Regulators shut down New York signature bank and say depositors will be cured


March 12 (Reuters) – State regulators closed New York-based Signature Bank (SBNY.O) on Sunday, just two days after California authorities shut down Silicon Valley Bank (SIVB.O), prompting a collapse , which shook global markets and left billions of dollars of deposits stranded by banks.

The US Treasury Department and other banking regulators said in a joint statement Sunday that all Signature Bank depositors will be restored and “no losses will be borne by the taxpayer.” The signature failure is the third largest in US banking history.

The New York Banking Commissioner appointed the Federal Deposit Insurance Corporation (FDIC) as liquidator for subsequent disposition of the bank’s assets. Signature Bank reported deposits totaling $89.17 billion as of March 8. As of December 31, it had approximately $110.36 billion in assets, according to the New York State Department of Financial Services.

Signature Bank officials did not immediately respond to a request for comment.

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The FDIC on Sunday set up a “bridge” successor bank to Signature that will allow customers to access their funds on Monday. Signature bank depositors and borrowers automatically become customers of the bridge bank, the FDIC said.

The regulator appointed former Fifth Third Bancorp chief executive Greg Carmichael as CEO of the bridge bank.

Signature’s failure followed Friday’s closure of Silicon Valley Bank, the biggest failure since Washington Mutual’s bankruptcy in 2008 during the financial crisis. Washington Mutual is still considered the largest bank failure in US history.

US officials said Sunday that Silicon Valley Bank customers will be able to access their deposits starting Monday. The federal government also announced measures to shore up deposits and stem further financial fallout from the collapse of the tech startup-focused lender.

Signature Bank, a commercial bank with retail offices in New York, Connecticut, California, Nevada and North Carolina, had nine national businesses including commercial real estate and digital asset banking.

In September, almost a quarter of Signature’s deposits came from the cryptocurrency sector, but the bank announced in December that it would reduce its crypto-related deposits by $8 billion.

Signature Bank announced in February that its chief executive officer, Joseph DePaolo, will transition to a senior advisor role in 2023 and will be succeeded by Eric Howell, the bank’s chief operating officer. DePaolo has served as President and CEO since Signature’s inception in 2001.

The bank had a long-standing relationship with former President Donald Trump and his family, providing checking accounts for Trump and his company and funding several of the family’s ventures. Signature Bank severed ties with Trump in 2021 after the deadly Jan. 6 riots on Capitol Hill, urging Trump to resign.

In a statement, New York Gov. Kathy Hochul said she hoped the US government’s actions on Sunday would inspire “greater 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 resilient economy,” she said.

Officials said Sunday that shareholders and certain unsecured creditors of Signature Bank and Silicon Valley Bank would not be protected and that management at both banks had been removed.

Any losses to the FDIC’s deposit insurance fund, which is used to support uninsured depositors, will be recouped through a special assessment of the banks, as required by law, officials said.

Reporting by Hannah Lang in Washington; additional reporting by Nupur Anand in New York; Edited by Leslie Adler, Lisa Shumaker and Lincoln Feast

Our standards: The Thomson Reuters Trust Principles.

Hannah Lang

Thomson Reuters

Hannah Lang covers fintech and cryptocurrency, including the companies driving the industry and the policy developments governing the sector. Hannah previously worked at American Banker, where she was responsible for banking regulation and the Federal Reserve. She graduated from the University of Maryland, College Park and lives in Washington, DC.

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