Signature Bank

State regulators closed New York-based Signature Bank on March 12, 2023, the third largest failure in U.S. banking history.^123561218 The bank's collapse followed a run on deposits after customers withdrew more than $10 billion on March 10, 2023, spooked by the failure of Silicon Valley Bank.³¹²¹⁶ The FDIC was appointed receiver and transferred all deposits and substantially all assets to Signature Bridge Bank, N.A., and later to Flagstar Bank, N.A., with all depositors made whole.¹⁸¹²

Timeline

Money raised

Signature Bank had total assets in excess of $100 billion at the time of its failure.¹² In 2021, Signature Bank's total deposits increased by $41 billion, a 67% increase.¹⁵ Cryptocurrency deposits increased by $20 billion in 2021, constituting over 25% of total deposits.¹⁵ On March 10, 2023, depositors withdrew more than $10 billion from Signature Bank.³¹²¹⁶ On March 19, 2023, New York Community Bank agreed to buy a significant portion of Signature Bank totaling $2.7 billion.¹² The portfolio of commercial real estate loans included more than 2,600 loans against properties primarily in the metropolitan area of New York.⁹

Investors named in the sources: Canada Pension Plan Investment Board⁹, Blackstone⁹, Rialto Capital⁹.

What happened

Signature Bank was a New York-based bank that was closed by state regulators on March 12, 2023.^12356781218 The closure was the third largest bank failure in U.S. banking history.^1235612 The bank had over 27 US branches and total assets in excess of $100 billion.¹² Signature Bank was known as a crypto-lender with deep ties to the tech industry.¹² The bank had a high percentage of uninsured deposits, which are prone to rapid withdrawal.¹⁶

In 2021, Signature Bank's total deposits increased by $41 billion, a 67% increase, and cryptocurrency deposits increased by $20 billion, constituting over 25% of total deposits.¹⁵ The bank's stock price hit record highs in 2021.¹⁵ Signature Bank executives assured investors that the bank's growth was achieved responsibly and that it had tools to ensure the stability of new deposits.¹⁵ However, the bank lacked adequate methods to analyze the stability of deposits and did not abide by risk or concentration limits.¹⁵ Deposits had become highly concentrated in relatively few depositor accounts, including large cryptocurrency deposits.¹⁵

The bank's stress testing and contingency funding plans were severely deficient.¹⁵ Regulators communicated these issues directly to the bank's executives leading up to and throughout the class period.¹⁵ In 2022, widespread turmoil hit the cryptocurrency market, resulting in deposit run-off.¹⁵ Signature Bank executives again assured investors that the bank had appropriate risk management strategies and even modeled for scenarios where cryptocurrency deposits were all withdrawn.¹⁵ On March 8, 2023, Silvergate Bank announced it would wind down operations and liquidate its investments.⁸

On March 10, 2023, Signature Bank customers withdrew more than $10 billion in deposits, spooked by the sudden collapse of Silicon Valley Bank.³¹²¹⁶ The bank's stock price dropped from $90.76 on March 9, 2023 to $70 intraday on March 10, 2023, at which point trading was halted.¹⁶ On March 12, 2023, the New York State Department of Financial Services closed Signature Bank and appointed the FDIC as receiver.^12356781218 The Treasury, Federal Reserve, and FDIC announced that depositors of Signature Bank would be protected in the same manner as Silicon Valley Bank depositors.⁸ The FDIC transferred all deposits and substantially all assets of Signature Bank to Signature Bridge Bank, N.A., a full-service bank operated by the FDIC.¹⁸

On March 19, 2023, New York Community Bank agreed to buy a significant portion of Signature Bank totaling $2.7 billion.¹² On March 20, 2023, the FDIC entered into a purchase and assumption agreement for substantially all deposits and certain loan portfolios of Signature Bridge Bank, N.A., by Flagstar Bank, N.A., a subsidiary of New York Community Bancorp.¹⁸ Depositors of Signature Bridge Bank, N.A., other than those related to the digital banking business, automatically became depositors of Flagstar Bank, N.A.¹⁸ All deposits assumed by Flagstar Bank, N.A., continued to be insured by the FDIC up to the insurance limit.¹⁸ Customers whose accounts were associated with the digital banking business were directed to reach out to Flagstar Bank, N.A.¹⁸

The 40 former branches of Signature Bank operated under New York Community Bancorp's Flagstar Bank, N.A., on Monday, March 20, 2023.¹⁸ All transferred deposits were separately insured from any accounts customers already had at Flagstar Bank, N.A. for at least six months after the failure of Signature Bank.¹⁸ Checks drawn on Signature Bank that did not clear before the institution closed were honored as long as there were sufficient funds in the account.¹⁸ Flagstar Bank, N.A., reviewed deposit rates and notified customers of any changes.¹⁸ Automatic payments, bill pay, and online banking services continued as usual, with routing and account numbers remaining the same until notified otherwise.¹⁸

ATM and debit cards continued to work as usual.¹⁸ Direct deposits, such as social security, payroll, veterans' benefits, disability, unemployment, or any electronic payments, continued as usual.¹⁸ Interest on certificates of deposit accrued through close of business on March 20, 2023, was paid at the same rate.¹⁸ Overdraft lines of credit were transferred to Flagstar Bank, N.A.¹⁸ Customers had access to their safe deposit boxes by calling their branch to arrange an appointment.¹⁸

