March 14: US regulators on Sunday closed New York-based Signature Bank just two days after authorities shut down Silicon Valley Bank (SVB). Signature Bank’s collapse is the third largest failure in US banking history after the recent collapse of SVB and since Washington Mutual went bust in 2008.
According to Reuters, the Federal Deposit Insurance Corporation (FDIC) took control of Signature Bank, which had $110.36 billion in assets and $88.59 in deposits at the end of last year.
The US Treasury Department and other bank regulators said in a joint statement that all of the depositors of Signature Bank and Silicon Valley Bank will be made whole, and "no losses will be borne by the taxpayer".
Representatives for the lender did not immediately respond to a request for comment, Reuters reported.
“Signature's failure followed Silicon Valley Bank's Friday shutdown, the second largest in US history behind Washington Mutual, which collapsed during the 2008 financial crisis,” added the news agency.
According to Reuters, investors were unnerved by the speed at which startup-focused SVB, the 16th largest lender in the US, was toppled by customer withdrawals. The episode last week erased more than $100 billion in market value from US banks, prompting swift action from government officials over the weekend to try and restore confidence in the financial system.
Signature was a commercial bank with private client offices in New York, Connecticut, California, Nevada and North Carolina, and had nine national business lines including commercial real estate and digital asset banking.
As of September, almost a quarter of its deposits came from the cryptocurrency sector, but the bank announced in December that it would shrink its crypto-related deposits by $8 billion, added Reuters.
Meanwhile, Al Jazeera reported that SVB’s business focused heavily on US technology startups.
“During the COVID-19 pandemic, the lender saw a surge in deposits as tech companies profited from providing entertainment and delivery services to people confined to their homes.”
SVB invested much of this cash in US government bonds — traditionally one of the safest types of investment but SVB’s troubles began when the US Federal Reserve started raising interest rates last year in response to soaring inflation, causing the value of those bonds to fall, added Al Jazeera.