Signature Bank has been seized to send a message to banks, the director said

A regulatory takeover of a New York-based bank was intended to send a message to US banks to stay out of the cryptocurrency business, a former member of Congress who sits on the bank’s board said.

Former U.S. Rep. Bernie Frank said Monday that he believes state officials behind the move are trying to make an example of Signature Bank.

“It was a way of telling people, ‘We don’t want you working with crypto,'” Frank told The Associated Press in a telephone interview.

Frank, a Democrat who served in Congress from 1981 to 2013, co-authored the Dodd-Frank Act that increased government oversight of banks after the 2008 financial crisis.

He was a director of Signature Bank until the New York Division of Financial Services took it over on Sunday and gave control of the bank to the FDIC, the federal agency that insures bank deposits.

The signature takeover came two days later Regulators seized California-based Silicon Valley Bank. Both follow a rush of withdrawals from banks, which cater to technology businesses.

New York Governor Cathy Hochul described the acquisition as a way to avoid a major crisis that could affect more banks.

“Our approach was to make sure that the entire banking community in New York was stable, so that we could project calmly,” Hochul said at a press conference on Monday.

Signature, which was founded more than two decades ago, has about 40 offices across the United States and says it focuses on banking for privately owned businesses, their owners and senior managers.

The bank said it is the first FDIC-insured bank to launch a blockchain-based digital payment platform.

As concerns about Silicon Valley Bank grew last week, Signature issued a statement to reassure clients and investors that it was stable. The statement included a reminder that despite efforts to cater to cryptocurrency holders, it “does not invest, trade, hold, custodial, and does not lend or lend against debt through digital assets.”

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But by Friday, there were more recalls, which Frank said were “solely based on contagion from SVB.”

He said the situation was stabilized when New York regulators took over on Sunday.

The bank had more than $110 billion in assets, making it the third largest banking failure in US history

Unlike Frank, Hochul did not point to cryptocurrencies as the reason for the bank’s closure over the weekend. He said withdrawals continued, making the move necessary.

And the state regulator went further, saying Signature is not a crypto bank.

“This is not about a specific sector in the case of Signature Bank, but we moved quickly to make sure depositors were protected,” said New York Financial Services Superintendent Adrienne Harris.

The bank’s top executives were ousted and it reopened Monday under the operational control of the FDIC as Signature Bridge Bank.

Also on Monday, the FDIC announced Those with deposits in both banks will have full access — even for amounts that exceed the regular $250,000 insurance limit.

Frank said that if the FDIC had agreed to insure the full deposit on Friday instead of waiting until Monday, the signature would not have been taken. He said insurance limits for businesses should be permanently increased by Congress to enough to cover a few months’ worth of payroll for most companies.

Frank said the former bank operators had no choice.

But he said he expects some truth when the bank is eventually sold.

“I believe they’re going to get a very good price,” Frank said, “proof that it wasn’t a bank problem.”

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Mulvihill reports from Cherry Hill, New Jersey. Associated Press/America Statehouse News Initiative reporter Mason Khan contributed from Albany, New York. Reporting for America is a nonprofit national service program that places journalists in local newsrooms to report on confidential issues.