Another Crypto Lender Fails as Signature Bank Shuts Down

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Signature Bank, one of the biggest lenders to the crypto industry, was shut down by New York regulators on Sunday in the third-largest bank failure in US history, ranking behind the shutdown of Silicon Valley Bank on Friday and the collapse of Washington Mutual in 2008. Financial crisis.

New York regulators cited “systemic risks” behind the shutdown and said the FDIC had been appointed as the bank’s receiver. It is the third banking meltdown in less than a week after Silvergates liquidated on Wednesday and Silicon Valley banks closed on Friday. Signature had assets of $110 billion and total deposits of about $88.6 billion at the end of last year, ranking it 29th among U.S. banks by assets. Its market value was $4.4 billion on Friday.

In a joint statement from the FDIC, Federal Reserve and Treasury Department, regulators assured that all depositors at the institution will be fully reimbursed. As with the Silicon Valley Bank resolution, no loss will be borne by the taxpayer. Bank depositors will also have full access to their deposits. Holders of stocks and bonds with SVB will be wiped out. Signature Bank has offices in New York, Connecticut, California, Nevada and North Carolina.

Like Silvergate, Signature Bank was a major lender to the cryptocurrency industry, with almost a quarter of the bank’s deposits coming from the crypto sector. The bank saw significant deposit outflows following the collapse of FTX and other top crypto exchanges, with deposits falling 17% in Q4 2022 from a year earlier. The bank’s problems were further compounded by rising interest rates due to Fed rate hikes.

In the weeks leading up to its closure, Signature Bank attempted to reassure investors of its financial strength, declaring a “strong and well-diversified financial position” and aiming to reduce its exposure to crypto. That didn’t stop investors from liquidating their positions, shares of Signature Bank (SBNY) sold 20% on Friday and were down 76% from a year earlier before the bank closed on Sunday.

US banking stocks fell in early trading on Monday, led by a 70% drop in shares of First Republic Bank (FRC). The broader financial sector fell by more than 3%.

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