State regulators closed New York-based Signature Bank on Sunday, March 12, the third largest failure in US banking history, two days after authorities shuttered Silicon Valley Bank in a collapse that stranded billions in deposits.
The Federal Deposit Insurance Corporation (FDIC) took control of Signature, which had $110.36 billion in assets and $88.59 billion in deposits at the end of last year, according to New York state’s Department of Financial Services.
All of the depositors of Signature Bank and Silicon Valley Bank will be made whole, and “no losses will be borne by the taxpayer,” the US Treasury Department and other bank regulators said in a joint statement.
Employees appeared to gather at the company’s Manhattan headquarters for meetings on Sunday, ordering catering from Carmine’s, an Italian restaurant, and Starbucks coffee, according to a Reuters reporter on the scene. People trickled out of the building after the news of the closure was announced.
Representatives for the lender did not immediately respond to a request for comment.
Signature’s failure followed Silicon Valley Bank’s shutdown on Friday, March 10, the second largest in US history behind Washington Mutual, which collapsed during the 2008 financial crisis.
Investors were unnerved by the speed at which startup-focused SVB, the 16th largest lender in the US, was toppled by customer withdrawals. The episode last week erased more than $100 billion in market value from US banks, prompting swift action from government officials over the weekend to try and restore confidence in the financial system.
The FDIC established a “bridge” successor bank on Sunday which will enable customers to access their funds on Monday, March 13. Signature Bank’s depositors and borrowers will automatically become customers of the bridge bank, the FDIC said.
The regulator named former Fifth Third Bancorp chief executive Greg Carmichael as CEO of the bridge bank.
Silicon Valley Bank customers will have access to their deposits starting on Monday, US officials said on Sunday. The federal government also announced actions to shore up deposits and try and stem any broader fallout.
Signature was a commercial bank with private client offices in New York, Connecticut, California, Nevada, and North Carolina, and had nine national business lines including commercial real estate and digital asset banking.
As of September, almost a quarter of its deposits came from the cryptocurrency sector, but the bank announced in December that it would shrink its crypto-related deposits by $8 billion.
Signature Bank announced in February that its chief executive officer, Joseph DePaolo, would transition into a senior adviser role in 2023 and would be succeeded by the bank’s chief operating officer, Eric Howell. DePaolo has served as president and CEO since Signature’s inception in 2001.
The bank had had a long-standing relationship with former president Donald Trump and his family, providing Trump and his business with checking accounts and financing several of the family’s ventures. Signature Bank cut ties with Trump in 2021 following the deadly January 6 riots on Capitol Hill, and urged Trump to resign.
In a statement, New York Governor Kathy Hochul said she hoped the US government’s actions on Sunday would provide “increased confidence in the stability of our banking system.”
“Many depositors at these banks are small businesses, including those driving the innovation economy, and their success is key to New York’s robust economy,” she said.
Officials on Sunday said shareholders and certain unsecured debtholders of Signature Bank, as well as those of Silicon Valley Bank, would not be protected, and that senior management of both banks has been removed.
Any losses to the FDIC’s Deposit Insurance Fund used to support uninsured depositors will be recovered by a special assessment on banks, as required by law, officials said. – Rappler.com
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