NYBC’s Flagstar Buys Signature’s Assets, FDIC Avoids Crisis Hike

NYBC Calming the Tides of Signature Fallout

Signature Bank’s fallout created huge tides in the US banking system. Leaving some with a fear of reiteration of the 2008 scenario, causing a global recession. Some of their loans and assets will be taken over by a unit of NYBC. It can safely be assumed that other than assets, loans, and cash, liabilities worth $36 billion, which includes $34 billion in deposits, will also be taken care of. 

Forty branches of Signature will now operate as Flagstar locations from Monday, March 20.  It shall be noted that the startup-friendly bank was seized on March 12 with no lender ready for a takeover. Regulators tend to look for such options before the closure of a bank. 

This new deal will facilitate FDIC with equity appreciation rights in the NYBC common stock valued at nearly $300 million. 

However, this sale does not require Flagstar to manage all Signature’s offload; the deal only showcases that purchasers are in the market for a few assets. This is done so the market can assume that the bank’s financial health is good. Said Todd Phillips, a former FDIC attorney and a fellow at Roosevelt Institute. 

What caused Signature Bank’s doom?

In a matter of weeks, the United States witnessed the collapse of three major banks, Silvergate, Signature, and Silicon Valley Bank. This black swan event caused panic in the banking industry, raising a contagion risk that might spread to other banks. After a deep study, some economists pointed out that almost 190 banks could join the failure club soon. 

These collapses have been linked to the banking crisis, followed by the global recession of 2008. Like current scenarios, banks are fighting the rapid rise of interest rates, devaluing their holdings. To make matters worse, US prosecutors are investigating Signature Bank’s working with crypto clients. This scrutiny is due to the infamous crypto events of 2022. 

Regulators lost belief in the management and took action this month to shut down the Silicon Valley Bank (SVB) and Signature Bank. Just a few days before the crypto bank, Silvergate announced its bankruptcy, fears of the contagion crossing the border of crypto could enter the traditional banking realm. This would have affected a larger section of finance. 

Commending the swift action by FDIC, a senior fellow at Columbia University’s Richard Paul Richman Center for Business, Law and Public Policy, Todd Baker, said this action was a positive sign. He mainly liked the equity kicker that FDIC is getting over the performance of NYBC’s stock. Further exhibiting the new smartness of regulatory agencies. 

Before the Flagstar deal, the FDIC had already transferred all the deposits and some assets of Signature Bank to Signature Bridge Bank NA. In 2022, New York Community Bancorp acquired Flagstar for nearly $2.6 billion on December 1, 2022. 

Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.

Latest posts by Steve Anderrson (see all)