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The Federal Reserve announced an emergency lending facility on Sunday to shore up the US banking system, and said another bank had been closed, as it tried to stem contagion after the implosion of Silicon Valley Bank.

In a statement, the Fed said it would make additional funding available to eligible depository institutions to “help assure banks have the ability to meet the needs of all their depositors”.

It added that it is “prepared to address any liquidity pressures that may arise”.

The new facility, the Bank Term Funding Program (BTFP), will offer loans of up to one year to lenders who pledge as collateral US Treasuries, agency debt, mortgage-backed securities and other “qualifying assets”.

The Fed said the assets will be valued at par and that the BTFP will “eliminat[e] an institution’s need to quickly sell those securities in times of stress”.

In a joint statement issued alongside the new facility, Treasury secretary Janet Yellen, Fed chair Jay Powell and Martin Gruenberg of the Federal Deposit Insurance Corporation said this step would “ensure that the US banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth”.

The regulators affirmed that all depositors of Silicon Valley Bank would have access to their money on Monday. All depositors of Signature Bank, which they said had been taken over by the New York Department of Financial Services, would also be made whole. No losses would be borne by the taxpayer, the officials said. Any shortfall would be funded by a levy on the rest of the banking system. They added that shareholders and certain unsecured debtholders will not be protected.

The likelihood of Silicon Valley Bank or Signature Bank being acquired by a rival bank was unlikely as all the potential buyers have so far walked away, said people with direct knowledge of the negotiations and who have been working with SVB and the US government.

PNC, a large US bank, and Canada’s RBC were invited to buy SVB but they decided against bidding as the economics of the deal would have made little sense, said people with direct knowledge of the matter.

America’s five largest banks, including JPMorgan and Bank of America, are also not going to be buyers, these people said.

For a transaction to make sense for any buyer the US government would be required to cover part of their losses, said a person working with the ailing California-based bank. However, that person said the government has made it clear it does not intend to transfer any taxpayer money to bail out SVB.

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