Signature Bank's Collapse Fueled by Crypto Bets and Run on Deposits
Signature Bank, a New York financial institution with a big real estate lending business that had recently made a play to win cryptocurrency deposits, closed its doors abruptly on Sunday, after regulators said that keeping the bank open could threaten the stability of the entire financial system.
To some extent, Signature is a victim of the panic around Silicon Valley Bank, which regulators seized on Friday. Its closing underscores the challenges that face small and midsize banks, which often focus on niche lines of business and have a narrower base of customers than Goliaths like JPMorgan Chase or Bank of America. That leaves them especially vulnerable to old-fashioned bank runs.
Silicon Valley Bank, a lender to start-ups, imploded on Friday after some ill-timed financial decisions left it struggling to meet customer withdrawal requests — and just as slowing venture capital funding prompted fledging companies to tap their accounts more. Similarly, Signature became one of the few banks to welcome cryptocurrency deposits, just before the overheated industry blew up last year.
As word about Silicon Valley Bank’s troubles began to spread last week, business customers of Signature began calling the bank, asking if their deposits were safe. Many were worried that their deposits could be at risk because, like business customers of Silicon Valley, most had more than $250,000 in their accounts. The Federal Deposit Insurance Corporation, the entity that seized Silicon Valley, insures deposits only up to $250,000.
https://www.msn.com/en-us/money/markets/signature-bank-s-collapse-fueled-by-crypto-bets-and-run-on-deposits/ar-AA18xAdc
If I ever find out my bank is involved in crypto-currency I'm going to take my business elsewhere.
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