On Friday, the FDIC published a document returning to the closure of Signature Bank. According to her, the failure of the bank is due to poor management and uncontrolled growth.
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FDIC : « la cause profonde de l’échec de Signature Bank était une mauvaise gestion »
FDIC releases report on Signature Bank failure
This week, the Federal Deposit Insurance Corporation (FDIC) unveiled a 63-page document in which it reviews the Signature Bank (SBNY) affair.
For the FDIC, the observation is simple, certainly the bank was affected by the liquidity crisis caused by the defaults of Silicon Valley Bank and Silvergate, but the main reason would be in the management of the company :
“However, the root cause of SBNY’s failure was poor management. The board of directors and management of SBNY continued rapid and unbridled growth [et ont] funded growth through an overreliance on uninsured deposits, failed to implement fundamental liquidity risk management practices, and failed to understand the risk of its association with the crypto industry. »
Additionally, the bank would not always have been responsive to the various FDIC investigations.
To highlight the rapid growth in question, Signature Bank has grown from $43.1 billion in assets in 2017 to a high of $118.4 billion in 2021, an increase of 175%. More generally, the federal agency reports that while the bank recorded 134% growth, the average for other establishments in the sector was 33%.
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A crypto-friendly bank
Signature Bank was renowned for its openness to cryptocurrencies, and was also partner of several ecosystem players. It was notably Binance’s intermediary for processing dollar transfers, and after the shutdown, Coinbase and Paxos had announced that cash was blocked in the bank.
For its part, the FDIC shows a correlation between Signature Bank stock price and cryptocurrency events in 2022. If the graph is telling, let’s remember that the year 2022 was catastrophic for many asset classes, although we cannot deny this correlation:
Signature Bank share price
As of September 30, 2022, the “Digital Assets Group” branch accounted for 23.5% of the bank’s deposits, and the establishment informed last January that it wanted to reduce this exposure to cryptocurrencies to 15%. In addition, the bank faced a lawsuit last February alleging that it participated in facilitating the frauds of which FTX is accused.
We know what happened next, customer withdrawals got bigger and bigger and Signature Bank was shut down on March 12 by the FDIC. The latter also considers that this case could cost its deposit insurance fund $2.5 billion.
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Source: FDIC
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I timidly discovered the world of blockchain at the end of 2018 during my quest for financial freedom. Initially invested moderately, it was only two years later that I took the gamble of betting everything on the movement that was taking shape then. I then dedicate 2021 to training myself better to acquire more knowledge and seriousness. As I often like to say: I still have a billion things to learn. And what I do know, I want to share with you.
Vincent Mayor
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