Chairman of the Federal Deposit Insurance Corporation: Signature Bank failed to understand the risks associated with its connections and reliance on deposits from the cryptocurrency industry

ChainCatcher News, Martin Gruenberg, the chairman of the Federal Deposit Insurance Corporation (FDIC), stated during a hearing on "Oversight of Prudential Regulators" that the fundamental reason for the failure of Signature Bank was mismanagement. According to the FDIC's Chief Risk Officer, the bank's management did not prioritize good governance practices; they were less responsive or timely in addressing FDIC regulatory recommendations; and they funded their rapid growth by overly relying on uninsured deposits without implementing basic liquidity risk management practices and controls. Additionally, Signature Bank failed to understand the risks associated with its connections and dependencies on deposits from the cryptocurrency industry.

Although the consequences of Silvergate's liquidation and the failure of Silicon Valley Bank (SVB) are unprecedented, the poor governance and inadequate risk management practices of Signature Bank prevented it from effectively managing its liquidity during times of stress, making it unable to meet very large withdrawal requests. (Source link)