FDIC sells deposits from Signature Bank to Flagstar; crypto deposits excluded

By: Mark Jessy

March 20, 2023 10:56 AM

On March 20, the 40 Signature Bank branches will reopen and operate as Flagstar Bank.

Signature Bank's savings and loans are expected to be sold to Flagstar Bank, a subsidiary of New York Community Bancorp, only a week after the bank's demise – but crypto-related deposits will not be included in the transaction.

The United States Federal Deposit Insurance Corporation announced the agreement on March 19, which will see the Michigan-based bank take over $38.4 billion in non-cryptocurrency-related deposits and $12.9 billion in loans under a "buy and assumption agreement."

Signature's Bank's 40 branches will begin operating as Flagstar Bank on March 20, with all deposits assumed by Flagstar Bank continuing to be covered up to the $250,000 insurance limit.

The Flagstar Bank acquisition does not include the nearly $4 billion in deposits held by Signature Bank's digital assets sector. Instead, the FDIC verified that these deposits will be transferred directly to clients who opened a digital banking account, stating:

"These deposits will be made directly by the FDIC to clients whose accounts are affiliated with the digital banking enterprise."

The $4 billion number represents 4.5% of Signature Bank's total deposits of $88.6 billion as of December 31.

Coinbase, Celsius, and Paxos are three cryptocurrency firms that have recently acknowledged exposure to Signature Bank.

Reuters reported last week, citing two individuals, that any buyer of Signature would be compelled to divest crypto activities as part of a prospective rescue plan.

An FDIC spokeswoman rejected this at the time, stating that the agency did not compel crypto divestiture as part of any transaction.

Nic Carter, a partner at Castle Island Ventures, feels the recent announcement demonstrates that the FDIC "lied" in its answer to Reuters.

The FDIC took over Signature Bridge Bank on March 12, following the New York Department of Financial Services shutting the bank and assigning the FDIC as receiver.