# Alert Memorandum: Closure of Participating Main Street Lending Program Bank (Signature Bank) (A-23-002-1) **Issuer:** Special Inspector General for Pandemic Recovery (SIGPR) **Report no.:** SIGPR-A-23-002-1 **Date:** 2023-04-11 **Type:** IG report/audit (alert memorandum) **Source URL:** https://www.oversight.gov/sites/default/files/documents/reports/2023-04/Alert-Memo-Closure-Participating-MSLP-Bank-FINAL.pdf **Captured:** 2026-06-22 (full text via web_fetch; boilerplate stripped) --- **Office of the Special Inspector General for Pandemic Recovery — Office of Audits** April 11, 2023 TO: Jacob D. Leibenluft, Chief Recovery Officer, U.S. Department of the Treasury FROM: Theodore R. Stehney, Assistant Inspector General for Auditing, Special Inspector General for Pandemic Recovery (SIGPR) SUBJECT: Alert Memorandum: Closure of Participating Main Street Lending Program Bank A-23-002-1 The purpose of this memorandum is to notify you of an issue we found during planning for our Audit of the Effects the Main Street Lending Program's Loan Losses Have on Treasury's Investment in the Program (A-23-002). On Sunday, March 12, 2023, the Federal Deposit Insurance Corporation (FDIC) announced that Signature Bank of New York (Signature Bank) was closed by the New York State Department of Financial Services. Signature Bank issued 5 loans under the Main Street Lending Program (MSLP), with a value of $113.4 million. Treasury should coordinate with the Federal Reserve Bank of Boston (FRBB) to determine how this closure may affect Treasury's investment in the MSLP. ## Background The MSLP was designed to help credit flow to small and medium-sized for-profit businesses and nonprofit organizations that were in sound financial condition before the onset of the COVID-19 crisis but needed loans to help maintain their operations until they recovered from, or adapted to, the impacts of the pandemic. The FRBB manages the program and set up a Special Purpose Vehicle (SPV) to purchase 95 percent of participations in MSLP loans from lender banks. These purchases are backed by a $16.6 billion equity investment by Treasury. The lender banks retain the remaining 5 percent of the risk associated with making a loan. By the end of the program, 319 participating lender banks issued 1,830 MSLP loans valued at approximately $17.5 billion. As of February 28, 2023, the SPV has recognized approximately $115 million in actual MSLP loan losses, net of subsequent recoveries. ## Specific Concern During planning for our Audit of the Effects the Main Street Lending Program's Loan Losses Have on Treasury's Investment in the Program, we identified a significant concern that warrants your immediate attention. This concern is described below and will be further explored as we continue with audit fieldwork. ### Closure of a Participating Main Street Lending Program Lender Bank Signature Bank, an MSLP lender bank that issued 5 MSLP loans valued at $113.4 million, was closed on March 12, 2023, by the State of New York. To protect depositors, the FDIC transferred all of Signature Bank's assets to an FDIC run institution that will continue to be operated by the FDIC until it can be sold. Although FDIC guidance indicates that borrowers of Signature Bank should continue to make their loan payments as usual to the FDIC's newly established institution, it is not clear how this closure, or any potential future closures, will affect MSLP borrowers and their loans. ## Conclusion Signature Bank held 5 MSLP loans valued at $113.4 million. In light of Signature Bank's closure, it is not clear how MSLP borrowers and their loans will be affected. Therefore, Signature Bank's closure, as well as any potential future bank closures, may put Treasury's investment in the MSLP at risk. ## Recommendation The Special Inspector General for Pandemic Recovery recommends that Treasury coordinate with the Federal Reserve Bank of Boston to determine what can be done to protect Treasury's investment in the Main Street Lending Program regarding this closure and any potential bank closures in the future. ## Agency Comments Treasury's Deputy Assistant Secretary for Capital Markets agreed with our recommendation. Treasury's written comments are included in Appendix B. ## Compliance Statement In accordance with generally accepted government auditing standards (GAGAS), during an audit, the auditors may provide interim reports of significant matters to appropriate entity and oversight officials. Such communication alerts officials to matters needing immediate attention and allows them to take corrective action before the final report is completed. The related ongoing audit, when completed, will comply with GAGAS. The associated performance audit report that will be issued in the future will incorporate the issues discussed in this alert memorandum. ## Audit Team This audit was managed and conducted by the individuals listed below: - Michael Sinclair — Audit Manager - Kevin Gallagher — Auditor-In-Charge ## Appendix A — Memorandum Distribution - Chief Recovery Officer – U.S. Department of the Treasury - Office of General Counsel – U.S. Department of the Treasury - Inspector General – Special Inspector General for Pandemic Recovery - Office of General Counsel – Special Inspector General for Pandemic Recovery ## Appendix B – Agency Comments [Treasury's written concurrence with the recommendation, from the Deputy Assistant Secretary for Capital Markets. The signed agency-comment letter appears as a 2-page image attachment in the source PDF and is not machine-extractable as text.]