According to the Chairman of the Federal Deposit Insurance Corporation (FDIC), Martin Gruenberg, they are looking into the leadership of Signature Bank and Silicon Valley Bank in order to hold them accountable for the banks’ failures. In his descriptions of the collapse of Silicon Valley and New York-based Signature, which were among the preferred financial institutions of the cryptocurrency sector, Gruenberg claimed that the FDIC put itself on the hook for an anticipated $22.5 billion hit to its insurance fund, mostly to cover uninsured deposits.
The problem began last year when the crypto exchange FTX fell down and pulled some of the sectors with it. Micheal Barr, the Federal Reserve Chairman, acknowledged that the eventual collapse of Silicon Valley Bank took agency supervisors by surprise after months of criticism and expansion restrictions due to the bank’s subpar management. He also added that “SVB’s failure is a textbook case of mismanagement,” as he pointed to the bank’s “concentrated business model,” in which its customers were overwhelmingly venture capital and high-tech firms.
As he and Barr prepare to explain what happened at Silicon Valley Bank, Signature Bank, and Silvergate Bank to U.S. senators, FDIC Chief Martin Gruenberg said an investigation is under progress. Barr will probably be subjected to difficult questioning from members of both parties, as the Fed has come under harsh criticism from groups calling for tighter financial regulation for failing to adequately supervise Silicon Valley Bank and stop its collapse.
Reflecting on Gruenberg’s written remarks to the U.S. Senate Banking Committee, which also covered the collapse of cryptocurrency-focused Silvergate Bank, top executives from the companies will be investigated “for the losses they caused to the banks and for their misconduct in the management of the banks.” Gruenberg reported that, “Signature Bank, like Silvergate, experienced deposit withdrawals and a drop in its stock price as a consequence of disruptions in the digital-asset market due to failures of several high-profile digital-asset companies.”
The regulatory bodies, the FDIC for Signature and the Fed for Silicon Valley, are examining their own actions in the lead-up to two of the biggest banking failures in the country’s history while they conduct their investigations into what happened inside the banks. On Wednesday, the Senate Banking Committee will hold the first official congressional hearing on the failures of Silicon Valley Bank and New York-based Signature Bank as well as the deficiencies in prior supervision and regulation by the Fed and other organisations.