In the aftermath of the Silicon Valley Bank’s (SVB) collapse, Signature Bank suffered a similar fate, becoming the third-largest bank failure in the history of the United States.
On Friday, March 10th, reacting to panic induced by SVB’s collapse, Signature Bank’s clientele withdrew their funds from the financial institution. According to a board member, more than $10 billion was withdrawn on Friday. “We had no indication of problems until we got a deposit run late Friday, which was purely contagion from SVB,” said Barney Frank, a Signature Bank board member. Signature Bank’s executives were shocked by their clientele’s reaction and attempted to resolve the situation throughout the weekend. Withdrawals slowed down on Sunday, March 12th, however, the damage was done. On the same day, the Federal Deposit Insurance Corporation (FDIC) took over the bank, removing its leadership and installing a new chief executive. The FDIC informed clients with more than $250,000 with the bank their funds would be available on Monday, March 13.
“All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer,” said a joint statement from the regulators handling the matter of the bank.
Signature Bank, founded in 2001, is a New York-based financial institution. It was a well-regarded bank in the cryptocurrency industry, providing services since 2018 that catered to crypto companies and individuals in the businesses. Signature Bank created a sense of legitimacy in the crypto industry, providing a 24-hour payment network for its clients, and according to CNBC, the bank held $16.5 billion in digital asset-related deposits.
While the bank played a significant role in the cryptocurrency ecosystem, it also served firms in the legal and real estate industries. At the end of 2022, Signature had 40 branches, $110 billion in assets, and $88 billion in deposits.
Financial industry experts have given a negative forecast for banking involving cryptocurrency and technology. The two fields have not been doing exceptionally well recently, with popular cryptocurrencies such as Bitcoin losing value and tech companies reducing their staff sizes.
“It’s very dark days at present for crypto,” said Yesha Yadav, a digital finance expert.
“Crypto firms have to figure out what to do next,” Yadav said. “It does not look like many banks are going to be excited to offer crypto firms banking business going forward.”