Two executives from Signature Bank reiterated on Tuesday that the now-defunct lender didn’t need to be shut down, weighing in before Congress on a high-profile collapse that looms large over the digital assets industry.

The hearing was convened by the Senate Banking Committee and also focused on Silicon Valley Bank, which was seized alongside Signature in March.

AD

A Signature co-founder and the bank’s former chairman, Scott Shay, said Signature was prepared to move forward, despite $16 billion in customer withdrawals that followed SVB’s failure.  

“I was confident that Signature Bank could withstand the economic earthquake that occurred that day,” Shay said. “The bank was well-capitalized. The bank was solvent.”

The belief that Signature Bank could continue was echoed by Signature’s former President Eric Howell, who said the lender was “well-capitalized, solvent, and had sufficient borrowing capacity to withstand these and future withdrawals.”

The failures of Signature and SVB tested the stability of the U.S. financial system, as two of the largest bank collapses in American history hit back-to-back. Both banks were rocked by a wave of withdrawals, which fatally crystallized losses on bond holdings for SVB—but the basis for Signature’s shutdown remains less clear. 

During the hearing, Senator Bill Hagerty (R-TN) alluded to comments made by Barney Frank in March, the former congressman who sat on Signature’s board of directors. Frank had said regulators shut down Signature to send a “very strong anti-crypto message.” 

The New York Department of Financial Services (DFS) has denied the claim, saying Signature’s shutdown wasn’t crypto-related.

When asked by Hagerty about whether Signature’s shutdown had anything to do with the bank’s exposure to crypto, Shay said he didn’t know what the reasons were, adding he “can’t speak for the regulators and their decision-making process.”  

Parts of Signature Bank were sold to Flagstar Bank after regulators seized the crypto-friendly institution, but the sale did not include crypto customers’ deposits or Signature’s Signet—the payments platform that connected traditional finance to crypto. 

AD

Signature buckled just days after Silvergate Bank, another crypto-friendly lender, voluntarily moved to wind down operations. Silvergate’s instant settlement platform, SEN, was also used heavily by financial institutions involved in crypto. 

Nonetheless, Senator Cynthia Lummis (R-WY) accused Shay of deflecting blame away from Signature’s management practices and toward crypto firms for its failure.

“You mentioned, in your testimony, digital assets 10 times, implying that digital assets was a driver of Signature Bank’s collapse,” she said. “It looks like there's been a lot of deflection of blame on to those particular depositors that deal in digital assets.”

Arguing crypto wasn’t to blame, Lummis cited an investigation done by the DFS, which found outflows among crypto customers were proportional to other clients that pulled their money out of Signature. She also noted that the bank never held or traded crypto.

Shay disagreed with the characterization of his testimony. He said, “I did not point earlier [...] to digital assets being a particular cause or not.”

By the time Tuesday’s hearing came to a close, the two former Signature executives had not expressed any strong opinions on why the bank was ultimately shut down. And whether crypto played a role in Signature’s failure was left unanswered, at least on behalf of some of those that were among the closest to its collapse.

Stay on top of crypto news, get daily updates in your inbox.