Regulators seize Signature Bank in third-largest US bank failure

Regulators seized New York regional bank Signature Bank (SBNY) two days after shutting down Silicon Valley Bank as overseers of the banking system try to restore calm before markets open Monday.

Signature becomes the third-largest bank to ever fail in the U.S., behind Silicon Valley Bank and Washington Mutual in 2008, if its assets haven’t changed significantly since the end of 2022. Signature had $110 billion in assets as of Dec. 31, ranking 29th among U.S. banks. It had $88 billion in deposits as of that date.

A joint statement from the Treasury Department Secretary Janet Yellen, Federal Reserve Chair Jerome Powell and FDIC Chair Martin Gruenberg said that all deposit holders would be made whole, citing a “systemic risk exemption” that is also being applied to Silicon Valley Bank, but that shareholders and certain unsecured debtholders will not be protected. Senior management, they said, had been removed.

Any losses to the FDIC’s Deposit Insurance Fund to support depositors who exceeded the $250,000-protected limit, they added, “will be recovered by a special assessment on banks, as required by law.” The FDIC maintains the fund with regular contributions from banks.

Signature served clients in the cryptocurrency world. Like Silvergate Bank, another crypto-friendly bank that said last week it would voluntarily wind itself down, it had been suffering from an outflow in deposits in the aftermath of the collapse of crypto exchange FTX. The value of some of its securities had also dropped in value due to a rise in interest rates.

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