FDIC’s Martin Gruenberg stated that Signature Bank’s involvement in the digital asset industry led to its demise. The FDIC chair also acknowledged their shortcomings in not acting earlier to prevent the crisis from spreading. Gruenberg added that their supervision could have been stronger.
FDIC Chair Holds Crypto Responsible for Signature’s Collapse
The FDIC chairman directly blamed Signature Bank’s reliance on crypto industry deposits for its vulnerability to contagion from digital asset industry turmoil in late 2022 and into 2023.
Gruenberg said that Signature Bank’s poor governance and inadequate risk management practices led to the institution’s inability to manage its liquidity. Signature Bank was not solely a crypto bank, but its efforts towards the industry became more prominent during the pandemic-era.
In a bid to reduce its exposure to the industry in a turbulent time, Signature Bank distanced itself after FTX’s fall. The bank claimed to have reduced significantly its digital asset deposits due to market volatility and regulatory apprehensions towards the end of 2022, according to Scott Shay, the bank’s co-founder.
The Blame Game
Reports linking Signature Bank’s collapse to its exposure to the crypto industry created speculation that the bank’s ties to crypto businesses led to its closure. However, the NYDFS Superintendent dismissed that possibility, stating that the bank was facing operational difficulties leading up to its shutdown.
The crypto industry criticized Signature’s seizure and blamed regulators for targeting them. The Blockchain Association submitted Freedom of Information Act (FOIA) requests for government actions that might have caused the failures.