The New York Stock Exchange stands in lower Manhattan after global stocks fell amid concerns that rising inflation will prompt central banks to tighten monetary policy May 11, 2021 in New York City. By afternoon, the tech-heavy Nasdaq Composite was down 0.6% after falling 2.2% from session lows.
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signature bank Shares fell as much as 32% on Friday and were eventually halted amid a sell-off in bank stocks that lasted for a second day.
Signature, one of the most important banks in the cryptocurrency industry, ended the day down 22%.
The first move followed a big day for his crypto banking peer Silvergate Capital, which announced earlier this week that it would liquidate its bank. Its losses deepened on Thursday after shares of SVB Financewhose Silicon Valley Bank lends to tech startups, announced a plan to raise more than $2 billion of capital to offset losses from bond sales.
Late Friday morning, the Federal Deposit Insurance Corp had shut down Silicon Valley Bank and taken control of its deposits, making it the largest US bank failure since the global financial crisis.
Troubles at Silicon Valley Bank spread to financial stocks as investors worried that other banks with large bond portfolios could face similar problems if forced to sell those bonds before maturity for fundraising purposes. Treasury bonds have fallen over the past year as the Federal Reserve hiked interest rates.
First Republic Bank, PacWest Bancorp, and Western Alliance Bancorp were among the other names that eventually halted trading due to volatility.
Signature has said that it has minimal exposure to crypto, but Silicon Valley Bank’s need to recapitalize after the Silvergate event has linked the two events in some people’s minds.
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Signature Bank shares Friday
Steve McClurg, Valkyrie’s chief investment officer, said the signature bank is already suffering from Silvergate’s losses, which now total nearly 50% this week. Friday’s losses were a spillover effect from Silicon Valley Bank’s troubles, he added.
Ed Moya, an analyst at Oanda, pointed out that Signature is caught in the middle of both narratives.
“Signature Bank is hit with a double whammy as concerns grow that every crypto-related bank may be at risk and concerns over financial instability for parts of the banking sector mount,” he said. “There are only a handful of listed banks that have crypto exposure and many traders are rushing to bet against them.”