Cross River Bank in FDIC’s Crosshairs

Cross River Bank is a New Jersey-based financial institution that has made a name for itself in the fintech industry by providing banking services to tech companies and startups. However, the bank has come under scrutiny recently after the Federal Deposit Insurance Corporation (FDIC) raised concerns about its lending practices.

The FDIC's findings suggest that Cross River Bank may have engaged in potentially unsafe and unsound lending practices, particularly in its system of internal controls, information systems, credit underwriting practices, and internal audit systems related to consumer protection laws and regulations. Although the bank did not admit or agree to the FDIC's findings, this situation highlights the importance of having strong underwriting standards and internal controls in place to ensure the safety and soundness of financial institutions.

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Cross River Bank was founded in 2008 by Gilles Gade and his team, with a focus on community banking. However, in recent years, the bank has shifted its focus to providing banking services to fintech companies and startups. By partnering with fintech firms, Cross River Bank has been able to provide innovative financial solutions, such as virtual credit cards, peer-to-peer payments, and online lending.

The bank had grown rapidly in recent years, with assets reaching close to $10 billion in recent months, up from $2.5 billion in 2017. Cross River Bank had also been able to raise significant funding, with a $620 million Series C funding round in 2022, led by venture capital firms Andreessen Horowitz and Eldridge.

While the bank has been successful in its mission to provide innovative banking solutions to the fintech industry, the FDIC's recent findings highlight the importance of maintaining strong underwriting standards and internal controls. The history of loose lending practices by other banks, such as those that contributed to the 2008 financial crisis, is a reminder of the importance of discipline in lending practices.