Is my money safe? That's the question on many bank customers' minds after the stunning failures of Silicon Valley Bank and Signature Bank in the past week, along with the current problems at Credit Suisse - though the Swiss bank's issues are very different from what took down the two US regional banks.
A bank run on Silicon Valley Bank led the Federal Deposit Insurance Corporation to take control of the bank last Friday in the second-largest bank failure in US history. Two days later, the FDIC also took over Signature Bank.
The FDIC insures depositors up to $250,000, but many companies used SVB as their bank and so had a lot more than that in their accounts. US customers held at least $151.5 billion in uninsured deposits by the end of 2022, SVB's latest annual report said. Foreign deposits reached at least $13.9 billion and are also uninsured.
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But before markets opened this week, the Biden administration took an extraordinary step, guaranteeing that SVB and Signature customers would have access to all their money starting Monday, even their uninsured deposits.
Do I have to worry about cash stored in my bank?
In short, if you have less than $250,000 in your account at an FDIC-insured US bank, then you almost certainly have nothing to worry about.
Each deposit account owner will be insured up to $250,000 - so, for example, if you have a joint account with your spouse, your money will be insured up to $500,000.
If you bank through a federally insured credit union, your deposits are insured at least up to $250,000 by the National Credit Union Administration, which, like the FDIC, is backed by the full faith and credit of the US government.
Banking customers in Europe also have deposit protections.
In the United Kingdom, through the Financial Services Compensation Scheme, depositors can have up to 85,000 ($102,484) returned if their bank goes under, doubling to 170,000 ($204,967) for joint accounts. The FSCS is funded by financial services firms, including banks, which pay an annual levy.
In the European Union, customers of failed banks are promised 100,000 ($105,431) of their deposits back under a Deposit Guarantee Scheme, which is funded wholly by banks. Joint account holders can receive a combined 200,000 ($210,956) in compensation.
In Switzerland, Swiss deposits are insured by the regulator FINMA up to 100,000 Swiss francs.
Should I pull my money out of my bank?
It doesn't make sense to take all your money out of a bank, said Jay Hatfield, CEO at Infrastructure Capital Advisors and portfolio manager of the InfraCap Equity Income ETF. But make sure your bank is insured by the FDIC, which most large banks are.
"I don't think people should panic, but it's just prudent to have insured deposits versus uninsured deposits," Hatfield said.
But the collapse is a good reminder to be aware of where your money is held.
"[It's] is a wake-up call for people to always make sure their money is at an FDIC-insured bank and within FDIC limits and following the FDIC's rules," said Matthew Goldberg, a Bankrate analyst.
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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.
Hatfield's advice was to split up your money between banks.
"Why not? If you have a million, why not have four accounts and have them insured," Hatfield said. "Why worry about it?"
That said, it is also worth noting that you may already be insured for more than $250,000 at your current US bank if you have more than one deposit account there or if you have a joint account.
How do I know if my bank is failing?
As an individual customer it would be nearly impossible.
"[Customers] would need to be keeping track of their bank's financial statements, regulatory filings, audit statements and other such materials to be able to identify red flags," said Marbue Brown, a former JP Morgan Chase customer experience executive who now works as a Fortune 500 executive consultant.
Plus, much of the information that would help you truly gauge 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 on a lagged basis at the end of each quarter.
So if a bank does run into trouble, those privy to the bank's books are the most likely to see it coming first.
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 US government's actions at the weekend were also an attempt to prevent the next SVB from happening, further stabilizing the sector after a chaotic week. Rising interest rates meant cheap Treasury bonds SVB and other banks invested in years ago crumbled in value - last week's bank run was triggered by SVB selling those securities at a steep loss to to help pay customers' deposit withdrawals after people started pulling their money out of the bank.
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.
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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.
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