Signature Bank Seized To Send Message To Other Banks That ‘We Don’t Want You To Deal With Crypto’, Manager Says

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A regulatory takeover of a New York-based bank was meant to send a message to U.S. banks to stay away from the cryptocurrency industry, says a former congressman who served on the board of administration of banks.

Former U.S. Representative Barney Frank said Monday he believed the state officials behind the action were trying to make an example of Signature Bank.

It was just a way of telling people, we don’t want you dealing with crypto, Frank told The Associated Press in a phone interview.

Frank, a Democrat who served in Congress from 1981 to 2013, co-authored the Dodd-Frank Act that strengthened government oversight of banks after the 2008 financial crisis.

He was a director of Signature Bank until New York’s Financial Services Division took control of it on Sunday and handed control over to the FDIC, the federal agency that insures bank deposits, until the bank can be sold.

The signature takeover came two days after regulators seized California-based Silicon Valley Bank. Both followed a wave of bank withdrawals, which were aimed at tech companies.

New York Governor Kathy Hochul described the takeover as a way to avert a bigger crisis that could have affected more banks.

Our point of view was to make sure the whole banking community here in New York was stable, that we can project calm, Hochul said at a press conference on Monday.

Signature, which was founded more than two decades ago, has about 40 offices across the United States and says it focuses on banking services for private businesses, their owners and senior executives.

The bank said it was the first FDIC-insured bank to launch a blockchain-based digital payment platform.

As concerns mounted over Silicon Valley Bank last week, Signature released a statement aimed at reassuring customers and investors of its stability. The statement included a reminder that despite its efforts to meet the needs of cryptocurrency holders, it does not invest, trade, hold, custody, or lend or make loans secured by digital assets.

But on Friday there were more withdrawals, which Frank said were based purely on SVB contagion.

He said the situation had stabilized by the time New York regulators took him in on Sunday.

The bank had over $110 billion in assets, making it the third largest bank failure in US history.

Unlike Frank, Hochul did not indicate that cryptocurrency was a factor in the bank closures over the weekend. She said withdrawals were continuing, making action necessary.

And the state regulator went even further, saying Signature was not a crypto bank.

It’s not a particular industry in Signature Bank’s case, but we acted quickly to make sure depositors were protected, said Adrienne Harris, New York’s Superintendent of Financial Services.

The bank’s top executives were ousted, and it reopened Monday under FDIC operational control as Signature Bridge Bank.

Also on Monday, the FDIC announced that those with deposits at both banks would have full access to them, even amounts that exceed the regular insurance limit of $250,000.

Frank said if the FDIC had agreed to insure the deposits in full on Friday rather than waiting until Monday, Signature would not have been covered. He said the insurance limit for businesses should also be permanently increased by Congress to an amount high enough to cover a few months of payroll for most businesses.

Frank said the former banking operators had no recourse.

But he said he expects vindication when the bank is finally sold.

I believe they’ll get a really good price, Frank said, proof that it wasn’t a banking problem.

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