A third US bank has toppled in as many days as shockwaves have been sent around the world.
Today New York-based Signature Bank collapsed, after a massive stock plunge.
US regulators said state authorities had to intervene and shut down the bank.
Signature Bank was a traditional banking institution and was federally insured but it was well known for being a primary lender for digital assets, including cryptocurrency exchanges.
The US Treasury, Federal Reserve, and Federal Deposit Insurance Corporation said in a joint statement that the bank had officially closed for good.
“Signature Bank, New York, New York, … was closed today by its state chartering authority,” they wrote.
However, customers will not lose any money poured into the bank.
“All depositors of this institution will be made whole,” the regulators added.
“This step will ensure that the US banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the statement added.
They also said that “no losses will be borne by the taxpayer” arising from Signature Bank’s collapse.
According to filings with the corporate regulator, as reported by CNBC, Signature Bank had US$110.4 billion ($177b) in assets and US$88.6 billion ($142b) in deposits.
In the past 12 hours, Signature Bank’s share price on Nasdaq dropped by an eye-watering 22.87 per cent.
The move came several months after Signature tried to reduce its exposure to the crypto sector, especially in the wake of the implosion of FTX.
Signature Bank had 38 banking branches across several US states, including its head office in New York, and also offices in Connecticut, California and North Carolina.
It’s unclear how many staff the bank had that will be impacted by its closure.
The US banking system has had a tumultuous few days.
On Friday, Californian-based Silvergate Capital announced it had gone into voluntary liquidation, after racking up US$1 billion ($1.6b) losses in the past quarter, as well as its shares being down 67 per cent.
Less than 24 hours later, Silicon Valley Bank went into receivership.
The bank was the 18th largest in the country and had a market capitalisation of around US$40 billion as well as assets of more than US$300 billion.
It was the second-biggest bank failure in US history.
SVB’s collapse is expected to have far-reaching consequences for tech start-ups, with many of them using debt facilities at the bank.
US building managers at Silicon Valley Bank’s Manhattan branch reportedly called the police after a group of tech founders showed up and attempted to pull out their cash.
Warnings of an economic meltdown
It comes as hedge-fund manager Bill Ackman warned of an economic meltdown on Monday as uninsured bank customers rush to withdraw cash, with several banks going bust in recent days.
In a rambling, 649-word, one-paragraph tweet on Saturday, the billionaire predicted that uninsured bank customers would rush to withdraw cash unless the US government stepped in to guarantee their funds.
“The [government] has about 48 hours to fix a-soon-to-be-irreversible mistake. By allowing [SVB Financial Group] to fail without protecting all depositors, the world has woken up to what an uninsured deposit is — an unsecured illiquid claim on a failed bank.
“Absent [J.P. Morgan, Citigroup or Bank of America] acquiring SVB before the open on Monday, a prospect I believe to be unlikely, or the [government] guaranteeing all of SVB’s deposits, the giant sucking sound you will hear will be the withdrawal of substantially all uninsured deposits from all but the ‘systemically important banks’,” he wrote on Twitter.
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