Signature Execs Say Crypto-Friendly Bank Was in Solid Shape

Two executives from Signature Financial institution reiterated on Tuesday that the now-defunct lender didn’t must be shut down, weighing in earlier than Congress on a high-profile collapse that looms giant over the digital property trade.

The listening to was convened by the Senate Banking Committee and likewise targeted on Silicon Valley Financial institution, which was seized alongside Signature in March.

A Signature co-founder and the financial institution’s former chairman, Scott Shay, mentioned Signature was ready to maneuver ahead, regardless of $16 billion in buyer withdrawals that adopted SVB’s failure.  

“I used to be assured that Signature Financial institution may stand up to the financial earthquake that occurred that day,” Shay mentioned. “The financial institution was well-capitalized. The financial institution was solvent.”

The assumption that Signature Financial institution may proceed was echoed by Signature’s former President Eric Howell, who mentioned the lender was “well-capitalized, solvent, and had ample borrowing capability to face up to these and future withdrawals.”

The failures of Signature and SVB examined the steadiness of the U.S. monetary system, as two of the most important financial institution collapses in American historical past hit back-to-back. Each banks had been rocked by a wave of withdrawals, which fatally crystallized losses on bond holdings for SVB—however the foundation for Signature’s shutdown stays much less clear. 

Throughout the listening to, Senator Invoice Hagerty (R-TN) alluded to feedback made by Barney Frank in March, the previous congressman who sat on Signature’s board of administrators. Frank had mentioned regulators shut down Signature to ship a “very robust anti-crypto message.” 

The New York Division of Monetary Companies (DFS) has denied the declare, saying Signature’s shutdown wasn’t crypto-related.

When requested by Hagerty about whether or not Signature’s shutdown had something to do with the financial institution’s publicity to crypto, Shay mentioned he didn’t know what the explanations had been, including he “can’t communicate for the regulators and their decision-making course of.”  

Elements of Signature Financial institution had been bought to Flagstar Financial institution after regulators seized the crypto-friendly establishment, however the sale didn’t embrace crypto prospects’ deposits or Signature’s Signet—the funds platform that linked conventional finance to crypto. 

Signature buckled simply days after Silvergate Financial institution, one other crypto-friendly lender, voluntarily moved to wind down operations. Silvergate’s on the spot settlement platform, SEN, was additionally used closely by monetary establishments concerned in crypto. 

Nonetheless, Senator Cynthia Lummis (R-WY) accused Shay of deflecting blame away from Signature’s administration practices and towards crypto companies for its failure.

“You talked about, in your testimony, digital property 10 occasions, implying that digital property was a driver of Signature Financial institution’s collapse,” she mentioned. “It appears like there’s been a whole lot of deflection of blame on to these explicit depositors that deal in digital property.”

Arguing crypto wasn’t accountable, Lummis cited an investigation finished by the DFS, which discovered outflows amongst crypto prospects had been proportional to different purchasers that pulled their cash out of Signature. She additionally famous that the financial institution by no means held or traded crypto.

Shay disagreed with the characterization of his testimony. He mentioned, “I didn’t level earlier […] to digital property being a specific trigger or not.”

By the point Tuesday’s listening to got here to a detailed, the 2 former Signature executives had not expressed any robust opinions on why the financial institution was finally shut down. And whether or not crypto performed a task in Signature’s failure was left unanswered, no less than on behalf of a few of people who had been among the many closest to its collapse.