Signature Bank Collapsed For Embracing Crypto Customers Without Adequate Safeguards – Regulation
U.S. Senator Elizabeth Warren claims Signature Bank failed because it “bought into its get-rich-quick narrative” and “accepted crypto clients with inadequate safeguards.” The senator stressed that the bank had taken “excessive risk” and demanded responses from Signature Bank’s CEO regarding “the economically disastrous results you have created.”
Letter from Senator Elizabeth Warren to the CEO of Signature Bank
US Senator Elizabeth Warren (DMA) has attributed the Signature Bank’s failure to accepting crypto customers without adequate safeguards, Yahoo Finance reported Thursday. Signature Bank was seized by the New York State Department of Financial Services last Sunday, becoming the third largest bank in the US to fail.
In a letter to Joseph DePaolo, CEO of Signature Bank, Senator Warren wrote:
You owe your customers and the public an explanation for the economically disastrous results you’ve created: you’ve worked hard to weaken the rules, promised they were a “good sign” for your bank — and then backed them off with bad Destroyed decisions and excessive risk-taking.
“Congress and the public must learn the lessons of Signature Bank’s failure,” the senator said.
Lawmakers argued that Signature Bank supported efforts to cut capital requirements set out in the Dodd-Frank Wall Street Reform Act, the publication said, adding that the bank also made thousands of dollars in campaign donations to leaders of the effort to ease banking regulation in Congress.
“Despite assurances given to Congress that mid-tier banks like Signature Bank would be able to independently manage risk, it has since become clear that your bank was utterly incapable of doing so, and this failure led to the bank’s closure and takeover of state regulators,” the senator told DePaolo.
Signature Bank ‘allegedly hugged crypto customers with inadequate safeguards’
Senator Warren went on to claim that Signature Bank took “excessive risk” to boost its bottom line by serving crypto customers like Nasdaq-listed crypto exchange Coinbase, which Blockchaininfrastructure platform Paxos and the collapsed crypto exchange FTX. By December of last year, crypto customers made up about 30% of Signature Bank’s total deposits. Warren explained:
Signature Bank bought into their get-rich-quick story… Signature Bank was briefly caught for embracing crypto customers with inadequate security.
According to Bloomberg, the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) were already investigating Signature Bank’s work with cryptocurrency customers before regulators took possession of the bank last Sunday. The news outlet noted that the DOJ was focused on whether the bank had taken reasonable steps to identify potential money laundering activities by its customers.
What do you think of Senator Elizabeth Warren claiming that Signature Bank collapsed for accepting crypto customers without proper safeguards? Let us know in the comment section below.
photo credit: Shutterstock, Pixabay, WikiCommons
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Source: Crypto News Deutsch
