Who is affected by Signature Bank’s failure?
After being seized by regulators on March 12, Signature Bank’s customer accounts were automatically transferred to the newly formed bridge bank, Signature Bridge Bank, which is operated by the FDIC. Depositors can continue to use the same checks, debit cards, and ATM cards as they did prior to the bank’s failure.
The failures of Signature Bank and SVB have raised concerns about the stability of the U.S. banking system and have led to significant losses in the market value of regional and big banks.
According to Mina Tadrus, CEO of Tampa-based investment management firm Tadrus Capital, consumer sentiment and behavior will likely be negatively affected by these failures. He predicts that investors may become less trusting of financial institutions and exercise more caution when choosing which ones to work with.
Signature Bank was known for working with crypto clients and real estate companies, with more than 80% of its deposits coming from middle-market businesses such as law firms, accounting practices, healthcare companies, manufacturing companies, and real estate management firms.
The bank had previously cut ties with former President Donald Trump, who had held checking accounts and received financing from the bank for various ventures. Ivanka Trump, Trump’s daughter, served on the bank’s board of directors from 2011 to 2013.
Is the government bailing out Signature Bank?
On March 12, regulators confirmed that both insured and uninsured deposits at Signature Bank would remain accessible to customers, similar to the case with SVB. However, more than $79 billion, equivalent to around 90 percent of deposits at Signature Bank, were not insured by the FDIC, as reported by The New York Times.
It’s worth noting that although the FDIC made exceptions with Signature and SVB, its regular policy is to insure up to $250,000 per depositor, per FDIC-insured bank, per ownership category. The FDIC is an autonomous government agency that gets its funding from its member banks, which pay fees to cover their customers’ deposits.
According to regulators and President Joe Biden, taxpayers will not bear the burden of deposit coverage, including both insured and uninsured deposits.
“No losses will be — this is an important point — no losses will be borne by the taxpayers,” Biden said in televised remarks on March 13. “Let me repeat that: No losses will be borne by the taxpayers. Instead, the money will come from the fees that banks pay into the Deposit Insurance Fund.”
According to regulators, any losses incurred by the Deposit Insurance Fund to cover uninsured depositors at Signature Bank and SVB would be recovered by a special assessment on banks, meaning that banks would be charged to replenish the fund.
Regulators also noted that parties who are not protected in the failure of the two banks include shareholders and some debtholders. However, President Joe Biden and Treasury Secretary Janet Yellen both emphasized that taxpayers would not be bearing any losses resulting from the bank failures.