For Release
WASHINGTON – Today, Federal Deposit Insurance Corporation (FDIC) Chief Risk Officer Marshall Gentry launched FDIC’s Supervision of Signature Bank, an inner overview comparing the company’s supervision of Signature Bank, New York, New York, from 2017 till its failure in March 2023. The inner overview document identifies the reasons of Signature Bank’s failure and assesses the FDIC’s supervision of the financial institution. The overview used to be performed on the request of FDIC Chairman Martin J. Gruenberg.
This detailed research identifies obviously that “the root cause of [Signature Bank’s] failure was poor management. [Signature Bank’s] board of directors and management pursued rapid, unrestrained growth without developing and maintaining adequate risk management practices and controls appropriate for the size, complexity and risk profile of the institution. [Signature Bank’s] management did not prioritize good corporate governance practices, did not always heed FDIC examiner concerns, and was not always responsive or timely in addressing FDIC supervisory recommendations (SRs). [Signature Bank] funded its rapid growth through an overreliance on uninsured deposits without implementing fundamental liquidity risk management practices and controls.”
In regard to the FDIC’s supervision of Signature Bank, the document unearths that “the FDIC conducted a number of targeted reviews and ongoing monitoring, issued Supervisory Letters and annual roll–up reports of examination (ROEs), and made a number of SRs to address supervisory concerns. In retrospect, FDIC could have escalated supervisory actions sooner, consistent with the Division of Risk Management Supervision’s (RMS) forward–looking supervision concept. Additionally, examination work products could have been timelier and communication with [Signature Bank’s] board and management could have been more effective.” The document additionally unearths that: “The FDIC experienced resource challenges with examination staff that affected the timeliness and quality of [Signature Bank] examinations.”
“Maintaining safety and soundness requires effective challenge from the regulators and receptivity and responsiveness from the banks,” in step with the document. “In the case of [Signature Bank], the bank could have been more measured in its growth, implemented appropriate risk management practices, and been more responsive to the FDIC’s supervisory concerns, and the FDIC could have been more forward–looking and forceful in its supervision.”
The inner overview document recommends quite a lot of issues for attention or additional learn about through the FDIC associated with exam steering, processes, and sources.
Background
Signature Bank used to be closed through the New York Department of Financial Services on March 12, 2023, and appointed the FDIC as receiver. The FDIC established and operated Signature Bridge Bank, N.A., till March 19 when it entered into a purchase order and assumption settlement with Flagstar Bank, a subsidiary of New York Community Bancorp, Inc., Westbury, New York, to suppose the deposits and a definite belongings of the bridge financial institution.
FDIC: PR-33-2023