Fed Creates New Backstop for Banks, Stablecoins Rebound

US authorities have announced measures to reassure depositors and restore confidence in the banking system following the sudden collapse of Silicon Valley Bank (SVB) on Friday.

The measures include pledges to fully protect all depositors’ money, even those exceeding the typical $250,000 threshold for FDIC insurance. SVB depositors will have access to their money from Monday, March 13, and taxpayers will not be responsible for any losses associated with SVB’s resolution. The government also said that Signature Bank, closed by New York state financial regulators on Sunday, would provide access to depositors’ money on Monday.

The authorities have also established a new “Bank Term Funding Program” under the Fed’s emergency authority, which offers loans to banks on easier terms than are typically provided by the central bank. This will be big enough to protect uninsured deposits in the wider US banking system, and the Treasury will make up to $25 billion available from the Exchange Stabilization Fund as a backstop for the bank funding program.

Following the Fed's announcement of the new backstops for back, stablecoins which have exposure to USD deposits in banks rebounded.