasury (Janet Yellen), Federal Reserve Board (Jerome Powell), and FDIC (Martin Gruenberg), the three regulators advised that decisive action would be taken to “protect the U.S. economy by strengthening public confidence in our banking system.” After consulting with President Biden, all SVB depositors will have access to all of their money beginning on March 13, 2023, and no losses associated with the resolution of SVB will be borne by taxpayers. In other favorable news, HSBC UK has also agreed to acquire the SVB UK subsidiary for £1.
Those not protected by this action include shareholders and certain unsecured debtholders. Senior management has also been removed from this relief, and the SEC is on “high alert” for any potential misconduct. SEC Chairman Gary Gensler advised on March 12, 2023 that “without speaking to any individual entity or person, we will investigate and bring enforcement actions if we find violations of the federal securities laws.”
While the closure of SVB rocked the news to start the weekend, there was yet another large bank closure on March 12, 2023. The New York Department of Financial Services announced that it took possession of Signature Bank and appointed the FDIC as receiver. Signature Bank had 40 branches across the US in New York, California, Connecticut, North Carolina, and Nevada. Signature Bank had total assets of $110.4 billion and total deposits of $88.6 billion as of December 31, 2022. Like SVB, the FDIC has announced that depositors and borrowers of Signature Bank will have access to their funds and will be made whole with no losses borne by taxpayers.
In other financial institution news, last Wednesday, March 8, 2023, Silvergate Bank announced by press release its intent to wind down operations and voluntarily liquidate in an orderly manner and in accordance with applicable regulatory processes. According to Silvergate, the plan includes full repayment of all deposits. Both Silvergate and Signature Bank were major banks for cryptocurrency.
The recent actions taken by regulators are a positive development for Insureds banking with SVB and Signature Bank. Given the amount of activity and the likely unease of those directly impacted by the closure of these two banks, we may see an uptick in social engineering and phishing attempts by bad actors. We will likely see efforts by fraudsters to commit social engineering fraud and/or phishing against customers by tricking them into clicking on a link or sending confidential account or personal information in order to access their funds. It is therefore important to remain vigilant in practicing good judgment when responding to requests regarding personal information.
While the regulatory response to the SVB and Signature Bank failures was positive, it is unclear how any future failures may be handled. Thus, it remains critical for Insureds to review their insurance policies and evaluate their coverages in the event of a financial institution failure impacting the stability of their business and potential risk exposures. Should you have any questions about your policies, please reach out to your HUB team for assistance.