The encyclopedia · Trading & Investing · Financial decision · 2023
Signature Bank was the crypto-friendly bank — and it failed two days after SVB
Signature Bank, a crypto-focused lender, was seized by regulators on March 12, 2023, two days after SVB collapsed. Third-largest US bank failure.
Signature Bank · 2023-03-12
What happened
Signature Bank, a New York-based commercial bank, had become a major banking partner for the cryptocurrency industry. Approximately 25% of its deposits were from crypto clients, and it operated a real-time payment network (Signet) used by crypto exchanges.
When SVB collapsed on March 10, 2023, Signature Bank experienced a rapid deposit outflow as crypto clients and other depositors withdrew funds. On March 12, two days after SVB's failure, regulators seized Signature Bank. It was the third-largest bank failure in US history at the time.
The case illustrated the contagion risk of serving a concentrated, volatile industry: when the crypto winter hit and SVB failed, Signature's crypto-heavy deposit base was the first to run. The bank's fate was sealed by its industry concentration and the systemic panic that followed SVB's collapse.
Why it happened
- Signature Bank had ~25% of deposits from crypto clients, creating industry concentration.
- SVB's collapse triggered a deposit run at Signature.
- Regulators seized the bank two days after SVB's failure.
- It was the third-largest US bank failure in history at the time.
The lesson
A bank serving a concentrated, volatile industry is exposed to that industry's systemic risk. Signature's crypto deposits ran when SVB fell. Diversification is a survival requirement.
Aftermath
Signature Bank was seized and its assets were sold to New York Community Bancorp. The case, alongside SVB and Silvergate, prompted a re-examination of bank concentration risk and crypto banking regulation.
Sources
- Signature Bank — Wikipedia (2023 failure)
- Signature Bank: third biggest bank failure in US history — CNBC (Mar 2023)
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