The demise of Signature Bank was caused by a combination of factors, including poor management, liquidity problems, and exposure to the volatile crypto industry.
FDIC Blames Crypto Exposure for Silvergate Bank Failure as Execs Remain Confused
The demise of Signature Bank was caused by a combination of factors, including poor management, liquidity problems, and exposure to the volatile crypto industry. This was the view of the FDIC chairman, Martin Gruenberg, who testified before the House Financial Services Committee on Oversight of Prudential Regulators.
Gruenberg cited the recent cases of Silicon Valley Bank and Silvergate Bank, which also collapsed due to massive withdrawals by their customers. These withdrawals were triggered by fears about the banks' solvency and their involvement in the crypto sector. According to a report by the FDIC chief risk officer, Signature Bank failed to manage its risks properly and relied too much on uninsured deposits from the crypto industry.
While some bank executives blamed the rising interest rates for their downfall, Gruenberg argued that no bank could survive a bank run of such speed and magnitude. Meanwhile, both the U.S. Government Accountability Office and the New York State Department of Financial Services have both downplayed crypto’s role in the bank’s shutdown. During a U.S. congressional hearing on Tuesday, former Signature Bank executives also maintained that the bank was in fine shape prior to its shutdown.
