Crypto bank Signature falls on Friday amid problems at Silicon Valley Bank, Silvergate
The New York Stock Exchange stands in lower Manhattan after global stocks fell as concerns grow that rising inflation will prompt central banks to tighten monetary policy May 11, 2021 in New York City. By mid-afternoon, the tech-heavy Nasdaq Composite had lost 0.6% after falling 2.2% at its session low.
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Signature Bank shares fell as much as 32% on Friday and at one point were halted amid a selloff in bank stocks that continued for another day.
Signature, one of the main banks of the cryptocurrency industry, was last down 24%.
The first move followed a big day for its crypto banking firm Silvergate Capital, which announced earlier this week that it would liquidate its bank. Losses widened Thursday after shares in SVB Financial, whose Silicon Valley Bank lends to tech startups, announced a plan to raise more than $2 billion in capital to help offset losses on bond sales.
By late Friday morning, the Federal Deposit Insurance Corp had shut down Silicon Valley Bank and taken control of its deposits, making it the biggest US bank failure since the global financial crisis.
The problems at Silicon Valley Bank rippled through financial stocks, as investors worried about the likelihood that other banks with large bond portfolios could face similar problems if they are forced to sell those bonds before maturity for fundraising purposes. Treasuries have fallen over the past year as the Federal Reserve has raised interest rates.
First Republic Bank, PacWest Bancorp, Western Alliance Bancorp were among the other names whose trading was halted at one point due to volatility.
Signature has said it has minimal exposure to crypto, but Silicon Valley Bank’s need to recapitalize on the heels of the Silvergate event has linked the two events in some people’s minds.
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Signatur Bank shares on Friday
Valkyrie chief investment officer Steve McClurg said Signature Bank was already hurt on the back of Silvergate’s losses, which are now nearly 50% for the week. Its Friday loss is a spin-off from Silicon Valley Bank’s problems, he added.
Ed Moya, analyst at Oanda, emphasized that Signature is caught in the middle of both narratives.
“Signature Bank is being hit with a one-two punch as concerns grow that any crypto-related bank could be at risk, and as concerns about financial instability increase for parts of the banking sector,” he said. “There are only a handful of listed banks that have crypto exposure, and many traders are rushing to bet against them.”
