Signature Bank’s collapse came stunningly fast, leaving behind the question of whether there was a fundamental flaw in the way it did business — or if it was just a victim of the panic that spread after the failure of Silicon Valley Bank.
There were few outward signs that Signature Bank was crumbling before the New York Department of Financial Services on Sunday seized the bank’s assets and asked the Federal Deposit Insurance Corp. take over its operations. The FDIC will run it as Signature Bridge Bank until it can be sold.
But leading up the the takeover, there were calls on social media warning depositors to get their funds out of the bank — and those were followed with a real-life frenzy of withdrawals. There hasn’t yet been a public accounting of exactly how much money was withdrawn from the bank with a history of being friendlier than most in the U.S. to the cryptocurrency industry.
“This is not about a particular sector in the case of Signature Bank,” Adrienne Harris, superintendent of the Department of Financial Services, said at a media briefing this week. “But we moved quickly to make sure depositors were protected.”
The department has described the New York-based financial institution as a “traditional commercial bank,” but its two-decade history was certainly unconventional.
Signature catered to privately held businesses and their owners and executives. It became one of the 20 largest banks in the country that way, based on deposits. By the same measure, it was also the third largest U.S. bank to fail, after Washington Mutual’s collapse in 2008 and Silicon Valley Bank’s demise last week.
Founded in 2001, it was a major lender to New York City apartment building owners. Clients included former President Donald Trump and the family of his son-in-law and former White House adviser, Jared Kushner. Trump’s daughter, Ivanka, who also became a key Trump administration adviser, was on the bank’s board of directors from 2011-13, before her father’s run for president.
She wasn’t the only high-profile member of the board. Over the years, two former members of Congress also served on it: Sen. Alfonse D’Amato, a New York Republican, and Rep. Barney Frank, a Massachusetts Democrat who was a co-author of the landmark 2010 legislation that overhauled regulation of the financial industry.
Signature also made loans to New York taxi drivers seeking medallions, a part of the business that struggled as ride-sharing services such as Uber and Lyft took off and the value of medallions fell.
Unlike most U.S. banks, it was also friendly to cryptocurrency businesses, becoming the first FDIC-insured bank to offer a blockchain-based digital payment platform in 2019.
Partly because of crypto, the bank’s deposits grew by 67% in 2021. But last year, as the crypto exchange FTX crashed and declared bankruptcy, Signature pulled back. Its deposits over the year declined by $17 billion, or nearly 17%. The bulk of that was because of what the bank called a “planned reduction” in crypto-related assets.
In a January earnings release, Joseph DePaolo, then …read more
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