U.S. regulators shut down Signature Bank, the largest cryptocurrency lender, in New York on Sunday, trying to halt the spreading banking crisis.
“We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority,” Treasury, Federal Reserve, and FDIC said in a joint statement Sunday evening.
The banking regulator said depositors of Signature Bank would be given full access to their deposits, similar to a move that made sure depositors of failed Silicon Valley Bank would have their money returned.
“All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer,” the regulators said.
The regulators shut down Silicon Valley Bank and seized its deposits on Friday, the largest bank failure in the United States—and second largest overall —since the financial crisis of 2008.
The dramatic action came days after the technology-focused institution, with ties also to crypto, reported that it was struggling, prompting a rush of deposits into the bank.
Signature is one of the leading banks for the crypto sector, and is the biggest alongside Silvergate, which announced last week it was going out of business.
It had a market cap of $4.4 billion on Friday, following a 40% drop in valuations so far this year, according to data from FactSet.
As of Dec. 31, Signature had $110.4 billion in total assets and $88.6 billion in total deposits, according to its securities filing.
To contain the damage and head off a larger crisis, the Federal Reserve and Treasury created an emergency program to shore up deposits at both Signature and Silicon Valley Bank using emergency borrowing powers from the Federal Reserve.
The FDICs Deposit Insurance Fund would be used to cover depositors, many of whom were not insured because of a $250,000 guarantee on deposits. While depositors will be allowed to withdraw their money, stockholders and bondholders in the two banks are being eliminated, according to one senior Treasury official.
