Signature Bank's Collapse Blamed on Poor Management and Crypto Risks, Says FDIC Report
The collapse of Signature Bank has been attributed to poor management and an inadequate understanding of the risks associated with cryptocurrencies, according to a report by the Federal Deposit Insurance Corporation (FDIC). The FDIC chairman, Martin Gruenberg, emphasized this point during a hearing on Oversight of Prudential Regulators, citing the failures of Silicon Valley Bank (SVB) and Silvergate Bank as examples that led to significant stock price declines and subsequent deposit outflows at other banks.
The FDIC's chief risk officer also highlighted poor management as the root cause of Signature Bank's failure, pointing out the bank's heavy reliance on uninsured deposits without proper risk controls. Gruenberg further noted that Signature Bank failed to comprehend the risks associated with its association with and dependence on cryptocurrency industry deposits, as well as its vulnerability to contagion from the turmoil in the crypto industry during late 2022 and into 2023.
Former SVB CEO Greg Becker attributed rising interest rates as one of the factors contributing to its demise, stating that no bank could survive a bank run of such magnitude. The failures of SVB and Signature Bank led to significant losses of $16.1 billion and $2.4 billion, respectively, as disclosed by Gruenberg. In conclusion, Gruenberg suggested that banks with assets of $100 billion or more should receive special attention and consideration of a long-term debt requirement to ensure orderly resolutions.
Although regulators and lawmakers often bring up the failures of Signature Bank, SVB, and Silvergate Bank when discussing cryptocurrencies, the preliminary review conducted by the U.S. Government Accountability Office did not explicitly attribute the collapse of Signature Bank to its exposure to crypto.
