Review of the Supervision of Silvergate Bank

Silvergate Bank's assets peaked at more than $16 billion in 2021, but in early 2023 its holding company began voluntarily liquidating the bank.

Silvergate's liquidation stemmed from its concentration in crypto industry deposit customers, rapid growth, and multilayered funding risks due to nearly all of the bank's deposits being uninsured and noninterest bearing. It also had significant weaknesses in its corporate governance and risk management capabilities.

The Board and the Federal Reserve Bank of San Francisco are responsible for supervising Silvergate to ensure that its business practices are safe and sound. However,

• they did not require Silvergate to obtain the Board's approval, nor did they implement conditions, as the bank evolved to a novel business model focused on the crypto industry
• examiners could have taken more aggressive, decisive action to address their concerns
• FRB San Francisco could have strengthened the process to transition Silvergate between supervisory portfolios as it grew exponentially
• the Board lacked sufficient guidance for examiners to assess the risks of banks with volatile funding sources
• the Board also lacked guidance for examiners supervising banks projecting or experiencing significant, rapid growth

Our report contains recommendations designed to enhance supervisory processes based on lessons learned from Silvergate's voluntary liquidation.

Our complete report contains supervisory information that is privileged and confidential and is thus restricted from public distribution.