Signature Bank Shutdown Caused by 'Crisis of Confidence' in Leadership, NYDFS Says
The New York regulator pushed back against claims it shut down Signature because of crypto.
Signature Bank was not shut down for crypto-related reasons, the New York Department of Financial Services said Tuesday, rejecting claims the regulator took over the bank to send an "anti-crypto message."
NYDFS took over Signature over the weekend, turning it over to the Federal Deposit Insurance Corporation (FDIC). The move followed California's banking regulator seizing Silicon Valley Bank last Friday, and Silvergate Bank announcing it would voluntarily liquidate its assets last week. Signature, like Silvergate, served a number of crypto clients.
In a statement Tuesday, an NYDFS spokesperson echoed comments from the regulator's head, Superintendent Adrienne Harris, who said Monday the bank closure was not due to its role with crypto companies.
"The decisions made over the weekend were not crypto-related," the spokesperson said. "Signature was a traditional commercial bank with a wide range of activities and customers, including small businesses like food vendors at Hunt’s Point, residential mortgage banking, commercial real estate, to name a few. DFS has been facilitating well-regulated crypto activities for several years, and is a national model for regulating the space."
Barney Frank, a Signature Bank board member and former U.S. congressman whose name adorns the 2010 Dodd-Frank Act, and who also endorsed a 2018 change to the law, told CNBC, Politico and other news organizations that he believed regulators shuttered Signature due to its servicing crypto clients.
“I think part of what happened was that regulators wanted to send a very strong anti-crypto message. We became the poster boy because there was no insolvency based on the fundamentals," Frank told CNBC.
NYDFS' statement said the bank still had "significant withdrawal requests" pending over the weekend, after a run on deposits on Friday.
Frank acknowledged that depositors withdrew over $10 billion on Friday.
"The bank failed to provide reliable and consistent data, creating a significant crisis of confidence in the bank’s leadership," DFS said. "The decision to take possession of the bank and hand it over to the FDIC was only made when it was clear the bank would be unable to do business in a safe and sound manner on Monday. The Department continues to work with federal regulators in addition to other officials to review and fully investigate the events that have unfolded and hold people accountable."
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