According to New York officials, the government seized Signature Bank on Sunday after regulators lost faith in management.
A representative for the state’s Department of Financial Services said in an email statement on Tuesday that the bank had failed to deliver trustworthy and consistent data, leading to a serious crisis of confidence in the bank’s leadership. “Based on the bank’s existing condition and capacity to conduct business in a safe and sound way on Monday, the decision was made to take possession of the bank and turn it over to the FDIC.”
The Federal Deposit Insurance Corp. took over the company and established a bridge bank to serve customers after the DFS placed Signature into receivership. According to a person familiar with the situation, the third-largest bank failure in American history occurred as a result of a Friday increase in customer withdrawals totaling around 20% of the company’s deposits.
Both a bridge bank spokesman and former CEO Joseph DePaolo did not immediately reply to requests for comment.
Former US congressman and member of Signature’s board of directors Barney Frank claimed to have a different understanding of how things transpired.
In an interview, Frank stated, “I’m surprised. “That wasn’t how I understood where we were,” she said.
Frank claimed that although executives eventually managed to get control of the situation, data regarding the bank’s balance sheet was volatile as management dealt with outflows. He claimed that although he wasn’t directly involved in the discussions with regulators, executives had briefed him and the other members.
By Sunday morning, according to Frank, the bank’s executives thought they had met the demand for the data and had obtained the necessary money from other sources as well as the discount window. He reaffirmed his conviction that the bank might have reopened on Monday and expressed his continued suspicion that the bank’s readiness to interact with cryptocurrency companies was the cause of its shutdown.
A DFS representative claimed that the decision “had nothing to do with cryptocurrency” and noted that the organization “has been facilitating well-regulated crypto activity for several years, and is a national model for regulation of the space.”
According to the former lawmaker, as of Sunday morning, deposit outflows had stabilized. Nonetheless, the DFS spokeswoman stated that “large withdrawal requests” would continue to be pending and increase throughout the weekend.
According to the individual with knowledge of the situation, Signature lost 20% of its deposits on Friday as customers fled to larger competitors after hearing about the failure of SVB Financial Group’s banking division.
The individual, who wished to remain anonymous because they were talking about a personal situation, didn’t give precise amounts for how much was taken from the bank. Yet, as of March 8, Signature claimed in a statement that it had deposits totaling about $89.2 billion. It would mean around $17.8 billion was removed in a single day. Contrarily, on Thursday, Silicon Valley Bank of SVB received withdrawal requests totaling $42 billion from investors and depositors, according to a regulatory filing.
According to the filing from last week, Signature has $26.4 billion in “marketable liquid securities” and $4.54 billion in cash on its balance sheet.
The unreported outflows give an idea of the difficulties regulators and bank executives faced over the weekend as federal authorities attempted to arrange liquidity solutions and reassure depositors.
Adrienne Harris, Superintendent of the New York Department of Financial Services, stated at a press conference on Monday, “We knew we were going to have to take action over the weekend so they could operate on Monday because of the volume of outflows we witnessed on Friday.
Ran Eliasaf claimed to be one of the depositors who took money out of the New York-based Signature. Providing short-term and construction financing for multifamily homes, condos, senior housing facilities, and nursing homes, he serves as managing partner of Northwind Group, a New York-based commercial real estate private equity company.
Eliasaf sent the following message to his team on Friday at approximately 10:30 a.m. New York Times when he observed the effects of SVB’s demise: “It’s better to be safe than sorry.” He instructed them to transfer “tens of millions of dollars’ worth” of deposits from Signature to JPMorgan Chase & Co., Bank of America Corp., and a few other smaller financial institutions.
(In the third paragraph, failure size is increased. In the eighth paragraph of a previous version of this story, the date was fixed.)
