Signature Bank: What to Know About March 12, 2023 Closing, FDIC Receivership and Bridge Bank

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: 

1. To protect Signature depositors, the FDIC transferred all deposits and substantially all of the assets to Signature Bridge Bank, N.A., a full-service bank that will be operated by the FDIC as it markets the institution to potential bidders.
2. The transfer of all of the Signature customer deposits was completed under the “systemic risk” exception approved in the Joint Statement issued March 12, 2023, and all depositors of Signature will be made whole.
3. All SVB customer depositors will have full access to such deposit amounts no later than Monday morning, March 13, 2023. 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.
4. Banking activities will resume Monday, March 13, 2023, including on-line banking.
5. No statement was explicitly made by the FDIC as to whether the main office and all branches of Signature will reopen on Monday March 13, 2023, but the resumption of banking activities implies that branches will be operational on Monday.
6. Signature Bank’s official checks will continue to clear.
7. Loan customers should continue making loan payments as usual.
8. Shareholders and certain unsecured debt holders will not be protected.
9. Senior management has also been removed. The FDIC named Greg D. Carmichael as CEO of Signature Bridge Bank, N.A. (Mr. Carmichael recently served as president and CEO of Fifth Third Bancorp.)

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.