The shutdown of Signature Bank, the third-largest banking failure in the history of the U.S., has caused many EB-5 investors to worry about the safety of their investment capital held in escrow by the institution. But in a joint statement, the Federal Deposit Insurance Corporation (FDIC), Federal Reserve and Department of the Treasury said the U.S. will guarantee the full deposits at the bank, which have been transferred to Signature Bridge Bank that is now overseen by the FDIC.
Why Signature shut down
The closure of Silicon Valley Bank created a panic that resulted in many customers of smaller banks to move their deposits to bigger banks; this led to the collapse of Signature Bank, established in 2001, and the largest EB-5 escrow agent.
The bank had total assets of $110.4 billion and total deposits of $88.6 billion the end of 2022. But nervous customers moved more than $10 billion in deposits out of Signature Bank, causing regulators to step in and shut down the bank.
The government takes over, Biden assures public the banking system is safe
As EB-5 investors have deposits of more than $250,000, the maximum amount protected by the FDIC’s insurance deposit maximum, they were worried about the safety of their investment capital.
But FDIC, Federal Reserve and Department of the Treasury said the U.S. guarantees the full deposits at the Signature Bank as well as Silicon Valley Bank, with President Biden assuring the public that they should “have confidence that the banking system is safe."
Signature Bank’s assets and deposits were transferred, under the systemic risk exception, to Signature Bridge Bank, N.A. A bridge bank operates under a board chosen by the FDIC, and assumes the deposits, liabilities, and certain assets of a failed bank. The bridge bank “bridges” the gap between the failed bank and the time when the FDIC can stabilize the institution.
Signature Bank’s president has been retained at bridge bank and the FDIC has installed Greg Carmichael as the Chief Executive Officer. Carmichael is executive chairman of the Board of Directors of Fifth Third Bancorp, the ninth-largest U.S.-based consumer bank.
Signature bank has released a statement: “Due to the actions of the Federal Reserve, U.S. Treasury, and FDIC, your deposits are not at risk. The bank is running business as usual and is well-positioned to serve you.”
See the EB5 Investors story “US government reassures EB-5 investors their deposits are safe”