After SVB fallout, New York-based Signature Bank collapses
The fallout from the implosion of Silicon Valley Bank (SVB) in the US is spreading to other areas. New York state's financial regulators have shuttered Signature Bank, a lender with close ties to the cryptocurrency industry. Signature's collapse makes it the third biggest failure in US banking history, and the government has already announced that the funds of its depositors will be safeguarded.
What relief measures have the federal agencies announced?
The Federal Deposit Insurance Corporation (FDIC), Federal Reserve, and US Treasury have come together to issue a joint statement. They said that depositors can get hold of their funds starting today and that taxpayers will not have to foot the bill to make up for the losses incurred during Signature's resolution. However, some unsecured shareholders and debtholders will not be protected.
The government has also taken other steps
FDIC has also set up a "bridge" successor bank led by former Fifth Third Bancorp CEO Greg Carmichael. All of Signature's depositors and borrowers are customers of the bridge bank and they access their funds from the new entity. The senior management of Signature has been relieved. Separately, all "eligible depository institutions" will now get extra funding from Federal Reserve to meet depositors' requirements.
A brief history of Signature Bank
Signature Bank was a New York state-chartered commercial bank established in 2001. It had client offices in Nevada, North Carolina, New York, Connecticut, and California. By the end of 2022, the institution had $110.36 billion in assets and total deposits of roughly $88.59 billion, as per the data provided by New York state's Department of Financial Services.
Signature gained prominence due to FTX's collapse last year
The collapse of the crypto exchange FTX had an impact on Signature last year. FTX was an account holder at the bank and following its crash, Signature claimed that it would shed deposits from digital asset clients by roughly $10 billion. The New York-based institution had also decided to put a cap on the deposit share from firms similar to FTX.
Here's recalling the SVB incident
California-based Silicon Valley Bank (SVB) collapsed last week after failing to raise capital. The bank had offloaded securities worth $1.75 billion at a loss and this spooked venture capital firms. SVB's collapse has triggered an avalanche with no end in sight.