New York-based Signature Bank, another crypto-friendly bank, has officially closed down and is being taken over by the New York Department of Financial Services (NYDFS).
The news was announced by Superintendent Adrienne A. Harris in a Mar. 12 statement. The New York regulator took possession of Signature Bank pursuant to Section 606 of New York Banking Law and appointed the U.S. Federal Deposit Insurance Corporation to handle the insurance process.
The Federal Reserve explained in a Mar. 12 statement that the decision to close the bank was made with the United States Federal Deposit Insurance Corporation (FDIC) to protect the U.S. economy and strengthen public confidence in the banking system.
@federalreserve @USTreasury @FDICgov issue statement on actions to protect the U.S. economy by strengthening public confidence in our banking system, ensuring depositors’ savings remain safe: https://t.co/YISeTdFPrO
– Federal Reserve (@federalreserve) March 12, 2023
A senior member of the U.S. Treasury reportedly told the press that today’s actions by the NYDFS and Federal Reserve were designed to limit depositor outflows and prevent additional bank runs:
“The actions that we took today were designed to limit the consequences of the depositor outflows from Silicon Valley and from Signature and to reduce any spillover effects.”
“The firms are not being bailed out. The depositors are being protected,” said the official. “The operations, the ability to keep payrolls working is really important,” the Treasury official added.
The Federal Reserve also noted that it is backstopping all depositors of Signature Bank.
“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.”
“This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the statement added.
Shareholders and certain unsecured debt holders will not be protected though, according to the statement. The senior management has also been removed.
Signature Bank has closed down, per press release from the federal reserve pic.twitter.com/sVl8B8G8bQ
– Pledditor (@Pledditor) March 12, 2023
Signature Bank had $88.6 billion in deposits as of Dec. 31 and was understood by some as one of the more crypto-friendly banks in the U.S.
Related: U.S. home-loan banks lent billions of dollars to crypto banks: Report
The other prominent crypto-friendly bank, Silvergate Bank announced last week that it would shut down and voluntarily liquidate “in light of recent industry and regulatory developments.”
According to some analysts, Signature Bank was able to weather the storm caused by the FTX collapse because its depositories were much more diversified than the likes of Silvergate Bank, with only 25% of its deposits coming from crypto.