The U.S. government has agreed to lend money to financial institutions that lack liquidity, guaranteeing the money entrusted to customers at Silicon Valley banks, which have been closed due to a liquidity crisis, regardless of what is insured.

The Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corporation announced this policy in a joint statement on 12 March (local time).

They actively intervened to prevent the Silicon Valley bank crisis from escalating into a crisis across the financial system.

The Treasury Department and others said in a statement that Treasury Secretary Janet Yellen reported the recommendations of the Fed and the Federal Deposit Insurance Corporation to President Joe Biden and approved a solution to the crisis that would fully protect all depositors.

As a result, all depositors will have access to their full deposits starting today and there will be no costs incurred by taxpayers in connection with Silicon Valley Bank's losses, he added.

However, the Treasury Department said some shareholders and unsecured creditors were not protected and that a senior Silicon Valley bank executive stepped down after taking responsibility for the incident.

The Treasury Department and others said in a statement that they had similar measures in place for Signature Bank, which was closed by the New York State Financial Services Authority.

However, he said the move would not "bailout" these banks.

In response to the move, the Fed said it was creating a new fund to support liquidity in banks.

Through this, we plan to lend funds for one year to financial institutions such as banks, savings associations, and credit unions that provide collateral such as U.S. Treasuries and mortgage securities.

In particular, the Fed has said it will value collateral at face value, not market value.

Much of the Treasury bonds currently held by banks are being released in light of the Fed's continued rate hikes, forcing them to receive less than face value if they sell them now.

Silicon Valley banks had $1 billion in total assets as of the end of last year, more than the $2.90 billion deposits deposited by customers, but they have to sell government bonds at a discount to face value in order to return their deposits, resulting in heavy losses.

The Ministry of Finance stated that losses incurred to the Deposit Insurance Fund to support uninsured depositors would be recovered by banks in accordance with the law.

(Photo = Yonhap News)