Signature Bridge Bank, N.A. or Flagstar Bank, N.A. was responsible for mailing 1099 tax information, and 1098 reporting was done by the FDIC or the servicer of the loan.¹⁸ Creditors who provided services or products to Signature Bank prior to March 12, 2023, and were not paid, could file a claim against Signature Bank.¹⁸ Creditors who provided services or products to Signature Bridge Bank, N.A. between March 12, 2023, and March 20, 2023, and were not paid, could file a claim against Signature Bridge Bank, N.A.¹⁸ The claims bar date for filing claims against the receiverships was July 17, 2023.¹⁸ Under federal law, failure to file a claim on or before the claims bar date would result in disallowance of the claim by the receiver.¹⁸

Allowed claims would be paid, after administrative expenses, in the following order of priority: depositors, general unsecured creditors, subordinated debt, and stockholders.¹⁸ On December 19, 2023, the Canada Pension Plan Investment Board announced a joint venture investment into a portfolio of mortgage loans previously run by Signature Bank.⁹ The portfolio of commercial real estate loans included more than 2,600 loans against properties primarily in the metropolitan area of New York.⁹ Approximately 90% of the portfolio consisted of fixed-rate loans with low coupons and strong debt coverage.⁹ Blackstone was to be the asset manager for the portfolio, while Rialto Capital would service the loans.⁹

A securities fraud class action was filed against former executives of Signature Bank and its auditor, KPMG LLP, alleging violations of Section 10(b) of the Securities Exchange Act of 1934.¹⁵¹⁶ The class period in the lawsuit was January 21, 2021 to March 12, 2023, according to one law firm, and April 23, 2020 to March 12, 2023, according to another.¹⁵¹⁶ The lawsuit alleged that the defendants made material misstatements and omissions about the bank's risk profile and management of risks.¹⁵¹⁶ On August 10, 2023, the Court appointed Sjunde AP-Fonden as Lead Plaintiff.¹⁶ The FDIC, as receiver for Signature Bank, intervened in the action to file a motion to dismiss on jurisdictional grounds.¹⁶

On March 21, 2025, the Court granted the FDIC's motion to dismiss the Amended Complaint, finding that the FDIC succeeded to the claims when it became Signature's receiver.¹⁶ Lead Plaintiff appealed the dismissal to the U.S. Court of Appeals for the Second Circuit on March 28, 2025.¹⁶ On August 19, 2026, the Second Circuit vacated the dismissal of investors' claims against Signature's former officers and KPMG, and remanded the case for further proceedings.¹⁴¹⁵ The Second Circuit held that the Succession Clause in FIRREA does not transfer investors' Section 10(b) and Rule 10b-5 claims to the FDIC when it becomes receiver of a failed bank.¹⁵ The case returned to the District Court, with Defendants' motions to dismiss pending.¹⁵

Legal outcomes

• filedA securities fraud class action was filed against former executives of Signature Bank and its auditor, KPMG LLP, alleging violations of Section 10(b) of the Securities Exchange Act of 1934.¹⁵¹⁶
• filedThe lawsuit alleged that the defendants made material misstatements and omissions about the bank's risk profile and management of risks.¹⁵¹⁶
• dismissedOn March 21, 2025, the Court granted the FDIC's motion to dismiss the Amended Complaint, finding that the FDIC succeeded to the claims when it became Signature's receiver.¹⁶
• pendingOn August 19, 2026, the Second Circuit vacated the dismissal of investors' claims against Signature's former officers and KPMG, and remanded the case for further proceedings.¹⁴¹⁵

Sources

1. Signature Bank becomes next casualty of banking turmoil ..., reuters.com, Mar 13, 20
2. Regulators close New York's Signature bank, say depositors ..., business.inquirer.net, Mar 13, 20
3. Why regulators seized Signature Bank in third-biggest bank failure in U.S. history, CNBC, 2023-03-13
5. Five things to know about Signature Bank, thehill.com, Mar 13, 20
6. March 2023 Bank Failures—Risky Business Strategies ..., gao.gov, Apr 28, 20
7. The Silicon Valley Bank Collapse Explained - UW School of Law, law.uw.edu, Mar 24, 20
8. Silicon Valley Bank, Signature Bank, and Silvergate Bank: Responding to Market Disruption with a Stronger Compliance Program - ACA Group, ACA Group, 2023-03-13
9. CPPIB Takes Stake in Signature Bank Loan Portfolio - Banking Exchange, bankingexchange.com, Dec 19, 20
12. Bank Failure: Collapse of Silicon Valley Bank and Signature Bank, Prudent Investors, 2023-03-24
14. US appeals court revives Signature Bank collapse lawsuit ..., reuters.com, Aug 19, 20
15. Signature Bank | Current Cases | Kessler Topaz, Kessler Topaz
16. Signature Bank | Bernstein Litowitz Berger & Grossmann LLP, blbglaw.com
18. Signature Bank | FDIC.gov, fdic.gov

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