Following SVB, The US Banking Regulator Closes Signature Bank

photo: The Boston Globe

The New York State Department of Financial Services has announced that it has taken over New York-based Signature Bank and appointed the US Federal Deposit Insurance Corp as the receiver of the bank's assets. The statement was made by the Department of Financial Services on Sunday (3/12). This is the second bank closure in a matter of days in the United States (US). 
Previously, on Friday (3/10), the California banking regulator had closed a bank or lender focused on startups, SVB Financial Group.

According to the Department of Financial Services, Signature Bank is known to have a total deposit balance of US$89.17 billion as of March 8, 2023. Signature Bank did not immediately respond to a request for comment from Reuters. 

The US Department of the Treasury, along with other banking regulators, said in a joint statement on Sunday (3/12) that all customer funds from Signature Bank will be returned (guaranteed) and that "no losses will be borne by customers."

Signature Bank is known to have private clients in New York, Connecticut, California, Nevada, and North Carolina, and has nine national business lines including commercial real estate and digital asset banking. 

In September, nearly a quarter of Signature Bank's deposits came from the cryptocurrency sector, but the bank announced in December that it would shrink its crypto-related deposits by $8 billion.

In February, Signature Bank announced that its chief executive officer, Joseph DePaolo, would transition to a senior advisory role in 2023 and be succeeded by the bank's chief operating officer, Eric Howell. DePaolo has served as President and CEO since Signature Bank's founding in 2001. The bank has had a long-standing relationship with former President Donald Trump and his family. 

Signature Bank is known to have provided Trump and his businesses with checking accounts and financed some of the family's ventures.

However, Signature Bank severed ties with Trump in 2021 after the deadly January 6th riot at Capitol Hill and urged Trump to resign. 

Officials on Sunday said that shareholders and some unsecured debt holders of Signature Bank, as well as Silicon Valley Bank, will not be protected, and senior management of both banks has been removed. Any loss to the FDIC's Deposit Insurance Fund used to support uninsured depositors will be restored through special assessments on the banks, as required by law, officials said.

To Calm the Market, US Announces Steps to Stem SVB Bankruptcy


The United States government has finally announced measures to prop up Silicon Valley Bank (SVB) from bankruptcy. On Sunday (12/3), US officials revealed that SVB customers would have access to their deposits starting Monday (13/3). 

The Federal Deposit Insurance Corporation (FDIC) and Federal Reserve, in consultation with President Joe Biden, approved the FDIC resolution for SVB, according to a joint statement from US Treasury Secretary Janet Yellen, Fed Chair Jerome Powell, and FDIC Chair Martin Gruenberg on Sunday evening. 

The move will not result in losses for US taxpayers, and all deposits will be insured and refunded, the statement said. "Today, we took decisive action to protect the US economy by strengthening public confidence in our banking system," the statement said.

"This action will ensure that the US banking system continues to fulfill its vital role in protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth," the statement said. 

The Federal Reserve also announced on Sunday that it will provide additional funding through a new Bank Term Funding Program (BTFP), which will offer up to one-year loans to depository institutions, backed by Treasury and other assets held by these institutions. 

Officials also said that customers of Signature Bank New York, which was shut down on Sunday by the state's financial regulator, will be insured and fully reimbursed. Shareholders and unsecured debt holders of Signature Bank will not be protected, and the bank's management has also been fired, the officials said.

Previously, Yellen stated that she was working with banking regulators to respond after SVB became the largest bank to fail since the 2008 financial crisis.

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