New York’s Department of Financial Services (NYDFS) denied that it closed Signature Bank due to its involvement in cryptocurrency. According to a spokesperson, the decision to close the bank was made based on its current status and its ability to conduct business safely. The spokesperson also said that the decision had nothing to do with crypto and that NYDFS has been regulating the sector in a well-regulated manner for several years. The comments contradict claims by former US Representative Barney Frank, a member of Signature Bank’s board, who said that the closure was an attempt by regulators to send an anti-crypto message.
Crisis of confidence in bank’s leadership
NYDFS stated that the closure was a result of a “significant crisis of confidence in the bank’s leadership” following the weekend closure of Silicon Valley Bank. Although the FDIC and Signature Bank have yet to comment, Frank expressed surprise at NYDFS’s comments, saying that he believed cryptocurrency was a factor in the bank’s closure. He also said that executives were providing data to regulators and that the bank was set to receive capital from the discount window.
Signature Bank was a commercial bank with private client offices and a range of activities, including commercial real estate and digital asset banking. Almost a quarter of its deposits as of September 2022 came from cryptocurrency, although it announced in December that it would shrink its crypto-related deposits by $8 billion.
The FDIC established a “bridge” successor bank to Signature Bank to enable depositors to access their funds, and the US Treasury and other regulators announced that no losses would be borne by taxpayers and that depositors at both Signature Bank and Silicon Valley Bank would be made whole.
Also Read: Barney Frank: Regulators Targeted Signature Bank to Send Anti-Crypto Message
The closure of Silicon Valley Bank is also an important factor in the situation, as it led to a “crisis of confidence” in Signature Bank’s leadership. While Signature Bank’s executives were reportedly working to provide data to regulators and expected to receive capital, the bank’s failure to provide reliable and consistent data over the weekend led to the FDIC’s decision to close it.
Signature Bank was a traditional commercial bank with diverse activities, including a focus on digital asset banking. Although a significant proportion of its deposits came from the crypto sector, it had already announced plans to reduce its exposure to the sector. The establishment of a “bridge” successor bank will enable depositors to access their funds, while regulators have ensured that no losses will be borne by taxpayers.
