US senators have reprimanded the executives of the failed banks for their poor management practices and for trying to deflect blame from digital asset firms.
During Tuesday’s Senate Banking Committee hearing, Senator Cynthia Lummis it rained heavily Scott Shay, former chairman of the now-defunct Signature Bank, to make a statement about the reasons for his bank’s collapse.
“You mentioned digital assets 10 times in your testimony, which means digital asset signatures were the driver of the bank collapse,” he said.
“It seems that too much of the blame has been placed on the specialized depositories that deal in digital assets.”
in his testimonyShay said the bank began accepting deposits from businesses in the digital asset sector in 2018 and then “significantly” reduced its digital asset deposits in 2022 as the industry experienced volatility.
He added that the collapse of a lender “with strong ties to the digital assets sector” led to the withdrawal of $16 billion from Signature after regulators seized the bank.
However, Lummis argued that the record $16 billion in outflows came as both crypto customers and other customers pulled their money out of Signature, arguing that crypto was not to blame.
“There seems to be a lot of deflection of blame on those particular depositories and regulators that deal in digital assets and regulators, but you yourself have accepted no blame,” Lummis said.
In response, Shay refused to point fingers at digital assets as the main reason for the bank’s closure. “I didn’t point out earlier […] digital assets whether or not there is a particular reason,” he said.
As mentioned, the first week of March saw declines in three US banks.
After struggling for months following the collapse of FTX, a crypto-friendly bank, Silvergate Bank, announced Its liquidation on 8 March.
Silvergate, just two days after the collapse of Silicon Valley Bank, one of the most popular lenders to Silicon Valley tech and growth startups, suffering from bank run And was later shut down by the FDIC.
Shortly after, federal regulators also close signature bank On the apprehension of constant contagion.
Signature executives claim the bank was in good shape
During the hearing, Signature officials also claimed that the bank was in good health and there was no need to close it despite the increase in withdrawals.
Shay said Signature was ready to move forward, reiterating his claims that the bank had sufficient liquidity to meet customer demands.
“I was confident that Signature Bank could weather the economic earthquake that day. The bank was well capitalised. The bank was solvent.
Similarly, Eric Howell, the bank’s former president, said the lender is “well-capitalized, solvent, and has sufficient borrowing capacity to withstand these and future withdrawals.”
Meanwhile, some in the crypto community have described the shutdown of Signature as an attack by the US government against the digital asset industry.