Crypto is not the reason why Signature Bank was closed

New York State regulators did not shut down Signature Bank ( SBNY ) because of the firm’s crypto clients, said Maria Vullo, a former superintendent at the New York State Department of Financial Services (NYDFS).

The decision was “based on whatever the data was in terms of customer withdrawals,” Vullo told CoinDesk TV’s “First Mover” on Friday.

On Sunday, New York-based Signature Bank closed its doors following action by state regulators in what appeared to be a precautionary measure to reduce further contagion following the collapse of Silicon Valley Bank (SVB).

A joint statement from the Federal Reserve, the Federal Depository Insurance Corporation (FDIC) and the US Treasury Department said depositors at Signature Bank would be made whole.

According to Vullo, echoing recent comments by current Superintendent Adrienne Harris, Signature Bank did not provide reliable and consistent data, creating a significant crisis of confidence in the bank’s leadership.

“I don’t think you close a bank for a political reason, you do it because its risk management or its financial picture is unsafe and unsound,” said Vullo, who served as NYDFS inspector from 2016 to February 2019.

She said Signature Bank “may also have suffered the consequences of contagion risks” that were underway after the closure of SVB just days earlier.

Nevertheless, the timing of regulators is significant, Vullo said. By acting quickly with SVB and Signature, banking regulators were able to “send a very strong message to the public that the system is OK and we will take care of the depositors,” she said.

The latter was important, Vullo said, because it gave depositors a reason “not to pull their money out of other banks.”

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