Feds Close Down Signature Bank; Depositors of Signature and Silicon Valley Banks Will Be Refunded

The message reassured jittery investors that despite the bankruptcy of multiple banks, the U.S. “banking system is robust.”

All Silicon Valley Bank depositors will have access to their cash on Monday, and depositors of Signature Bank will also be closed by New York’s state chartering body on Sunday.

The announcement was made in a joint statement by Chairman of the U.S. Federal Reserve Jerome Powell, Secretary of the U.S. Treasury Janet Yellen, and Chairman of the Federal Deposit Insurance Corporation (FDIC) Martin Gruenberg.

According to a press statement, the decision was taken in collaboration with President Joseph Biden, and the resolution would not result in any damages for U.S. taxpayers.

“The U.S. banking system is resilient and on a firm foundation,” the joint statement stated, highlighting banking rules enacted following the global financial crisis of 2008 that “ensured greater protections for the banking sector.”

Signature Bank is the third U.S. bank to collapse the previous week and the second institution essential to the digital assets market to fail.

On Wednesday, Silvergate announced that the company would voluntarily cease operations and liquidate, promising to repay depositors in full. The bank announced that the Silvergate Exchange Network would also be discontinued.

Being a round-the-clock payment service for Silvergate’s customers, the SEN plays a significant role for crypto-native enterprises. Signature Bank runs a comparable service called Signet, a digital payments platform the institution’s customers use for real-time payments.

With the announcement of the joint statements, the value of cryptocurrencies rose. According to CoinGecko, Bitcoin and Ethereum prices increased by 7.2% and 8.2% during the last day to around $21,850 and $1,580, respectively.

Stablecoin USDC also became closer to its dollar peg, which it had previously lost due to the failure of Silicon Valley Bank. The price of USDC, the second-largest stablecoin by market capitalization, dropped to $0.87 when the token’s issuer, Circle, disclosed that the bankrupt bank held $3.3 billion of the token’s reserves.

Signature Bank depositors will be safeguarded when the institution reopens on Monday. Still, stockholders and “some unsecured debtholders” will not be, according to a statement announcing the removal of the bank’s top management.

The Federal Reserve Board said on Sunday that qualifying depository institutions would get extra funding to ensure they can satisfy the demands of their depositors.

“The Federal Reserve is prepared to meet any potential liquidity concerns,” the agency claimed in a news statement, adding that the measures would minimize “an institution’s need to sell [high-quality] assets swiftly during times of stress.”

In a separate announcement, the Federal Reserve Board issued information regarding its so-called Bank Term Financing Program (BTFP), which grants bank loans for up to one year in return for the face value of U.S. Treasuries and other assets pledged as collateral by qualifying institutions.

Also Read: The USDC Falls To A Record Low As Investors Withdraw Funds From The Stablecoin