On March 10, 2023, California regulators shut down Silicon Valley Bank (SVB) and the Federal Deposit Insurance Corporation was appointed its receiver. All FDIC-insured deposits were transferred to the newly created Deposit Insurance National Bank of Santa Clara (DINB) to protect insured depositors. A copy of the FDIC press release is available here. Other institutions also are affected by current market conditions.

On March 12, 2023, the Department of the Treasury, the Federal Reserve and the FDIC issued a joint statement announcing that the FDIC will be authorized to complete the resolution of institutions subject to FDIC receivership, including SVB, in a manner that fully protects all depositors, regardless of insured status. All depositors of institutions subject to FDIC receiverships commenced to date in March 2023 should have access to all of their money beginning Monday, March 13, 2023. A copy of the joint press release is available here.

The Federal Reserve also announced the creation of a new Bank Term Funding Program intended to assist eligible depository institutions in meeting the needs of all of their depositors. A copy of the Federal Reserve press release is available here.

An FDIC receivership is a special legal relationship whereby the FDIC controls the assets and liabilities of the financially distressed bank. In a receivership, the FDIC has broad discretion to manage the bank’s assets and liabilities, including selling assets for the benefit of creditors, transferring assets and liabilities to other FDIC-member banks, or bailing out the distressed bank.

This situation is continuing to evolve. Though there is a guaranty on cash deposits for certain banks in recently commenced FDIC receiverships, clients with banking or other relationships with institutions in FDIC receivership may still be experiencing disruptions and have questions regarding issues that may arise including:

• access to deposits;
• access to lines of credit and revolving credit facilities;
• employment and payroll issues caused by liquidity disruptions;
• credit facilities involving SVB (as lender or agent);
• loan obligations;
• escrow accounts;
• offset rights;
• deposit account control agreements;
• securities disclosure requirements; and
• qualified financial contracts, including securities contracts and derivatives.