As of July 2023, the United States experienced three significant bank failures: Signature Bank in New York, Silicon Valley Bank in Santa Clara and First Republic Bank in San Francisco. In this blog post, we will discuss the details of these bank failures and the decisive actions taken by the Federal Deposit Insurance Corporation (FDIC) to protect depositors and maintain the stability of the financial sector.
We will continue to maintain an ongoing list of the failed banks, so please bookmark this page for your reference.
Bank Failures in 2023
Are you wondering how many banks have failed in 2023? So far, 3 banks have failed and have been taken over by the FDIC. The total value of the assets of these failed banks was $548.5 billion, a figure higher than 2008. Additionally, one bank voluntarily wound down its operations and has not been taken over by the FDIC.
To put this in perspective, let’s look at some of the stats of bank failures during the Great Financial Crisis. Although we typically think about the 2007 to 2009 period, I have included the eight years from 2007 to 2014, as a large number of banks failed then. Here are the details:
- According to the FDIC, a total of 510 banks failed between 2007 and 2014 (inclusive).
- The total value of the assets held by these failing banks was $701 billion.
- The worst year, based on total assets, was 2008 when banks holding $374 billion failed.
- The worst year, based on the number of failed banks, was 2010 when 157 banks failed.
List of Failed Banks of 2023
Which banks failed in 2023 so far? Let’s take a look at the list, which is current as of March 2023. We will continue to monitor the news and update this page periodically.
Signature Bank, New York, NY
- Closing Date: March 12, 2023
- Approximate Assets: $110.4 billion
- Approximate Deposits: $88.6 billion
- Acquirer & Transaction: Flagstar Bank NA
Signature Bank, a major financial institution based in New York, was closed by the New York State Department of Financial Services on March 12, 2023. At the time of closure, the bank had total assets of $110.4 billion and total deposits of $88.6 billion. In response, the FDIC established Signature Bridge Bank, N.A., as a full-service bank to protect depositors and assumed all deposits and substantially all assets of Signature Bank. Banking activities resumed on March 13, 2023, with customers automatically transitioning to Signature Bridge Bank, N.A.
On March 19th, the FDIC has entered into a purchase and assumption agreement with Flagstar Bank, a subsidiary of New York Community Bancorp, for most deposits and certain loan portfolios of Signature Bridge Bank, National Association.
Signature Bank’s 40 branches started operation under Flagstar Bank beginning March 20, 2023. Depositors, excluding those related to the digital-asset banking businesses, became part of Flagstar Bank, with deposits continuing to be FDIC-insured. The FDIC will provide approximately $4 billion of deposits directly to customers associated with the digital-asset banking businesses.
The transaction includes the purchase of around $38.4 billion in assets, with $60 billion in loans remaining in the receivership for later disposition. The FDIC received equity appreciation rights in New York Community Bancorp’s common stock, potentially worth up to $300 million. The estimated cost of Signature Bank’s failure to the Deposit Insurance Fund is $2.5 billion.
Silicon Valley Bank, Santa Clara, CA
- Closing Date: March 10, 2023
- Approximate Assets: $209 billion
- Approximate Deposits: $174.4 billion
- Acquirer & Transaction: First-Citizens Bank & Trust Company
Silicon Valley Bank, another significant bank located in Santa Clara, CA, was closed by the California Department of Financial Protection and Innovation on March 10, 2023. The bank had approximately $209 billion in assets and $175.4 billion in deposits at the time of its failure. SVB failed because its depositors – mainly technology and start-up firms – started withdrawing money to fund their operations. SVB had to sell its available-for-sale securities portfolio at a steep loss to fund these deposit outflows. This eventually led to a panic cycle accompanied by a classic run-on-the-bank.
In an effort to protect all depositors, the FDIC transferred all deposits—both insured and uninsured—and substantially all assets to Silicon Valley Bridge Bank, N.A., a full-service FDIC-operated ‘bridge bank.’ Banking services, including online banking, resumed on March 13, 2023, with customers automatically becoming clients of Silicon Valley Bridge Bank, N.A.
On March 26, 2023, the FDIC entered into a purchase and assumption agreement for all deposits and loans of Silicon Valley Bridge Bank with First-Citizens Bank & Trust Company.
Depositors of Silicon Valley Bridge Bank automatically became depositors of First-Citizens Bank, and their deposits will remain insured by the FDIC. First-Citizens Bank purchased about $72 billion of Silicon Valley Bridge Bank’s assets at a $16.5 billion discount, while approximately $90 billion in securities and other assets will remain with the FDIC for disposition.
