Following Silicon Valley Bank (SVB) in the United States closed Signature Bank, a bank with a similar stock portfolio — the regulator in New York State made this decision because of systemic risks, according to a joint statement of the U.S. Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corporation. Obviously, the S&P 500 and other stock indices are facing bad times. 

All of the bank’s depositors will have full access to their deposits, as in the case of SVB, and the taxpayer will suffer no losses. Senior management has been suspended.

Meanwhile, the agencies stress that the U.S. banking system remains resilient, thanks in large part to reforms implemented since the 2008 financial crisis. “These reforms, combined with today’s actions, demonstrate our commitment to taking the necessary steps to ensure the safety of depositors’ savings,” the publication notes.

Commercial Signature Bank had total assets of about $110.36 billion and total deposits of about $88.59 billion as of Dec. 31, 2022, according to the New York Department of Financial Services.

The decision to put Signature into receivership came as a surprise to its managers, who learned of it shortly before the public announcement. On March 10, the bank faced a flood of deposit outflows, but by March 12 the situation had stabilized, said in a private conversation an agency interlocutor who asked not to be named.

On March 11, SVB went bankrupt, which began having problems after the closure of Silvergate, a cryptocurrency bank that invested in startups. This caused concern in the market and a rush by investors to sell off industry stocks. Silicon Valley Bank became the largest failed bank in 15 years since the 2008 global economic crisis, Bloomberg wrote. According to The New York Times, this is the second-largest bankruptcy in U.S. history.

Three days earlier, Silicon Valley Bank customers had abruptly begun withdrawing funds from their accounts, after which the lending institution had to take emergency measures. Investors also began to get rid of shares of peer banks: besides Signature Bank; these are Western Alliance and First Republic.

The authorities are considering the possibility of creating a fund to protect deposits in banks that may face problems after the bankruptcy of SVB. U.S. President Joe Biden’s administration should find a buyer for the bankrupt SVB. The Treasury Department and the White House must also remove any regulatory hurdles to the immediate acquisition of the bank. Otherwise, the U.S. banking system faces a crisis.

Earlier, we reported that Credit Suisse shares fell to an all-time low.