Ajit Karn
San Francisco: The US banking regulator has reached an agreement to transfer the majority of Signature Bank’s assets to another institution, the agency announced on Sunday.
Signature Bank was confiscated by the Federal Deposit Insurance Corporation (FDIC) a week ago after it imploded in the wake of Silicon Valley Bank’s (SVB) collapse in early March, a failure that has sent global banking into convulsions.
Bloomberg reports that the FDIC is also pursuing a similar arrangement to sell off portions of SVB.
Flagstar Bank, a subsidiary of New York Community Bancorp, will assume all of Signature Bank’s deposits and a portion of its loan portfolio, according to a statement from the regulator.
Signature Bank held $88.6 billion in deposits as of December 31, 2022, according to the statement, which added that the bank’s 40 branches would operate under Flagstar on Monday.
According to a statement, approximately $60 billion in loans and $4 billion in deposits related to Signature Bank’s digital banking division will remain under the supervision of the regulator.
The US Federal Reserve, Treasury Department, and FDIC intervened last week to prevent a massive surge of withdrawals at SVB from expanding to other small and midsize institutions.
To reassure the market, they assured consumers that they could withdraw all deposits from SVB and Signature Bank.
Bloomberg reports that regulators have been unable to find a suitor for startup lender SVB and are now contemplating breaking up the bank.
The FDIC is currently “looking to sell the failed bank in at least two pieces,” according to news agency sources. The regulator refused to comment when contacted by AFP.
The failure of SVB, Signature Bank, and regional lender Silvergate has prompted concerns of industry-wide contagion as customers withdraw cash out of fear.
The stock market valuation of San Francisco’s First Republic Bank, the fourteenth largest bank in the United States by assets, has plummeted by 80 percent.
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Despite a $30 billion rescue package from 11 large US banks, Standard & Poor’s (S&P) downgraded the bank’s long-term issuer credit rating from BB+ to B+ on Sunday.
The measure “should alleviate near-term liquidity pressures,” S&P said in a statement, “but it may not resolve the bank’s substantial business, liquidity, funding, and profitability challenges.”
The agency warned that it could lower the bank’s rating further if deposits are not stabilised.
First Republic Bank asserted that with the $30 billion infusion, the financial institution is “well-positioned to manage short-term deposit activity.”
A spokesperson stated, “This support reflects confidence in First Republic and its ability to continue providing unwaveringly exceptional service to its clients and communities.”
