U.S. Bank Closures: Silvergate, SVB, Signature

March is turning out to be a downer for U.S. banks, with three shuttering their operations in four days. Silvergate Bank was the first to go on March 8, followed by SVB on the 10th, and Signature Bank, the latest to fold, on the 12th. It turns out you can get hat tricks in banking, although this particular record isn’t one too many banks would relish!

According to Bloomberg, even the managers at the bank were surprised by the decision to end operations at Signature. As recently as December 2022, the bank had what looked like a healthy balance book with aggregate deposits of over $88 billion. Friday, March 10, saw a run on the bank with massive withdrawals. On Sunday the 12th, The New York state regulator Department of Financial Services (DFS), assumed control at the bank to protect client deposits. The DFS appointed the Federal Deposit Insurance Corporation (FDIC) as the bank receiver.

Silvergate Bank went into voluntary liquidation, refusing FDIC receivership.

“I think if we were allowed to open tomorrow, we could continue – we have a solid loan portfolio, we’re the largest lender in New York” said former Congressman Barney Frank and board member of Signature Bank, best known for the Dodd-Frank Act, which overhauled U.S. financial regulation in the wake of the global financial crisis. “I believe the bank could continue to exist as a business,” he added.

While the U.S. authorities initially downplayed the possibility of bailing out SVB and Signature Bank, Sunday saw the decision to protect all depositors as a move “protect the U.S. economy by strengthening public confidence in our banking system.”

Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, and FDIC Chairman Martin J. Gruenberg issued a joint statement:

“Today, we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its vital role of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.

After receiving a recommendation from the boards of the FDIC and the Federal Reserve and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors. Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.

We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.”

Several major Crypto companies held significant deposits with Signature Bank. Among these are stablecoin issuer Paxos and the Coinbase exchange, the latter holding $240 million on deposit and the former with over $250 million in deposits.