US authorities continue to put pressure on fintech companies close to the cryptocurrency sector. Recently, the Federal Deposit Insurance Corporation (FDIC) released several documents particularly offensive towards the industry.
The FDIC is an independent agency of the United States government whose mission is to preserve and promote public confidence in the American financial system. Consequently, the positions adopted by the institution have great importance in the minds of regulators.
In fact, the FDIC’s analysis of the Signature Bank bankruptcy could be a turning point for the industry crypto currencies. Thus, banks with a strong will to adopt cryptocurrencies could be subject to greater obligations and be supervised with very close attention by the authorities.
In this sense, the FDIC has published a summary document on the events that led to the closure of Signature Bankbut they also issued a consent order with respect to the Cross River Bank.
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FDIC releases report on Signature Bank bankruptcy
In a 63-page long document, the FDIC dwelt on the bankruptcy of Signature Bank. Without denying the economic difficulties intrinsically linked to the defaults of Silicon Valley Bank and Silvergate, the institution believes that the most important reason for the closure of the Signature Bank lies in the management of the latter by its leaders.
She explains that “the root cause of SBNY’s failure was poor management.” She adds that “SBNY’s board and management have pursued rapid and unbridled growth and have funded growth through an overreliance on uninsured deposits, without implementing fundamental liquidity risk management practices“.
Finally, unsurprisinglythe FDIC points the finger at the close ties maintained by the Signature Bank and the cryptocurrency industry. She believes that “the bank did not understand the risk of its association with the cryptocurrency industry”.
Moreover, in its report, the FDIC considers that a correlation exists between the stock price of Signature Bank and the events that took place in the sector during the year 2022. This is not surprising since on September 30 2022, the specialized crypto arm of Signature Bank accounted for 23.5% of bank deposits.
The Cross River Bank in the sights of the FDIC
In conjunction with its report on the Signature Bank bankruptcy, the FDIC issued a consent order to against the Cross River Bank. This regional New Jersey bank, openly favorable to cryptocurrencies, would use “unsafe or questionable banking practicesaccording to this document.
Indeed, the order explains that “the bank engaged in dangerous or questionable banking practices related to its compliance with applicable laws and regulations relating to fair lending by failing to establish and maintain internal controls of its system disclosure and prudent credit underwriting practices.
According to the bank, this order is the result of a standard examination. On the other hand, a spokesperson for the bank explains that “the bank has already proactively made significant improvements to its Fair Lending and other programs, including investing in technology and people.
Finally, Gilles Gade, founder of the Cross River Bank, believes that “the regulatory scrutiny of banks in general is increasing and the events with the SVB will only increase these efforts. with a particular focus on banks supporting fintech“.
In any case, the next few months are likely to be lively for businesses supporting cryptocurrency adoption and growth.
The article The FDIC Steps Up Its Surveillance Of The Crypto Industry appeared first on Corner Academy
