Cross River Bank, a venture-backed regional bank based in New Jersey, has been issued a consent order by the Federal Deposit Insurance Corporation (FDIC) for "unsafe or unsound banking practices" related to compliance with fair lending laws and regulations. The order, issued on March 8 and made public last Friday, calls for the bank's board to increase its supervision and direction of the management and take corrective action to remedy any unsafe practices and prevent future violations.
Cross River Bank is known for doing business with major crypto firms such as Coinbase and Circle, and a spokesperson for the bank stated that the order is "the result of a standard review" pertaining to aspects of the bank's lending processes from two years ago. The spokesperson also emphasized that the bank has made significant enhancements to its fair lending and other programs, including investing in technology and personnel, since identifying areas for improvement prior to the examination.
Despite the FDIC consent order, Cross River Bank is still dedicated to partnering with the fintech community and remains a model for transparent, compliant, fair, and responsible lending. The order does not identify discriminatory practices or anything that would require Cross River to compensate consumers for harm, and it places no limitations on the bank's existing fintech partnerships or the credit products offered in partnership with them.
However, the bank is required to review its information systems, identify new credit products, and submit a list of third parties offering them, among other tasks, as part of the corrective action plan. Cross River Bank is also required to compile written progress reports on actions taken to secure compliance with the order.
The founder, chair, and CEO of Cross River Bank, Gilles Gade, acknowledged this week that his institution is facing regulatory scrutiny after the collapse of Silicon Valley Bank. He made the comments in a "Q1 Message" blog post, which did not mention the FDIC consent order. Gade stated that regulatory scrutiny on banks in general is increasing and the events with SVB will only expand those efforts with a specific focus on banks that support fintech. Cross River Bank is the largest of these banking institutions and as such, has regulatory examiners reviewing some elements of its business on a continuous basis.
In conclusion, the FDIC consent order serves as a reminder to banks doing business with the crypto industry that regulatory compliance is critical to success. While Cross River Bank has taken steps to improve its compliance with fair lending laws, the order shows that there is still work to be done. As regulatory scrutiny on banks continues to increase, it is essential that banks prioritize compliance and work closely with regulators to ensure that their practices are safe and sound.