Ahmed Ali A recent communication from the U.S. Federal Reserve Board of Governors divulged that Silvergate Bank has a stringent ten-day time frame to propose a plan outlining their self-liquidation procedures and orderly termination of activities. This directive from the central bank follows Silvergate’s self-liquidation announcement 86 days ago on March 8, which was subsequently followed by the downfall of three significant banking institutions.
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Fed Directs Silvergate Bank to Formulate a Self-Liquidation Plan Within a 10-Day Window
Around three months prior, Silvergate Bank made public their resolution to willingly dissolve their assets and cease all functions. The bank had been grappling with financial issues, causing a steep decline in the value of its shares. The bank identified “recent industry and regulatory changes” as the main triggers for closure, reassuring that their dissolution strategy would ensure “complete repayment of all deposits.”
Post Silvergate’s announcement, the U.S. banking sector faced a significant slump, and not long after, the failure of Silicon Valley Bank (SVB), representing the second-largest bank failure in U.S. history. The downturn continued with Signature Bank and First Republic Bank’s subsequent failures, marking them the third and fourth largest banking collapses ever recorded in America. Amid these disastrous events, Silvergate’s planned liquidation was somewhat overshadowed.
On May 23, both the Federal Reserve Board of Governors and the California Department of Financial Protection and Innovation directed Silvergate to formulate a liquidation plan within a ten-day period post the order. The central bank’s mandate states that “Within 10 days of approval by the supervisors, the company and the bank, as applicable, shall adopt the self-liquidation plan.”
Upon adoption, they are urged to “promptly implement the self-liquidation plan, and henceforth fully abide by the plan.” Furthermore, the Fed’s directive expands on Silvergate’s downfall, underscoring the “numerous deficiencies” detected by regulatory bodies. The report also discloses Silvergate’s affiliation with the now-bankrupt crypto exchange FTX and its insolvent trading subsidiary, Alameda Research.
According to the report, “Beginning in the fourth quarter of 2022, [Silvergate Bank] experienced a significant drop in deposits by its crypto-asset-related customers, partially instigated by the collapse of the crypto-asset exchange FTX Trading Ltd. and its associated proprietary trading firm Alameda Research LLC, which has led to financial and liquidity strain on the bank and a decrease in activities that were primary revenue sources.”
What are your views on Silvergate Bank’s self-liquidation? We welcome your thoughts and perspectives on this topic in the comments section below.
FAQ about Silvergate Bank Self-Liquidation
Why is Silvergate Bank facing a regulatory deadline?
Silvergate Bank has been directed by the U.S. Federal Reserve and the California Department of Financial Protection and Innovation to produce a self-liquidation plan within ten days. This comes after the bank declared its decision to dissolve its assets and cease operations voluntarily.
What led to Silvergate Bank’s decision to self-liquidate?
Silvergate Bank attributed its decision to self-liquidate to “recent industry and regulatory changes”. Prior to this decision, the bank experienced financial difficulties that saw its share value plummet.
What impact will Silvergate Bank’s self-liquidation have on its customers?
Silvergate Bank has assured its customers that their dissolution strategy includes the full repayment of all deposits, which means customers should get their money back. However, the specifics of the plan are yet to be released.
How does the downfall of Silvergate Bank relate to the failure of other major banks?
After Silvergate Bank announced its self-liquidation, the banking sector experienced a significant downturn. This was followed by the failure of Silicon Valley Bank (SVB), Signature Bank, and First Republic Bank, which were the second, third, and fourth largest bank failures in U.S. history, respectively.
What connection does Silvergate Bank have with the crypto-asset exchange, FTX Trading Ltd.?
The report from the U.S. Federal Reserve and the California Department of Financial Protection and Innovation mentioned that Silvergate Bank had significant dealings with FTX Trading Ltd. and its proprietary trading firm, Alameda Research LLC. The collapse of FTX and Alameda Research is noted to have contributed to the financial and liquidity stress on Silvergate Bank.
5 comments
wow…didn’t see this coming. Silvergate’s going under?? That’s huge…banking sector’s really been hit hard, huh?
So Silvergate’s tied with FTX, right? That explains a lot. once ftx went down, they felt the heat. Talk about domino effect…
regulatory deadline in 10 days, pressure’s on them. wonder how they’re gonna handle this. it’s a tough spot to be in.
darn… had stocks in Silvergate… value’s gone down the drain.. 🙁 gotta rethink my investment strategies.
lot of banks struggling recently, silvergate’s just another one. these are tough times, gotta navigate carefully. Wonder what’s next?