Prices of banks, including some of our best-known local banks, dropped today as Wall Street worries about what may be next after the second and third largest bank failures in U.S. history. It comes after the collapse of two large banks, Silicon Valley Bank and Signature Bank. Now their banks that specialized in loans and technology companies. In the case of Signature of New York was a leader in cryptocurrency lending. But smaller banks then started reassuring their customers today and the big question remains, is your bank and your money safe?
As consumers, we all have concerns about the safety of our finances, especially in the current economic climate. Recent bank failures have raised concerns and left many of us wondering whether our money is secure. In this article, we will discuss what happened with Silicon Valley Bank and Signature Bank, how they differ from our local banks, and what steps have been taken to protect consumers.
Do we all need to be worried about our local banks based on what happened to these two? From a deposit depositor point of view, we would say no. The government, the Federal Reserve, the Treasury, and the FDIC all stepped in to make sure people were confident in the banking system. They put a place to ensure the 250,000 FDIC normal limit, but they declare this as a systemic failure risk. So they’re saying they’re gonna make all the depositors whole on Silicon Valley and in these cases here which should apply to any other failures that related.
Silicon Valley Bank had their deposits roughly doubled in 2021 as a lot of cash came in with the pandemic and all the support investments, and they invested a lot of it in long-dated treasuries. However, they had a huge chunk of their money from corporations, and a significant amount of their deposit base was uninsured. This differs from most banks where the majority of the deposit base is in retail investors and insured. So if it’s insured, it’s also safe from people who are less likely to feel like they need to make a run and withdraw their money.
The recent failures of Silicon Valley Bank and Signature Bank have exposed the risks of investing in banks that specialize in loans and technology companies. This has raised concerns about the safety of our local banks, but there are some significant differences between these banks and our local banks.
Firstly, most local banks have a significant amount of their deposit bases in retail investors, and that money’s relatively sticky. It’s not likely to get pulled out, and much of it is insured. Therefore, retail customers are less likely to feel like they need to make a run and withdraw their money.
Secondly, smaller banks are much more likely to have a higher percentage of their money insured than the larger banks, which are more likely to have a higher percentage of uninsured money. For instance, Silicon Valley Bank had a very high percentage of uninsured money, while smaller banks have a much higher percentage of their money insured.
Despite the differences between these banks, the recent failures of Silicon Valley Bank and Signature Bank have highlighted the importance of consumer protection measures. Thankfully, the government, the Federal Reserve, the Treasury, and the FDIC have stepped in to make sure that consumers are protected.
The FDIC has declared these failures as systemic failure risks and has promised to make all depositors whole on Silicon Valley and in these cases here, which should apply to any other failures that related. Additionally, banks are allowed to borrow on their collateral, on their assets, not at their market value, but at their par value or their book value. This gives them a much greater opportunity to borrow when they need it most.
The recent failures of Silicon Valley Bank and Signature Bank have raised concerns about the safety of investing in banks, especially those that specialize in loans and technology companies. As consumers, it is important to understand the risks associated with these banks and to take measures to protect ourselves.
One way to protect your money is to diversify your portfolio. This means spreading your money across different types of investments, such as stocks, bonds, and cash. By doing so, you reduce your overall risk and increase your chances of earning a positive return. Additionally, it’s important to do your research and understand the financial health of any bank you invest in.
Another way to protect your money is to make sure that your deposits are insured by the FDIC. The FDIC insures deposits up to $250,000 per depositor, per insured bank, for each account ownership category. This means that if your bank were to fail, your deposits would be protected up to that amount. However, it’s important to note that not all deposits are covered by the FDIC. For instance, if you have more than $250,000 in deposits at one bank, only $250,000 would be insured.
In conclusion, recent bank failures have raised concerns about the safety of our finances, especially when it comes to banks that specialize in loans and technology companies. While these failures have exposed some risks associated with these banks, it’s important to note that our local banks differ significantly from these larger banks. The government, the Federal Reserve, the Treasury, and the FDIC have taken steps to protect consumers and ensure that their deposits are safe. As consumers, it’s important to understand the risks associated with investing in any bank and to take measures to protect ourselves, such as diversifying our portfolios and making sure our deposits are insured by the FDIC.
