After the failure of Silicon Valley Bank (SVB), many Americans are worried that the same thing will happen to their bank. If it did, do you know what would happen to your money? Find out
After the failure of Silicon Valley Bank, many people fear a repeat of what happened to the bank where they have their money. Here we can tell you that this will not happen, especially because the banking system in the United States has a shield that protects Americans’ money. It is the Federal Deposit Insurance Corporation (FDIC).
Since 1933, not a single person in the U.S. has lost a penny of his or her bank deposits. When the country went through the Great Depression, the FDIC put safety measures in place so that the dollars inside a bank account would be protected from economic adversities, such as severe recessions, or mismanagement of a financial institution.
The Federal Deposit Insurance Corporation (FDIC) is an independent U.S. federal agency that insures bank deposits, helps maintain the solvency of the nation’s banking system and protects the money supply when financial institutions fail.
Before opening a bank account in the United States, individuals should verify that the institution is FDIC-insured. How can they find out? Companies should have the FDIC shield or you can ask the managers directly. The logo indicating that the institution is affiliated with the FDIC means that the money a person puts into checking, savings and other accounts is insured by the full faith and credit of the U.S. government.
The FDIC has several resources on its site. The “banking package” tool provides a list of FDIC-insured banking institutions and the Electronic Deposit Insurance Estimator calculates the insurance coverage of different deposit accounts at banks.
By confirming this information, you are now assured that the money you put into your bank account is protected for up to $250,000. There are even ways you can extend the protection if you have more than that amount. This protection covers checking, savings, certificates of deposit (CDs) and money market accounts.
In other words, if a bank is in trouble, the worst thing you can do is go withdraw your money in a panicked horde, because it is protected. This phenomenon, which is known as a bank run, is precisely one factor that could aggravate the bank’s financial crisis and that of the customers themselves. You are going to get your money back as long as it does not exceed $250,000 protected.
While not one person has lost money from his or her account due to a bank failure since 1933, this is not the case for businesses, because they tend to have larger amounts of money in excess of the $250,000 protected by the FDIC. In fact, this is the situation that several technology companies are going through after the failure of Silicon Valley Bank (SVB), and they are seeking to recover as much of their funds as possible.
Although the outlook is gray for these companies, the government acted quickly on this occasion. The FDIC assured that the insured funds of SVB’s customers will be paid out. For uninsured depositors, as is the case with many technology companies, they will be paid an early dividend within the next week and will obtain a certificate of receivership for the remainder of their uninsured funds.
U.S. customers had at least $15.5 billion in uninsured deposits at the end of 2022, according to SVB’s latest annual report. Foreign deposits reached at least $13.9 billion and are also uninsured.
SVB was among the top 20 U.S. commercial banks, with $209 million in total assets at the end of last year, provided funding for nearly half of U.S.-backed technology and healthcare companies.