On Monday, about a week after the collapse of Signature Bank, the Federal Deposit Insurance Corporation (FDIC) announced that Flagstar Bank, a wholly owned subsidiary of New York Community Bancorp, acquired 40 former Signature branches and their assets. Flagstar took over almost all of Signature’s deposits except for $4 billion of deposits related to the bank’s crypto banking business.
FDIC forecasts $2.5 billion loss from Signature Bank bankruptcy and extends bidding period for Silicon Valley Bank
The FDIC has Announced that Flagstar Bank, a subsidiary of New York Community Bancorp, acquired Signature Bank’s assets and bank branches effective March 20, 2023. Branches will continue to operate during regular business hours. With the exception of depositors related to the digital banking business, Signature Bank depositors will automatically become Flagstar Bank depositors.
I really hope we understand how Signature Bank was selectively divested of its digital asset business before being acquired.
—David Marcus (@davidmarcus) March 20, 2023
Despite FDIC statements to the contrary, Flagstar bought Signature Bank without acquiring its cryptocurrency operations. Sources familiar with the sale had He suggested that divestment from crypto activities was required, but the FDIC insisted last week that it would not be necessary. The New York State Department of Financial Services also publicly stated that Signature’s closure was unrelated to cryptocurrency, prior to the FDIC’s announcement. Former politician Barney Frank speculated that Signature’s closure was intended to convey an “anti-crypto” message.
The FDIC press release on Monday indicated that Flagstar Bank will not take over any of Signature Bank’s cryptocurrency depositors or customers. “Flagstar Bank’s offer did not include approximately $4 billion in deposits related to the digital banking business of the former Signature Bank,” the FDIC announced. The agency also said it will provide the deposits directly to customers associated with the digital banking business.
The FDIC’s announcement on Monday sparked a discussion on social media, with some speculating that a conspiracy theory had been proven true. Caitlin Long, Founder and CEO of Custodia Bank, tweeted on the news: “In fact, they kept crypto deposits out. Investigation time. In addition to Flagstar not assuming Signature Bank’s cryptocurrency deposits, the FDIC also noted that the government anticipates losses.
The FDIC estimated the cost of Signature Bank’s failure to its Deposit Insurance Fund at about $2.5 billion, according to the agency’s announcement. “The exact cost will be determined when the FDIC completes the receivership.” Additionally, the FDIC extended offer window for Silicon Valley Bank (SVB) on Monday. Offers for SVB’s private bank are due March 22, 2023, and offers for the bridge bank, Silicon Valley Bridge Bank, NA, are due two days later.
What do you think about the FDIC’s decision not to include Signature Bank’s cryptocurrency deposits in the Flagstar Bank acquisition? Share your opinion in the comments section below.
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