Signature Bank Closes; Is Second U.S. Bank To Fail In Days
At more than $110 billion in assets, New York-based Signature Bank is the third-largest bank failure in U.S. history. Signature Bank, the third-largest bank failure in U.S. history, has been closed by its state chartering authority. Shareholders and unsecured debtholders will not be protected, and senior management has been removed. The Fed has also announced that it will make funding available to ensure America's banks can serve their depositors. The Treasury has set aside $25 billion to offset any losses incurred under the Fed's emergency lending facility, but they do not expect to have to use any of that money, given that the securities posted as collateral have a very low risk of default. The two failed banks have not been rescued.
Published : one year ago by Anna Schier in Finance
Signature Bank was closed by its state chartering authority, officials said, adding that depositors will be made whole and no losses will be borne by taxpayers. Shareholders and unsecured debtholders will not be protected, and senior management has been removed. At more than $110 billion in assets, Signature Bank is the third-largest bank failure in U.S. history. The second-largest such failure came Friday from Santa Clara-based Silicon Valley Bank. Signature Bank is among the main banks for the cryptocurrency industry, according to CNBC.
The bank's closure was announced in a statement from Secretary of the Treasury Janet Yellen, Federal Reserve Board Chair Jerome Powell, and Federal Deposit Insurance Corp. Chairman Martin Gruenberg. Yellen has cleared the FDIC to resolve both Silicon Valley and Signature banks. Depositors at the banks, including those whose holdings exceed the $250,000 insurance limit, will be able to access their money Monday.
Additionally, the Fed announced Sunday it would make funding available to ensure America's banks could serve their depositors. “The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry,” the statement said. “Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe.”
Regulators closed Silicon Valley Bank, a financial institution with more than $200 billion in assets, when it experienced a traditional bank run, with depositors rushing to withdraw their funds all at once. The only larger bank failure in U.S. history is the 2008 failure of Washington Mutual. Silicon Valley Bank had to sell bonds at a loss to cover the withdrawals. Yellen described rising interest rates, which have been increased by the Fed to combat inflation, as the core problem for the bank.
The Treasury has set aside $25 billion to offset any losses incurred under the Fed's emergency lending facility. Fed officials said, however, that they do not expect to have to use any of that money, given that the securities posted as collateral have a very low risk of default. Though Sunday's steps marked the most extensive government intervention in the banking system since the 2008 financial crisis, its actions are relatively limited compared with what was done 15 years ago. The two failed banks themselves have not been rescued. The Associated Press contributed to this story.
Topics: U.S. Bank, Signature Bank