Who’s Next? Crypto-Friendly Signature Bank Closed By U.S. Regulators; Protection Scheme Implemented!

Signature Bank closed by regulators
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U.S. regulators on Sunday shut down New York-based Signature Bank, a big lender in the crypto industry, to prevent the spreading banking crisis. The regulators said depositors at Signature Bank would have full access to their deposits, regardless of the amount. A similar bail-out procedure will be applied to the failed Silicon Valley Bank. With Signatur Bank, three banks collapsed last week that were systemically important to the startup and crypto sectors.

Regulators said keeping open the 24-year-old Signature Bank, which held deposits from law firms and real estate companies, could threaten the financial system’s stability. However, the regulators said that Silicon Valley Bank and Signature Bank customers would be made whole regardless of how much they held in their accounts.

After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer. We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.

Joint Statement by Treasury, Federal Reserve, and FDIC (link)

The NYT reports that more than $79 billion of Signature Bank’s roughly $88 billion in deposits were uninsured at the end of last year2022. More than 80 percent of its deposits were from law firms, accounting firms, healthcare companies, manufacturers, and real estate management companies. The bank’s crypto-related deposits stood at $16.52 billion.

It seems that the wave of bank failures continues. Especially those small banks involved in startups and crypto are likely to be affected by the panic of their customers and bank runs. The measure taken by the U.S. regulators aims to calm these customers and prevent the spread of bank failures.


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