Signature Bank plans to offload as much as $10bn in deposits tied to the cryptocurrency industry, a U-turn for a US lender that achieved rapid growth after aggressively courting digital assets.
The move comes as turmoil envelops the crypto industry in the wake of falling token prices and the bankruptcy of the FTX exchange, a client of Signature’s. The New York-based bank’s shares are down more than 50 per cent this year after it was the best-performing stock in the KBW Bank index last year.
About 23 per cent of Signature’s $103bn in customer deposits were related to the crypto industry as of the middle of November. It is now seeking to reduce the share to less than 20 per cent and eventually less than 15 per cent of total deposits, chief operating officer Eric Howell told an industry conference on Tuesday.
“We’re not just a crypto bank and we want that to come across loud and clear,” he said.
Reducing crypto exposure meant Signature was “going to exit about $8bn to $10bn worth of deposits in that space, which we can easily cover through cash and borrowings”, Howell said.
Signature is one of the only federally regulated US banks known to have taken large-scale deposits from crypto clients, having started the business four years ago with a decision to accept crypto exchanges, stablecoin issuers and bitcoin miners as customers. This helped Signature’s deposits triple from $33.4bn in 2017.
FTX, led by Sam Bankman-Fried, was one of the world’s largest crypto exchanges before its failure in November. Signature said last month that its deposit relationship with FTX and its related companies amounted to less than 0.1 per cent of its overall deposits.
Signature’s share price was down about 4.5 per cent in New York trading on Tuesday. Its other businesses include wealth management and fund lending, through which it bankrolls capital calls to investment funds on behalf of clients.
In a further sign of the concerns around losses in the crypto market spilling over to US lenders, Silvergate, another US bank which took deposits from crypto clients, this week defended its role in accepting deposits from FTX and Alameda Research, a trading group founded by Bankman-Fried.