I hope you and your family are well!
On Friday, March 10th, Silicon Valley Bank (SVB) out of California was taken into receivership by FDIC. SVB is the first FDIC-insured financial services institution to be taken over by FDIC since 2020 and the largest since Washington Mutual in 2008. Additionally, on Sunday night March 12th, the United States government stepped in and offered customers access to their uninsured deposits.
SVB had two main issues that came to fruition at the same time. First, SVB’s customer base was focused on early-stage startup companies who typically run through cash quickly when other funding options are not available. Second, the longer term Treasury bonds and other government securities SVB owned have decreased in value as interest rates have increased. When deposits were withdrawn and the bonds were calculated at their current value, SVB was no longer capitalized appropriately.
Once it was common knowledge that the bank was facing financial difficulties, word traveled quickly and the deposits fled as fast as account holders could log into their online accounts. With the federal backstop now in place further spillover should be limited.
There have been 72 bank failures over the last 10 years. Deposit insurance is in place for this reason. Please review your deposit and savings account held at banks and credit unions, whether held locally or at online institutions to make sure they are protected by FDIC, Federal Deposit Insurance Corporation, or NCUA, National Credit Union Administration.
If you have any questions or would like to talk further, please reach out anytime.
Have a great week!
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