Signature executives say the crypto-enabled bank was in great shape

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Two Signature Bank executives reiterated on Tuesday that the now-defunct lender does not need to be shut down, weighing in on Congress over a high-profile meltdown that is weighing on the digital asset industry.

The hearing was convened by the Senate Banking Committee and also focused on Silicon Valley Bank, which was seized alongside Signature in March.

A Signature co-founder and former chairman of the bank, Scott Shay, said Signature was ready to move forward, despite $16 billion in customer withdrawals following the failure of SVB.

I was confident that Signature Bank could withstand the economic earthquake that happened that day, Shay said. The bank was well capitalized. The bank was solvent.

The belief that Signature Bank could continue was echoed by former Signatures chairman Eric Howell, who said the lender was well capitalized, creditworthy and had sufficient borrowing capacity to support these and future withdrawals.

The Signature and SVB bankruptcies tested the stability of the US financial system, as two of the biggest banking meltdowns in US history followed one another. Both banks have been rocked by a wave of withdrawals, which inevitably crystallized losses on SVB’s bond holdings, but the basis for the closure of Signatures remains less clear.

During the hearing, Sen. Bill Hagerty (R-TN) alluded to comments made by Barney Frank in March, the former congressman who served on the board of Signatures. Frank had said regulators shut down Signature to send a very strong anti-crypto message.

The New York Department of Financial Services (DFS) denied the claim, saying Signatures’ shutdown was unrelated to crypto.

Asked by Hagerty if the shutdown of Signatures had something to do with banks’ exposure to crypto, Shay said he didn’t know what the reasons were, adding that he couldn’t speak on behalf. regulators and their decision-making process.

Parts of Signature Bank were sold to Flagstar Bank after regulators seized the crypto-enabled institution, but the sale did not include deposits from crypto clients or Signatures Signet, the platform for payment that linked traditional finance with crypto.

The signature became distorted just days after Silvergate Bank, another crypto-friendly lender, voluntarily decided to cease operations. Silvergates instant settlement platform, SEN, has also been widely used by financial institutions involved in crypto.

Nonetheless, Sen. Cynthia Lummis (R-WY) accused Shay of shifting blame from Signatures management practices to crypto firms for his failure.

You mentioned, in your testimony, digital assets 10 times, implying that digital assets were a driver of Signature Banks’ collapse, she said. It seems that there has been a lot of blame shifting onto those particular depositors who deal in digital assets.

Arguing that crypto was not to blame, Lummis cited a survey conducted by the DFS, which found that outflows among crypto customers were proportional to other customers who withdrew their money from Signature. She also noted that the bank has never held or traded crypto.

Shay disagreed with the characterization of her testimony. He said, I didn’t clock in earlier […] whether or not digital assets are a particular cause.

By the time Tuesday’s hearing ended, the two former Signature executives had not expressed a strong opinion on why the bank was ultimately closed. And the question of whether crypto played a role in Signatures’ failure has gone unanswered, at least on behalf of some of those closest to its collapse.

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