GAO cites exposure to digital assets in exploring collapse of Signature Bank
The United States Government Accountability Office, or GAO, has released its preliminary review of the failures of Silicon Valley Bank and Signature Bank — and included exposure to deposits from the cryptocurrency industry.
In a report released on May 11, the GAO said “poor governance and unsatisfactory risk-management practices” led to the collapse of Signature Bank in March. The GAO did not explicitly report that digital assets were the cause of the bank’s failure but mentioned exposure to the crypto industry alongside potential reasons.
“Signature Bank had exposure to the digital assets industry and declining liquidity in the months prior to failure,” said the report. “FDIC staff said Signature Bank management was unable to fully understand the bank’s liquidity positions in the days and hours before failure.”
Though the GAO largely did not mention the crypto-friendly Silvergate Bank, which went into voluntary liquidation in March, the report said Signature was “perceived to be similar.” Signature held roughly $12 billion in deposits connected to digital asset firms in 2022 but intended to reduce its exposure to the crypto industry.
U.S. lawmakers discussed oversight of the failed banks in a May 11 hearing, in which GAO director of financial markets and community investment Michael Clements said bank regulators had identified concerns with Silicon Valley Bank and Signature Bank before their collapse but “did not escalate supervisory actions in time.” In response to questioning from Tennessee Representative John Rose, Clements said the GAO had reviewed “large deposits from the digital asset space” in considering whether crypto had contributed to Signature’s failure.
“[Signature] was simply holding deposits and operating the
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