HomeTop U.S. NewsSignature Bank Collapsed Due to “Poor Management” Says Latest Report

Signature Bank Collapsed Due to “Poor Management” Says Latest Report

Federal Deposit Insurance Corporation (FDIC) released a report detailing the collapse of Signature Bank and identified “poor management” as the main reason why the New York City-based bank folded.

Signature Bank went out of business in March after a bank run caused by the failure of other crypto-friendly financial institutions, Silicon Valley Bank and Silvergate Bank. While the outflow of deposits greatly contributed to Signature’s doom, FDIC says that the collapse was mainly because of the bad practice the bank had.

The report says that Signature’s management failed to act on FDIC’s recommendations while also pursuing “rapid, unrestrained growth without developing and maintaining adequate risk management practices.” The bank also didn’t do itself any favors by keeping 90% of its deposits uninsured.

Another contributing factor was Signature’s involvement in the crypto industry without fully understanding the associated risks. More than 20% of the bank’s deposits were tied to crypto in some way, making the bank vulnerable to the volatility of the crypto market.

“When that industry started to turn, and interest rates started to rise, those deposits started leaving the bank,” explained FDIC’s chief risk officer Marshall Gentry. “Even though they were crypto cash deposits, it was a traditional kind of bank run.”

After Signature Bank went into FDIC receivership, most of its assets were sold to New York Community Bancorp (NYCB). Most of the locations and clients of Signature were absorbed by NYCB’s subsidiary Flagstar Bank.

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