The shutdown of New York’s Signature bank by the FDIC marks the third-largest bank failure in the U.S. This comes within a week after the second-largest bank failure in the U.S.
The action comes as the fallout of the Silicon Valley Bank is impacting other money lenders in the banking field. The signature was on its track to come back from a crypto banking bet. Recently, new banking regulations have been acting as a slap on the digital assets’ exposure of the money lenders.
The bank had 88.59 US dollars in deposits and 110.36 billion US dollars in assets at the time of closure. The bank was closed by the FDIC, Federal Deposit Insurance Corporation, the one that was also behind the closure of the SVB.
The FDIC officials have assured that everyone who was a customer at Signature would get all of their deposits back. This would comprise money more than the 250,000 US dollars limit for the federal deposit insurance.
The banking regulator has launched a bridge bank that would operate to give back the funds to the customers. Greg Carmichael, the Chief Executive of Fifth Third Bancorp, an American bank holding company, is appointed as the CEO of the bridge bank.
Signature attempted to see another potential buyer and shore up its balance sheet before Monday’s dawn. However, it ended in vain as the regulators did not wait until Monday morning and took the action to close the bank on Sunday itself.
The bank conducted a meeting on Sunday before the seizure to order catering from Starbucks coffee and the Italian restaurant Carmine.
Barney Frank, the board member at Signature, revealed that the bank did suffer a run out of billions of dollars on Friday itself as soon as the news of the SVB crash came alive.
Frank said that as the bank announced its exposure to SVB, the customers started to take out their money in fear of a savings loss.
The bank employees did try to convince the customers and to persuade them to not withdraw the amounts, but they did not succeed.
Also Read: Silicon Valley Bank Collapse: The Second Largest Bank Crash In U.S. History Explained
A comment that came from the majority of customers was that they felt more comfortable having accounts at industry leaders such as JPMorgan and Co.
Frank was giving out an interview explaining the events that had occurred over the past couple of days. As per the details available from his interview, it could be understood that the Signature bank crash was a mere panic generated by the fall of SVB.
He commented that Sinagture was doing fine until the last couple of hours on Friday, which was when the clients flooded into the bank outlets with the demand to take back their money, close their accounts, and end their businesses with the bank.
The depositors of the bank are waiting to be made whole. The same is the case with the depositors of Silicon Valley Bank. However, the U.S. Treasury Department and other bank regulators have stated that no losses would be borne by the taxpayer. The regulators added that all depositors if the shuttered banks, would be made whole.
Adrienne A. Harris, the Superintendent of the New York Department of Financial Services, said that the agency was in close contact with all regulated entities in light of market events.
It added that the market trends were under frequent monitoring and it has established close collaboration with other states and federal regulators to protect consumers, and ensure the health of entities.
Harris was providing a statement on behalf of the agency, and she said that the goal was to preserve the stability of the global financial system.
A joint statement was issued by the US Federal Reserve and the FDIC. It was said in the statement that the agencies were taking decisive actions to protect the U.S. economy by strengthening public confidence in the nation’s banking system.
The statement further said that the US banking system would remain resilient and on a solid foundation. It went on to say that the reforms added after the previous financial crisis have been combined with the present actions to demonstrate the commitment of the regulators to take the necessary steps to ensure that the hard-earned savings of the depositors will remain safe.
New reforms to make sure this was added after the 2008 financial crisis that fluctuated the US economy and the banking sector.
Kathy Hochul, the Governor of New York, issued a statement citing that the current actions on the part of the government would serve as a hope that the banking system would remain stable.
Hochul added that many depositors at the now-failed banks happen to be small business owners whose success was essential to a healthy New York economy and that they were the driving force of the innovation economy.
More banks, financial institutions, and money lenders who had exposure to SVB are on the verge of failure, which would have an enormous impact on the American banking sector.
The biggest challenge that the banks face is that they could not convince the account holders to stay with the bank. The clients are more vigilant than ever to not face any huge losses.
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