Flagstar to Buy Signature's Non-Crypto Assets

A week after Signature Bank closed, Flagstar Bank, a New York Community Bank subsidiary, has agreed to purchase a huge chunk of the failed institution in a $2.7 billion deal.

According to the Federal Deposit Insurance Corporation (FDIC), all of Signature Bank's 40 branches will operate as Flagstar Bank beginning Monday. Customers won't need to make any changes to conduct business with the new bank.

Flagstar bid excluded $4 billion crypto deposits

FDIC's 19 March press statement didn’t address the fate of the much larger Silicon Valley Bank (SVB) that the regulator took over two days before taking over Signature Bank.

The takeover deal includes purchasing Signature Bank's assets worth $38.4bn. SVB had $209 billion in assets compared to Signature Bank's $110.36 billion.

Per the announcement, the Flagstar takeover bid, which includes a $60 billion loan portfolio, excluded $4 billion associated with Signature's crypto banking business. Accordingly, crypto deposits will remain with the agency in receivership, and FDIC will provide them directly to the customers concerned.

The shutting down of Signature Bank came hot on the heels of the fall of the crypto-friendly Silvergate Capital earlier in March and the 12 March closure of SVB, which previously caused Circle’s USDC to stumble and lose its peg to the US dollar. Commenting during a previous press interview, Circle's Chief Strategy Officer Dante Disparte opined that the ongoing fallout was a stress test for traditional finance and emerging cryptocurrencies, presenting an opportunity for them to "weather the storm side by side".

Traditional banks introducing risk to the crypto space

The unwillingness of Flagstar Bank to take over all of Signature Bank's assets, including the crypto-related ones, indicates that banks are becoming wary of taking on risk due to the spreading banking crisis.

The ongoing banking failures demonstrate that, contrary to what everyone else might have thought, traditional banks are now introducing risk to the crypto space. The current state of affairs is the opposite of the "travel risk" regulators routinely offered to would-be crypto investors on the risk that crypto would introduce to banking.

The back-to-back failure of Silicon Valley Bank and Signature sparked a nationwide fear that it could kick off a more significant crisis of confidence within the US banking system.

FDIC is looking to step in and save the situation by brokering sales to pay back the failed banks' depositors to more vital financial institutions.