Monday, March 13, 2023

Fintech companies assist businesses whose funds are trapped at Silicon Valley

Signature Bank becomes next casualty of banking turmoil after Silicon Valley Bank

 

WASHINGTON: Two days after authorities shuttered Silicon Valley Bank in a collapse that stranded billions of dollars' worth of deposits, state regulators shut down the New York-based Signature Bank, the third largest failure in the history of US banking.


Signature was taken over by the Federal Deposit Insurance Corporation (FDIC), which had $88.59 in deposits and $110.36 billion in assets at the end of last year, according to the New York State Department of Financial Services.


In a joint statement, the US Treasury Department and other bank regulators stated that "no losses will be borne by the taxpayer" and that "all depositors of Signature Bank and Silicon Valley Bank will be made whole."


According to a Reuters reporter on the scene, employees appeared to gather for meetings on Sunday at the company's Manhattan headquarters, ordering catering from Italian restaurant Carmine's and Starbucks coffee. After the announcement of the closure, a small number of people left the building.


A request for clarification was sent to the lender's representatives, who did not immediately respond.


Following Silicon Valley Bank's Friday shutdown, which was the second largest in US history after Washington Mutual's collapse during the 2008 financial crisis, Signature failed.


The rapid rate at which customer withdrawals toppled startup-focused SVB, the 16th largest US lender, alarmed investors. US banks lost more than $100 billion in market value as a result of the incident last week, prompting government officials to take swift action over the weekend to try to restore confidence in the financial system.


Customers will be able to access their funds on Monday after the FDIC established a "bridge" successor bank on Sunday. Mark Bank's investors and borrowers will consequently become clients of the extension bank, the FDIC said.


Greg Carmichael, a former CEO of Fifth Third Bancorp, was appointed CEO of the bridge bank by the regulator.


Silicon Valley Bank clients will approach their stores beginning on Monday, US authorities said on Sunday. In addition, the federal government announced measures to protect deposits and prevent further damage.


Signature was a commercial bank with private client offices in North Carolina, California, Nevada, New York, and Connecticut. It had nine national business lines, including digital asset banking and commercial real estate.


The cryptocurrency industry accounted for almost a quarter of the bank's deposits as of September, but the bank announced in December that it would reduce its crypto-related deposits by $8 billion.


Signature Bank declared in February that its CEO, Joseph DePaolo, would progress into a senior consultant job in 2023 and would be prevailed by the bank's head working official, Eric Howell. Since Signature was founded in 2001, DePaolo has held the positions of president and CEO.


The bank had a long-term relationship with former President Donald Trump and his family. The bank opened checking accounts for Trump and his business and helped finance a number of the Trump family's ventures. After the deadly riots on Capitol Hill on January 6 in 2021, Signature Bank cut ties with Trump and urged him to resign.


Kathy Hochul, governor of New York, said in a statement that she hoped the actions taken by the US government on Sunday would inspire "increased confidence in the stability of our banking system."


She stated that "many depositors at these banks are small businesses, including those driving the innovation economy," and that "their success is key to New York's robust economy."


Signature Bank shareholders and certain unsecured debtholders, as well as Silicon Valley Bank shareholders, were informed on Sunday that they would not be protected and that senior management at both banks had been removed.


According to officials, a special assessment on banks will be made to cover any losses to the FDIC's Deposit Insurance Fund, which is used to help uninsured depositors.

Catch Daily Highlights In Your Email

* indicates required

Post Top Ad