Silicon Valley Bank wasn’t the only major financial firm to collapse over the weekend.
Just two days after Silicon Valley Bank became the largest bank failure since the 2008 financial crisis, state regulators closed Signature Bank in New York, marking the third-largest bank failure in the country’s history.
The failures have shaken the financial landscape and sparked questions about the stability of the U.S. banking system overall.
Silicon Valley Bank was a major bank for the tech industry, while Signature Bank stood out as one of the main banks accepting cryptocurrency deposits.
Here’s what you need to know about the Silicon Valley Bank shutdown — and here’s what you need to know about the Signature Bank collapse:
Like SVB, Signature had lots of uninsured deposits
The New York Department of Financial Services seized Signature Bank on Sunday “in order to protect depositors” after customers withdrew billions in a bank run in the wake of the Silicon Valley Bank collapse.
The state-chartered commercial bank had more than $110 billion in assets and nearly $89 billion in deposits as of the end of last year, according to the department. More than $79 billion of those deposits were not insured by the Federal Deposit Insurance Corporation (FDIC), according to The New York Times.
The FDIC sets a $250,000 limit per account on how much it will back up customer deposits, but the vast majority of deposits at both Silicon Valley and Signature banks were in accounts that far exceeded the limit. The collapse of Silicon Valley Bank prompted similar concerns among Signature customers, forcing the FDIC to take control the New York-based firm, as well.
Signature Bank depositors will get their money back
The administration moved Sunday night to use emergency measures to guarantee depositors at both failed banks, drawing from the Deposit Insurance Fund.
The Department of the Treasury, Federal Reserve and the FDIC said in a joint statement that all depositors of the bank “will be made whole.” Shareholders and certain unsecured debtholders will not be protected.
“As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer,” the statement reads.
Here’s who is paying to restore Silicon Valley, Signature Bank deposits
The money in the DIF comes from insurance premiums that banks are required to pay into as well as interest earned on funds invested in U.S. bonds and other securities and obligations.
Signature Bank was heavily exposed to crypto losses
Signature Bank made waves by becoming one of the few banks to accept cryptocurrency deposits. The bank was deeply intwined with the cryptocurrency industry as it exploded in size and prominence throughout the late 2010s and the start of 2020s.
Just as the tech-centric Silicon Valley Bank suffered when high interest rates walloped venture-capital-backed startups, Signature Bank took a serious hit as Fed rate hikes caused a meltdown in cryptocurrency values.
Former Rep. Barney Frank (D-Mass.), a Signature Bank board member, blamed the collapse of the bank on “crypto panic.”
“By Sunday, we had stabilized the situation,” Frank told The Block, a cryptocurrency news outlet.
“But I believe the regulators, especially the New York state regulators, wanted to send the message that crypto is toxic.”
Signature Bank had a long relationship with Trumps
Signature Bank made headlines back in 2021 for cutting ties with former President Trump and his New York-based Trump Organization in the wake of the Jan. 6, 2021, riot at the U.S. Capitol.
The bank had long been used by Trump as he ran his business empire in New York. His daughter, Ivanka Trump, was appointed to the bank’s board in 2011 and served until 2013.
Signature Bank shut down Trump’s personal accounts, which reportedly held around $5.3 million, in 2021 after the Jan. 6 riot at the Capitol.
“To witness a rioter sitting in the presiding chair of the U.S. Senate and our elected representatives being told to seek cover under their seats is appalling and an insult to the Republic,” Signature Bank said.
“We witnessed the President of the United States encouraging the rioters and refraining from calling in the National Guard to protect the Congress in its performance of duty.”
Biden says the chaos is contained
President Biden has stressed that the U.S. banking system is safe amid the last few days of uncertainty and repeated assurances that the government’s actions don’t constitute a bailout.
“No losses will be — and I want — this is an important point — no losses will be borne by the taxpayers. Let me repeat that: No losses will be borne by the taxpayers. Instead, the money will come from the fees that banks pay into the Deposit Insurance Fund,” the president said Monday.
Lawmakers on both sides of the aisle have expressed opposition to a bailout possibility for the banks, and the administration has said its actions to make sure deposits are guaranteed won’t come at a cost to taxpayers.
Biden sought to reassure Americans in remarks on Monday.
“The bottom line is this: Americans can rest assured that our banking system is safe. Your deposits are safe. Let me also assure you, we will not stop at this. We’ll do whatever is needed,” Biden said.