KEY POINTS
- New York Department of Financial Services announced that FDIC has seized Signature Bank
- The DFS said the move was made to protect the bank’s depositors
- New York regulators acting with the FDIC also removed Signature Bank’s executive team
Banking turmoil escalates in the United States after state regulators shut down the New York-based crypto-friendly Signature Bank on Sunday following the collapse of the Silicon Valley Bank (SVB) and just days after the crypto-focused Silvergate Bank fell.
Just a couple of days after authorities bolted down Silicon Valley Bank following a $42 billion bank run that grounded billions in customers’ deposits, state regulators shuttered Signature Bank in what is now considered the third-largest failure in the banking history of the United States.
New York Department of Financial Services (NYDFS) Superintendent Adrianne Harris said in a press release that the Federal Depository Insurance Corporation (FDIC) had taken receivership of the bank and explained that the decision was made to “protect depositors.”
The Department of Financial Services also assured that it is “in close contact with all regulated entities in light of market events, monitoring market trends, and collaborating closely with other state and federal regulators to protect consumers, ensure the health of the entities we regulate, and preserve the stability of the global financial system.”
While the Department of Financial Services did not explicitly reveal the details behind the Signature Bank’s closure, industry watchers pinned the blame on the panic that ensued following the collapse of the Silicon Valley Bank, which regulators seized Friday.
Following the collapse of the famed bank and after reports surfaced online, business customers of Signature Bank started calling the institution, inquiring about the status of their deposits, out of fear that like SVB’s customers, most had over $250,000 money stashed in Signature Bank, the New York Times reported.
Depositors’ actions did not stop at inquiring about their accounts at Signature Banks, though.
Since the SVB collapse, Signature Bank’s customers started panicking and started to see a wave of deposits leaving its coffers, which translated to its stocks consequently tanking, the outlet revealed, citing a person with knowledge on the matter.
Signature Bank was initially optimistic that it could weather the storm since the outflows slowed by Sunday morning. However, when state regulators informed Signature Bank’s executives that it is seizing the bank along with its 40 branches across the country, some of the bank officials were shocked.
Following the seizure of the bank, New York regulators acting with the FDIC also removed the bank’s executive team. During the closure announcement Sunday, regulators confirmed that customers of Signature Bank would be made whole regardless of the amount their accounts hold.
Last week, Silvergate Capital, the parent company of the crypto-friendly bank Silvergate, announced that it is winding down its operations and will voluntarily liquidate the bank after being hit by the sweeping impact of the turmoil in digital assets.
“In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward,” the parent company said in a press release.
