US shuts down Signature Bank – second lender to fail in three days
The New York-based bank had assets valuing more than $110 billion dollars, making it the third largest lender to have collapsed in the US’ history.
Two days after the Silicon Valley Bank in the United States was declared insolvent, authorities on Sunday announced that New York-based Signature Bank has also failed and its assets were being seized.
With assets valuing more than $110 billion dollars (over Rs 9 lakh crore), Signature Bank is the third-largest bank failure in the US’ banking history, reported Reuters. As of March 8, Signature Bank, which is a big lender to crypto businesses, had deposits totaling $89.17 billion (over Rs 7 lakh crore).
In a statement, the US Treasury Department and other bank regulators said that all depositors of Signature Bank and the Silicon Valley Bank will be protected and taxpayers will not have to bear any losses.
“Today we are taking decisive actions to protect the US economy by strengthening public confidence in our banking system,” the joint statement said. “This step will ensure that the US banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.”
US authorities will use funds from the Deposit Insurance Fund to protect the depositors, CNBC reported. The fund pools money through quarterly fees from financial institutions and interests on government bonds, to safeguard the interests of depositors.
What this will do is remove the fear somewhat. But banks are shut so you have to take your banking elsewhere. But all money will be accessible, it appears, in the same bank accounts.
— Deepak Shenoy (@deepakshenoy) March 13, 2023
Startups and vcs can now set up better practices for diversification of funds.
On Friday, the California Department of Financial Protection and Innovation decided to shut down the Silicon Valley Bank – the largest lender to fail since the global economic crisis of 2008.
The California state banking regulator took control of the bank two days after it announced a loss of nearly $1.8 billion (over Rs 14,500 crore) from a sale of investments on March 8. The announcement created panic among customers of the bank, triggering a withdrawal of $42 billion (over Rs 3.4 lakh crore) in deposits.
On Sunday, US President Joe Biden said that he would speak on the US banking sector crisis on March 13.
“I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again,” Biden said in a statement.