Signature Bank Follows Silicon Valley Bank into Collapse, Stranding Billions in Deposits

Signature bank

New York-based Signature Bank has become the third largest failure in US banking history, following Silicon Valley Bank’s closure on Friday. The FDIC, or  Federal Deposit Insurance Corporation, took control of Signature Bank, which had $110.36 billion in assets and $88.59 billion in deposits at the end of 2022. Both banks’ depositors will be made whole, and “the taxpayer will bear no losses,” the US Treasury Department and other bank regulators said in a joint statement.

Signature Bank was a significant commercial bank with private client offices in five states and nine business lines, including commercial real estate and digital asset banking. However, in September, almost a quarter of its deposits came from the cryptocurrency sector. The bank announced in December that it would reduce its crypto-related deposits by $8 billion.

Last week’s sudden collapse of Silicon Valley Bank, the 16th largest lender in the US, due to customer withdrawals was a cause for concern among investors. The incident led to over $100 billion in market value losses for US banks. Government officials took immediate action over the weekend to restore confidence in the financial system.

Officials said on Sunday shareholders, certain unsecured debtholders of both banks would not be protected. The senior management of both banks has been removed. As mandated by law, banks will be subjected to a special assessment to recover any losses incurred by the FDIC’s Deposit Insurance Fund, which is utilized to support uninsured depositors.

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