Page 5 - Banking Finance May 2023

BANK UPDATE

Banking

Latest casualty of banking Signature Bank reported deposit bal- where the loan terms may have to be
ances totaling $89.17 billion as of rejigged and borrowers may not be
sector turmoil: Signature
March 8. As of 31 December, it had cooperative.
Bank approximately $110.36 billion in assets,
The banking regulator has asked the
according to New York state's Depart-
Signature Bank was closed by New industry body Indian Banks' Association
ment of Financial Services.
York state financial regulators as the (IBA) to explore ways to suggest pos-
fallout from recent implosion of SVB sible rules for migration from Libor, two
Financial Group's Silicon Valley Bank Banks may have problems people familiar with the matter.
spreads to other lenders.
with loan disputes and "A difficult borrower and its legal team
Depositors at the New York-based bank can always argue that the loan docu-
defaults after Libor
will have access to their money under mentation does not provide for
"a similar systemic risk exception" to switchover switchover to another rate. Even the
one that will allow Silicon Valley Bank As the end date approaches for the courts cannot apply it retrospectively.
clients to get their money, the Treasury London Interbank Offered Rate (Libor) So, this is an issue that has to be sorted
Department, the Federal Reserve and - the benchmark that has been in vogue out," said a bank CEO.
the Federal Insurance Deposit Corp. for decades for pricing of loans - the
said in a joint statement. Reserve Bank of India (RBI) has asked The Stand-Up India scheme
the banking industry to figure out the
"All depositors of this institution will be
sanctioned Rs. 40,700 crore
transition path for dollar loans in cases
made whole," the regulators said. "As
of disputes, delays and defaults. in loans
with the resolution of Silicon Valley
Bank, no losses will be borne by the After allegations of manipulation and Around Rs 40,710 crore in loans have
taxpayer." collusion by big global banks, the end been sanctioned to over 1.8 lakh ac-
counts under the government's flag-
of Libor began in 2017, with 2023 de-
Signature Bank, a New York state-char-
cided as the last year in the transition ship Stand Up India Scheme, which is
tered commercial bank that's FDIC-in-
road. By end-2021 many banks had focused on economic empowerment
sured, had total assets of about
stopped drawing contracts using Libor and job creation, according to official
$110.36 billion and total deposits of
data.
and June 2023 was set as the deadline
roughly $88.59 billion as of Dec. 31,
for replacing the guiding rate. Of the funds sanctioned since the in-
the New York Department of Financial
ception of the scheme in 2016, about
Services said in a separate statement. While multiple alternative rates have
80% of the loans have been given to
been proposed, it is feared that the
New York banking regulators ap-
transition would not be smooth where women entrepreneurs.
pointed the Federal Deposit Insurance
there are disputes between borrowers The scheme was launched on April 5,
Corporation (FDIC) as receiver for later
and lenders, particularly in matters 2016 to promote entrepreneurship
disposition of the bank's assets.
BANKING FINANCE | MAY | 2023 | 5