Signature Bank Under Investigation For Money Laundering

Signature Bank

Prior to its demise, two US federal agencies were apparently looking into the cryptocurrency-friendly Signature Bank.

Authorities with the Justice Dept were reportedly looking into whether Signature took sufficient steps to identify suspected financial fraud by its clients, in a March 15 Bloomberg article citing individuals familiar with the situation. Silicon Valley Bank was closed down by US regulators on Friday after they confiscated its assets. Silicon Valley Bank focused on financing technology companies. It was a US bank’s worst failure since the 2008 financial crisis.

Signature Bank Shut Down

It had been attempting to raise money in order to cover a loss on the asset sales impacted by rising interest rates. Customers rushed to withdraw money as soon as they heard about the problems, creating a cash shortage. Authorities also seized control of New York’s Signature Bank on Sunday. This institution was seen to be the most vulnerable to a comparable bank run because it had a large number of cryptocurrency-related clients.

SVB and Signature Bank each focused on a certain industry. Also, they had an excessive amount of exposure to assets whose prices were being affected by rising interest rates. With the failure of SVB and Signature Bank, bank shares in the US, Asia, and Europe fell as investors worried about the overall health of the banking industry.

Particularly heavily impacted were smaller American lenders, though they recovered on Tuesday. They assured clients that they had exposure to plenty of cash to be capable of safeguarding themselves from shocks, yet the initial sell-off nevertheless occurred. Investors are concerned that problems at other companies may be indicated by the collapse of the two banks.

The presumption is that the overall risk to the remainder of the banking industry is low because most banks have diversified their exposure across numerous industries and have a large amount of cash on hand.

The collapses have, however, brought to light the fact that several banks are riskier than they may appear because many will have suffered losses on their holdings in government bonds when interest rates rose, depressing their value.