Silicon Valley Bank collapse results in Signature Bank shutting down operations Sunday
Silicon Valley Bank (SVB) was a major financial institution that served the tech industry and start-ups for 40 years. SVB collapsed on Friday, March 10, 2023, after failing to raise enough capital to meet its obligations. It was the second-largest bank failure in US history, after Washington Mutual in 2008. The bank’s troubles began when it reported a $4.5 billion loss in the fourth quarter of 2022, due to bad loans and investments in the crypto sector. As the bank’s stock price plummeted, depositors started to withdraw their money, creating a bank run.
The bank failed to find a buyer or a merger partner, despite reaching out to several potential suitors. President Biden praised the “decisive action” by federal financial agencies in an effort to protect everyone involved in the process, including the US banking system as a whole. The Department of the Treasury, Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) have declared that depositors of the Silicon Valley Bank will have the ability to access their funds by Monday. This decision has been praised by members of the Democratic Party, and Senator Alex Padilla (D-Calif.) has praised the regulators’ actions. However, Treasury Secretary Janet Yellen and other officials have voiced opposition to a potential bailout that could safeguard the bank and its shareholders. Instead, the authorities will prioritize restoring the full funds of depositors who have invested in the bank.
Immediately after the news broke the public, dozens of financial and bank experts said that SVB’s collapse marked the beginning of much larger bank crises in United States with other banks and companies to follow. The initial expectations turned out to be true on Sunday when federal regulators confirmed that New York-based Signature Bank was being shut down to protect consumers and the financial system following the collapse of California’s Silicon Valley Bank.
The information was released to the public during the same Sunday’s statement from the U.S. Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corporation when announcing that SVB’s clients will have access to their funds as early as Monday. A similar program, they said, was being enacted for Signature Bank, which was closed Sunday by its state chartering authority.
“All depositors of this institution will be made whole,” the joint statement read. “As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.”
The New York-based Signature Bank is a commercial bank that offered personalized banking and credit services to businesses and individuals. It was founded in 2001 and had over 30 offices in the New York metropolitan area. It was also one of the first banks to embrace the crypto industry and provide banking services to crypto firms and investors. Last week, Signature Bank Co-founder and Chief Executive Officer Joseph J. DePaolo said in a statement that ‘Signature Bank was a well-diversified, full-service commercial bank with more than two decades of history and solid performance serving middle market businesses’ while trying toa assure clients that the bank is at no risk of facing SVB’s scenario.
“We have built a strong reputation serving commercial clients through nine business lines and reached in excess of $100 billion in assets by continually executing our single-point-of-contact, relationship-based model where banking teams are capable of meeting all client needs,” Joseph J. DePaolo said partly in the statement.
Starting Monday, more information and details are expected as our team will continue to closely monitor the latest happenings.
