If the FDIC had treated Signature Bank as a routine bank failure, it would have been resolved without a penny of cost for the FDIC deposit insurance fund. Under normal rules, all losses would have been borne by the uninsured depositors as required by the FDIC Improvement Act of 1991 which generally requires the FDIC to carry out resolutions in a manner that imposes the least cost on the deposit insurance fund.
Instead of large depositors taking a loss, the U.S. Treasury, the Federal Reserve and the FDIC choose to declare Signature Bank a “systemic risk” to the financial system so they could perform a more costly resolution. The Signature Bank resolution will cost the FDIC fund at least $2.5 billion instead of nothing. Other banks, and ultimately taxpayers, will pay for Signature Bank’s insurance fund losses, losses that were a direct result of regulatory neglect.
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