Sunday saw the abrupt closure of Signature Bank, a New York-based major bank with a sizable real estate lending division that had recently made an effort to attract cryptocurrency deposits.
Regulators claimed that keeping the financial institution open could endanger the stability of the entire banking market. In some ways, Silicon Valley Bank’s Friday regulator-seized seizure has harmed Signature Bank. Its closure highlights the difficulties faced by small and midsize banks, which frequently concentrate on specialized business areas and have a smaller customer base than behemoths like JPMorgan Chase and Bank of America. They are hence particularly susceptible to traditional bank runs.
Signature Bank Users In Distress
Startup lender Silicon Valley Bank collapsed on Friday as a result of some poor financial timing, making it difficult for it to meet customer deposit requests at the same time that dwindling venture capital funding was pushing start-up businesses to use their accounts more frequently. Similarly to that, shortly before the overheated market blew up last year, Signature Bank became among the very few banks to accept bitcoin deposits.
This week, as news of Silicon Valley Bank’s problems spread, business clients of Signature started calling the bank to inquire about the security of their deposits. Like Silicon Valley’s business clients, many were concerned that their deposits would be at risk because the majority of them had over $250,000 in their accounts.
Only savings up to $250,000 are insured by the Federal Deposit Insurance Corp., the organization that grabbed Silicon Valley. In notifying the liquidation of Signature early Sunday, authorities said clients of both institutions would’ve been made whole irrespective of the amount they had in their accounts. According to a source with expertise in the matter, however, Signature had a flood of deposits leaving its bank accounts on Friday as a result of clients’ worry over their money. Together with several of its peers’ equities, its stock price also kept falling.