Signature Bank, a New York-based crypto-friendly institution with assets of $110.36 billion, has been taken over by regulators in order to protect its depositors and maintain the stability of the U.S. financial system.
This follows the sudden collapse of Silicon Valley Bank, which prompted Signature Bank customers to withdraw over $10 billion in deposits on Friday. This run on deposits quickly led to the third-largest bank failure in U.S. history.
In response to the crisis, a joint statement from the regulator was issued on Sunday to reassure the public that the banking system in the U.S. is sturdy and remains on a strong foundation.
They emphasized that the government is taking decisive actions to protect the economy by strengthening public confidence in the banking system.
Signature Bank Falls Victim To Crypto Contagion
The sudden move to take over Signature Bank shocked executives and board members alike. According to board member and former U.S. Rep. Barney Frank, crypto-friendly Signature had no indication of problems until they received a deposit run late on Friday.
During a phone interview yesterday, Frank stated that the executives had explored all options available to improve the situation, such as obtaining additional capital and assessing interest from potential buyers. By Sunday, the rate of deposit withdrawals had decreased, and the executives were confident that they had stabilized the situation.
Regulators took fast action by removing senior management to prevent systemic risks. However, shareholders and some debtholders won’t be protected, and losses from the Deposit Insurance Fund will be recouped via a special assessment of banks as per the law.
While some speculate that regulators wanted to send a strong anti-crypto message, Frank believes that Signature Bank became the poster boy because there was no insolvency based on the fundamentals. He believes that the deposit run was purely contagion from Silicon Valley Bank’s collapse.
As regulators conduct a sales process for Signature Bank, customers can rest assured that their deposits will remain safe and service will continue uninterrupted. The U.S. banking system remains resilient, and the government’s commitment to ensuring the safety of depositors’ savings is unwavering.
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