When Silicon Valley Bank (SVB) collapsed late last week, it left more than just investors, lenders, and financial institutions quavering and on edge. Just 48 hours later New York–headquartered bank Signature announced its closure in what has become the third-biggest bank failure in U.S. history. Among SVB’s clients were a host of innovative tech startups and software makers, as well as residential solar panel companies and affordable housing projects. Half of Signature’s lending was to real estate companies and developers with extensive portfolios in commercial buildings and multifamily housing.
While the SVB collapse felt sudden, financial experts say it was actually years in the making. Back when interest rates were near-zero, SVB funneled money into government bonds and when interest rates rise, as they have significantly in the last year, bond prices fall. This in turn makes borrowing costs for loans higher. On March 10, SVB clients withdrew their money in large sums, and the bank ran out of money.
The demise of Signature Bank, headquartered in New York, is a result of the manic and panic set off by the SVB collapse, but also an outcome of a bank too focused on cryptocurrency.
A joint statement from the U.S.Treasury Department, Federal Reserve, and Federal Deposit Insurance Corporation (FDIC) on Sunday, March 12, ensured depositors they would have access “to all of their money” put into SVB and also announced “a similar systemic risk exception for Signature Bank.”
The repercussions of these two recent bank collapses extend beyond that of financial institutions and affect clients who depend on the banks to manage assets and provide loans. For SVB, this is a long roster of tech startups, established tech companies, and life science and biotech businesses. Among these are several residential solar companies including Sunrun, Sunnova Energy, and Sunlight Financial Holding.
While the SVB collapse felt sudden, financial experts say it was actually years in the making. Back when interest rates were near-zero, SVB funneled money into government bonds and when interest rates rise, as they have significantly in the last year, bond prices fall. This in turn makes borrowing costs for loans higher. On March 10, SVB clients withdrew their money in large sums, and the bank ran out of money.
The demise of Signature Bank, headquartered in New York, is a result of the manic and panic set off by the SVB collapse, but also an outcome of a bank too focused on cryptocurrency.
A joint statement from the U.S.Treasury Department, Federal Reserve, and Federal Deposit Insurance Corporation (FDIC) on Sunday, March 12, ensured depositors they would have access “to all of their money” put into SVB and also announced “a similar systemic risk exception for Signature Bank.”
The repercussions of these two recent bank collapses extend beyond that of financial institutions and affect clients who depend on the banks to manage assets and provide loans. For SVB, this is a long roster of tech startups, established tech companies, and life science and biotech businesses. Among these are several residential solar companies including Sunrun, Sunnova Energy, and Sunlight Financial Holding.
In a statement published on March 13, the ANHD said: “Signature Bank’s collapse comes as no surprise to the Association for Neighborhood & Housing Development (ANHD), who has long called out their faulty business model, which relied on predatory and speculative activities in New York City. Signature paved the way for thousands of tenants to suffer living in unsafe conditions, the victims of harassment, or displaced from their homes and communities.”
Among Signature’s more recent real estate dealings, are a $155 million refinancing loan for 777 Third Avenue, an office tower in Manhattan; and a $127.5 million refinancing loan for a newly constructed multifamily complex in Astoria, Queens.
On Monday, the FDIC transferred all SVB deposits into a new full-service FDIC-operated “bridge bank,” a chartered national bank that operates under a board appointed by the FDIC. It did the same with Signature, forming Signature Bridge Bank, N.A.
Today the U.S. Justice Department announced it has opened an investigation into the collapse of SVB.
AN will continue to monitor this story for its ties to how the financing of buildings and technologies will be affected by the failures of SVB and Signature.
Source: Arch Paper
