FDIC Review Ties Signature Bank’s Failure to Liquidity, Management and Crypto Contagion

On April 28, 2023, the Federal Deposit Insurance Corporation and the New York State Department of Financial Services published separate reviews of Signature Bank, supplying the first detailed official accounts of why a bank closely associated with digital-asset firms had been closed on March 12.

The findings were more precise than a simple “crypto bank failed” narrative. The FDIC identified illiquidity, triggered by contagion after Silvergate Bank announced self-liquidation on March 8 and Silicon Valley Bank failed on March 10, as the immediate cause. It identified poor management as the root cause: rapid growth, weak governance, excessive reliance on uninsured deposits and liquidity controls that did not match the bank’s changing risk profile.

That distinction mattered for crypto markets and institutions. Signature had operated a Digital Assets Banking Group and Signet, a blockchain-based internal payment platform. Its failure removed an important banking and dollar-payment connection for digital-asset businesses. The April 28 reports showed that exposure to the sector was relevant, but chiefly through deposit concentration, reputation and the speed of contagion—not through losses on cryptocurrency held by the bank.

A vulnerable funding structure

The FDIC’s balance-sheet snapshot, dated December 31, 2022, showed $110.4 billion in total assets and $88.6 billion in total deposits. Of those deposits, $79.5 billion were uninsured and $17.8 billion were classified as digital-asset deposits. These are year-end accounting figures, not balances at the moment of closure.

The same FDIC table showed digital-asset deposits falling from $28.7 billion at the end of 2021 to $17.8 billion at the end of 2022. The agency said Signature experienced $17.6 billion of total deposit outflow during 2022, mostly in the fourth quarter, and that digital-asset-related deposits represented 62% of that outflow. Those figures document a funding contraction during a calendar-year window; they do not establish that crypto customers alone caused the March run.

The FDIC also acknowledged its own supervisory shortcomings. It said supervisory actions could have escalated sooner, examination communications were often late, and persistent staffing gaps affected the timeliness and quality of work. From 2020, an average of 40% of large-financial-institution examination positions in the agency’s New York region were vacant or filled by temporary staff.

The run moved at digital speed

The New York review added an operational account of March 10. It said an extended Fedwire session allowed Signature to process about 692 wires totaling approximately $14 billion. The bank reported that roughly 1,000 March 10 wires, representing about $4.6 billion, remained to be processed, although its estimates changed during the weekend.

By Sunday evening, Signature reported known pending withdrawals of $7.4 billion to $7.9 billion against $4.27 billion of certain liquidity, according to NYDFS. The regulator concluded that management’s liquidity information was inconsistent, available collateral could not be mobilized quickly enough, and the bank lacked a credible plan to open safely on March 13.

NYDFS also supplied an important limitation on the crypto explanation. It said virtual-currency-business deposits represented 18% of Signature’s deposit base in March 2023 and that withdrawals by digital-asset customers on March 10 were relatively proportional to their share of deposits. The larger vulnerability, in the state regulator’s account, was a heavy concentration of uninsured funding combined with the market’s perception that Signature belonged in the same risk category as Silvergate and Silicon Valley Bank.

What April 28 established

The contemporaneous record supports a layered conclusion: crypto-sector turmoil helped transmit fear to Signature, but the bank’s inability to withstand the run reflected broader failures of liquidity preparation, governance and supervision. The reports did not settle the final cost of the receivership, create new binding crypto-banking rules, or prove that every digital-asset deposit behaved alike. They did establish, with regulator-held records, why concentration and payment speed had become central institutional risks by April 28, 2023.