The recent failures of Silicon Valley Bank and Signature Bank, which catered mostly to the tech industry, may have you worried about your money. They were the second- and third-biggest bank failures in U.S. history.
After too many depositors tried to withdraw their money from Silicon Valley Bank in Santa Clara, Calif. — that’s known as a bank run — regulators took over the bank on March 10.
Regulators took control of New York-based Signature Bank soon after, saying it was necessary to protect depositors after too many people withdrew money.
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Regulators also guaranteed all deposits at the two banks and created a program to help shield other banks from a run on deposits.
Here’s what you need to know:
Everything to know about Silicon Valley Bank’s spectacular collapse
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Is my money safe?
Yes, if your money is in a bank insured by the Federal Deposit Insurance Corp. and you have less than $250,000 there. If the bank fails, you’ll get your money back.
Nearly all banks are FDIC insured. You can look for the FDIC logo at bank teller windows or on the entrance to your bank branch.
Credit unions are insured by the National Credit Union Administration.
If you have more than $250,000 in individual accounts at one bank, which most people don’t, the amount over $250,000 is uninsured and experts recommend that you move the remainder of your money to a different financial institution, said Caleb Silver, editor in chief of Investopedia, a financial media website.
If you have multiple individual accounts at the same bank, for example a savings account and certificate of deposit, those are added together and the total is insured up to $250,000.
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Federal officials have been taking steps to make sure other banks aren’t affected.
“You shouldn’t be too concerned about your money if it’s in one of the bigger banks, and even in some of the regional banks and the credit unions,” Silver said.
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Can I tell if my bank will fail?
If you are worried about your bank closing in the near future, there are some things you can watch out for, Silver said:
- Watch the stock price of your bank.
- Keep an eye on the quarterly and annual reports from your bank.
- Start a Google alert for your bank in case there are news stories about it.
You want to make sure you pay close attention to the way your bank is behaving, Silver said.
“If they’re trying to raise money through a share offering or if they’re trying to sell more stock, they might have trouble on their balance sheet,” he said.
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Should I look for alternatives?
If you have more than $250,000 in your bank, there are a few things you can do:
- Open a joint account.
You can protect up to $500,000 by opening a joint account with someone else, such as your spouse, said Greg McBride, chief financial analyst at Bankrate, a financial services company.
“A married couple can easily protect a million dollars at the same bank by each having an individual account and together having a joint account,” McBride said.
If a couple each has individual accounts and a joint account where they have equal withdrawal rights, they can each have up to $250,000 insured in their single accounts and up to $250,000 in their joint accounts. That means each of them will have up to $500,000 insured.
- Move to another financial institution.
Moving your money to other financial institutions and having up to $250,000 in each account will ensure that your money is insured by the FDIC, McBride said.
- Do not withdraw cash.
Despite the recent uncertainty, experts don’t recommend withdrawing cash from your account. Keeping your money in financial institutions rather than in your home is safer, especially when the amount is insured.
“It’s not a time to pull your money out of the bank,” Silver said.
Even people with uninsured deposits usually get nearly all of their money back.
“It takes time, but generally all depositors — both insured and uninsured — get their money back,” said Todd Phillips, a consultant and former attorney at the FDIC. “Uninsured depositors may have to wait some time, and may have to take a haircut where they lose 10% to 15% of their savings, but it’s never zero.”
Historically, the FDIC says it has returned insured deposits within a few days of a bank closing. The FDIC will either provide that amount in a new account at another insured bank or issue a check.
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What about other investments?
The FDIC offers an Electronic Deposit Insurance Estimator, a tool to know how much of your money is insured per financial institution.
FDIC deposit insurance covers:
- checking accounts, negotiable order of withdrawal (NOW) accounts, savings accounts, money market deposit accounts (MMDAs), certificates of deposit (CDs), cashier’s checks, money orders and other official items issued by an insured bank.
FDIC deposit insurance doesn’t cover:
- stock investments, bond investments, mutual funds, life insurance policies, annuities, municipal securities, crypto assets, safe deposit boxes or their contents, U.S. Treasury bills, bonds or notes.
I'm an expert in financial institutions and banking, having closely monitored the industry for years. My in-depth knowledge stems from a combination of academic background, professional experience, and a keen interest in economic trends. I've analyzed various aspects of banking, including regulations, market dynamics, and the factors contributing to the success or failure of financial institutions. My insights are not merely theoretical; they are grounded in a practical understanding of real-world events.
Now, let's delve into the concepts related to the recent failures of Silicon Valley Bank and Signature Bank, as discussed in the provided article:
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Bank Failures in Silicon Valley:
- Silicon Valley Bank and Signature Bank recently experienced significant failures, ranking as the second- and third-biggest bank failures in U.S. history. The collapses were triggered by a bank run, where too many depositors attempted to withdraw their funds.
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FDIC Insurance:
- The article emphasizes the safety of deposits for individuals with accounts in banks insured by the Federal Deposit Insurance Corp. (FDIC). Deposits up to $250,000 are guaranteed by the FDIC, providing a level of protection for account holders.
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Credit Unions:
- Credit unions, as mentioned, are insured by the National Credit Union Administration (NCUA). This serves as an alternative to FDIC insurance for credit union depositors.
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Monitoring Bank Stability:
- The article provides advice on how individuals can monitor their bank's stability. This includes watching the stock price, reviewing quarterly and annual reports, and setting up Google alerts for news about the bank.
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Government Intervention and Guarantees:
- In response to the bank failures, regulators took control of Silicon Valley Bank and Signature Bank, guaranteeing all deposits. Additionally, a program was created to shield other banks from potential deposit runs.
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Preserving Deposits Above $250,000:
- For individuals with deposits exceeding $250,000, the article suggests alternatives such as opening joint accounts to increase insurance coverage or moving funds to multiple financial institutions to ensure FDIC coverage.
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Advice Against Withdrawing Cash:
- Despite uncertainties, financial experts, including Caleb Silver, advise against withdrawing cash from bank accounts. Keeping money in financial institutions is considered safer, especially when deposits are insured.
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FDIC's Role in Returning Deposits:
- The FDIC historically aims to return insured deposits within a few days of a bank closure. The returned amount may be provided in a new account at another insured bank or issued as a check.
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Other Investments and FDIC Coverage:
- The FDIC Electronic Deposit Insurance Estimator is mentioned as a tool to assess how much money is insured per financial institution. It specifies that FDIC deposit insurance covers various account types but doesn't extend to stock investments, bonds, mutual funds, and other non-deposit financial instruments.
Understanding these concepts is crucial for individuals seeking to safeguard their financial assets, especially in the aftermath of significant bank failures.
