The Federal Deposit Insurance Corporation (FDIC) has sold Signature Bank’s deposits to Flagstar, excluding $4 billion in cryptocurrency assets. The sale caused a stir in the crypto community, as it highlighted the ongoing battles faced by cryptocurrency companies in securing financial services due to regulatory uncertainty. Despite being excluded from the sale, Signature Bank’s CEO, Joseph DePaolo, has confirmed that the bank will continue to hold the $4 billion in crypto assets. Flagstar’s acquisition of Signature Bank’s deposits is set to create a new banking partnership, with Flagstar offering a range of consumer and commercial banking services.
Signature Bank, currently known as Signature Bridge Bank, will be transferring its non-crypto deposits to Flagstar Bank effective Monday, according to a statement by the FDIC on Sunday. The transfer comes as part of a purchase and assumption agreement between the two financial institutions. Flagstar Bank will be taking over $38.4 billion in non-cryptocurrency deposits and $12.9 billion in loans previously held by Signature Bank. However, the deal does not include the roughly $4 billion worth of cryptocurrency deposits held by Signature Bank, which accounts for about 4.5% of Signature Bank’s total $88.6 billion deposits as of Dec. 31. Customers who hold a digital banking account with Signature Bank will have their deposits transferred directly to them.
Flagstar Bank’s acquisition deal only covers non-crypto deposits, so depositors of Signature Bridge Bank will be seamlessly integrated as depositors of Flagstar, with FDIC insurance covering their accounts up to the insured limit. All 40 branches of Signature Bank will operate under the name Flagstar Bank beginning March 20, 2023.
Crypto firms such as Celsius, Coinbase, and Paxos have confirmed having exposure to Signature Bank in the past. The FDIC utilized the “systemic risk exception” to transfer all deposits and a majority of assets from Signature Bank to Signature Bridge Bank, N.A. to safeguard the funds of depositors. The newly-formed full-service bank will be operated by the FDIC as it seeks potential buyers for the institution.
Systemic risk exception refers to the possibility of a risk event that can trigger a ripple effect throughout an entire system or network, causing widespread disruption or even collapse. The FDIC determined it is essential to identify and manage systemic risks to ensure the stability and resilience of the system. The FDIC anticipates gradually divesting all of its held assets and estimates that the final expense to the government will reach approximately $2.5 billion.
In the meantime, Bitcoin (BTC) continues to move strong and breaches the $28K barrier on the daily chart as per TradingView.com.