Signature Bank seized to send banks a message, director says

A regulatory takeover of a New York-based financial institution was supposed to ship a message to U.S. banks to steer clear of the cryptocurrency enterprise, a former member of Congress who was on the financial institution’s board says.

Former U.S. Rep. Barney Frank stated Monday that he believes the state officers behind the motion had been attempting to make an instance of Signature Financial institution in takeover that he stated was the flawed transfer. Regardless of a wave of withdrawals, the financial institution’s scenario was underneath management earlier than regulators swooped in, he stated.

“This was only a strategy to inform folks, ‘We don’t need you coping with crypto,’” Frank stated in an interview.

Frank, a Democrat who served in Congress from 1981 till 2013, coauthored the Dodd-Frank act that boosted authorities oversight of banks following the 2008 monetary disaster.

He was a director at Signature Financial institution till the New York Division of Monetary Providers took it over Sunday and gave management of it to the FDIC, the federal company that insures financial institution deposits, till the financial institution could be bought.

Frank stated the financial institution’s former operators haven’t any recourse. However he stated he expects some vindication when Signature is bought finally.

“I consider they’re going to get an excellent worth,” Frank stated, “proof that it was not a financial institution drawback.”

Signature’s takeover got here two days after regulators seized California-based Silicon Valley Financial institution. Each adopted a rush of withdrawals from the banks, which catered to know-how companies.

New York Gov. Kathy Hochul described the takeover as a strategy to avert an even bigger disaster that might have affected extra banks.

“Our view was to guarantee that the whole banking neighborhood right here in New York was steady, that we will venture calm,” Hochul stated in a information convention Monday.

Signature, which was based greater than 20 years in the past, has about 40 places of work throughout the U.S. and says it focuses on banking for privately owned companies, their house owners and senior managers.

The financial institution stated it was the primary FDIC-insured financial institution to launch a blockchain-based digital funds platform.

As worries mounted about Silicon Valley Financial institution final week, Signature put out an announcement looking for to reassure purchasers and traders that it was steady. The assertion included a reminder that regardless of its efforts to cater to cryptocurrency holders, it “doesn’t put money into, doesn’t commerce, doesn’t maintain, doesn’t custody and doesn’t lend towards or make loans collateralized by digital belongings.”

However by Friday, there have been extra withdrawals, which Frank stated had been “primarily based solely on the contagion from SVB.”

He stated the scenario had stabilized by the point Sunday that New York regulators took it over.

The financial institution had greater than $110 billion in belongings, making it the third-largest banking failure in U.S. historical past.

In contrast to Frank, Hochul didn’t level to cryptocurrency as an element within the financial institution’s shuttering over the weekend. She stated withdrawals had been persevering with, making the motion essential.

And the state regulator went even additional, saying Signature wasn’t a crypto financial institution.

“This isn’t a couple of specific sector within the case of Signature Financial institution, however we moved rapidly to ensure depositors had been protected,” stated New York Monetary Providers Superintendent Adrienne Harris.

The financial institution’s prime executives had been ousted and it reopened Monday underneath operational management of the FDIC as Signature Bridge Financial institution.

Additionally Monday, the FDIC introduced that these with deposits in each banks would have full entry to them — even the quantities that exceed the common $250,000 insurance coverage restrict.

Frank stated that if the FDIC had agreed to insure the whole deposits on Friday somewhat than ready till Monday, Signature wouldn’t have been taken over. He stated the insurance coverage restrict for companies also needs to be raised completely by Congress to an quantity excessive sufficient to cowl a number of months’ price of payroll for many companies.

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Mulvihill reported from Cherry Hill, New Jersey. Related Press/Report for America Statehouse Information Initiative reporter Maysoon Khan contributed from Albany, New York. Report for America is a nonprofit nationwide service program that locations journalists in native newsrooms to report on undercovered points.