The head of the U.S. Federal Deposit Insurance Corporation (FDIC) says that Signature Bank (SBNY) failed to grasp the risks of doing business with the crypto industry ahead of its collapse. In new testimony before a U.S. Housing of Representatives committee, FDIC chairman Martin Gruenberg says that the crypto industry’s market volatility in the past […]
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The CIO of JPMorgan Asset Management said it’d be “naive to say that this is just limited to First Republic.”
An executive at JPMorgan Asset Management is unsure how United States regional banks are “going to operate” when the Federal Deposit Insurance Corporation (FDIC) and Federal Home Loan Bank (FHLB) emergency lending programs expire – warning that the possible collapse of First Republic Bank may cause a domino effect.
In an April 27 Bloomberg television interview, Bob Michele, CIO of JPMorgan Asset Management said that the impact of First Republic's liquidity issues caused by significant deposit outflows isn’t “just limited” to the bank itself, but could potentially affect the entire banking industry.
Michele emphasized that this is not an isolated incident, when asked if he sees this as a “First Republic problem or a banking problem.” He stated:
“Well, I think we have both, I think it’s somewhat naïve to say that this is just limited to First Republic.”
He added that the liquidity issues faced by First Republic “should never have happened,” as banking is the “most heavily regulated capitalized industry on the planet.”
Michele believes there needs to be “continuous progress to some sort of resolution” for the impact of First Republic’s downfall to be contained, or “ringfenced,” and prevented from spreading throughout the broader financial system.
Michele blamed the “high price of everything” as a major factor leading to the recent banking crisis events, as the “bottom quartile of earners” in the United States have been “most punished,” forced to deplete their deposit balances “just to live.”
He stated that "most people’s" deposit balances are now even lower than before the beginning of the Covid-19 pandemic.
Michele believes that a resolution is urgently needed as regional banks are “heavily dependent” on both the FDIC and FHLB.
“I think the regional banks are heavily dependent on the FDIC, they are heavily dependent on the federal home loan bank to get additional cash, we don’t know how they are going to operate when those two programs expire.”
During the last quarter of 2022, both Signature Bank and Silvergate Bank reportedly received substantial loans from the FHLB – a consortium of 11 regional banks across the United States that provides funds to other banks and lenders – totalling nearly $10 billion and at least $3.6 billion, respectively.
However, despite the financial assistance, both banks eventually collapsed due to significant deposit outflows.
Related: Bitcoin price jumps in the wake of First Republic Bank price crash
Ryan Selkis, CEO of blockchain research firm Messari, suggested in a tweet to his 322,000 followers on April 29 that unless the government recognizes that the Federal Reserve's (Fed) policies "are to blame and not crypto," more banks may face collapse in the future.
Did crypto kill First Republic too?
— Ryan Selkis (@twobitidiot) April 28, 2023
Or is DC going to recognize that their and the Fed’s policies are to blame and not crypto.
Maybe by bank #10, things will change.
This comes after “people with knowledge” told Bloomberg on March 21 that Treasury Department staff members are reportedly studying ways to expand the current deposit insurance beyond the maximum cap of $250,000 to cover all deposits in the United States.
According to the FDIC, domestic U.S bank deposits totalled $17.7 trillion as of December 31.
Magazine: Unstablecoins: Depegging, bank runs and other risks loom
Cross River is yet to admit nor deny the allegations that it “engaged in the unsafe or unsound banking practices” related to its lending activity in 2021.
The Federal Deposit Insurance Corporation (FDIC) has requested Cross River Bank – known for its services to fintech and crypto firms like Visa and Coinbase – to "self-correct" and appropriately address weaknesses in its lending activities.
On April 28, the FDIC made public a consent order executed with Cross River Bank on March 8, alleging that the bank engaged in “unsafe” or “unsound” banking practices in regard to its compliance with applicable fair lending laws and regulations in 2021.
Despite accepting the consent order, Cross River has yet to admit nor deny the violations discovered in the 2021 report of examination. It was noted:
“The FDIC considered the matter and determined, and the Bank neither admits or denies, that it engaged in the unsafe or unsound banking practices related to its compliance with applicable fair lending laws and regulations”.
The order states that the bank must immediately take action to increase its supervision over the “system of internal controls, information systems, credit underwriting practises, and internal audit systems related to the consumer protection laws and regulations.”
Furthermore, the bank is required to promptly “self-correct” any violations of fair lending laws.
Cross River was ordered to “appropriately address” the deficiencies and weaknesses identified in the 2021 report of examination, as well as create processes to ensure these weaknesses don’t appear in future.
The FDIC requested that Cross River fully comply with the consent order in a “timely manner.”
Just one day before the consent order was made public, Cross River’s CEO, Gilles Gade, released a statement on April 27, without any mention to the FDIC allegations.
Gades emphasized that regulatory scrutiny on banks is increasing, suggesting that Cross River takes adequate measures to ensure “transparency, and responsibility.”
“Cross River is the largest of these banking institutions and as such, we have regulatory examiners reviewing some elements of our business on a continuous basis” Gades stated.
