On Sunday, March 12, 2023, regulators took the unprecedented step of closing Signature Bank, the third-largest bank failure in U.S. history. The move came after a run on deposits sparked by the sudden collapse of Silicon Valley Bank earlier in the week.
Signature Bank had reported 40 branches, assets of $110.36 billion and deposits of $88.59 billion at the end of 2022. The former U.S. Rep. Barney Frank, a board member, told CNBC that the bank had no indication of problems until late Friday when a deposit run began in response to the Silicon Valley Bank collapse.
The bank had been exposed to a number of high-risk asset classes during the Covid-19 pandemic and had created a 24/7 payments network for crypto clients, leading to an influx of deposits from digital-asset-related customers. As worries spread late last week, customers moved deposits to bigger banks such as JPMorgan Chase and Citigroup.
Regulators identified the Silicon Valley Bank and Signature Bank closures as risks to financial stability and announced new facilities to shore up confidence in other banks. First Republic declared that it had more than $70 billion in untapped funding from the Federal Reserve and JPMorgan Chase.
However, Frank speculated that Signature Bank was chosen as a “poster boy” to send a strong anti-crypto message, as there was no insolvency based on the fundamentals. Regulators are now conducting a sales process for the bank, while guaranteeing that customers will have access to deposits and service will continue uninterrupted.