The US Treasury Department has stepped in to guarantee deposits following the collapse of Silicon Valley Bank (SVB) and to end wider bank run jitters.

Secretary of the Treasury Janet Yellen, Chairman of the Federal Reserve Board Jerome Powell and Chairman of the Federal Deposit Insurance Corporation (FDIC) Martin Gruenberg released a joint statement on Sunday night, U.S. time, amid concerns about the spread of contagion on Monday, triggering an emergency program to protect all deposits at both California-based SVB and New York’s Signature Bank.

The intervention expands the existing FDIC scheme, which guarantees the first US$250,000 in deposits. But the problem for startups and investors is that many had deposited millions or tens of millions of dollars into the SVB.

More than 90% of the money deposited in the 40-year-old bank came from the startup ecosystem. The bank provided banking to about half of all venture capital-backed startups in the US, but imploded last week when customers tried to withdraw about $40 billion in funds — nearly a quarter of the capital in the bank — before state regulators on Friday stepped in to raise money. check. The FDIC is now the trustee of Silicon Valley Bank.

Concerns that startup founders would be unable to pay staff led to concerns over dinosaur extinction this weekend amid pleas for the US government to intervene.

ASX-listed tech companies exposed to the SVB’s collapse fell in early Monday morning trading ahead of the US Fed’s announcement.

The Federal Reserve’s intervention also included the crypto-focused Signature Bank, which New York state regulators took control of on Sunday, citing concerns about its viability.

The 25-year-old California bank Silvergatewhich has also focused on crypto in recent years, collapsed last week, but is not part of this bailout.

“Today, we are taking decisive action to protect the U.S. economy by strengthening public confidence in our banking system,” Yellen, Powell and Gruenberg said in their joint statement.

“This move will ensure that the U.S. banking system continues to fulfill its vital role of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.”

Depositors will have access to all their money from Monday 13 March.

“No losses associated with the resolution of Silicon Valley Bank will be borne by taxpayers,” they said.

On my direction, @SecYellen and my director of the National Economic Council worked with banking regulators to address issues at Silicon Valley Bank and Signature Bank.

I’m glad they found a solution that protects workers, small businesses, taxpayers and our financial system. https://t.co/CxcdvLVP6l

— President Biden (@POTUS) March 13, 2023

At its peak, the SVB had nearly $200 million in deposits, but as interest rates rose, those funds began to leave the bank, drawing about $25 billion in 2022 and surpassing that figure in the early weeks of 2023. as concerns about the bank’s liquidity increased.

The rush to withdraw money then turned into a stampede on Thursday Bloomberg reported that leading investor Peter Thiel’s Founders Fund has withdrawn all of its money from SVBwith several other VC funds Coatue Management, Union Square Ventures and Founder Collective, who also told founders to get their money from SVB.

The agreement with the Federal Reserve to protect SVB deposits also extends to New York’s Signature Bank, which was shut down by regulators on Sunday. Shareholders and some unsecured debt holders, including bondholders, are not covered by the announcement, and senior management at both banks has been removed.

“All losses to the Deposit Insurance Fund supporting uninsured depositors will be recovered through a special assessment against banks as required by law,” the joint statement said.

“Today’s actions demonstrate our commitment to taking the necessary steps to ensure that depositors’ savings remain safe.”

The Federal Reserve will also make additional funding available to eligible depositories to ensure banks can meet any withdrawal requests from depositors.

Several Australian startups had deposited money with SVB and after an anxious weekend, they failed to secure their capital.