Signature Bank failed to understand risks associated with crypto: FDIC chair

Signature Bank failed to understand risks associated with crypto: FDIC chair



Investigations into the collapse of Signature Bank level towards illiquidity circumstances and poor administration. However, the Federal Deposit Insurance Corporation (FDIC) chairman, Martin Gruenberg, believes the financial institution’s failure to understand the risks associated with cryptocurrencies expedited its fall.

Speaking at a latest United States House of Representatives Financial Services Committee listening to on Oversight of Prudential Regulators, Gruenberg highlighted the latest failures of Silicon Valley Bank (SVB) and Silvergate Bank, which ultimately manifested in giant declines in inventory costs and subsequent deposit outflows at different banks.

A associated report by the FDIC chief threat officer cited poor administration as “the root cause of Signature Bank’s failure.” While stating Signature’s overreliance on uninsured deposits with out correct threat controls, Gruenberg added:

“Additionally, the bank failed to understand the risk of its association with, and reliance on, crypto industry deposits or its vulnerability to contagion from crypto industry turmoil that occurred in late 2022 and into 2023.”

Although regulators and banking professionals agree that deposit runs are one of many key drivers of financial institution collapses, former SVB CEO Greg Becker blamed rising rates of interest among the many elements for its demise.

According to Becker, no financial institution “could survive a bank run of that velocity and magnitude.” Gruenberg revealed that the failures of SVB and Signature Bank resulted in losses of $16.1 billion and $2.4 billion, respectively. Concluding the dialogue, Gruenberg stated that banks with property of $100 billion or extra “merit special attention, including consideration of a long-term debt requirement to facilitate orderly resolutions.”

Related: FDIC pins Signature Bank’s failure on poor governance and illiquidity

On the flip facet, the U.S. Government Accountability Office’s preliminary overview didn’t explicitly blame crypto publicity for the collapse of Signature Bank.

As beforehand reported by Cointelegraph, many regulators and lawmakers proceed to invoke the collapses of Signature Bank, Silicon Valley Bank and Silvergate Bank in discussions round crypto.



Source link

[adinserter block=”2″]