Flagstar Takes Over Signature, Minus Its Crypto Business

Following an unsuccessful first attempt by the FDIC to find a buyer for Signature Bank, the latter placed in receivership by the fiscal authority will be bought out by Flagsta Bank – a subsidiary of New York Community Bancorp, Inc.

Today, we entered into an agreement with a subsidiary of New York Community Bancorp, Inc., to purchase and assume deposits and assets out of Signature Bridge Bank. Read more ➡️ https://t.co/bSshY93lBh. pic.twitter.com/b9RBvYtGF7

— FDIC (@FDICgov) March 19, 2023

Crypto Divestment Was Not Required

A Reuters report, which was later updated to reflect a statement on the matter from the FDIC, said unnamed sources stated that any buyer of Signature Bank would be forced to divest from the crypto industry. The FDIC responded that they merely warned potential buyers of the risk drawn from dealing with crypto and did not require potential buyers to ditch the asset class.

Whether required or not, Flagstar Bank has made the decision to exclude cryptocurrency-related customers from the deposits it took control of. Most of Signature’s assets will, for now, remain in the hands of the FDIC, who also received equity appreciation right in the form of common stock in Flagstar’s parent company worth about $300 million as part of the deal.

“The former Signature Bank had total deposits of $88.6 billion and total assets of $110.4 billion. Today’s transaction included the purchase of about $38.4 billion of Signature Bridge Bank, N.A.’s assets, including loans of $12.9 billion purchased at a discount of $2.7 billion. Approximately $60 billion in loans will remain in the receivership for later disposition by the FDIC.”

Signet Payment Network Left Behind

Taking into consideration the fact that only a fraction of Signature’s deposits and assets were acquired by Flagstar, the abandonment of crypto customers could have been deemed a mere coincidence. However, Flagstar’s divestment from the industry extends to operations as well.

Signet, a real-time payment network built specifically for crypto customers, has been left under receivership at the FDIC, according to Bloomberg. The sale of the payment network, along with other assets and deposits that belonged to the now-defunct Signature Bank, will be done at a later date.

After a week of uncertainty, Signature Bank’s 40 branches have reopened today. All customers are directed to carry out their day-to-day banking operations as they did before until informed otherwise by Flagstar Bank.

For the moment, Signet appears to still be operational, despite being in receivership. However, it’s unclear how long it will continue processing payments, and Circle has already moved its operations to BNY Mellon.