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Collapse of Signature Bank

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On March 12, 2023, New York banking officials closed Signature Bank, a New York-based full-service commercial bank in the third-largest bank failure in U.S. history.[1] United States federal regulators stated that it was being shut down to protect consumers and the financial system in the wake of the collapse of Silicon Valley Bank.[2] At the time of closure, the bank had $110 billion in assets.[3]

Background

Main article: Signature Bank

Signature Bank was founded on May 1, 2001, by Joseph J. DePaolo, the bank's president and chief executive officer; Scott A. Shay, chairman of the board; and John Tamberlane, vice chairman and director. The former two were ex-employees at Republic National Bank of New York, which had been purchased by HSBC the year prior.[4] The bank primarily focused on wealthy clients.[5] The bank swiftly grew to be valued at $950 million in assets in around 20 months by February 2003, becoming one of the top five commercial banks in the United States.[6]

After completing its initial public offering in March 2004, the bank began trading on the NASDAQ as SBNY.[7] From 2004 to 2014, its stock price rose 650 percent, a return 10 times the S&P 500 and double the next highest-performing institution (Silicon Valley Bank's parent SVB Financial Group). A 2014 article in Crain's New York Business hailed Signature as "New York's most successful bank".[8]

In the late 2010s, Signature Bank began to expand its operations geographically and industry-wise, with the bank opening an office in San Francisco in 2018.[9] The bank also added offices in Southern California, North Carolina, and Nevada; it had 40 offices by March 2023.[10]

Expansion into cryptocurrency

Beginning in 2018, cryptocurrencies became a major focus for the bank as it began to accept customers from the industry that year; Signature Bank would quickly become one of the most widely used banks by cryptocurrency firms.[11][12] The proportion of deposits at Signature Bank from companies in the sector rose to 16 percent by April 2021[13] and 30 percent by February 2023.[14] The core of its cryptocurrency business was Signet, a payment network opened in 2019 for approved clients that allowed the real-time gross settlement of fund transfers through the blockchain without third parties or transaction fees, similar to Ripple; by the conclusion of 2020, Signature Bank had 740 clients using Signet.[13][15]

Silicon Valley Bank Collapse

Main articles: Silicon Valley Bank and Collapse of Silicon Valley Bank

The closure came two days after the collapse of Silicon Valley Bank amid an ongoing string of United States bank failures.[1][16]

Collapse

On March 12, 2023, regulators with the New York State Department of Financial Services closed Signature Bank. The bank proved unable to close a sale or otherwise bolster its finances before Monday morning in order to protect its assets after customers began withdrawing their deposits in favor of bigger institutions. Former U.S. congressman Barney Frank, who was a member of the bank's board, noted that in the wake of the SVB collapse, clients became concerned over the bank's exposure to crypto and withdrew their funds, resulting in an "SVB-generated panic" that only set in late on Friday. The SVB and Signature collapses, the second- and third-largest bank failures in American history, were designated as systemic risks to the financial system, allowing for extraordinary measures to be taken to ensure the availability of funds beyond the Federal Deposit Insurance Corporation (FDIC)-insured $250,000.[17]

The FDIC was appointed as the bank's receiver and immediately established Signature Bridge Bank, N.A., which the FDIC would operate as it marketed its assets to bidders.[18]

Impact and legacy

Further information: 2023 United States bank failures
See also: List of largest U.S. bank failures

References

  1. ^ a b Ostroff, David Benoit, Rachel Louise Ensign and Caitlin. "Signature Bank Is Shut by Regulators After SVB Collapse". The Wall Street Journal. Retrieved March 13, 2023.{{cite web}}: CS1 maint: multiple names: authors list (link)
  2. ^ Betz, Bradford (March 12, 2023). "Signature Bank shut down in connection with Silicon Valley Bank collapse". FOXBusiness. Retrieved March 13, 2023.
  3. ^ "Regulators close New York's Signature Bank following Silicon Valley Bank collapse". www.cbsnews.com. Retrieved March 13, 2023.
  4. ^ Agosta, Veronica (May 4, 2001). "Signature: We'll Fill NYC 'Vacuum'". American Banker. p. 5. ProQuest 249811436.
  5. ^ Pristin, Terry (May 1, 2001). "Bank for Small Businesses". The New York Times. p. 8. ProQuest 431759721.
  6. ^ Fredrickson, Tom (February 17, 2003). "Signature Bank grows fast with personal touch". Crain's New York Business. p. 4. ProQuest 219169336.
  7. ^ Gelsi, Steve. "Signature Bank makes its mark". MarketWatch. Archived from the original on November 16, 2018. Retrieved November 15, 2018.
  8. ^ Elstein, Aaron (April 28, 2014). "NY's most successful bank". Crain's New York Business. p. 1. ProQuest 1521398598.
  9. ^ Calvey, Mark (April 18, 2018). "New York bank poaches from First Republic to expand into Bay Area". San Francisco Business Times.
  10. ^ "Private Client Offices". Signature Bank. Archived from the original on November 14, 2018. Retrieved March 12, 2023.
  11. ^ "Signature Bank bet big on crypto — and must now reckon with the crash". Financial Times. July 28, 2022. Retrieved March 13, 2023.
  12. ^ Lopatto, Elizabeth (March 12, 2023). "Signature Bank is closed by regulators, the third US bank failure in a week". The Verge. Retrieved March 13, 2023.
  13. ^ a b Adams, John (April 23, 2021). "Signature Bank raises its bet on cryptocurrency". American Banker. ProQuest 2516512682.
  14. ^ Elstein, Aaron (February 20, 2023). "Signature Bank CEO to step down after 22 years". Crain's New York Business. p. 2. ProQuest 2779159714.
  15. ^ Adams, John (December 26, 2018). "Can blockchain jolt energy payments? What about real estate?". American Banker. ProQuest 2160050934.
  16. ^ Lang, Hannah; Anand, Nupur; Lang, Hannah (March 13, 2023). "Signature Bank becomes next casualty of banking turmoil after SVB". Reuters. Retrieved March 13, 2023.
  17. ^ Benoit, David; Ensign, Rachel Louise; Ostroff, Caitlin (March 12, 2023). "Signature Bank Is Shut by Regulators After SVB Collapse". The Wall Street Journal.
  18. ^ "FDIC Establishes Signature Bridge Bank, N.A., as Successor to Signature Bank, New York, NY". Federal Deposit Insurance Corporation (Press release). March 12, 2023.
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