Signature Bank, a New York-based bank, is the latest to be shut down by state regulators on Sunday and is considered the third largest failure in the history of US banking.
The decision came two days after authorities shut down Silicon Valley Bank in a collapse that caused billions of deposits to be stranded. As a result of Signature Bank's shutdown, the Federal Deposit Insurance Corporation (FDIC) will take control of its $110.36 billion in assets and $88.59 billion in deposits at the end of last year.
Signature Bank's Closure
Signature Bank's and Silicon Valley Bank's depositors will be made whole, and there will be "no losses" that the taxpayer will bear, said a joint statement released by the US Treasury Department and other bank regulators.
The bank employees gathered at the company's Manhattan headquarters for meetings on Sunday. They ordered catering from Carmine's, an Italian restaurant, and Starbucks coffee. People were also being seen trickling out of the building after the news of the closure was released, as per Reuters.
The lender's representatives did not immediately reply to a request for comment regarding the incident. The failure of Signature Bank following a similar scenario with Silicon Valley Bank, which occurred on Friday and is considered the second largest in US banking history, came after the collapse of Washington Mutual in 2008 during a financial crisis.
Despite the speed at which startup-focused SVB, the 16th largest lender in the country, was topped by customer withdrawals, investors were unnerved. Last week, more than $100 billion in market value from US banks were erased, prompting swift action from government officials during the weekend to restore confidence in the financial system.
On Sunday, the FDIC established a "bridge" successor that would allow customers to access their funds on Monday. They added that Signature Bank's depositors and borrowers would automatically become customers of the bridge bank.
Looming Financial Crisis?
Board member and former US Rep Barney Frank said that the sudden closure also shocked executives of the bank, which is an institution that has deep ties to the real estate and legal industries, according to CNBC.
During a phone interview, Frank said they only indicated problems once they received a late deposit on Friday. Last week, issues for US banks exposed to the frothiest asset classes of the COVID-19 pandemic, crypto and tech startups, boiled over with the wind-down of crypto-centric Silvergate Bank.
While that specific firm's closure was long expected by many, its actual shutdown helped ignite a panic about banks with high levels of uninsured deposits. On Thursday, Venture capital investors and founders took out all of the contents of their Silicon Valley Bank accounts, which led to its seizure by midday Friday.
The FDIC named former Fifth Third Bancorp chief executive Greg Carmichael as the CEO of the bridge bank. Furthermore, the federal government will work on announcing actions that seek to shore up deposits and try to stem any broader fallout due to the bank's closure, said Rappler.