Signature Bank (SBNY) went bankrupt primarily due to contagion spreading from other recently collapsed financial institutions, according to the US Federal Deposit Insurance Corporation (FDIC).
The FDIC says in a new report that the self-liquidation of Silvergate Bank and the bankruptcy of Silicon Valley Bank (SVB) set the stage for Signature’s high-profile implosion last month.
However, the regulator also notes that other factors, including crypto, played a role in the financial institution’s demise.
“SBNY’s board and management pursued rapid, unfettered growth without developing and maintaining adequate risk management practices and controls appropriate to the institution’s size, complexity and risk profile. SBNY management did not prioritize good corporate governance practices, did not always heed the concerns of FDIC investigators, and did not always or timely respond when addressing FDIC supervisory recommendations (SRs). SBNY funded its rapid growth by over-relying on uninsured deposits without implementing fundamental liquidity risk management practices and controls. In addition, SBNY did not understand the risk of its association and reliance on deposits in the crypto industry or its vulnerability to contagion from the crypto industry turmoil that occurred in late 2022 and into 2023.
The New York Department of Financial Services (NYDFS) shut down the crypto-friendly financial institution in March after customers withdrew $10 billion in deposits in a single day. The NYDFS then appointed the FDIC to run a “bridge bank” that held all of Signature’s assets until it could be sold.
Signature Bank board member Barney Frank, a former Democratic congressman from Massachusetts, told CNBC at the time that he thought the bank’s closure was part of a regulatory crackdown on crypto. However, NYDFS Superintendent Adrienne A. Harris later denied that, saying the bank’s shuttering was entirely due to liquidity problems.
Later in March, the FDIC entered into a “purchase and acquisition agreement” with Flagstar Bank, a subsidiary of New York Community Bancorp.
Don’t Miss Out – Subscribe to receive crypto email alerts delivered straight to your inbox
Check price action
follow us on TwitterFacebook and Telegram
Surf the Daily Hodl mix
Image generated: Midway through the journey
