March 2023 United States bank failures

During March 2023, two large banks in the United States with significant exposure to the technology sector or to cryptocurrency failed, while another entered liquidation under financial distress.[1][2]

US Treasury interest rates compared to Federal Funds Rate. The Federal Funds Rate pushes up shorter term treasuries to cause an Inverted yield curve when the Federal Reserve wants to tame demand and inflation.
  Federal Funds Rate
First Republic Bank Stock Price

By March 16, large interbank flows of funds were occurring to shore up bank balance sheets and numerous analysts were reporting on a more general U.S. banking crisis. Many banks had invested their reserves in U.S. Treasury securities, which had been paying low interest rates. As the Federal Reserve began raising rates in 2022, bond prices declined decreasing the market value of bank capital reserves, leading some banks to sell the bonds at steep losses as yields on new bonds were much higher.[3] Eleven of the largest U.S. banks provided up to $30 billion to support the teetering San Francisco-based First Republic regional bank,[4] and the Federal Reserve's discount window liquidity facility had experienced approximately $150 billion in borrowing from various banks by March 16.[5]

The first bank to fail, cryptocurrency-focused Silvergate Bank, announced it would wind down on March 8 due to losses suffered in its loan portfolio.[1][6] Two days later, upon announcement of an attempt to raise capital, a bank run occurred at Silicon Valley Bank, causing it to collapse and be seized by regulators that day.[1] Signature Bank, a bank that frequently did business with cryptocurrency firms, was closed by regulators two days later on March 12, with regulators citing systemic risks.[1][7][8] The collapses of Silicon Valley Bank and Signature Bank were the second- and third-largest bank failures in the history of the United States, smaller only than the 2008 collapse of Washington Mutual during the global financial crisis.[9]

In response to banking failures, the Federal Reserve Board of Governors, Federal Deposit Insurance Corporation, and the United States Department of the Treasury announced in a joint communiqué that extraordinary measures would be taken to ensure that all deposits at Silicon Valley Bank and Signature Bank would be honored,[2] with the Federal Reserve separately announcing the creation of the Bank Term Funding Program (BTFP), a program that would offer loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral.[10][11]

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