March 14 (Reuters) – New York’s financial regulator said the decision to close Signature Bank ( SBNY.O ) had “nothing to do with crypto,” citing what it called “a significant crisis of confidence in the bank’s management” that occurred in over the weekend after regulators shut down Silicon Valley Bank ( SIVB.O ).
The comments by a spokesperson for the New York State Department of Financial Services contrasted with those made by Signature Bank board member and former U.S. Representative Barney Frank, one of the pioneers of the landmark Dodd-Frank Act, which was passed after the 2008 financial crisis to better insulate the banking system from shocks.
“I think part of what happened was that regulators wanted to send a very strong anti-crypto message,” Frank told CNBC on Monday. “We became the poster boy because there was no insolvency based on the fundamentals.”
But the NYDFS denied Frank’s claims in a statement on Tuesday, saying the decision to close Signature Bank on Sunday and appoint the Federal Deposit Insurance Corp as receiver “was based on the current status of the bank and its ability to do business in a safe and properly on Monday.”
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The FDIC and Signature Bank did not immediately respond to a request for comment.
“The decisions made over the weekend had nothing to do with crypto. Signature was a traditional commercial bank with a wide range of activities and clients,” a NYDFS spokesperson said.
“DFS has facilitated well-regulated crypto activities for several years and is a national model for regulating the space,” they said.
The spokesperson added that as withdrawal requests were completed over the weekend, Signature Bank was unable to provide reliable and consistent data.
In response to the NYDFS’ statement, Frank said he was surprised the regulator said the decision to close the bank was unrelated to cryptocurrency.
“I think that was a factor,” he said in an interview. “I’m confused as to why it was closed.”
He added that as far as he knew, bank executives were working to provide data to regulators.
“What we heard from our managers is that the deposit situation had stabilized and they would get the capital from the discount window, and I continue to be convinced that if we had opened on Monday given the announcements of these two policies, we would have been in a reasonably good form and absolutely functional,” he said.
Signature was a commercial bank with private client offices with nine national business lines including commercial real estate and digital asset banking.
As of September, nearly a quarter of deposits came from the cryptocurrency sector, but the bank announced in December that it would shrink its crypto-related deposits by $8 billion.
The FDIC established a “bridge” successor bank to Signature Bank on Sunday to give depositors access to their money. The U.S. Treasury Department and other banking regulators announced Sunday that all depositors in both Signature Bank and Silicon Valley Bank would be made whole and “no losses will be borne by the taxpayer.”
Reporting by Hannah Lang in Washington, editing by Nick Zieminski
Hannah Lang covers financial technology and cryptocurrency, including the businesses that drive the industry and the policy developments that govern the sector. Hannah previously worked at American Banker where she covered banking regulation and the Federal Reserve. She graduated from the University of Maryland, College Park and lives in Washington, DC.