March 14 (Reuters) – New York’s monetary regulator mentioned its resolution to shut Signature Financial institution (SBNY.O) had “nothing to do with crypto,” citing what it known as “a major disaster of confidence within the financial institution’s management” that occurred over the weekend after regulators shuttered Silicon Valley Financial institution (SIVB.O).
The feedback from a New York State Division of Monetary Companies spokesperson have been in distinction with these made by Signature Financial institution board member and former U.S. Rep. Barney Frank, one of many pioneers of the landmark Dodd-Frank Act, which was enacted after the 2008 monetary disaster to higher insulate the banking system from shocks.
“I believe a part of what occurred was that regulators needed to ship a really robust anti-crypto message,” Frank advised CNBC on Monday. “We turned the poster boy as a result of there was no insolvency primarily based on the basics.”
However NYDFS denied Frank’s claims in a press release on Tuesday, saying that its resolution to shut Signature Financial institution on Sunday and appoint the Federal Deposit Insurance coverage Corp as receiver “was primarily based on the present standing of the financial institution and its capacity to do enterprise in a protected and sound method on Monday.”
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The FDIC declined to remark. Signature Financial institution didn't instantly reply to a request for remark.
“The choices remodeled the weekend had nothing to do with crypto. Signature was a standard business financial institution with a variety of actions and clients,” an NYDFS spokesperson mentioned.
“DFS has been facilitating well-regulated crypto actions for a number of years, and is a nationwide mannequin for regulating the area,” they mentioned.
The spokesperson added that as withdrawal requests ballooned over the weekend, Signature Financial institution failed to offer dependable and constant information.
In response to NYDFS' assertion, Frank mentioned he was shocked the regulator mentioned the choice to shut the financial institution was not associated to cryptocurrency.
“I believe that was an element,” he mentioned in an interview. “I’m puzzled as to why it was closed.”
He added that to his information, financial institution executives have been working to offer information to regulators.
“What we heard from our executives is that the deposit state of affairs had stabilized and they might be getting the capital from the low cost window and I proceed to be satisfied that if we had opened on Monday given the bulletins of these two insurance policies, we'd have been in a fairly fine condition and definitely purposeful,” he mentioned.
Signature was a business financial institution with personal consumer workplaces with 9 nationwide enterprise traces together with business actual property and digital asset banking.
As of September, virtually 1 / 4 of its deposits got here from the cryptocurrency sector, however the financial institution introduced in December that it could shrink its crypto-related deposits by $8 billion.
The FDIC established a “bridge” successor financial institution to Signature Financial institution on Sunday to allow depositors to entry their funds. The U.S. Treasury Division and different financial institution regulators introduced Sunday that all the depositors at each Signature Financial institution and Silicon Valley Financial institution could be made complete and “no losses can be borne by the taxpayer.”
Reporting by Hannah Lang in Washington, Modifying by Nick Zieminski
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