Regulators | Regulators

Fitch Ratings Downgrades and Withdraws Signature Bank's Ratings

Mar 17, 2023   •   by   •   Source: Fitch Ratings   •   eye-icon 144 views

Fitch Ratings has downgraded Signature Bank's (SBNY) Long-Term Issuer Default Rating (IDR) to 'D' from 'BBB+' following its closure by the New York State Department of Financial Services. In addition, SBNY's Short-Term IDR has been downgraded to 'D' from 'F2'. All assets and deposits have transferred to Signature Bridge Bank N.A., a full-service bank that operated by the FDIC.


Fitch Ratings is subsequently withdrawing the ratings of Signature Bank as the bank is under regulatory supervision. Accordingly, Fitch Ratings will no longer provide ratings or analytical coverage for Signature Bank.


Key Rating Drivers


IDRs and VR

The Long- and Short-Term IDRs have been downgraded to 'D', in accordance with Fitch's Bank Rating Criteria, which deems a bank in default when placed into receivership. Similarly, SBNY's VR has been downgraded to 'f' from 'bbb+' indicating the institution has failed.


Long- and Short-Term Deposits: Long- and Short-Term deposit ratings have been withdrawn reflecting insufficient information to maintain the ratings subsequent to the transfer of deposits under an announced systemic risk exception approved by regulators, under which all depositors will be made whole.


Subordinated Debt and Other Hybrid Securities: SBNY's subordinated debt and preferred stock rating have been downgraded to 'C' from 'BBB' and 'BB, respectively, consistent with Fitch's Bank Rating criteria, which states that for a bank rated 'RD' or 'D', a non-performing hybrid obligation will be rated 'C', unless Fitch expects above average (above 50%) recoveries on the instrument, in which case it can be rated up to 'CCC'. Fitch has not factored in the potential for any recoveries as there is insufficient information to do so.


Government Support Rating: SBNY's GSR of 'ns' remains unchanged and is affirmed and withdrawn.


Rating Sensitivities


Factors that could, individually or collectively, lead to negative rating action/downgrade:

Rating Sensitivities are no longer relevant as the ratings have been withdrawn.


Factors that could, individually or collectively, lead to positive rating action/upgrade:

See above.


Best/Worst Case Rating Scenario

International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. 



Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity.


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