On Tuesday, two executives from the now-defunct Signature Bank testified before Congress, stating that the bank did not need to be shut down despite a high-profile collapse looming large over the digital assets industry. A Senate Banking Committee hearing discussed the concurrent failure of Silicon Valley Bank (SVB) alongside Signature Bank.
Signature Bank co-founder and former chairman, Scott Shay, testified that he was confident the bank would have recovered despite facing customer withdrawals of $16 billion following SVB’s collapse, as it was well-capitalized and solvent at the time. The same sentiment was echoed by Signature’s former President Eric Howell, who added that sufficient borrowing capacity was available to withstand these and future withdrawals.
The back-to-back failures of the two banks shook the US financial system, with SVB experiencing fatal losses on bond holdings due to the ensuing wave of withdrawals. However, the underlying reasons for Signature Bank’s shutdown remain less clear.
Senator Bill Hagerty (R-TN) alluded to comments made by Barney Frank, the former congressman and Signature Bank board member, who claimed that regulators had shut down Signature Bank to send a “very strong anti-crypto message”. The New York Department of Financial Services (DFS) denied these allegations, asserting that the bank’s closure was not related to crypto exposure. When asked about the role of crypto in Signature’s shutdown, Shay expressed uncertainty and said he could not speak for the regulators’ decision-making process.
Following the seizure of the crypto-friendly Signature Bank, parts of it were sold to Flagstar Bank, excluding crypto customers’ deposits and the Signet payment platform that connected traditional finance with crypto.
Senator Cynthia Lummis (R-WY) accused Shay of blaming crypto firms for Signature Bank’s failure in an attempt to deflect the issue away from the bank’s management practices. Despite these accusations, Lummis referenced a DFS investigation which found outflows among crypto customers proportional to other clients withdrawing their funds from Signature and noted that the bank never held or traded crypto.
As the hearing came to a close, the two former Signature Bank executives did not express any strong opinions on the reasons behind the bank’s shutdown. The question of whether or not crypto played a role in Signature Bank’s failure remains unanswered, leaving the responsibility for the collapse up for debate.
Source: Decrypt
