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FDIC said that the deal between Signature and Flagstar would cost the Deposit Insurance Fund an estimated $2.5 billion.
On Sunday, March 19, the Federal Deposit Insurance Corporation announced that Flagstar Bank, a subsidiary of the New York Community Bancorp, has entered an agreement with US regulators to secure the deposits and loans from Signature Bank, which announced shutdown a week back. The FDIC said that roughly $4 billion of Signature Bank’s deposits and $60 billion worth of loans would remain with it in receivership. However, Flagstar Bank will only undertake non-crypto deposits from Signature Bank.
This, that Signature Bank depositors, other than those related to the digital assets banking business, will automatically become depositors of Flagstar. Thus, they remain insured as per FDIC’s insurance limit. The official press release from FDIC reads:
“Depositors of Signature Bridge Bank, N.A., other than depositors related to the digital banking business, will automatically become depositors of the assuming institution. All deposits assumed by Flagstar Bank, N.A., will continue to be insured by the FDIC up to the insurance limit. Flagstar Bank’s bid did not include approximately $4 billion of deposits related to the former Signature Bank’s digital banking business. The FDIC will provide these deposits directly to customers whose accounts are associated with the digital banking business.”
As part of the recent deal, more than 40 branches of the Signature Bank will become Flagstar Bank starting Monday, March 20 onwards. Signature Bank was the second among the two major bank failures on Wall Street this month, the first being the collapse of the Silicon Valley Bank. However, Singautre’s collapse followed just within 48 hours of the collapse of the Silicon Valley Bank.
FDIC Doesn’t Mention Silicon Valley Bank
However, Sunday’s announcement by the FDIC talks only about the Signature Bank and doesn’t mention anything about the Silicon Valley Bank, which was a much larger bank in size. When both these banks failed last week, the Signature Bank had $110.36 billion in assets while the Silicon Valley Bank had $209 billion in assets.
The FDIC also stated that the deal would cost the Deposit Insurance Fund an estimated $2.5 billion. Previously, the agency also reported that the fund held $128.2 billion at the end of 2022.
Significant cracks have appeared in the global banking sector as central banks in the US and Europe have to take cognitive measures to stop the contagion spread. On Sunday, the Swiss National Bank brokered a $3.25 billion deal for the UBS Group to acquire Credit Suisse.