What happened to Signature Bank? The latest bank failure marks the third largest in history

The top row

Signature Bank, a New York-based regional bank that became a leader in cryptocurrency lending, closed suddenly on Sunday, marking the third-largest bank failure in US history, just two days after the country’s second-largest failure, Silicon Valley Bank , which rocked the stock. market and rekindled fears of “challenging and turbulent” economic times.

Basic elements

New York state regulators shut down Signature Bank – a 23-year-old regional bank that previously focused on digital assets by becoming one of the few banks to accept crypto deposits – after regulators warned that the stability of the financial system could threatened if the bank remained open.

New York’s Department of Financial Services announced Sunday that it had seized the bank, which had more than $110 billion in assets and more than $88 billion in deposits at the end of last year.

Signature Bank became the third regional bank to collapse in a matter of weeks, following the collapse of cryptocurrency-friendly California-based Silvergate Bank and Silicon Valley Bank, whose failure had investors worried about widespread financial vulnerability.

Signature had announced new financials on Thursday and said it had limited crypto deposit balances in an effort to increase its diversification, telling investors, “we want to make it clear again that Signature Bank is a well-diversified, full-service commercial bank and from two decades of solid performance serving mid-market businesses.”

The bank previously announced in December that it would cap its crypto-related deposits between $8 billion and $10 billion.

On Friday, however, customers quickly withdrew their deposits New York Times it said, after shares fell nearly 25 percent to $70 in the bank’s worst day on Wall Street, and after a brief halt Friday morning on volatility fears.

Fearing that Signature would suffer the same fate as SVB a few days earlier, customers moved their deposits to larger banks, including JPMorgan Chase and Citigroup, former Rep. Barney Frank (D-Mass.), who served on Signature’s board of directors;

Ilya Volkov, CEO of fintech platform YouHodler, said he does not believe the bank’s failure will have a long-term impact on the crypto industry, arguing that crypto giants Bitcoin and Ethereum have already recovered from the collapse of the banks, which he called “a sign of increased trust in independent decentralized assets”.

Volkov believes the biggest impact from Signature’s failure will likely be increased scrutiny of banking regulations, how banks design risk management and how they work with crypto companies, saying “it’s not clear what new financial institutions will work with these crypto companies in the wake of Silvergate, SVB and now Signature.”

Crucial passage

“I think all markets are in a volatile period in the short term,” Volkov said when asked about the strength of European and US stock markets following the collapse of SVB, adding that “even though Silicon Valley Bank is a regional bank, the news around it show a lack of confidence in the banking sector” that could have a “domino effect on other US regional banks”. Volkov noted that the fear of financial instability is “reasonable,” but predicted it won’t last long.

Tangent line

The collapse of SVB and Signature created a ripple effect across both large US banks and smaller regional banks as investors lost confidence. Market value losses in the 10 largest banking stocks exceeded $165 billion since SVB’s last session on Wednesday before its sudden collapse.

News Peg

In his first speech on banks since last week’s SVB failure, President Joe Biden said on Monday that Americans can “breathe easier” after a series of measures taken by his administration in recent days, which he supported that they leave the banking system “safe”. Those measures included a plan announced by the Treasury Department, the FDIC and the Federal Reserve in a joint statement Sunday to safeguard all deposits at Signature Bank and SVB and to give SVB depositors full access to their deposits on Monday morning. Biden also said he would ask Congress and bank regulators to “strengthen the rules for banks” to reduce the risk of future bank failures.

On the contrary

Not all economists or policymakers were optimistic about the Biden administration’s approach. In a New York Times In a column published Monday, Sen. Elizabeth Warren (D-Mass.) expressed skepticism about federal regulators’ goal of having banks, not taxpayers, bear the cost of the federal backstop needed to protect deposits, writing: “It will let’s see if that’s true.” In the column, Warren also argued that banks would have to regularly implement “stress tests” at their own risk of vulnerability if lawmakers in Congress and the Federal Reserve “didn’t withdraw tighter oversight” through the Dodd-Frank Act.

Further reading

Bank stock crash intensifies: Losses to $165 billion as analyst warns SVB risk of failure Intense regulatory scrutiny (Forbes)

What You Need to Know About Silicon Valley’s Bank Collapse—The Biggest Bank Failure Since 2008 (Forbes)

Biden Says Silicon Valley Bank Savings Helped Economy ‘Breathe Easier’—But Not All Experts Agree (Forbes)

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