- The closure of Signature Bank was done to send a “very strong anti-crypto message” according to one of its board members
- Former U.S. congressman Barney Frank said that there were no fundamental reasons why the bank had to close
- Frank said that outflows had stabilized by Sunday night
A U.S. congressman and Signature Bank board member has claimed that the bank was shuttered by U.S. regulators to send a “very strong anti-crypto message”. Former U.S. representative Barney Frank told CNBC that the bank was not in the perilous position that has been suggested, and that regulators acted too swiftly following the collapse of Silicon Valley Bank in order to imprint the notion that crypto entities are fundamentally risky.
$16.5 Billion in Assets
Founded in 2001, Signature Bank emerged as a business-oriented alternative to larger financial institutions, extending its services to the West Coast before embracing the crypto industry in 2018. This move significantly boosted deposit growth in recent years, thanks to the creation of a round-the-clock payment system for crypto customers, with $16.5 billion in deposits held for clients involved in digital assets.
Frank used a phone call with CNBC to explain how quickly things changed for Signature Bank, saying how on Friday there were no signs of anything like the fallout that has taken place since. However, by that evening the imminent collapse of Silicon Valley Bank spread fears among similar institutions, leading to a “deposit run” which was “purely contagion from SVB”, according to Frank.
With concerns over Silicon Valley Bank spreading, Signature customers withdrew their funds and moved them to bigger banks such as JPMorgan Chase and Citigroup, according to Frank. This deposit exodus had slowed by Sunday, he said, and executives believed they had stabilized the situation, only for the government to step in, shut down the bank, and remove the directors.
Signature Bank Was Not Insolvent
Frank summarized that there was “no real objective reason” for seizing Signature, adding that “part of what happened was that regulators wanted to send a very strong anti-crypto message and that “there was no insolvency based on the fundamentals.” The government’s move comes amid an effort from U.S. regulators to clamp down on the crypto sector in many and varied ways, and the closure of Signature Bank should be a concern to other banks with a heavy crypto presence.