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Was this a bad precedent to save SVB customers?
New York CNN—
Is my money safe? That is itquestion that many bank customers haveafter the fantastic failuresSilicon Valley-bankand Signature Bank in the past week, along withtakeover of Credit Suisse- although the Swiss bank's problems are very different from the problems that brought down the two US regional banks.
A bank that runs on Silicon Valley Bankled to the Federal Deposit Insurance Corporation taking control of the bank last Friday during the second largest banking crash in American history. Two days later, the FDIC also took overSignature bank.
The FDIC insures savers up to $250,000, but many companies used the SVB as a bank and therefore had much more than that in their accounts. U.S. customers held at least $151.5 billion in uninsured deposits at the end of 2022, according to the SVB's latest annual report. Foreign deposits amounted to at least $13.9 billion and are also uninsured.
But before the markets opened this week, the Biden administration took an extraordinary step and guaranteed itSVB and Signature customerswould have access to all their money from Monday, even their uninsured deposits.
Should I worry about the money in my bank?
In short, if you have less than $250,000 in your account at an FDIC-insured U.S. bank, you almost certainly have nothing to worry about.
Any deposit account holderis insured up to €250,000, so for example if you have a joint account with your partner, your money is insured up to €500,000.
If you bank through a federally insured credit union, your deposits up to a minimum of $250,000 are insured by the National Credit Union Administration, which, like the FDIC, is backed by the full faith and credit of the U.S. government.
Bank customers in Europe also have deposit protection.
In Great Britain viaCompensation scheme for financial servicessavers can get up to £85,000 ($102,484) back if their bank fails, doubled to £170,000 ($204,967) for joint accounts. The FSCS is funded by financial services providers, including banks, who pay an annual levy.
In the European Union, customers of failed banks are promised €100,000 ($105,431) of their deposits, under aDeposit Guarantee Scheme, which is fully financed by banks. Joint account holders can jointly receive compensation of €200,000 ($210,956).
I Switzerland,Swiss deposits are insuredof the controllerFINMAup to 100,000 Swiss francs.
Do I have to withdraw my money from my bank?
There's no point in taking all your money out of a bank, says Jay Hatfield, CEO of Infrastructure Capital Advisors and portfolio manager of the InfraCap Equity Income ETF. But make sure your bank is FDIC insured, which most major banks are.
“I don't think people should panic, but it's just smart to have insured deposits versus uninsured deposits,” Hatfield said.
But the crash is a good reminder to know where your money is kept.
“[It's] a wake-up call for people to always make sure their money is in an FDIC-insured bank, within FDIC boundaries and according to FDIC rules,” said Matthew Goldberg, a Bankrate analyst.
The FDIC has several resources on its website. That"banksuite' tool provides a list of FDIC-insured financial institutions andElectronic deposit insurance estimatorcalculates the insurance coverage of various deposit accounts at financial institutions.
Hatfield's advice was to spread your money among the banks.
'Why not? If you have a million, why not have four accounts and insure them,” Hatfield said. "Why would you worry about that?"
That said, it's also worth knowing that you may already be insured for more than $250,000 with your current US bank if you have more than one.deposit accountthere or if you have a joint account.
How do I know if my bank is bankrupt?
As an individual customer it would be almost impossible.
“[Customers] should maintain their bank's financial statements, regulatory filings, audit reports and other such materials to identify red flags,” says Marbue Brown, a former JP Morgan Chase customer experience manager who now works as a Fortune 500 executive. consultant.
In addition, much of the information that can help you assess the health of your bank is not public, such as deposit inflows and outflows, credit losses, and funding sources. And to the extent they are reported, it is done on a lagged basis at the end of each quarter.
So if a bank gets into trouble, those familiar with the bank's books will most likely see it coming first.
Is this 2008 again?
The banking sector should theoretically be more stable as a result of the regulatory reforms introduced after the 2008 crisis.
The US government's actions this weekend were also an attempt to prevent the next SVB, further stabilizing the sector after a chaotic week. Rising interest rates caused cheap government bonds that SVB and other banks had invested in years ago to crumble in value - last week's bank run was caused by SVB selling these securities at a big loss to help pay for customer deposit withdrawals after people withdrew their money from the bank had started withdrawing.
The Fed also said it will offer bank loans for up to one year in exchange for U.S. Treasury bonds and mortgage-backed securities that have lost value. The Fed will honor the original value of the debt for the banks making the loans.
The Treasury Department will also provide $25 billion in credit protection to hedge against bank losses, which should help banks easily access cash when they need it.
CNN's Anna Cooban, David Goldman, Nicole Goodkind, Allison Morrow and Jeanne Sahadi contributed to this report.