A loss-share transaction was agreed upon between the FDIC and First-Citizens Bank for the commercial loans purchased, aiming to maximize recoveries and minimize disruptions for loan customers. The FDIC estimates the cost of Silicon Valley Bank’s failure to its Deposit Insurance Fund to be around $20 billion.
First Republic Bank, San Francisco, California
- Closing Date: May 1, 2023
- Approximate Assets: $229 billion
- Approximate Deposits: $104 billion
- Acquirer & Transaction: JPMorgan Chase Bank
After a very protracted saga that first started with the bank run on Silicon Valley Bank, First Republic Bank was finally closed by the California Department of Financial Protection and Innovation, with the FDIC appointed as receiver.
JPMorgan Chase Bank, led by Jamie Dimon, entered into a purchase and assumption agreement to assume all deposits and substantially all assets of First Republic Bank. The bank’s 84 offices across eight states will reopen as branches of JPMorgan Chase Bank.
The FDIC and JPMorgan Chase Bank entered into a loss-share transaction on loans from the former First Republic Bank. The FDIC estimates the cost to the Deposit Insurance Fund will be about $13 billion.
Under normal circumstances, JP Morgan would not be allowed purchase another bank as their deposit market share in the US exceeds 10%. However as the FDIC has a mandate to find a deal that imposes the lowest cost on the Deposit Insurance Fund, it selected JP Morgan’s offer as the best one.
List of Closed Banks in 2023
Not all banks that close are “failed banks”. Some, like Silvergate, announce a voluntary closure and are not taken over by the FDIC. More details below.
Silvergate Bank, La Jolla, CA
Silvergate Bank was another casualty of the banking crisis of 2023. Unlike Signature Bank and Silicon Valley Bank, Silvergate Bank did not “fail”. Silvergate Capital Corp. is undergoing a voluntary liquidation process in California, supervised by the California Department of Financial Protection and Innovation (DFPI), rather than entering the FDIC’s receivership program.
The liquidation follows a liquidity crunch in the crypto industry, which severely impacted Silvergate’s deposits and operations. Silvergate lost 68% of its deposits in the fourth quarter of 2022, which would make it virtually impossible for any bank to operate. As of Dec. 31, 2022, Silvergate had $4.57 billion in cash equivalents and $5.73 billion in total securities against $6.34 billion in total deposits. Those balances have likely since changed, as Silvergate restructured its business.
The bank plans to fully repay deposits and, due to the voluntary nature of the liquidation, it is unlikely that the FDIC will be appointed as receiver for now. Silvergate’s assets could potentially be restored by selling intellectual property rights for its Silvergate Exchange Network and assets from its acquisition of Diem Group Ltd.
FDIC’s Actions and Bridge Bank Concept
The FDIC has played a crucial role in mitigating the impact of these bank failures on depositors and the financial sector. By establishing bridge banks, the FDIC can transfer deposits and assets from the failed banks, ensuring customers have uninterrupted access to their funds and banking services. These bridge banks are chartered national banks operating under FDIC-appointed boards, designed to “bridge” the gap between the failure of a bank and the time when the FDIC can stabilize the institution and implement an orderly resolution.
As part of the resolution process, the FDIC appointed experienced executives to lead the bridge banks. Greg D. Carmichael, the former president and CEO of Fifth Third Bancorp, was named the CEO of Signature Bridge Bank, N.A., while Tim Mayopoulos, the former president and CEO of the Federal National Mortgage Association and most recently the president of Blend Labs, Inc., was appointed CEO of Silicon Valley Bridge Bank, N.A.
Before You Go…
The failures of Signature Bank and Silicon Valley Bank in 2023 serve as reminders of the importance of the FDIC’s role in maintaining a stable financial system. By swiftly intervening and establishing bridge banks, the FDIC not only protects depositors but also helps to restore confidence in the banking sector. The prompt and decisive actions of the FDIC highlight its commitment to preserving the stability and integrity of the US banking system in the face of challenges.
We are working on a number of articles about bank failures and the safety of banks and your money. If you’re a depositor with Ally Bank for example, you may be interested in reading our article on whether Ally is safe or not.
Please visit us over the coming days to learn more.
FAQ
Is my money safe in the bank 2023?
If your money in the bank is less than the $250,000 limit for FDIC insurance, then your money is safe. However please ensure that your bank is covered by the FDIC. If your deposits exceed that level, you can ensure they’re safe by spreading out your money so that each account has no more than $250,000 in it.
by Brianna Johnson
Brianna Johnson, a Miami-based finance veteran, is a wealth advisor for high net-worth families. She loves to write and to share her knowledge. For PFF, she writes in-depth articles on finance and investments that help readers get unique insights. See more.