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Federal and state banking regulators announced Sunday that Signature Bank, one of the main financial institutions for cryptocurrency firms, had been shut down.
The decision to shutter the New York-based bank was revealed in a joint statement from the Federal Reserve, Treasury Department, and Federal Deposit Insurance Corporation. The trio said that the FDIC would make customers of Signature and Silicon Valley Bank, whose Friday collapse sparked fears of a possible banking crisis, whole. The Signature failure is the third-largest in U.S. banking history, while SVB is the second.
SILICON VALLEY BANK COLLAPSE: US REGULATORS ANNOUNCE PLAN TO BAIL OUT CUSTOMERS
“We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority,” the statement about SVB read, adding that “no losses will be borne by the taxpayer.”
New York bank regulators said in a separate statement Sunday that the closure was “in light of market events, monitoring market trends, and collaborating closely with other state and federal regulators” to protect both consumers and the financial system.
The FDIC also established a “bridge” successor bank, which will enable Signature customers to access their funds on Monday morning. The regulator named Fifth Third Bancorp CEO Greg Carmichael as chief executive of the bridge bank.
The moves come as federal and state regulators attempt to prevent a major banking crisis from spreading.
New York Gov. Kathy Hochul, a Democrat, said Sunday that she hoped the U.S. government’s actions would provide “increased confidence in the stability of our banking system.”
“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,” she said.
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The state of California shuttered SVB on Friday, just two days after the nation’s 16th largest federally insured bank announced that it needed to raise more than $2.2 billion to remain solvent, which sent its stock price plunging over 60% in 48 hours. The bank had achieved financial stardom during the COVID-19 pandemic because major cash deposits from the booming firms. Its securities portfolio rose from roughly $27 billion in 2020’s first quarter to approximately $127 billion at the end of 2021.
The fact that most of SVB’s assets were seemingly secure — they were mainly longer-term government bonds — led many investors to feel the bank was secure. The government securities bought by SVB pay a fixed rate, so when market interest rates were raised, a gap began to grow between how much the securities were worth on the open market and what they were valued on the bank’s books. The unrealized losses in SVB’s securities portfolio in December had grown to more than $17 billion, a number expected to rise as the securities could only be sold at a loss.
Original Location: Regulators shut down Signature Bank two days after Silicon Valley Bank collapse
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