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Signature Bank - The Next to fall under the bank turmoil curse.
In Brief: The collapse of Signature.The third bank failure over the past week, two days after authorities closed Silicon Valley Bank and Silvergate shuttered its operations.
The Signature Bank, a commercial bank with offices in New York, Connecticut, California, Nevada and North Carolina, had nine national business lines including commercial real estate and digital asset banking. In response to regulators’ concerns that retaining the bank could threaten the entire financial system, the bank shut its doors abruptly on Sunday.
After Silicon Valley Bank was shuttered in a collapse that left billions in deposits stranded, Signature collapsed two days later, making it the third significant bank failure in a week. In addition, Silvergate, a California-based bank that lent to cryptocurrency companies, announced last Wednesday that it would cease operations and liquidate its assets.
In some ways, Signature holds its own as a victim of the panic that erupted around Silicon Valley Bank in recent days, which was seized by regulators on Friday. With its closing, it underlines the challenges, which are likely to threaten the viability of small and midsized banks, which are most likely to leave them vulnerable to old-fashioned bank runs.
As announced by the New York State Department of Financial Services, the Federal Deposit Insurance Corporation (FDIC) has taken control of Signature Bank, which had assets of $110.36B and deposits of $88.59B as of the end of last year.
In a joint statement, the U.S. Treasury Department and other bank regulators said that all Signature Bank and Silicon Valley Bank depositors will be compensated, and taxpayers will not bear any losses.
According to regulators, both banks’ customers would be refunded regardless of how much money they held in their accounts. However, Currently, the Federal Deposit Insurance Corporation, which seized Silicon Valley, only insures deposits up to $250,000.
“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,” – Kathy Hochul, New York Governor. She also express her hope that the US government’s actions on Sunday would provide “increased confidence in the stability of our banking system.”
In contrast, regulatory filings show that more than $79 billion, or close to nine-tenths, of Signature Bank’s roughly $88 billion in deposits were uninsured at the end of last year.
It is a blow to many professional services firms that relied on Signature. For many years, the bank had specialized in serving law firms, providing escrow accounts and other services to hold client money.
Amid the shamble, the Fed announced that it would set up an emergency lending program, with Treasury approval, to provide funding to eligible banks so that they could “meet the needs of all their depositors.” With a $25 billion cash backing from the Treasury, the Fed’s new lending program could provide the banking industry with an even stronger backstop.
Deposits related to digital assets by customers amounted to $16.52B, according to the bank.
Ultimately, that was a fateful decision, crypto assets experienced a crash following the collapse of FTX and the ensuing criminal investigation. Among the top banks serving the cryptocurrency industry, Signature is the biggest, second to Silvergate.
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