Regulators unveil plan to assure depositors will get money after SVB collapse

Banking regulators devised a plan Sunday to shore up deposits at Silicon Valley Bank, a critical step in stemming a feared panic over the collapsed tech-focused institution.

In an anxiously awaited announcement from the Federal Reserve, the central bank said it is creating a new Bank Term Funding Program aimed at safeguarding deposits at the failed institution.

The facility will offer loans of up to one year to banks, saving associations, credit unions and other institutions. Those taking advantage of the facility will be asked to pledge high-quality collateral such as Treasurys, agency debt and mortgage-backed securities.

“This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy,” the Fed said in a statement. “The Federal Reserve is prepared to address any liquidity pressures that may arise.”

The Treasury Department is providing up to $25 billion from its Exchange Stabilization Fund as a backstop for the funding program.

Along with the facility, the Fed said it will ease conditions at its discount window, which will use the same conditions as the BTFP.

The news came after Treasury Secretary Janet Yellen said Sunday morning that there would be no SVB bailout.

“We’re not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs,” Yellen said on CBS’ “Face the Nation.”

The SVB failure was the nation’s largest collapse of a financial institution since Washington Mutual went under in 2008.

There also has been discussion about the Fed stepping in to ease terms at its discount window so that impacted institutions have easy access to liquidity. In concept, banks could pledge bonds to get cash to pay nervous depositors.

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