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Crypto Bank Silvergate Capital To Shut Down - Slashdot
source link: https://slashdot.org/story/23/03/09/0121241/crypto-bank-silvergate-capital-to-shut-down
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Crypto Bank Silvergate Capital To Shut Down (axios.com) 9
Posted by BeauHD
on Wednesday March 08, 2023 @08:50PM from the financially-pummeled dept.
Silvergate Capital, the publicly-traded parent of Silvergate Bank, said Wednesday that it would liquidate the bank, just days after saying future operations would be uncertain. Axios reports: "In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward," a press statement reads. While the bank's demise had everything to do with its choice of industry -- FTX's collapse sent the entire crypto world in hunt of liquidity, causing a run on deposits at Silvergate -- balance-sheet problems in today's high-rate environment is not a crypto bank-specific stumbling block. Silvergate's troubles were in plain sight in that respect.
When customers pulled more than $8 billion from its platform late last year, the bank got a $4.3 billion assist in home loan advances from the Federal Home Loan Bank (FHLB). It effectively benefited from an implicit government backstop. But between having to pay those loans back right away and other investment losses, its outlook was grim, even before the company filed a registration statement saying so.
The overwhelming majority of bank liquidations are announced on a Friday afternoon, to give the FDIC a full weekend to shore up the institution and reassure depositors before the next business day. The fact this happened on a Wednesday is an indication of just how quickly Silvergate imploded. "Crypto exchanges, platforms and stablecoin issuers at least have the excuse that they don't have direct access to central bank liquidity," Frances Coppola, an economist and writer of blog Coppola Comment, said in a recent post about the bank. "But Silvergate does -- and yet it didn't use it." That would appear to be an oversight for the bank, but also its regulator.
When customers pulled more than $8 billion from its platform late last year, the bank got a $4.3 billion assist in home loan advances from the Federal Home Loan Bank (FHLB). It effectively benefited from an implicit government backstop. But between having to pay those loans back right away and other investment losses, its outlook was grim, even before the company filed a registration statement saying so.
The overwhelming majority of bank liquidations are announced on a Friday afternoon, to give the FDIC a full weekend to shore up the institution and reassure depositors before the next business day. The fact this happened on a Wednesday is an indication of just how quickly Silvergate imploded. "Crypto exchanges, platforms and stablecoin issuers at least have the excuse that they don't have direct access to central bank liquidity," Frances Coppola, an economist and writer of blog Coppola Comment, said in a recent post about the bank. "But Silvergate does -- and yet it didn't use it." That would appear to be an oversight for the bank, but also its regulator.
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