SBNY – Signature Bank Bought By New York Community Bancorp After Sudden Collapse
Topline
New York Community Bancorp has acquired Signature Bank and assumed most of its deposits, the Federal Deposit Insurance Corporation announced Sunday evening, one week after crypto-friendly Signature Bank and tech-focused Silicon Valley Bank both collapsed in the span of a few days—sending shockwaves through the U.S. financial system.
Key Facts
New York Community Bancorp’s subsidiary Flagstar Bank will operate Signature Bank’s 40 branches starting Monday, and the vast majority of Signature’s $88.6 billion in deposits will automatically head to Flagstar, though about $4 billion in digital banking deposits weren’t included in the sale and will still be handled by the FDIC.
The company also bought $38.4 billion worth of loans and other assets previously held by Signature, though some $60 billion in loans will remain with the FDIC, which took over Signature after it was shut down by New York state regulators last weekend.
The FDIC says Signature’s collapse will cost the federal Deposit Insurance Fund—which is funded by payments from banks—roughly $2.5 billion.
Key Background
The collapse of New York-based Signature Bank—which had $110 billion in assets last year—marked the third-largest bank failure in U.S. history, after Washington Mutual’s failure in 2008 and Silicon Valley Bank’s failure just two days before Signature was shut down. A regional bank, Signature became known for its unusual willingness to work with cryptocurrency industry customers, and although it began pivoting away from crypto last year, a recent plunge in crypto prices harmed the bank, especially after crypto-friendly Silvergate Bank failed earlier this month. Signature Bank was also pulled down by the collapse of Silicon Valley Bank, facing a surge in withdrawals after SVB failed, the New York Times reported. Last weekend, the FDIC assumed responsibility for Signature and SVB and promised to safeguard all deposits in both banks, even if they exceed the $250,000 per account normally insured by the federal government, a sweeping action designed to prevent a broader crisis in the rest of the U.S. banking system.
Surprising Fact
One of Signature Bank’s board members was former Rep. Barney Frank (D-Mass.), one of the architects of the Dodd-Frank bank regulations. Frank told Bloomberg he thinks regulators in New York “singled out” Signature Bank, shutting it down to “send a message to get people away from crypto.” The New York Department of Financial Services rejected this claim, telling multiple news outlets it forced Signature to shut down because it “failed to provide reliable and consistent data, creating a significant crisis of confidence in the bank’s leadership.”
Big Number
$90 billion. That was New York Community Bancorp’s total assets as of December, making it the 35th largest commercial bank in the United States. The company—which operates in greater New York City, the Midwest, Florida and Arizona—acquired Michigan-based Flagstar Bank last year.
What We Don’t Know
Whether tech-focused Silicon Valley Bank will also find a buyer. SVB was among the 20 largest U.S. banks before its collapse, which came after rising interest rates eroded the value of its assets and sparked a massive bank run. The FDIC has reportedly struggled to sell the bank in one piece, leading it to consider selling SVB’s wealth management division and most of its assets and liabilities separately, Bloomberg reported Sunday.
