2023 United States banking crisis

[1] The Federal Reserve established a Bank Term Funding Program (BTFP) to offer loans of up to one year to eligible depository institutions pledging qualifying assets as collateral.

[7] The Federal Reserve discount window liquidity facility had experienced approximately $150 billion in borrowing from various banks by March 16.

Despite a $30 billion capital infusion from a group of major banks in March, FRB continued to destabilize and its stock price plummeted as the FDIC prepared to take it into receivership and find a buyer on April 29.

[11][12] In the lead-up period, many banks within the United States had invested their reserves in U.S. Treasury securities, which had been paying low interest rates for several years.

Despite its rapid growth, the company maintained a small physical footprint; in 2018[update], the bank had only three branches, all located in Southern California.

A large number of cryptocurrency companies set up accounts with the bank to take advantage of Silvergate's relatively quick transaction settling times.

However, if forced to sell these securities at a lower mark-to-market price, the losses on these types of assets become realized, posing significant risks to the bank's ability to continue to operate.

[26] Silvergate faced tight financial constraints in the coming months, selling assets at a loss and borrowing $3.6 billion from the Federal Home Loan Bank of San Francisco to maintain its liquidity.

[16][30] Facing continued losses from sales of securities at mark-to-market price, Silvergate released a public notice on March 8, 2023, saying that it would undergo voluntary liquidation and would return all deposited funds to their respective owners.

Until its collapse, SVB was the 16th largest bank in the United States and was heavily skewed toward serving companies and individuals from the technology industry.

[35] In addition to financing venture-backed companies, SVB was well known as a source of private banking, personal credit lines, and mortgages to tech entrepreneurs.

[37] Silicon Valley Bank recorded an increase of its deposit holdings during the COVID-19 pandemic, when the tech sector experienced a period of growth.

However, the current market value of these bonds decreased as the Federal Reserve raised interest rates to curb the 2021–2023 inflation surge.

[38] Higher interest rates also raised borrowing costs throughout the economy and some Silicon Valley Bank clients started pulling money out to meet their liquidity needs.

The announcement, coupled with warnings from prominent Silicon Valley investors, caused a bank run as customers withdrew funds totaling US$42 billion by the following day.

[39] On March 10, 2023, as a result of the bank run, the California Department of Financial Protection and Innovation (DFPI) seized SVB and placed it under the receivership of the FDIC.

[40][41] Two days after the failure, the FDIC received exceptional authority from the Treasury and announced jointly with other agencies that all depositors would have full access to their funds the next morning.

[58][59] Beginning in 2018, Signature Bank began to court customers in the cryptocurrency industry, securing hires that were experienced in the area with the goal of moving away from its dependence on real estate lending.

The payment network, Signet, had opened in 2019 for approved clients, and allowed the real-time gross settlement of fund transfers through the blockchain without third parties or transaction fees.

[86] On the morning of May 1, the California Department of Financial Protection and Innovation announced that FRB had been closed, and its assets were sold to JPMorgan for $10.6 billion.

[95][96] The collapse of Silicon Valley Bank itself also spurred federal investigations from the U.S. Securities and Exchange Commission as well as the United States Department of Justice.

[73] Following SVB and Signature's collapses, Western Alliance Bancorporation share price fell 47% and PacWest Bancorp was down 21% recovering after their trading was halted.

[99][100] Moody's downgraded its outlook on the U.S. banking system to negative, citing what it described as "rapid deterioration" of the sector's financial footing.

[114][115] Late on Sunday, the Federal Reserve and several other central banks announced significant USD liquidity measures in order to calm market turmoil.

[118][119] In May 2023, FDIC proposed imposing higher fees on an estimated 113 of the largest banks to cover the costs of bailing out uninsured depositors.

One month before the events in the United States, Credit Suisse had announced its largest annual loss since the 2008 financial crisis, as clients continued withdrawing their cash at a rapid pace; $147 billion had been withdrawn in the fourth quarter of 2022.

[123] Late on Sunday the Federal Reserve and several other central banks announced significant USD liquidity measures in order to calm market turmoil.

The fall was led by fears over the SVB collapse and the risks in Japan's regional banking sector, partly because of exposure to US interest rate hikes.

[135] The turbulence in the financial system caused India's central bank to put any further hikes in interest rate on hold on 6 April, with governor Shaktikanta Das saying "it's a pause not a pivot".

[138] On 11 April the International Monetary Fund downgraded its forecast for GDP growth globally in 2023 from 2.9% to 2.8%, saying "Uncertainty is high and the balance of risks has shifted firmly to the downside so long as the financial sector remains unsettled".