Regulators seized New York’s regional bank Signature Bank (SBNY) two days after shutting down Silicon Valley Bank as banking system overseers try to restore calm before markets open Monday.
Signature will become the third largest bank to ever fail in the US, after Silicon Valley Bank and Washington Mutual in 2008, if its assets have not changed significantly since the end of 2022. Signature had $110 billion in assets as of December 31. ranked 29th among U.S. banks. It had $88 billion in deposits as of that date.
A joint statement from Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, and FDIC Chair Martin Gruenberg said all depositors would be made healthy, citing a “systemic risk exemption” that also will be applied to Silicon Valley Bank, but that shareholders and certain unsecured debt holders will not be protected. Senior management, they said, had been removed.
Any losses to the FDIC’s deposit insurance fund to support depositors who exceeded the $250,000 limit protected by law, they added, “will be recovered by a special assessment against banks, as required by law.” The FDIC maintains the fund with regular contributions from banks.
Signature served clients in the cryptocurrency world. Like Silvergate Bank, another crypto-friendly bank that last week said it would voluntarily wind itself down, it suffered an outflow of deposits in the wake of the collapse of crypto exchange FTX. The value of some of its securities had also fallen in value due to an increase in interest rates.
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