USA financial authorities were busy behind the scenes for the weekend, as it was announced today that New York regulators have shut down Signature Bank (SBNY) in the country. 118 billion USD of the bank’s assets was seized by the country’s Federal Deposit Insurance Corporation (FDIC) this morning, making it the third largest bank failure in US history, right behind the Silicon Valley Bank and Washington Mutual bank failure.
In a joint statement by the US Treasury, Federal Reserve, and FDIC, New York-based Signature Bank was closed due to systemic risks in the current economic climate. The bank is the 3rd US bank to be shut down this week, after the Silvergate and Silicon Valley Bank (SVB) collapse.
Investors and the general US public sentiment on the bank shut downs this week are very concerning, as Etsy sellers were receiving notices of delay of their payments, and US companies such as Roku and Silicon Valley tech startups were concerned about employee payrolls due to the unavailability of cash due to the collapse of the banks.
However, the joint statement announced that US Treasury Secretary Janet Yellen has approved exceptions to both Signature Bank (SBNY) and Silicon Valley Bank (SVB) today that allow the banks’ depositors to receive more than the 250,000 USD insured amount promised by FDIC on Monday.
The statement announces that depositors will have access to all of their money, including the uninsured amounts above the 250k limit, starting Monday, March 13 in the country. It was also highlighted that no losses associated with the resolution of Silicon Valley Bank will be borne by US taxpayers’ money.
It should be noted that the banks’ shareholders and certain unsecured debtholders will not be protected. Senior management of both banks has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by US federal law.
On a closing note, the US government has announced that “the U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry.”
Signature Bank (SBNY) ranks 3rd in the list of largest US bank failures in history with $118 billion USD in assets at the time of failure in 2023, Silicon Valley Bank (SVB) ranks 2nd with $209 billion in assets in 2023, and Washington Mutual ranks 1st with $307 billion in assets in 2008.
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