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The Federal Deposit Insurance Corporation (FDIC) has reportedly asked potential buyers of Signature to give up all the crypto business at the bank if they wish to buy it. The report comes as the federal agency has asked banks interested in acquiring Signature and Silicon Valley Bank to submit bids by March 17.
The FDIC, which took over Silicon Valley Bank last Friday and shuttered Signature Bank over the weekend, is preparing to sell both banks. Reuters reported that the federal agency had asked potential buyers to submit bids by March 17, citing people familiar with the matter.
This is the FDIC’s second attempt to sell SVB after the agency failed to find a buyer over the weekend. According to the report, the FDIC has tasked investment bank Piper Sandler Companies to run a new auction.
The FDIC is seeking to sell both SVB and Signature in their entirety. However, if whole company sales do not happen, the agency will consider offers for parts of the banks.
Furthermore, only “bidders with an existing bank charter will be allowed to study the banks’ financials ahead of submitting their offer,” the report said, adding that this would give traditional lenders an edge over private equity firms.
SVB Financial Group, one of the most popular lenders to Silicon Valley tech and growth startups, failed late last week after a run on the bank. On Friday, the Federal Deposit Insurance Corporation (FDIC) took control of the bank and created the Deposit Insurance National Bank of Santa Clara, which now holds the insured deposits from SVB.
Subsequently, US regulators, including the Federal Reserve and the US Treasury Department, closed Signature Bank, citing “systematic risks.” Lawmakers also announced emergency measures to avert a banking crisis and restore confidence in the banking system.
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Notably, the report said those interested in acquiring Signature must agree to give up all the crypto business at the bank. The bank has come under increasing regulatory scrutiny for its role in the FTX saga.
According to a recent report by Bloomberg, the US Department of Justice investigated Signature Bank’s work with crypto clients before regulators closed the bank. The report also said that the Securities and Exchange Commission was taking a look, citing people familiar with the matter.
In a statement, SEC Chair Gary Gensler vowed to “investigate and bring enforcement actions if we find violations of the federal securities laws.” Signature has not been accused of wrongdoing.
Back in February, Statistica Capital, an algorithmic trading firm, filed a class-action lawsuit against Signature for its involvement in the operations of FTX. The suit alleges that the bank knew and facilitated the “now infamous FTX fraud.”
US Representative Tom Emmer has argued that regulators are “weaponizing” the recent issues around banks to push back against the crypto industry. In a letter to FDIC Chairman Martin Gruenberg, he wrote:
“These actions to weaponize recent instability in the banking sector, catalyzed by catastrophic government spending and unprecedented interest rate hikes, are deeply inappropriate and could lead to broader financial instability.”
Barney Frank, a Signature Bank board member, also echoed the same point of view in a recent interview with CNBC, speculating an anti-crypto motive behind the bank’s closure. He claimed that Signature Bank was solvent, but regulators intervened anyway to send a message.
“I think part of what happened was that regulators wanted to send a very strong anti-crypto message. We became the poster boy because there was no insolvency based on the fundamentals.”
Editorial Update (17th March 2023, 8:11 AM): FDIC clarified in an official statement that the Reuter reports were baseless and that Signature Bank buyers would not be asked to divest the crypto business.
Do you think there was an anti-crypto motive behind the closure of Signature? Let us know in the comments below.