Signature Bank of New York is the latest bank in the United States to declare bankruptcy, with federal regulators seizing its headquarters on Sunday.
In a statement made available on the Federal Deposit Insurance Corporation (FDIC) website, it said that the New York State Department of Financial Services had appointed the FDIC as receiver.
The FDIC said, “Signature Bank, New York, NY, was closed today by the New York State Department of Financial Services, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.”
This closure is the second in three days after Silicon Valley Bank (SVB) was shut down by federal regulators—the FDIC and the California Department of Financial Protection and Innovation (DFPI)—on Friday last week.
According to New York state’s Department of Financial Services, the FDIC has taken control of Signature Bank, whose financial statement as of December 31, 2022, revealed $110.36 billion in assets and $88.59 billion in deposits.
All of the depositors of Signature Bank and Silicon Valley Bank will be made whole, and “no losses will be borne by the taxpayer,” the statement said.
The regulators added that all “transfers of customer deposits were completed under the systemic risk exception approved earlier today (Sunday).”
Other key points pointed out by the FDIC include the fact that “shareholders and certain unsecured debt holders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund (DIF) to support uninsured depositors will be recovered by a special assessment on banks, as required by law.”
Apparently, just like the SVB situation, the FDIC said that depositors, creditors, and debtors would become customers of the “bridge” successor bank, Signature Bridge Bank, N.A., a full-service bank that will be operated by the FDIC as it markets the institution to potential bidders.
“Signature Bank had 40 branches across the country in New York, California, Connecticut, North Carolina, and Nevada. Banking activities will resume Monday, March 13, 2023, including online banking.
“Depositors and borrowers will automatically become customers of Signature Bridge Bank, N.A., and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards, and writing checks in the same manner as before.
“Signature Bank’s official checks will continue to clear. Loan customers should continue making loan payments as usual,” the statement added.
The FDIC named Greg D. Carmichael as CEO of Signature Bridge Bank, N.A. Carmichael recently served as president and CEO of Fifth Third Bancorp. As the CEO, he would help stabilize the bank and help the FDIC implement an orderly resolution.
Reuters reported that employees of the New York bank appeared to have gathered at the company’s Manhattan headquarters for meetings on Sunday, ordering catering from Carmine’s, an Italian restaurant, and Starbucks coffee. People trickled out of the building after the news of the closure was announced.
Signature’s failure raises questions about the solidity of banking regulations in the U.S., especially after customers trooped into start-up-focused SVB to withdraw their monies.
Some experts say that there may be a repeat of the 2008 financial crisis if not enough is done to nip it in the bud.
The episode last week erased more than $100 billion in market value from U.S. banks, prompting swift action from government officials over the weekend to try and restore confidence in the financial system, Reuters said.
New York Governor Kathy Hochul had said in a statement that she hoped that federal regulators’ actions on Sunday would provide “increased confidence in the stability of our banking system.”
“Many depositors at these banks are small businesses, including those driving the innovation economy, and their success is key to New York’s robust economy,” she said.