The Federal Deposit Insurance Corporation (FDIC) has requested Cross River Bank – known for its services to fintech and crypto firms like Visa and Coinbase – to “self-correct” and appropriately address weaknesses in its lending activities.
On April 28, the FDIC made public a consent order executed with Cross River Bank on March 8, alleging that the bank engaged in “unsafe” or “unsound” banking practices in regard to its compliance with applicable fair lending laws and regulations in 2021.
Despite accepting the consent order, Cross River has yet to admit nor deny the violations discovered in the 2021 report of examination. It was noted:
“The FDIC considered the matter and determined, and the Bank neither admits or denies, that it engaged in the unsafe or unsound banking practices related to its compliance with applicable fair lending laws and regulations”.
The order states that the bank must immediately take action to increase its supervision over the “system of internal controls, information systems, credit underwriting practises, and internal audit systems related to the consumer protection laws and regulations.”
Furthermore, the bank is required to promptly “self-correct” any violations of fair lending laws.
Cross River was ordered to “appropriately address” the deficiencies and weaknesses identified in the 2021 report of examination, as well as create processes to ensure these weaknesses don’t appear in future.
The FDIC executed the consent order with Cross River Bank on March 8. Source: FDIC
The FDIC requested that Cross River fully comply with the consent order in a “timely manner.”
Just one day before the consent order was made public, Cross River’s CEO, Gilles Gade, released a statement on April 27, without any mention to the FDIC allegations.
Gades emphasized that regulatory scrutiny on banks is increasing, suggesting that Cross River takes adequate measures to ensure “transparency, and responsibility.”
“Cross River is the largest of these banking institutions and as such, we have regulatory examiners reviewing some elements of our business on a continuous basis” Gades stated.
“We view our compliance capability as a strategic advantage and are proud to lead our industry in maintaining the highest levels of compliance, transparency, and responsibility” he wrote.
Related: Crypto-friendly banks mismanaged traditional risks, FDIC head tells Senate hearing
The order was executed with the bank only days before Circle, the stablecoin issuer behind USD Coin (USDC), partnered with Cross River for banking services – which was announced on March 13.
Circle had sought the new partnership, after its previous provider, Silicon Valley Bank, collapsed on March 11.
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Author: Ciaran Lyons
