• FDIC said Signature 'did not prioritize good corporate governance practices'
  • It also said the bank's 'unrestrained growth' was driven by uninsured deposits
  • The crypto-friendly bank was shut down by federal regulators in March

The Federal Deposit Insurance Corporation (FDIC) has blamed "poor management" for the crypto-friendly Signature Bank's (SBNY) collapse, adding the bank did not "always" adhere to concerns raised by the regulator.

"The root cause of SBNY's failure was poor management," FDIC said in a report Saturday. "SBNY management did not prioritize good corporate governance practices, did not always heed FDIC examiner concerns, and was not always responsive or timely in addressing FDIC supervisory recommendations (SRs)."

The U.S. regulator said Signature's board of directors and leadership pursued "unrestrained growth" by using uninsured deposits without implementing liquidity risk management measures that could have prevented issues with large withdrawal requests.

The FDIC said the bank didn't have a full understanding of the risks associated with crypto deposits, while admitting that staffing shortages at the agency's New York office had resulted in some incomplete or untimely reviews.

The crypto-friendly bank was shut down by federal regulators in March. The FDIC was appointed as the insurance process handler of the case as the New York Department of Financial Services (NYDFS) started taking over the bank, reported Coin Telegraph.

Signature Bank's senior management was removed, the FDIC said in a joint statement with the Federal Reserve and the Treasury Department.

FDIC chair Martin Gruenberg at the time said that apart from fears surrounding the controversial fall of the FTX exchange, another factor that affected the collapse of crypto-friendly Signature Bank and Silicon Valley Bank was the high number of uninsured clients.

Gruenberg estimated that Signature Bank would need $16 billion to cover uninsured deposits. Uninsured deposits accounted for 90% of overall deposits at Signature by the end of 2022, FDIC quarterly banking data showed.

An investigation into Signature Bank's crypto-related processing was going on even before the FDIC found lapses within its deposit management systems, Bloomberg reported. People with knowledge of the situation told the outlet that U.S prosecutors were investigating whether Signature took the necessary measures to detect possible money laundering by clients.

The NYDFS previously clarified that the decision to shut down Signature had "nothing to do with crypto," and cited a "crisis of confidence" in the bank's leadership as the reason.

The Bloomberg report also revealed that a separate probe into Signature was launched by the Securities and Exchange Commission (SEC) ahead of the bank's closure.

The company logo for Signature Bank is displayed at a location in Brooklyn, New York
Signature Bank, like Silicon Valley Bank, embraced crypto transactions before it collapsed. Reuters