Recent failures of Silicon Valley Bank and Signature Bank, which was primarily aimed at the technology industry, you may be worried about your money. They were the second and third largest bank failures in US history.
It all started last week when too many depositors tried to withdraw their money from Silicon Valley Bank at once, leading to a bank run.
The bank had to sell government bonds and other securities at high losses to give customers their cash, and the news quickly spread on social media, contributing to the bank’s sudden collapse. Regulators took control of New York-based Signature Bank soon after, saying it was necessary to protect depositors after too many people began withdrawing money.
In response, regulators guaranteed all deposits at the two banks and created a program to protect other banks from a deposit rush.
Here’s what you need to know about your own money.
Are my deposits protected?
Yes, all deposits up to $250,000 are insured by the Federal Deposit Insurance Corp. The FDIC also has a solid track record of insuring deposits above its limit.
Almost all banks are FDIC insured. You can look for the FDIC logo at bank teller offices or at the entrance to your bank branch.
Credit unions are insured with the National Credit Union Administration.
Individuals or businesses with large deposits are encouraged to spread the funds among different financial institutions, as the FDIC insures up to $250,000 per depositor per bank for each account type.
Federal officials have taken action to ensure customers at other banks don’t fret and withdraw their deposits.
Will my bank go bust?
If you’re worried about your bank closing anytime soon, there are telltale signs a bank is in trouble, according to Caleb Silver, editor-in-chief of investment site Investopedia.
He recommends bank customers:
- Watch the bank’s share price.
- Keep an eye on the bank’s quarterly and annual reports.
- Set a Google alert for the bank to monitor reporting.
Pay close attention to how your bank behaves, Silver said.
“If they’re trying to raise money through a stock offering or if they’re trying to sell more shares, they could have problems with their balance sheet,” Silver said.
Should I look for alternatives?
If you have more than $250,000 in your bank, there are a few things you can do, including opening a second joint account.
According to Greg McBride, chief financial analyst at Bankrate, a financial services company, you can protect up to $500,000 by opening a joint account with a spouse.
“A married couple can easily protect a million dollars at the same bank by having an individual account and a joint account together,” he said.
You can also open an account with another financial institution to spread out your deposits so that each falls under the FDIC insurance limit.
No cash withdrawal
Despite the recent turmoil, experts advise against withdrawing cash from your account. It’s safer to keep your money in a bank than at home, especially if it’s insured.
“It’s not time to pull your money out of the bank,” Silver said.
Even people with uninsured deposits usually get almost all of their money back.
“It takes time, but generally all depositors — both insured and uninsured — get their money back,” said Todd Phillips, a counsel and former attorney with the FDIC. “Uninsured depositors may have to wait some time and may have to get a haircut where they lose 10-15% of their savings, but it’s never zero.”