US authorities have reached an agreement to buy out part of Signature Bank’s assets to another institution, according to a statement from the banking regulator, the Federal Deposit Insurance Corporation (FDIC – “Federal Deposit Insurance Corporation”) , and are seeking a similar solution for Silicon Valley Bank (SVB), according to Bloomberg.
The FDIC announced on Sunday March 19 that Flagstar Bank, a subsidiary of New York Community Bancorp, will acquire deposits and loans from New York-based Signature Bank, 21e bank of the country, automatically closed on Sunday. Flagstar will take over the 40 Signature agencies and most of the 88.6 billion dollars (83.01 billion euros) in deposits. But about 60 billion dollars (56.21 billion euros) in loans and 4 billion dollars (3.74 billion euros) deposited online will remain under the control of the authorities, according to a press release.
This weekend, the Fed, US Treasury and FDIC stepped in to prevent a wave of massive withdrawals at SVB from spreading to other small and medium banks. To reassure the market, they had guaranteed that customers could withdraw all deposits from SVB and Signature Bank. But regulators have so far failed to find a buyer for SVB, and are now considering dismantling the tech institution, according to an article by Bloomberg.
The FDIC is now looking to sell the bank “in at least two parts”, according to sources from the news agency. Contacted by Agence France-Presse, the regulator declined to comment.
S&P downgrades First Republic
The banking sector has just gone through a dark week, with the recent bankruptcies of Silicon Valley Bank and Signature Bank causing a crisis of confidence in the sector. The First Republic bank has seen its stock market valuation drop by 80%. Based in San Francisco, it is the 14e US bank by asset size.
On Sunday, the financial rating agency S&P downgraded its rating from BB+ to B+, despite the lifeline sent by eleven American banks this week. The country’s main banks have, in fact, undertaken to deposit 30 billion dollars (28.11 billion euros) in its accounts.
This measure will “relieve the pressure on short-term liquidity”explains S&P in its press release, but it will not “not necessarily solve the substantial problems of the bank in terms of liquidity, financing and profitability”. The rating agency says it could downgrade the rating further if the bank fails to “stabilize deposits”.
First Republic, for its part, assured that thanks to the deposits of the eleven banks and its own reserves, it is “well placed to manage” short-term withdrawals. “This support demonstrates confidence in First Republic and its ability to continue to provide exceptional and flawless service to its customers”added a spokesperson for the bank.