3 - 4 minute read
The Federal Deposit Insurance Corporation (FDIC) has issued a consent order to Cross River Bank, a fintech and crypto-focused bank, to improve its lending activities and address weaknesses related to compliance with fair lending laws and regulations. The order requires the bank to increase its focus on internal controls, credit underwriting practices, and internal audit systems related to consumer protection laws and regulations. Cross River must also monitor its compliance with fair lending laws and promptly self-correct any violations.
The FDIC executed the consent order with Cross River Bank on March 8, but it was made public on April 28. The order states that the bank must appropriately address the deficiencies and weaknesses identified in the 2021 report of examination and create processes to ensure these weaknesses don’t appear in the future. The FDIC has requested that Cross River fully comply with the consent order in a timely manner.
Cross River Bank has not admitted nor denied the violations discovered in the 2021 report of examination. Just one day before the consent order was made public, Cross River’s CEO, Gilles Gade, released a statement emphasizing that regulatory scrutiny on banks is increasing and that Cross River takes adequate measures to ensure transparency and responsibility. Gade 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.”
“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 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.
The implications of the consent order on Cross River Bank’s future market moves are uncertain, but traders should consider the potential impact of increased regulatory scrutiny on the bank’s lending activities. The order may also affect Circle’s partnership with Cross River Bank, which could impact the stability of USD Coin.
The Bottom Line
The FDIC’s consent order to Cross River Bank underscores the importance of compliance with fair lending laws and regulations in the fintech and crypto industries. Traders should monitor the bank’s compliance with the order and consider the potential impact on the stability of USD Coin.