FDIC Blames Crypto Exposure for Silvergate Bank Failure as Execs Remain Confused
According to the FDIC chairman, Martin Gruenberg, the failure of Signature Bank can be attributed to several factors, including poor management, liquidity issues, and exposure to the volatile crypto industry. During his testimony before the House Financial Services Committee on Oversight of Prudential Regulators, Gruenberg cited the cases of Silicon Valley Bank and Silvergate Bank, which also collapsed due to massive withdrawals by their customers. These withdrawals were triggered by concerns about the banks’ solvency and their involvement in the crypto sector.
The FDIC chief risk officer’s report revealed that Signature Bank failed to properly manage its risks and relied too heavily on uninsured deposits from the crypto industry. Some bank executives pointed to rising interest rates as a cause for their collapse, but Gruenberg argued that no bank could withstand such a rapid and massive bank run.
In contrast, both the U.S. Government Accountability Office and the New York State Department of Financial Services downplayed the role of crypto in the bank’s closure. At a recent congressional hearing, former Signature Bank executives maintained that the bank was in good standing before its closure.