US Authorities Shut Down Silicon Valley Bank & Signature Bank In One Week
Authorities in the United States (US) have shut down two banks in one week, seizing assets amounting to S$428 billion (US$319 billion).
The closures of Silicon Valley Bank and Signature Bank now mark the second and third largest US bank failures in history.
At the time of its shutdown, Signature Bank had S$147 billion (US$110 billion) in assets, while Silicon Valley Bank had S$281 billion (US$209 billion).
However, the US Treasury department assured both banks’ depositors that they wouldn’t bear any losses.
Silicon Valley Bank impacted by rapidly rising US interest rates
On Friday (10 Mar), CNBC reported that financial regulators had closed Silicon Valley Bank and seized control of its assets.
Two days prior, the bank had announced its plan to raise over S$2.68 billion (US$2 billion) in additional capital following a S$2.4 billion (US$1.8 billion) loss on asset sales.
According to Reuters, the bank was already under immense pressure stemming from US interest rate hikes.
As a startup-focused lender, rising interest rates impacted finances in the startup scene, which, in turn, affected the bank.
Following news of the closure, there were concerns over whether small businesses that banked with Silicon Valley Bank could pay their staff, especially since deposits are only insured up to S$335,900 (US$250,000).
Furthermore, the Federal Deposit Insurance Corporation (FDIC), which received the seized assets, said that 89% of deposits in the bank were uninsured as of the end of 2022.
To the relief of customers, regulators announced that they will have access to all their funds starting today (13 Mar).
Signature Bank collapse spurred by Silicon Valley Bank panic
Just two days after authorities shut Silicon Valley Bank down, they also moved to close Signature Bank.
The bank’s failure is tied to its standing as one of the leading banks in the cryptocurrency market, which has suffered a massive blow since last year.
According to Wall Street Journal (WSJ), Signature board member Barney Frank said the bank’s crypto-heavy assets had customers concerned after the collapse of Silicon Valley Bank.
In 2018, Signature Bank moved into the crypto space by hiring bankers specialising in the sector.
As of early 2022, 27% of its deposits came from digital-asset clients.
Since the downward spiral of cryptocurrency, Signature Bank has cut ties with Binance, the world’s biggest crypto exchange platform.
Similar to Silicon Valley Bank, Signature Bank customers can get all their deposits back even if they have funds above the insured limit of S$335,900 (US$250,000).
Largest US bank failures in history since 2008 global financial crisis
News of the banks’ shutdowns comes 15 years after Washington Mutual’s fall in 2008’s global financial crisis.
It remains the biggest US bank failure to date.
At the time, Washington Mutual was the country’s largest savings and loans bank, with S$415 billion (US$309 billion) in assets.
The collapse was triggered by risky mortgage lending and scores of depositors withdrawing their funds at the same time, according to The Washington Post.
Upon its seizure by the US federal government, the country’s largest bank JPMorgan Chase bought it up.
Have news you must share? Get in touch with us via email at news@mustsharenews.com.
Featured image adapted from Boston Globe and Forbes.
