Editor’s Note: The NYU Program on Corporate Compliance and Enforcement (PCCE) has been following the recent collapse of three banks in the U.S. and will be publishing articles exploring the reasons for the banks’ failures and the broader regulatory, policy, and legal implications arising therefrom.

by Maria T. Vullo

Maria T. Vullo (Photo courtesy of the author)

Over the past ten days, three midsize U.S. banks have failed: Silvergate Capital (Silvergate), a $12 billion bank, announced its voluntary liquidation on March 8, 2023[1]; Silicon Valley Bank (SVB), a $210 billion bank, was closed by its California state regulator with the Federal Deposit Insurance Corporation (FDIC) appointed receiver on March 10, 2023[2]; and Signature Bank (Signature), a $110 billion bank, was closed by its New York state regulator with the FDIC appointed receiver on March 12, 2023.  While Silvergate voluntarily closed its doors with a promise to return all depositor funds, for both SVB and Signature, the FDIC triggered the “systemic risk” exception to the “least costly” requirement of receivership, in order to provide full insurance protection to all depositors.[3]  As receiver, the FDIC has removed senior management, appointed new chief executive officers, and bank operations are continuing while the FDIC considers possible acquisitions and other remedies.[4]

Media reports are littered with opinions as to the potential causes of these bank failures, and some of the reporting includes finger pointing at the crypto industry.  While additional facts undoubtedly will be disclosed in the weeks and months ahead, based on current information, it would be overly simplistic to blame the failures of SVB and Signature on any one cause, given that various market, regulatory and human factors appear to have contributed to their demise. 

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