After SVB: US regulators close NY bank with Israeli history

The drama in the US banking system continues. Yesterday, the authorities there took over another bank seen to be in danger of collapse. The bank in question is Signature Bank, one of the main banks in the cryptocurrency industry, which manages assets of some $110 billion.

The bank had $80 billion in uninsured deposits, and its share price plunged 23% last Thursday, its largest ever daily fall. The bank tried to reassure the market, saying that its financial position was strong and that it was well diversified, but, as mentioned, the regulators moved in yesterday.

US regulators have said that all depositors at both Signature Bank and Silicon Valley Bank, which collapsed at the end of last week, will receive their money in full.

A joint statement by the US Federal Reserve, the US Treasury, and the Federal Deposit Insurance Corporation said concerning Silicon Valley Bank: “Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”

The statement continues: “We are also announcing a similar systemic risk exception for Signature Bank, New York, New York, which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.”

The Federal Reserve said that it was introducing measures that “will reduce stress across the financial system, support financial stability, and minimize any impact on businesses, households, taxpayers, and the broader economy.”

Signature Bank started out as an Israeli bank. It was set up by Bank Hapoalim in 2000, and began operations in May 2001. The bank’s target clientele was wealthy private customers in the US, through six branches in New York. Its chairperson was Scott Shay, who was also a director of Bank Hapoalim.

At the same time, Bank Hapoalim launched Signature Securities, to provide broking in securities and other financial services. The two entities were part of Bank Hapoalim’s strategy at the time of expanding its private banking business overseas.

Bank Hapoalim invested $45 million in founding Signature Bank and injected a further $55 million in 2001 and $20 million in 2002. After initial losses, the bank reported a $30 million profit in 2004.

In March that year, Signature Bank was floated on Nasdaq, reducing Bank Hapoalim’s holding from 100% to 76%, and yielding it a gain of $32 million. Six months later, a further offering diluted Bank Hapoalim’s holding to 59%, and yielded it a gain of $60 million.

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In 2005, Bank Hapoalim sold its remaining stake in two tranches for some $500 million. In the following decade, the bank’s share price rose more than five-fold.

Published by Globes, Israel business news – en.globes.co.il – on March 13, 2023.

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