New York state regulators shut down Signature Bank amid SVB turmoil
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State regulators have closed New York-based Signature Bank, marking the third-largest banking failure in the United States. Signature Bank was closed two days after authorities in the country closed Silicon Valley Bank after a run on the bank.
New York regulators shut down Signature Bank
Signature is currently under the Federal Deposit Insurance Corporation (FDIC) control. The bank had $110.36 billion in assets and $88.59 billion in deposits by the end of 2022. The closure of the bank happened barely two days after the collapse of Silicon Valley Bank.
The depositors at Signature Bank and those at Silicon Valley Bank will be made whole, according to a statement issued by the US Treasury Department. The US Treasury also said these depositors would get their money, and the taxpayer would bear no losses.
The employees at Signature Bank appeared to have been recalled at the office on Sunday as meetings in the bank’s Manhattan headquarters appeared to be taking place. Shortly after this meeting, the closure of the bank was announced.
The US banking system appears to be under stress because of the failure of three banks: Silvergate Bank, Silicon Valley Bank, and Signature Bank. Silicon Valley Bank was shut down on Friday, marking the second-largest failure in US banking history after the collapse of Washington Mutual during the 2008 crisis.
The situation at Silicon Valley Bank created concern about how quickly the bank folded after an increase in customer withdrawals. Before its collapse, SVB was the 16th largest lender in the United States.
US government rushes to rebuild confidence in the banking sector
After SVB was shut down, over $100 billion worth of market value was wiped from US banks, resulting in quick action from government officials during the weekend looking to restore confidence in the banking industry.
The FDIC has created a bridge bank that will allow the customers of the collapsed banks to access their funds. The depositors and borrowers at Signature bank have become customers of the bridge bank. US authorities also said that SVB customers would access their funds from Monday. The officials are also looking to mitigate further fallout.
Signature was a bank with a significant presence in the cryptocurrency sector. Nearly a quarter of the deposits at the bank came from the cryptocurrency industry. However, in December last year, the bank announced plans to reduce its crypto exposure, saying it would reduce crypto-related deposits by $8 billion.
In the statement released on Sunday, the US government officials said that unsecured shareholders and some debtholders at Signature Bank and Silicon Valley Bank would not be among the parties protected. Those holding senior management positions at the two banks have also been removed.
The closure of the two banks has also raised questions over whether the Federal Reserve will continue hiking interest rates given the banking industry’s stress. The Fed was expected to hike rates by 25 basis points in the next policy meeting.
