Signature Bank headquarters at 565 Fifth Avenue in New York, USA, on Sunday, March 12, 2023.
Lokman Vural Elibol | Anadolu Agency Getty Images
On Friday, Signature Bank Customers spooked by the sudden collapse of Silicon Valley Bank withdrew more than $10 billion in deposits, board members told CNBC.
That rapid opening of deposits led to the third largest bank failure in US history. Regulators announced late Sunday that Signature was taken over to protect depositors and the stability of the US financial system.
The sudden move surprised executives of Signature Bank, a New York-based institution with deep ties to the real estate and legal industries, said board member and former congressman Barney Frank. Mark has 40 branches, assets of $110.36 billion and deposits of $88.59 billion at the end of 2022, according to a regulatory filing.
“We had no indication of a problem until we got the deposit at the end of Friday, which was actually transmitted from SVB,” Frank told CNBC in a phone interview.
Trouble for US banks with exposure to the pandemic’s biggest asset class — crypto and tech startups — boiled over last week with the windfall of crypto-centric Silvergate Bank. While the death of the company was expected for a long time, it can cause panic about the banks with the level of uninsured deposits. Venture capital investors and founders drained their Silicon Valley Bank accounts on Thursday, leading to a seizure later in the day.
Panic spread
That puts pressure on Signature, The first republic and other names late last week because of fears that uninsured deposits could be locked up or lose value, which could spell death for startups.
Signature Bank was founded in 2001 as a more business-friendly alternative to the big banks. It expanded to the West Coast and then opened itself up to the crypto industry in 2018, which helped turbocharge deposit growth in recent years. The bank created a 24/7 payment network for crypto clients and has $16.5 billion in deposits from customers related to digital assets.
Signature Bank shares have come under pressure.
But when a wave of panic spread late last week, Signature customers moved their deposits to bigger banks including JPMorgan Chase and CitigroupFrank said.
According to Frank, Signature executives are exploring “all avenues” to resolve the situation, including seeking more capital and gauging interest from potential buyers. The deposit exodus had slowed on Sunday, he said, and executives believed the situation had stabilized.
However, Signature’s top manager was quickly removed and the bank closed Sunday. The regulator is now conducting a sales process for the bank, while assuring customers that they will have access to their deposits and services will continue without interruption.
The poster boy
The move raised some eyebrows among observers. In the announcement of the same Sunday that identified SVB and Signature Bank as a risk to financial stability, the regulator announced a new facility for Shore up confidence in the country’s other banks.
Another bank that has come under pressure recently, First Republic said it has more than $70 billion in funding from the Federal Reserve and JPMorgan Chase.
For his part, Barney, who helped draft the Dodd-Frank legislation in the wake of the 2008 financial crisis, said there was “no real objective reason” that Mark should be arrested.
“I think part of what’s happening is that regulators want to send a very strong anti-crypto message,” Frank said. “We’re the poster child for not having fundamental-based insolvency.”