Amid falling stock prices, the Federal Deposit Insurance Corporation (FDIC) pointed fingers at crypto and poor management for the demise of Signature Bank.
commented In a US House of Reps hearing, Martin Gruenberg, chairman of the FDIC, attributed the failure of the signature to an ignorance of the risks involved. cryptocurrency,
a related reports The FDIC investigation into the collapse of crypto-friendly Signature Bank revealed a lack of liquidity and poor management.
FDIC Chair Explains Why Signature Bank and Two Others Collapsed
Questions have been raised regarding the demise of three US crypto-friendly banks Silicon Valley Bank (SVB), Silvergate Bank and Signature Bank, which led to a drop in share price and a deposit run.
during a speech At a House Financial Services Committee hearing on oversight of prudential regulators, Gruenberg outlined the reasons for the banks’ failures.
According to the FDIC chairman, a related report by the FDIC’s chief risk officer pointed to poor management as the root cause of Signature Bank’s failure.
Furthermore, Gruenberg blamed Signature Bank for over-reliance on uninsured crypto deposits without implementing proper risk control measures.
He added that cryptocurrency deposits are risky as the crypto industry is still vulnerable to contagion from the late 2022 crisis.
In addition, Gruenberg stated that the failures of Silicon Valley Bank and Signature Bank resulted in losses of $16.1 billion and $2.4 billion, respectively.
In addition, the subsequent closure of First Republic Bank resulted in a loss of $13 billion.
In essence, the FDIC chairman suggested that banks with assets of $100 billion or more deserve special attention and a long-term debt requirement to ensure orderly resolution.
in the previous reportsThe FDIC blamed Signature’s management and board of directors for pursuing growth using uninsured deposits without adequate risk management strategies.
It further said that the bank management did not prioritize good governance practices nor heed the concerns and recommendations of the FDIC examiner.
In particular, the massive stock price drop was caused by the contagion effect of the Silicon Valley Bank collapse, which spread across media outlets and social media platforms, leading to an overwhelming bank run.
Exposure to crypto and interest rate hikes played a big role in bank failures
Organized by the US Government Accountability Office (GAO) initial review About bank failures.
The agency also included banks’ exposure to crypto as the reason for their demise.
Furthermore, while regulators and banking officials agree that deposit runs were the primary cause of the bank’s collapse, former SVB CEO Greg Baker blamed interest rate increases for the bank’s collapse.
In Baker’s words, no bank could survive a deposit run of that magnitude.
Notably, the collapse of three crypto-friendly banks remains a reference topic for US regulators and anti-crypto lawmakers when discussing digital asset regulation.