- Signature Bank is scheduled to sell its deposits and loans to Flagstar Bank minus deposits tied to cryptocurrencies.
- The FDIC stated that it will distribute these deposits directly to customers whose accounts are affiliated with the digital banking business.
Barely one week after its collapse, Signature Bank is scheduled to sell its deposits and loans to Flagstar Bank, a division of New York Community Bancorp. But, deposits tied to cryptocurrencies won’t be included in the purchase.
The deal, which would see the Michigan-based bank acquire $38.4 billion in non-cryptocurrency-related deposits and $12.9 billion in loans under a “buy and assumption agreement,” was announced by the United States Federal Deposit Insurance Corporation on March 19.
Beginning on March 20, the 40 locations of Signature’s Bank will operate as Flagstar Bank, where all deposits will continue to be covered up to the $250,000 insurance limit.
The FDIC stated that it will distribute these deposits directly to customers whose accounts are affiliated with the digital banking business. However, the FDIC affirmed that it would transfer these deposits to customers who opened a digital banking account.
The $4 billion amount represents 4.5% of the $88.6 billion in total deposits held by Signature Bank as of December 31.
Three cryptocurrency companies, including Coinbase, Celsius, and Paxos, recently acknowledged having some exposure to Signature Bank.
Will Signature Bank purchasers be forced to exit the crypto market?
Unnamed sources reportedly said that any potential acquirer of Signature Bank would be required to exit the cryptocurrency market, according to a Reuters report, which was later modified to reflect a statement on the subject from the FDIC. The FDIC reacted by saying that they only informed prospective buyers of the risks associated with dealing with cryptocurrencies and did not demand that they abandon the asset class.
Flagstar Bank decided to keep cryptocurrency-related clients out of the deposits it acquired control of, whether it was necessary or not. The FDIC, which also got equity appreciation in the form of common shares in Flagstar’s parent company valued at nearly $300 million as part of the agreement, will continue to hold the majority of Signature’s assets for the time being.