“We view our compliance capability as a strategic advantage and are proud to lead our industry in maintaining the highest levels of compliance, transparency, and responsibility” he wrote.
Related: Crypto-friendly banks mismanaged traditional risks, FDIC head tells Senate hearing
The order was executed with the bank only days before Circle, the stablecoin issuer behind USD Coin (USDC), partnered with Cross River for banking services – which was announced on March 13.
Circle had sought the new partnership, after its previous provider, Silicon Valley Bank, collapsed on March 11.
Magazine: Unstablecoins: Depegging, bank runs and other risks loom
BitMEX founder Arthur Hayes says that the price of Bitcoin (BTC) is being driven by the recent US banking crisis while calling First Republic a “dead bank walking.” In a new thread, Hayes says that the banking crisis won’t end until the Federal Reserve cuts short-term interest rates, adding that the uncertainty of the Fed’s […]
The post BitMEX Founder Arthur Hayes Says US Banking Crisis Driving Bitcoin Price, Labels First Republic ‘Dead Bank Walking’ appeared first on The Daily Hodl.
The banking industry in the United States is still struggling after the collapse of three major banks. According to statistics, bank lending in the U.S. has dropped by close to $105 billion in the last two weeks of March, which is the largest decline on record. Additionally, Elon Musk, a Tesla executive and owner of […]
Roughly 26 days ago and in the following days, the U.S. witnessed two significant bank failures when Silicon Valley Bank and Signature Bank collapsed. After speaking at an event on Monday at Yale University, Janet Yellen, the current U.S. Treasury secretary, told reporters that she was closely monitoring the banking industry. Yellen insisted that “matters […]
Any crypto deposits not transferred to another bank by April 5 will be liquidated and a check mailed to the client's address.
Signature Bank’s cryptocurrency clients have been reportedly given until April 5 to take their funds out and find another bank, or have their accounts closed by the federal regulator.
According to reports, a United States Federal Deposit Insurance Corporation (FDIC) spokesperson said on March 28 that the agency was “reaching out to depositors from Signature whose deposits were not included in NYCB’s bid, confirming that these deposits belonged to digital asset clients.
Depositors who have their accounts closed will receive a check to their registered address, so anyone with funds held with Signature but unable to transfer them out should at least ensure their registered address is up-to-date.
Cointelegraph has reached out to the FDIC for confirmation but did not hear back by the time of publication.
While New York Community Bancorp (NYCB) bought most of the deposits and loans held by Signature Bank on March 19, the deal with the FDIC did not include “approximately $4 billion of deposits related to the former Signature Bank’s digital banking business.”
Related: Crypto-friendly banks mismanaged traditional risks, FDIC head tells Senate hearing
Also excluded from the deal was Signature’s payments platform Signet, which is powered by blockchain technology to facilitate real-time payments with no transaction fees or limits. The fate of Signet is still currently uncertain.
New York-based Signature was closed by New York regulators on March 12, amid concern that it was experiencing a bank run and posed a “systemic risk” to the U.S. economy.
Gruenberg: Signature Bank lost 20% of its deposits in a matter of hours on March 10, the day SVB was shut.
— Nick Timiraos (@NickTimiraos) March 27, 2023
Signature had a negative balance at the Fed at the close of business, and “bank management could not provide accurate data regarding the amount of the deficit.” pic.twitter.com/679dNnnrzJ
The FDIC was appointed as the receiver of the bank, which meant that it was tasked with administering the funds and property connected to it.
Banks interested in acquiring the assets of Signature were asked to submit bids to the FDIC by March 17, with the agency reportedly only considering bids from those with an existing bank charter.
A top Coinbase researcher thinks the recent US banking crisis reinforces the value of blockchain and cryptocurrency technology. David Duong, the head of institutional research at Coinbase, argues in a recent analysis that crypto has “exhibited resilience” as some traditional banks faltered. “Overall, we believe the medium to long-term outlook for cryptocurrencies has been reinforced […]
The post Coinbase Says US Banking Crisis Reinforcing Crypto Assets to the Upside, Catching Attention of Institutions appeared first on The Daily Hodl.
The U.S. Federal Deposit Insurance Corporation (FDIC) has found a buyer for the failed, crypto-friendly financial institution Signature Bank. According to a new press release from the regulator, the FDIC has entered into a “purchase and assumption agreement” with Flagstar Bank, a subsidiary of New York Community Bancorp. The document states that the deal is […]
The post FDIC Set To Sell Crypto-Friendly Bank in $38,400,000,000 Deal, but Excludes Digital Asset Banking Branch From Transaction appeared first on The Daily Hodl.
Regulators at the Federal Deposit Insurance Corporation (FDIC) are reportedly imposing a notable requirement for all interested buyers of failed lender Signature Bank. Reuters reports that all banks interested in acquiring Signature Bank will have to agree to give up all of the company’s businesses that are related to crypto. “Any buyer of Signature must […]
The post US Regulator Will Require Any Buyer of Failed Signature Bank To Scrap the Company’s Crypto Business: Report appeared first on The Daily Hodl.
