March 13, 2023
Signature Bank, New York, NY (“Signature”) was closed on March 12, 2023 by the New York Department of Financial Services, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver. This is one of several key developments in the banking industry that began last week and continued this past weekend. (Please see our related updated Client Alert on developments with Silicon Valley Bank, and our related Client Alert on the new Fed Bank Term Funding Program/First Republic issues that occurred on March 12, 2023 as well).
The Signature situation remains fluid, but in the FDIC’s Press Release regarding Signature Bank, the FDIC stated:
We expect the FDIC to release more detailed FAQs early the week of March 13, 2023 which will most likely be similar to the March 12, 2023 FDIC FAQs for SVB.
The FDIC has only established three bridge banks since 2007 (operating as receiver for over 525 bank during that same time period). Bridge banks are utilized when a bank fails suddenly, including due to liquidity issues, and there is no time to identify a buyer through a bid process due to the speed of the failure and/or the size of the failed institution. While the FDIC operated two bridge banks in 1992 for less than six months, the FDIC managed the bridge bank formed in IndyMac’s failure for nine months, during which the bridge bank was wound down and sold. Given Signature’s size and product lines, there is a limited universe of potential buyers, and the FDIC may take the same approach used on IndyMac - winding down certain of Signature’s business lines (possibly including any remaining crypto relationships) and then selling the remainder.
We intend to monitor the situation and update this Client Alert as additional information becomes available.
How We Can Help: Hunton Andrews Kurth LLP has assembled a cross-disciplinary team consisting of attorneys from our bank regulatory, finance, structured finance and securitization, capital markets, securities, private equity/VC, M&A, employers’ rights, bankruptcy, restructuring and creditors’ rights practices to assist clients with the unfolding situations involving Silicon Valley Bank, Signature Bank and any similarly situated banks.
Please contact any of the attorneys listed on this Client Alert, any other attorney you regularly work with at Hunton, or reach out via email to HuntonTroubledBankTaskForce@huntonak.com, to be connected with our team monitoring and helping clients respond to these issues and continuing developments.