• Martin Gruenberg, chairman of the FDIC, has blamed Signature Bank’s involvement in the crypto industry for its ultimate collapse.
• In a recent speech before the House Committee on Financial Services, the Federal Deposit Insurance Corporation (FDIC) chairman criticized Signature’s reliance on uninsured deposits from crypto and its exposure to 2022 events.
• The NYDFS announced that their decision to shut down Signature was not influenced by its involvement in the crypto industry.
FDIC Chairman Blames Crypto Industry for Signature Bank’s Collapse
Martin Gruenberg, Chairman of the Federal Deposit Insurance Corporation (FDIC), recently blamed Signature Bank’s involvement with the crypto industry for its eventual collapse. Speaking before the House Committee on Financial Services, Gruenberg criticized Signature’s reliance on uninsured deposits from cryptocurrency and its exposure to events that occurred in 2022.
Risk Management & Poor Governance
Gruenberg also acknowledged that FDIC bank supervision could have been more substantial to prevent crisis from spreading through Signature’s operations. He noted that due to a lack of risk management procedures and poor governance, the bank was unable to manage liquidity in a crisis or meet large withdrawal requests triggered by fears about its solvency.
Reduction of Crypto-Related Deposits
Signature had worked extensively with several crypto firms, with an estimated 30% of its deposits originating from digital asset clients. Following news of FTX exchange accounts being held at the bank, Signature said these accounts represented less than 0.1% of overall deposits and announced plans to reduce around $10 billion in deposits emanating from digital asset clients. This would bring their crypto-related deposits down to between 15-20%.
NYDFS Denies Crypto Influence
In March 2021, New York State Department of Financial Services (NYDFS) announced that their decision to shut down Signature was not influenced by its involvement in cryptocurrency or digital assets sector. They clarified this point shortly after reports surfaced about FTX exchange accounts at the bank and allegations linking it towards eventual closure.
Ultimately, FDIC Chairman Martin Gruenberg concluded that no bank could survive a run as fast and as strong as seen with Signature Bank; ruling out all other theories such as rising interest rates which some executives had suggested were responsible for their collapse instead. It is important to note however that this article is provided solely for informational purposes only and should not be used or interpreted as legal advice or counsel.