Here’s what’s happening to US banks and why Signature Bank was closed
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Signature Bank is closed by the American authorities, in what is the second major bank failure in three days and the third largest in history after Washington Mutual in 2008 and Silicon Valley Bank.
Confidence crisis
The New York institute paid for the collapse of Svb, guilty of having triggered a crisis of confidence and a flight of customers. The bank has been unsuccessfully trying to find a buyer for the past 48 hours but failed to close a deal Signature Bank customers will get all their deposits back, as well as those of Svb. The bank had opened its doors in 2001 as an alternative to large institutions and prided itself on its accurate customer service. After the 2008 financial crisis it quickly grew into an investor favourite. In 2018, it took its first steps into the crypto world, hiring specialized personnel to expand its reach beyond the real estate market.
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Digital assets
An important step that led it to become one of the largest financial institutions on the cryptocurrency market, and helped it double its deposits in two years. At the beginning of 2022, just 27% of its total deposits came from customers with digital assets. However, the exposure to cryptocurrencies has also made it vulnerable to the collapse of Ftx so as to push it to cut relations with some of its clients active in digital assets, including Binance.
Investor fears
However, the step back failed to calm investors’ fears and so the closure of Silvergate Capital first and then of Silicon Valley Bank then overwhelmed it. The failure of Signature Bank threatens to cut the crypto industry out of the US regulated banking system. A fear that emerged during some emergency meetings held in the last few hours by companies active in the cryptocurrency sector. In announcing the closure of Signature Bank, the authorities have specified that the shareholders will not be protected and the management will be removed. The bank, at the end of 2022, had $110 billion in assets and $88.6 billion in deposits.
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