Federal regulators said New York-based Signature Bank was being shut down to protect consumers and the financial system following the collapse of California’s Silicon Valley Bank. The announcement came in a joint statement from the U.S. Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corporation. The regulators said SVB clients will have access to their money starting Monday, at no expense to the American taxpayer. The Associated Press has the story:
Signature Bank is 2nd causality after SVB
Newslooks- (AP)
State regulators closed New York-based Signature Bank (SBNY.O), the third largest failure in U.S. banking history, two days after authorities shuttered Silicon Valley Bank (SIVB.O) 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 U.S. 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 Friday shutdown, the second largest in U.S. 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 U.S., was toppled by customer withdrawals. The episode last week erased more than $100 billion in market value from U.S. 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. Signature Bank’s depositors and borrowers will automatically become customers of the bridge bank, the FDIC said.
The regulator named former Fifth Third Bancorp (FITB.O) Chief Executive Greg Carmichael as CEO of the bridge bank.
Silicon Valley Bank customers will have access to their deposits starting on Monday, U.S. 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 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 Jan. 6 riots on Capitol Hill, and urged Trump to resign.
In a statement, New York Governor Kathy Hochul said she hoped the U.S. 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 said on Sunday 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.
