OBA Leader On Signature Bank, Fintech & More
[Updated] Following the closure of U.S based Signature Bank by New York regulators, Opposition Leader Cole Simons noted that in 2019 the Government “unveiled its relationship with Signature Bank as a banking service solution for Bermuda‘s fintech companies” and asked “now that this banking option is off the table, what’s next for Bermuda’s emerging digital asset and cryptocurrency industry.”
Mr. Simons said, “Signature Bank, Bermuda‘s banking solution for our emerging Digital Asset Business and our emerging cryptocurrency business is closed by New York State Regulators on Sunday. It is now under the control of the Federal Deposit Insurance Corporation. According to Reuters, this is the third largest failure in US Banking industry.
“What a blow to Premier’s Burt‘s emerging Fintech and digital asset industry, and moreover, what will be the impact for the reputation of Bermuda Inc, as the Government has reportedly been working diligently to promote Bermuda as the destination of choice for fintech companies looking for a place to domicile.
“In a media release from Feb 2019, the Burt Government unveiled its relationship with Signature Bank as a banking service solution for Bermuda‘s fintech companies and boasted that ‘Bermuda is setting itself apart by providing regulatory certainty combined with a world-renowned reputation for transparency and the highest standards of global compliance. Signature Bank’s endorsement showcases how Bermuda is competitively placed to advance the pace of the digitization of global commerce as modern technology is applied to the highly regulated world of finance.’
“The release further stated that Signature Bank agreed to provide full banking services which includes deposit account and debit card services to both BDA and US ‘Fintech startups in the digital asset and cryptocurrency industries and provide a full range of banking services to companies that meet Bermuda and Signature Bank‘s standards.
“Now that this banking option is off the table, what’s next for Bermuda’s emerging digital asset and cryptocurrency industry? Did our Government perform adequate due diligence before they entered the relationship with Signature Bank? Were they providing any ongoing monitoring and due diligence since the start of the relationship?
“Did Bermuda’s regulators perform their ongoing enhanced due diligence with the New York State financial service regulators?
“If they did, were they aware that as of September, almost a quarter of its deposits came from the cryptocurrency, and that the bank announced in December that it would shrink its crypto-related deposits by $8 billion dollars?! This should have been a red flag. Again, this mega bank failure is extremely alarming and has the real potential of compromising Bermuda ‘s blue chip financial services jurisdictional reputation.”
The official press release from the FDIC said, “Signature Bank, New York, NY, was closed today by the New York State Department of Financial Services, which appointed the Federal Deposit Insurance Corporation [FDIC] as receiver. To protect depositors, the FDIC transferred all the deposits and substantially all of the assets of Signature Bank to Signature Bridge Bank, N.A., a full-service bank that will be operated by the FDIC as it markets the institution to potential bidders.
“Signature Bank had 40 branches across the country in New York, California, Connecticut, North Carolina, and Nevada. Banking activities will resume Monday, March 13, 2023, including on-line banking. Depositors and borrowers will automatically become customers of Signature Bridge Bank, N.A. and will continue to have uninterrupted customer service and access to their funds by ATM, debit cards, and writing checks in the same manner as before. Signature Bank’s official checks will continue to clear. Loan customers should continue making loan payments as usual.
“The transfer of all the deposits was completed under the systemic risk exception approved earlier today. All depositors of the institution will be made whole. No losses will be borne by the taxpayers. Shareholders and certain unsecured debt holders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund [DIF] to support uninsured depositors will be recovered by a special assessment on banks, as required by law.”
We asked the Government for comment and will update if able.
Update 11.27pm: The Premier is speaking about this now in Parliament, we will add the audio here once it concludes…this will be a while as we have to wait for the session to conclude then extract that section of audio and upload it, however we will update when able. As a super brief summary of what he is saying, while he is speaking…the Premier noted the bank is not even licensed here, said it is regulated in another country, said the OBA are using a situation that has nothing to do with Bermuda to attack and more. For full context, check back for when we are able to upload the full audio.
Update 12.02am: The relevant extract of the Premier’s response is below.
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