Signature Bank, which held nearly $200 billion in assets and deposits as of the conclusion of 2022, has been taken over by the New York State Department of Financial Services (DFS) in a moved designed to protect depositors, the agency announced Sunday evening.
It’s the second major financial institution taken over by a government entity since Friday, March 10,when the federal government shuttered Silicon Valley Bank in California. Upon taking possession of Signature Bank, the DFS appointed the Federal Deposit Insurance Corporation (FDIC) as its receiver, a move designed to protect depositors.
“Throughout the weekend, DFS Superintendent Adrienne Harris and I have been working closely with Federal partners on ways to stabilize the banking sector and protect the hard-earned money of New Yorkers whose livelihoods depend on impacted companies,” Governor Kathy Hochul said in a statement about the takeover Sunday. “I’m grateful that the Federal regulators have taken steps to do just that, and I hope that these actions will provide increased confidence in the stability of our banking system. Many depositors at these banks are small businesses, including those driving the innovation economy, and their success is key to New York’s robust economy.”
The Federal Reserve also announced that Signature Bank would receive a systemic risk exemption — a move that not only protects the depositors’ assets but also aims to help protect the entire financial system at large. The Fed had issued a systemic risk exemption to Silicon Valley Bank as well.
“All depositors of this institution will be made whole,” according to a joint statement by Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell and FDIC President Martin Gruenberg on Sunday evening. “As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.”
Shareholders and some unsecured debtholders, however, are not protected under the systemic risk exemption, it was noted.
The DFS said the takeover was executed under Section 606 of the New York State banking law, which maintains that the agency may take possession of a financial institution operating in the Empire State for a multitude of reasons — including legal violations, has an impairment on its capital, cannot meet its financial obligations, or refused to comply with an agency-mandated investigation. No specific reason for the takeover was provided in the DFS statement.
As recently as Thursday, March 9, Signature Bank claimed it remained in a “strong, well-diversified financial position,” and that it held more than “$100 billion in well-diversified assets across nine national business lines and nearly 130 commercial banking teams spanning its metropolitan New York area and the west coast.” That news came a day before the Silicon Valley Bank takeover.
The Signature Bank takeover resulted in the dismissal of all senior management, according to the joint statement. Through Dec. 31, 2022, the bank held assets of $110.36 billion and deposits of $88.59 billion, according to the DFS.
“DFS is in close contact with all regulated entities in light of market events, monitoring market trends, and collaborating closely with other state and federal regulators to protect consumers, ensure the health of the entities we regulate, and preserve the stability of the global financial system,” according to an announcement from DFS Superintendent Adrienne Harris.
Any Signature Bank depositors or investors with questions about FDIC coverage limits and requirements can visit fdic.gov or call 877-ASK-FDIC.
The takeovers of Signature Bank and Silicon Valley Bank are “decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” according to the joint statement from Yellen, Powell and Gruenberg.
Eligible banks will also be provided with additional funding from the Federal Reserve to ensure they “meet the needs of all their depositors,” the joint statement noted.
Despite the two takeovers, Yellen, Powell and Gruenberg maintain that the U.S. banking system “remains resilient and on a solid foundation,” thanks in part to reforms made after the financial crisis of 2008-09.
“Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe,” the statement concluded.