Another Crypto Lender Fails as Signature Bank Shuts Down

Signature Bank, one of the biggest lenders to the crypto industry, was shut down by New York regulators Sunday in the third-largest bank failure in U.S. history, ranking behind only Silicon Valley Bank's shutdown on Friday and the collapse of Washington Mutual during the 2008 Financial Crisis.

New York regulators cited "systemic risks" prompting the shutdown and said the FDIC was appointed as receiver of the bank. This marks the third bank collapse in under a week following Silvergate’s liquidation on Wednesday and Silicon Valley Bank’s shutdown on Friday. Signature had assets of $110 billion and total deposits of about $88.6 billion as of the end of last year, ranking it 29th among U.S. banks by assets. Its market value was $4.4 billion as of Friday.

In a joint statement by the FDIC, Federal Reserve, and the Treasury Department, regulators insured “All depositors of the institution will be made whole. As with the resolution of Silicon Valley Bank no losses will be borne by the taxpayer.” Depositors at the bank will also have full access to their deposits. Equity and bondholders—as with SVB — will be wiped out. Signature Bank has offices in New York, Connecticut, California, Nevada and North Carolina.

Like Silvergate, Signature Bank was a significant lender to the cryptocurrency industry, with almost a quarter of the bank's deposits coming from the crypto sector. The bank experienced large outflows of deposits in the aftermath of the collapse of FTX and other high-profile crypto exchanges, with deposits sinking 17% in the fourth quarter of 2022 compared to a year prior. The bank's troubles were compounded further by rising interest rates due to the Fed's rate hikes.

In the weeks leading up to its closure, Signature Bank attempted to reassure investors of its financial soundness, declaring a "strong, well-diversified financial position" and aiming to reduce its exposure to crypto. This did not stop investors from liquidating their positions, as shares of Signature Bank (SBNY) sold off 20% on Friday and were down 76% from a year earlier before the bank's closure on Sunday.

U.S. banking stocks tumbled at the start of trading Monday, led by a 70% plunge in shares of First Republic Bank (FRC). The broader financial sector was down over 3%.