FDIC releases Gruenberg testimony in advance

The FDIC has released testimony of Chairman Martin J. Gruenberg scheduled for today before the Senate Committee on Banking, Housing, and Urban Affairs.

Chairman Gruenberg's remarks review in detail the events surrounding the March 10, 2023, closing of Silicon Valley Bank (SVB), Santa Clara, California, the announcement on March 8 by Silvergate Bank that it would wind down operations and voluntarily liquidate, and the March 12 closure of Signature Bank, New York, New York. The Boards of the FDIC and Federal Reserve voted to recommend, and the Treasury Secretary, in consultation with the President, determined that the FDIC could use emergency system risk authorities under the Federal Deposit Insurance (FDI) Act to full protect all depositors in winding down SVB and Signature Bank. Both institutions were allowed to fail — shareholders lost their investment, unsecured creditors sustained losses, the directors and senior executives of both banks were removed. Any losses to the Deposit Insurance Fund as a result of uninsured deposit coverage at those banks will be repaid by a special assessment on banks as the law requires, taking into consideration the types of entities that benefit from any action taken or assistance provided.

The Chairman's remarks also describe the events leading up to the failure of SVB and Signature Bank and the facts and circumstances that prompted the decision to utilize the authority in the FDI Act to protect all depositors in those banks following these failures. They also discuss the FDIC’s assessment of the current state of the U.S. financial system, which remains sound despite recent events, and include some preliminary lessons learned as we look back on the immediate aftermath of this episode.

Chairman Gruenberg's remarks will also announce the FDIC will undertake a comprehensive review of the deposit insurance system and will release a report by May 1, 2023, that will include policy options for consideration related to deposit insurance coverage levels, excess deposit insurance, and the implications for risk-based pricing and deposit insurance fund adequacy. In addition, the FDIC’s Chief Risk Officer will undertake a review of the FDIC’s supervision of Signature Bank and will also release a report by May 1, 2023. Further, the FDIC will issue in May 2023 a proposed rulemaking for the special assessment for public comment.