Silvergate Agrees With The Fed With A Self-Liquidation Plan Within 10 Days
- Silvergate Bank voluntarily agreed to the Fed’s order and will submit a self-liquidation plan within 10 days.
- Banks must save cash and other resources to ensure the safety of depositors.
- As part of the order, the regulator must approve any bonuses, promotions, or severance payments to senior executives.
Silvergate Bank has agreed to the Federal Reserve’s order and will submit a self-liquidation plan to the California financial regulator within 10 days.
The Federal Reserve Board of Governors announced the order on Wednesday as part of Silvergate’s shutdown process. Although the bank voluntarily declared liquidation with a plan of “full refund of all deposits.” Banks must preserve cash and other resources to compensate depositors.
The California Department of Financial Protection and Innovation must approve Silvergate’s plan to liquidate assets. This bank announced it would be shutting down in March of this year.
The Fed’s order notes that recent Silvergate audits by state regulators and officials from the San Francisco Fed “discovered many deficiencies in its safety, soundness, and compliance. “It linked the bank’s failure to its transactions with the now-defunct cryptocurrency exchange FTX.
Fed said the failure of FTX and Alameda, combined with Silvergate’s business strategy tied to the digital asset industry and a banking run prelude to similar higher-impact operations in the Valley Silicon and Signature Bank “has led to the funding and liquidity stress for the bank and a decline in processes that are the primary source of revenue.
The Fed statement noted that Silvergate executives voluntarily consented to all elements of the enforcement action. The regulator must approve any bonuses, promotions, or severance packages for executives as part of the order.
Silvergate was the first central crypto-friendly bank to close operations, followed by Silicon Valley Bank and Signature Bank. Many digital asset companies – including Coinbase, Paxos, Gemini, Bitstamp, and Galaxy Digital – previously had financial ties to Silvergate but announced that they would be leaving following allegations that the bank was involved in the collapse of FTX.
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