In the third-largest failure in US banking history, New York-based Signature Bank was shut down by state regulators on Sunday, only two days after Silicon Valley Bank was shut down due to a collapse that left billions in deposits unclaimed.
According to the New York State Department of Financial Services, Signature had $110.36 billion in assets and $88.59 billion in deposits at the end of the previous year when the Federal Deposit Insurance Corporation (FDIC) assumed control.
The US Treasury Department and other bank authorities declared in a joint statement that “no losses would be borne by the taxpayer” and that all of the depositors of Signature Bank and Silicon Valley Bank will get full compensation.
When contacted for comment, the lender’s representatives did not react immediately.
Following Silicon Valley Bank’s failure on Friday—the second-largest in American history behind Washington Mutual, which fell victim to the 2008 financial crisis—Signature also failed.
Investors were alarmed by how quickly startup-focused Withdrawals by customers caused SVB, the 16th largest lender in the US, to fail. Government officials acted quickly over the weekend to try and restore trust in the financial system after the episode last week destroyed more than $100 billion in market value for U.S. banks.
In order to allow customers to access their money on Monday, the FDIC established a “bridge” successor bank on Sunday. Customers of Signature Bank will automatically become bridge bank depositors and borrowers, according to the FDIC.
Former Fifth Third Bancorp CEO Greg Carmichael was chosen by the regulator to lead the bridge bank.
According to US officials, customers of Silicon Valley Bank will be able to access their deposits as of Monday.
In an effort to protect deposits and prevent any more damage, the federal government also outlined measures.
Commercial bank Signature had private client offices in New York, Connecticut, California, Nevada, and North Carolina. It also had nine national business lines, including commercial real estate and banking for digital assets.
As of September, about 25% of its deposits came from the cryptocurrency industry, but the bank said in December that it would reduce such deposits by $8 billion.
In a February press release, Signature Bank stated that Eric Howell, the bank’s chief operating officer, would follow Joseph DePaolo as chief executive officer effective in 2023. Since the company’s founding in 2001, DePaolo has held the positions of president and CEO.
Former President Donald Trump and his family had a long-standing association with the bank, which gave Trump and his company checking accounts and provided funding for several of the family’s businesses. During the tragic Capitol Hill riots on January 6, 2021, Signature Bank severed its relationship with Trump and called for his resignation.
New York Governor Kathy Hochul expressed her hope in a statement that the U.S. government’s measures on Sunday will lead to “greater confidence in the safety of our banking sector.”
“Many of the depositors at these banks are small businesses, especially those driving the innovation sector, and their success is crucial to New York’s vibrant economy,” she said.
Authorities said on Sunday that the senior management of both institutions has been replaced and that shareholders and some unsecured debtholders of Silicon Valley Bank and Signature Bank will not be protected.
According to officials, a special levy on banks will be used to make up any losses to the FDIC’s Deposit Insurance Fund that were incurred while supporting uninsured depositors.