Signature Bank failure becomes third-largest bank failure in US history

Just days after the fall of Silicon Valley Bank (SVB) On March 12, 2023, New York-based Signature Bank was closed by the New York State Department of Financial Services. Signature Bank was unable to close a sale or otherwise bolster its finances before Monday morning, March 13, 2023 in order to protect its assets after customers began withdrawing their deposits. The bank’s failure was designated as a systemic risk to the financial system, allowing for extraordinary measures to be taken to ensure the availability of funds beyond the Federal Deposit Insurance Corporation (FDIC)-insured $250,000. Signature bank had $110 billion in assets.

The Signature Bank closure follows the collapse of Silicon Valley Bank and the failure of Silvergate Bank — a major bank for the cryptocurrency industry. The Signature Bank failure was the third-largest in U.S. history, ranking behind the Silicon Valley Bank collapse in 2023 and Washington Mutual’s closure in 2008.

Barney Frank (D-MA), former member of the U.S. House of Representatives from Massachusetts from 1981 to 2013, and Frank served as chairman of the House Financial Services Committee from 2007 to 2011, joined the board of directors of Signature Bank on June 17, 2015.

On Sunday, March 12, 2023, Signature Bank, New York, NY was closed by the Department of Financial Services of New York. Subsequently, the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.

To protect depositors, the FDIC transferred all the deposits and substantially all of the assets of Signature Bank to Signature Bridge Bank, N.A., a full-service bank that will be operated by the FDIC as it markets the institution to potential bidders.

— Signature Bridge Bank, N.A.

The FDIC was appointed as the bank’s receiver and immediately established Signature Bridge Bank, N.A. (created until a buyer can be found), which the FDIC would operate as it marketed its assets to bidders. The FDIC appointed Greg D. Carmichael, former president and CEO of Fifth Third Bancorp, as the bridge bank’s CEO. As of December 2022, 90 percent of $89 billion in bank deposits exceeded the maximum insured by the FDIC. All depositors are expected to be made whole, but holders of Signature Bank equity and bonds may face losses.

The collapse was rapid in nature and surprised insiders, and there are statements on social media accusing the government of using the bank failures to put a stop to cryptocurrency. Although Signature Bank had experienced significant outflows of deposits on Friday, March 10, 2023, executives with the bank believed the bank was well-capitalized and could absorb the losses. Former U.S. congressman Barney Frank, who was a member of the bank’s board, noted that in the wake of the SVB collapse, clients became concerned over the bank’s exposure to crypto and withdrew their funds, resulting in an “SVB-generated panic” that only set in late on Friday. That day, according to a Signature board member, customers withdrew more than $10 billion in deposits. Former congressman Barney Frank told CNBC that part of the cause of the closure was that regulators wanted to send a very strong anti-crypto message. Analyst Christopher Whalen attributed the bank’s failure to its cryptocurrency involvement, which he called a “huge error in judgment by veteran bankers”.

A New York Times opinion piece from Sen. Elizabeth Warren (D-MA) stated that the bank failures were caused by Washington leaders weakening financial rules.

ABC News’s Mona Kosar Abdi joins from a New York City Signature Bank location where customers are being reassured that their money is safe. YouTube Tips ⓘ

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Press Release from FDIC …

FDIC Establishes Signature Bridge Bank, N.A., as Successor to Signature Bank, New York, NY

WASHINGTON — Signature Bank, New York, NY, was closed today by the New York State Department of Financial Services, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect depositors, the FDIC transferred all the deposits and substantially all of the assets of Signature Bank to Signature Bridge Bank, N.A., a full-service bank that will be operated by the FDIC as it markets the institution to potential bidders.

Signature Bank had 40 branches across the country in New York, California, Connecticut, North Carolina, and Nevada. Banking activities will resume Monday, March 13, 2023, including on-line banking. Depositors and borrowers will automatically become customers of Signature Bridge Bank, N.A. and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards, and writing checks in the same manner as before. Signature Bank’s official checks will continue to clear. Loan customers should continue making loan payments as usual.

The transfer of all the deposits was completed under the systemic risk exception approved earlier today. All depositors of the institution will be made whole. No losses will be borne by the taxpayers. Shareholders and certain unsecured debt holders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund (DIF) to support uninsured depositors will be recovered by a special assessment on banks, as required by law.

The FDIC, as receiver for Signature Bank, has also transferred all Qualified Financial Contracts (as defined in 12 USC 1821(e)) of the failed bank to the bridge bank.

These actions will protect depositors and preserve the value of the assets and operations of Signature Bank, which may improve recoveries for creditors and the DIF.

Signature Bank had total assets of $110.4 billion and total deposits of $88.6 billion as of December 31, 2022. As receiver, the FDIC will operate Signature Bridge Bank, N.A. to maximize the value of the institution for a future sale and to maintain banking services in the communities formerly served by Signature Bank.

A bridge bank is a chartered national bank that operates under a board appointed by the FDIC. It assumes the deposits and certain other liabilities and purchases certain assets of a failed bank. The bridge bank structure is designed to “bridge” the gap between the failure of a bank and the time when the FDIC can stabilize the institution and implement an orderly resolution.

The FDIC named Greg D. Carmichael as CEO of Signature Bridge Bank, N.A. Mr. Carmichael recently served as president and CEO of Fifth Third Bancorp.

FDIC: PR-18-2023

‘Varney & Co.’ host Stuart Varney argues that the Biden administration’s spending and ‘massive’ Fed money printing pushed the U.S. into a ‘banking crisis.’ YouTube Tips ⓘ

Former Reagan admin economic adviser Art Laffer argues Fed policy and government spending makes Silicon Valley Bank’s collapse a ‘long-term problem’ (FOX Business). YouTube Tips ⓘ

 FLASHBACK … 

Eva Ados, ERShares, gives a pitch on why to buy Signature Bank stock. With CNBC’s Sara Eisen and the Fast Money traders, Tim Seymour, Karen Finerman, Pete Najarian and Mike Khouw (CNBC/Jan 11, 2022). YouTube Tips ⓘ