• U.S. bank regulators are investigating the leaders of failed tech banks Silicon Valley Bank, Signature Bank and Silvergate Bank for their management practices.
• FDIC Chairman Martin Gruenberg and Fed Vice Chairman Michael Barr are preparing to testify before the U.S. Senate Banking Committee on Tuesday about what went wrong at these banks, particularly related to digital assets at Signature.
• The FDIC expects $22.5 billion in losses to its insurance fund as a result of the bank failures, mostly due to uninsured deposits.
US Bank Regulators Investigating Failed Tech Banks
U.S. bank regulators are currently investigating the leaders of three failed tech banks: Silicon Valley Bank, Signature Bank and Silvergate Bank for their management practices leading up to their failure. FDIC Chairman Martin Gruenberg and Fed Vice Chairman Michael Barr have prepared testimony to deliver on Tuesday before the U.S Senate Banking Committee detailing what went wrong at these banks, particularly related to digital assets at Signature, which is expected to lead to an estimated $22.5 billion hit to its insurance fund, mostly due to uninsured deposits .
Silicon Valley Bank
Silicon Valley Bank (SVB) was a California-based financial services provider that specialized in providing services for technology companies including venture capital firms and startups with a focus on innovation banking as well as traditional banking products such as checking accounts and loans. In 2021, SVB began experiencing economic challenges due in part to investments into unsecured cryptocurrency projects resulting in losses that could not be recovered despite restructuring efforts by management teams appointed by regulators in 2022 .
Silvergate Bank
Silvergate Bank was a crypto-focused institution that provided various services such as digital asset custody solutions, fiat currency transactions processing capabilities and general commercial banking services across multiple jurisdictions including Europe and Asia Pacific regions . It had grown rapidly from 2017 through 2020 but experienced difficulties with liquidity constraints caused by heavy exposure from lending against bitcoin collateral during the bear market of early 2021 . As well as this , there were allegations of fraudulent activities within its operations leading up its closure in 2022 .
Signature Bank
Signature bank was another tech-focused institution that primarily offered corporate banking services along with some consumer accounts including business checking accounts , loan origination , foreign exchange trading , merchant payment processing capabilities etc., focusing mostly on high net worth individuals and businesses . It too suffered financial losses due its involvement with unsafe digital asset investments resulting in its closure later in 2022 .
Consequences
The consequences of these closures have been significant not only for customers who lost money but also for taxpayers who will be footing most of the bill when it comes time for reparations via FDIC insurance funds which is estimated at around $22 5 billion dollars total between all three institutions combined . Investigations are now underway by federal authorities into those responsible for mismanagement , fraud or any other criminal activity relating to these failed banks so justice may still be served yet even after their demise .