A regulatory takeover of the New York-based bank was intended to send a message to US banks to stay away from the cryptocurrency business, a former member of Congress who was on the bank’s board said.
Former US Rep. Barney Frank said there is a belief that state officials behind the action were trying to make an example of Signature Bank.
“It’s just a way of telling people, ‘We don’t want you to deal with crypto,'” Frank told The Associated Press in a phone interview.
Frank, a Democrat who served in Congress from 1981 to 2013, authored the Dodd-Frank act that increased government oversight of banks after the 2008 financial crisis.
He was a director at Signature Bank until the New York Division of Financial Services took over Sunday and gave control to the FDIC, the federal agency that insures bank deposits, until the bank can be sold.
Signature’s takeover comes two days after regulators seized California-based Silicon Valley Bank. Both followed a withdrawal from banks, which cater to technology businesses.
New York Gov. Kathy Hochul described the takeover as a way to prevent a bigger crisis that could affect more banks.
“Our view is to make sure that the entire banking community in New York is stable, so that we can calm things down,” Hochul said at a press conference Monday.
Signature, which was founded more than two decades ago, has about 40 offices in the US and says it focuses on banking for private businesses, owners and senior managers.
The bank says it is the first FDIC-insured bank to launch a blockchain-based digital payment platform.
Amid concerns about Silicon Valley Bank last week, Signature issued a statement seeking to reassure clients and investors that it is stable. The statement includes a reminder that despite efforts to satisfy cryptocurrency holders, “do not invest, do not trade, do not hold, do not hold and do not lend or make loans secured by digital assets.”
But on Friday, there were more withdrawals, which Frank said were “simply based on contagion from SVB.”
He said the situation had stabilized by Sunday when New York regulators took over.
The bank had more than $110 billion in assets, making it the third largest banking failure in US history.
Unlike Frank, Hochul did not point to cryptocurrency as a factor in the bank shuttering over the weekend. They said that if the withdrawals continue, they should do so.
And state regulators went further, saying Signature is not a crypto bank.
“This is not about a specific sector in the case of Signature Bank, but we moved quickly to ensure depositors were protected,” said New York Financial Services Superintendent Adrienne Harris.
The bank’s top executives were ousted and it reopened Monday under FDIC operational control as Signature Bridge Bank.
Also, the FDIC announced that depositors at both banks will have full access — even for amounts that exceed the usual $250,000 insurance limit.
Frank said that if the FDIC had agreed to insure all deposits there instead of waiting until there, Signature would not be taken over. He said insurance limits for businesses should also be permanently raised by Congress to an amount high enough to cover several months’ salary for most companies.
Frank said that the former bank operator has no recourse.
But he said he expects some vindication when the bank is finally sold.
“I’m sure they’ll get a really good price,” Frank said, “proof that it’s not a bank problem.”
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