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HomeEconomy and FinanceAnother massive bank failure in USA: Regulators shut down New York's Signature Bank, two...

Another massive bank failure in USA: Regulators shut down New York’s Signature Bank, two days after authorities forced Silicon Valley Bank’s closure

The New York-headquartered Signature Bank had long catered to former US President Donald Trump and his family but had snapped ties after the Capitol Hill riots on January 6 in 2020.

State regulators in USA shut down New York-based Signature Bank on Sunday, just two days after California authorities closed Silicon Valley Bank, marking the 3rd largest failure in US banking history. The shutdown is the result of the collapse of SVB Financial Group’s Silicon Valley Bank, with the economic meltdown spreading to other institutions.

The US Treasury Department and other bank authorities stated in a joint statement on Sunday that all Signature Bank depositors will be made whole and that “no losses will be borne by the taxpayer”.

“We are also announcing a similar systemic risk exception for Signature Bank, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole,” the statement said.

The Federal Deposit Insurance Corporation (FDIC) was appointed as receiver for the bank’s assets by New York banking authorities. The bank reported $89.17 billion in deposit balance as of March 8. According to the New York State Department of Financial Services, it had roughly $110.36 billion in assets as of December 31.

The FDIC formed a “bridge” successor bank to Signature on Sunday, allowing customers to access their funds on Monday. Signature Bank depositors and borrowers will automatically become bridge bank customers, according to the FDIC. The regulator named Greg Carmichael as CEO of the bridge bank.

According to the interagency federal statement, shareholders and certain unsecured debt holders, however, will not be protected. “The senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law,” it said.

Signature Bank, a commercial bank based in New York, Connecticut, California, Nevada, and North Carolina, had nine national business lines, including commercial real estate and digital asset banking.

Over a quarter of Signature’s deposits originated from the cryptocurrency sector as of September, however, the bank said in December that it will reduce its crypto-related deposits by $8 billion.

The bank stated in February that its CEO, Joseph DePaolo, would step down as a senior adviser in 2023 and be succeeded by the bank’s chief operating officer, Eric Howell. DePaolo was President and CEO of Signature since its founding in 2001.

After the collapse of the second US bank, President Joe Biden vowed to hold those responsible for bank failures “fully accountable”. Biden also said that he will speak about the US banking system on Monday and reassure Americans after the failures of Silicon Valley Bank and Signature Bank.

Signature Bank pulled back from doing business with Donald Trump

The New York-headquartered Signature Bank had long catered to former US President Donald Trump and his family. Following the storming of Capitol Hill in January 2021, Signature Bank snapped ties with the US President while insisting that he must resign from his constitutional position. Signature Bank even closed down two personal accounts in which Trump held about $5.3 million.

Meanwhile, Signature’s fall came on the heels of Silicon Valley Bank’s failure on Friday, the greatest failure since Washington Mutual went bankrupt during the financial crisis in 2008. Washington Mutual remains the largest bank failure in American history.

Ayodhra Ram Mandir special coverage by OpIndia

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OpIndia Staff
OpIndia Staff
Staff reporter at OpIndia

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