Investigations into the bankruptcy of Signature Bank point to circumstances of illiquidity and mismanagement. However, Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg believes the bank’s failure to understand the risks associated with cryptocurrencies hastened its downfall.
A related report by the FDIC’s chief risk officer cited mismanagement as “the root cause of Signature Bank’s failure.”. Noting Signature’s overreliance on uninsured deposits without adequate risk controls, Gruenberg added:
“Furthermore, the bank did not understand the risk of its association with and reliance on crypto industry deposits or its vulnerability to contagion from the crypto industry turmoil that occurred in late 2022 and into 2023.”
Although regulators and banking professionals agree that runs on deposits are one of the main drivers of bank collapses, former SVB CEO Greg Becker blamed rising interest rates among factors in its demise.
According to Becker, no bank “could survive a bank run of that speed and magnitude.” Gruenberg revealed that the bankruptcies of SVB and Signature Bank resulted in losses of USD 16.1 billion and USD 2.4 billion, respectively. Concluding the discussion, Gruenberg said that banks with assets of $100 billion or more “deserve special attention, including consideration of a long-term debt requirement to facilitate orderly resolutions.”.
On the other hand, the US Government Accountability Office’s preliminary review did not explicitly blame cryptocurrency exposure for Signature Bank’s collapse.
As Cointelegraph previously reported, many regulators and legislators keep mentioning the collapses of Signature Bank, Silicon Valley Bank, and Silvergate Bank in cryptocurrency discussions.
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