A panicked run on withdrawals at New York-based Signature Bank helped lead to the institution’s government takeover Sunday night, but state and federal leaders are urging customers — at Signature and other institutions — to remain calm.
President Joe Biden and Gov. Kathy Hochul delivered separate public statements Monday morning, seeking to calm fears a day after Signature became the next domino to fall in the wake of Friday’s collapse of California-based Silicon Valley Bank, or SVB.
Their message was unified: Your money is not in danger.
“The bottom line is this: Americans can rest assured that our banking system is safe,” Biden said from the White House. “Your deposits are safe.”
What is Signature Bank and who are its customers?
Signature Bank is a niche, New York-based financial institution that has 20 branches across the country.
The bank has some headline-grabbing customers, lending to businesses owned by the Trump and Kushner families. It also was notable for making a big bet on cryptocurrency before it bottomed out, with “digital assets” representing about 20% of the bank’s $89 billion in deposits, according to its latest regulatory filings.
But Signature catered to far more than crypto investors and the Trumps.
The bank courted a number of commercial customers in the New York City, Los Angeles and San Francisco areas — focusing heavily on landlords, law firms, accounting firms and medical professionals among others. Among the bank’s customers are a variety of small businesses across New York — including vendors at the Hunts Point Produce Market in the Bronx — according to state Department Financial Services Superintendent Adrienne Harris.
Signature is one of New York City’s biggest multifamily mortgage lenders. It finances about 3,000 multifamily buildings with around 80,000 tenants, according to the University Neighborhood Housing Program’s Building Indicator Project, which tracks lenders.
What led to Signature Bank’s collapse? Is it still open?
All of Signature’s branches remain open as of Monday, according to Harris and Hochul. All of its customers will retain access to their money — whether it’s via ATM, check, in person or anything else.
That’s in part because the state financial services department effectively seized the bank Sunday night and immediately turned it over to the Federal Deposit Insurance Corporation, or FDIC. The bank’s senior management was removed and the bank was immediately replaced by a new entity known as Signature Bridge Bank, N.A. It’s now being run by the feds as they seek a new owner.
“Depositors and borrowers will automatically become customers of Signature Bridge Bank, N.A. and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards, and writing checks in the same manner as before,” according to the FDIC. “Signature Bank’s official checks will continue to clear. Loan customers should continue making loan payments as usual.”
At a briefing Monday morning, Harris and Hochul largely painted Signature Bank’s collapse as a side effect of SVB's collapse.
SVB's failure led to unease amongst bank customers Friday, particularly those with deposits of more than $250,000 — the upper limit for coverage from the FDIC — at niche banks like Signature. Of Signature’s deposits, about 90% weren’t insured by the FDIC, meaning the accounts were over the $250,000 limit.
All of that led to a rush of withdrawals at Signature that began Friday and, with the help of online banking, continued through the weekend, leading state regulators to step in, Harris said.
“A number of banks were under everyone's watchful eye,” Harris said. “So Signature, because of the amount of outflows we saw on Friday, we knew we were going to have to take action over the weekend so that they could open on Monday.”
How might everyday New Yorkers be affected?
The federal government’s next moves could have enormous consequences for tens of thousands of New York City tenants and the owners of their buildings.
If owners can’t access their accounts or take out loans to invest in the properties, building conditions — and the people living in them— suffer, said UNHP Research Director Jacob Udell. The state and federal government’s quick intervention gave some sense of stability, he said. Now, as federal regulators plan their next actions, tenant groups are urging them to consider their effect on Signature-financed housing.
“Regulators have to be thinking about how, in this transition, the tenants in those buildings aren’t negatively affected,” said Udell. “It’s hard to know what could go wrong, but there are regular working class people at the end of it.”
Many buildings with Signature loans are already in bad shape, and at least one large investment firm has begun defaulting on its mortgages in Harlem and Washington Heights, leaving tenants in limbo as they seek repairs, Gothamist reported last week. The company says it can’t keep up with expenses with rents capped and interest and other costs rising.
A bank shutdown triggers even more uncertainty for owners and their tenants, said Jay Martin, executive director of the rent-stabilized landlord trade group Community Housing Improvement Program. He said landlords were extremely concerned by the Signature closure before the state and federal government stepped in.
“Over the weekend, it was pretty existential,” Martin said. “In the short term, the Fed’s quick action is very good.”
But he said he worries about the future, where banks may withhold loans or charge higher interest rates to ensure they have more money at hand. That would make it harder for property owners to invest in their buildings, leading to worse conditions, he said.
“A majority of multifamily small and mid-sized rent-stabilized owners get their loans from banks like Signature,” Martin said. “If all of a sudden, these banks don’t exist or have much stricter standards on lending, then an owner’s ability to borrow for a new building, or refinance, or finance for improvement will essentially freeze up.”
My money is in a different bank. Do I need to worry?
Both state and federal leaders say regulators are keeping a close eye on withdrawals to make sure other institutions aren’t in danger.
Biden and Hochul both emphasized that all SVB and Signature customers will be kept whole, too, thanks to fees assessed on banks through the FDIC.
Hochul, speaking from her Manhattan office, acknowledged the Signature bank situation is extraordinary, but she sought to downplay the potential for chaos at other institutions.
“The main message I want to deliver is New Yorkers should have confidence that their money is secure,” she said. “Wherever they’ve chosen to bank, that is protected.”
