New York-based Signature Bank Closed Down by NYDFS Over 'Systemic Risk'


On March 12, Superintendent Adrienne A. Harris announced that
Signature Bank, a popular bank with cryptocurrency companies, has been
officially closed down by the New York Department of Financial Services (NYDFS)
due to 'systemic risk'. The closure comes after Section 606 of New York Banking
Law was enacted, giving the regulator the power to take possession of Signature
Bank and appoint the Federal Deposit Insurance Corporation (FDIC) for the
insurance process.
With deposits of $88.59 billion as of December 31, 2022,
Signature Bank is one of the two major US destinations for cryptocurrency
companies. The FDIC will handle the insurance process to ensure all depositors
receive their funds. However, concerns have been raised among investors, as
this is the third major bank to collapse within a week.
According to a statement released by the Federal Reserve on
the same day, the decision to close the bank was made in conjunction with the
FDIC to strengthen public confidence in the banking system and protect the US
economy. A senior member of the US Treasury also reportedly told the press that
the actions taken by NYDFS and Federal Reserve were aimed to limit depositor outflows
and prevent bank runs.
Silvergate, the other prominent crypto-friendly bank, announced on March 8 that it would shut down and voluntarily liquidate "in light of recent industry and regulatory developments."
Despite the turmoil in the crypto market, analysts believe that Signature Bank's diversified depositories, which only contain 25% of crypto deposits, allowed it to withstand the FTX collapse storm.
In conclusion, the closure of Signature Bank has raised
concerns among investors about the stability of the banking system, especially
in light of the recent closures of other major banks. While the decision was
made to protect the US economy and prevent bank runs, it remains to be seen
what impact it will have on the cryptocurrency market and its investors.

Pavan A
CBW - External Analyst
INDIA