Is my money safe? How secure is the banking system? CNN answers your most pressing questions in the aftermath of Silicon Valley Bank’s stunning collapse:
Do I have to worry about cash I stored in my bank?
If you have less than $250,000 in your account, then you almost certainly have nothing to worry about. That’s because the US government insures the first $250,000 in eligible accounts.
Many SVB customers had much more than $250,000 deposited, and now that they can’t get their money, some companies are struggling to make payroll.
Should I pull my money out of my bank?
It doesn’t make sense to take all your money out of a bank, Jay Hatfield, CEO at Infrastructure Capital Advisors and portfolio manager of the InfraCap Equity Income ETF, said. But make sure your bank is insured by the FDIC, which most large banks are.
Hatfield’s advice was to split up your money between banks, so each one had a maximum of $250,000. “Why not? If you have a million, why not have four accounts and have them insured?”
But if I don’t run to pull my money out of the bank now, won’t it disappear?
Everyday consumers, on the whole, are unlikely to be affected. But the collapse is a good reminder to be aware of where your money is held, and not to have it all in one place.
The FDIC has different resources on its site. The “bank suite” tool offers a list of FDIC-insured banking institutions and the Electronic Deposit Insurance Estimator calculates the insurance coverage of different deposit accounts at banks.
Is this 2008 all over again?
The banking sector should be, theoretically, more stable due to the regulatory reforms put in place after the crisis in 2008.
The government’s actions this past weekend also tried to prevent the next SVB from happening, further stabilizing the sector after a chaotic week. The Fed also said it will offer bank loans for up to a year in exchange for US Treasury bonds and mortgage-backed securities that lost value. The Fed will honor the debt’s original value for the banks that take the loans.
The Treasury will also provide $25 billion in credit protection to ensure against banks’ losses, which should help banks easily access cash when they’re in need.
“The Fed ring-fenced the SVB disaster and averted a crisis of epic proportions for the banking sector,” said Wedbush Securities’ Dan Ives.
Can the US federal government contain the panic?
SVB was among the top 20 American commercial banks, with $209 billion in total assets at the end of last year, provided financing for almost half of US venture-backed technology and health care companies. Every bank has losses on their securities and uninsured deposits. US banks were sitting on $620 billion in unrealized losses (assets that have decreased in price but haven’t been sold yet) at the end of 2022, according to the FDIC.
The government took steps over the weekend to quell fears of SVB turning into a full-blown crisis. So there’s no need to panic, say analysts.
Most large US banks are in good financial condition and won’t find themselves in a situation where they’re forced to realize bond losses, said DIC Chairman Martin Gruenberg.
CNN’s David Goldman, Nicole Goodkind and Allison Morrow contributed to this report.