March 13, 2023 Latest on the Silicon Valley Bank collapse
6:32 p.m. ET, March 13, 2023
No, you should not withdraw your money from your bank. Here you will find answers to other important questions
By CNN’s Ramishah Maruf
After the stunning collapse of the Silicon Valley Bank became the second largest banking collapse in US history, many customers are wondering if their money is safe.
Here are the answers to some frequently asked questions:
Do I need to worry about cash held at my bank?
In short, if you have less than $250,000 in your account, you almost certainly have nothing to worry about. That’s because the US government insures the first $250,000 of eligible accounts.
Many SVB customers had deposited well over $250,000 and now that they aren’t getting their money, some companies are struggling with payroll.
Should I withdraw my money from my bank?
No, it doesn’t make sense to take all your money out of one bank, said Jay Hatfield, CEO of Infrastructure Capital Advisors and portfolio manager of the InfraCap Equity Income ETF. However, make sure your bank is insured with the FDIC, which is the case with most major banks.
“I don’t think people should be panicking, but it only makes sense to have insured versus uninsured deposits,” Hatfield said.
Your money is most likely going nowhere. Overall, normal consumers should hardly be affected. But the breakdown is a good reminder to be aware of where your money is kept and not have everything in one place.
“The first bank failure since 2020 is a wake-up call for people to always make sure their money is with an FDIC-insured bank and is within FDIC limits and compliant with FDIC rules,” said Matthew Goldberg, Bankrate analyst.
How does that compare to 2008?
The banking sector should theoretically be more resilient due to the regulatory reforms introduced after the 2008 crisis.
Government action this weekend is also trying to prevent the next SVB and further stabilize the sector after a chaotic week. Rising interest rates caused cheap government bonds that SVB and other banks invested in years ago to crumble in value – last week’s bank run was sparked when SVB sold these securities at heavy losses to support withdrawals from customer deposits after it people started withdrawing money from their bank.
The Fed also said it will offer bank loans for up to a year in exchange for US Treasuries and mortgage-backed securities that have fallen in value. The Fed will recognize the original value of the debt for the banks that make the loans.