‘Poor management’ tagged for Signature Bank demise – but FDIC admits its own flops in supervision, too

“Poor management” was the root cause of the failure of a large, regional New York bank last month, according to a report issued Friday by the federal insurer of bank deposits.

However, the agency was also critical of its own actions in supervising Signature Bank of New York, N.Y., before its March demise.

The report, issued by the Federal Deposit Insurance Corp.’s (FDIC) Chief Risk Officer Marshall Gentry, was one of three reports issued the same day about bank failures. The other two were a review by Federal Reserve Board Vice Chair for Supervision Michael Barr of the failure of Silicon Valley Bank (SVB) of Santa Clara, Calif., and an account of account of regulator actions surrounding the failures of both banks, conducted by the congressional Government Accountability Office (GAO).

The FDIC report said Signature Bank’s board and management “pursued rapid, unrestrained growth without developing and maintaining adequate risk management practices and controls appropriate for the size, complexity and risk profile of the institution.” The report asserts that management did not prioritize good corporate governance practices, did not always heed FDIC examiner concerns, and was not always responsive or timely in addressing FDIC supervisory recommendations (SRs).

FDIC said the bank “funded its rapid growth through an overreliance on uninsured deposits without implementing fundamental liquidity risk management practices and controls.”

As for its own supervision, FDIC said it could have ramped up supervisory actions sooner (even though it had prior to the failure, the agency said, conducted targeted reviews and ongoing monitoring, issued Supervisory Letters and annual roll–up reports of examination (ROEs), and issued several supervisory recommendations (SRs) to address supervisory concerns).

“Additionally, examination work products could have been timelier and communication with [Signature Bank’s] board and management could have been more effective,” the report stated. The agency said it also found that experienced resource challenges with examination staff that affected the timeliness and quality of the bank’s examinations.

Still, the FDIC placed much of the blame burden on the bank itself. “In the case of Signature Bank, the bank could have been more measured in its growth, implemented appropriate risk management practices, and been more responsive to the FDIC’s supervisory concerns, and the FDIC could have been more forward–looking and forceful in its supervision,” the report stated.

The report contains includes “matters for further study” related to examination guidance, processes, and agency resources.

FDIC Releases Report Detailing Supervision of the Former Signature Bank, New York, New York