Two days after the collapse of the Silicon Valley Bank (SVB), the biggest retail banking failure since the 2008 global financial crisis, regulators closed New York-based lender Signature Bank. The Federal Deposit Insurance Corporation (FDIC) has formed a bridge bank to handle the accounts of Signature Bank customers.
According to the FDIC, Signature Bank has 40 branches across the US and had total assets worth $110.4 billion and deposits totalling $82.6 billion as of December 31, 2022. The tech-friendly bank has significant exposure to cryptocurrency and is said to have been impacted by the sudden collapse of SVB.
Signature Bank started operations back in 2001 and grew to become one of the few banks to hold funds from cryptocurrency investors and startups. After the Silicon Valley Bank shut down, Signature Bank's business customers started enquiring if their deposits were safe as they had more than $250,000 in their accounts while the FDIC only assures funds up to $250,000, reported The New York Times.
Soon, the Signature Bank witnessed a surge in withdrawals as depositors started pulling their money from the lender, the report added, citing a person with knowledge of the matter. The bank also witnessed its stocks tanking along with that of some of its peers.
As per regulatory filings of Signature Bank, more than $79 billion of its total deposits of nearly $88 billion were uninsured at the end of last year. The bank started accepting deposits of crypto assets in 2018 and is likely to have suffered from the collapse of Sam Bankman-Fried's crypto exchange FTX in November 2022.
Crypto companies helped Signature Bank increase its deposits as the lender's 27% deposits in early 2022 belonged to digital assets clients. After the FTX crisis, Signature Bank decided to sever ties with some crypto clients but failed to retain investors, according to The Wall Street Journal.
The shares of Signature Bank slumped 23% on Friday. Anxious customers soon started moving their funds from the lender to other banks amid the panic caused by the SVB collapse.
The FDIC said that depositors and borrowers will have access to their funds and the transfer of assets to Signature Bridge Bank was completed under the “systematic risk exception”. It added that all depositors of the bank “will be made whole”.
