For the first time in a decade, the US experienced one of the largest failures by a US lender – Silicon Valley Bank.
Today, Treasury Secretary Janet Yellen reacted to the largest failure by a US lender in more than a decade by declaring that the US banking system “remains resilient” and regulators “have effective tools” to address fallout from the collapse of Silicon Valley Bank.
Ms. Yellen called a meeting today with leaders from the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency to discuss developments around SVB, the Treasury said in an emailed statement.
Regulators stepped in and seized the bank today in a stunning downfall for the lender that had quadrupled in size over the past five years and was valued at more than $40 billion last year. That followed a tumultuous week that saw an unsuccessful attempt to raise capital along with a cash exodus from the tech startups that had fueled the lender’s rise.
Just days earlier, Silvergate Capital Corp. also announced it was shutting down its bank.
This combination of bank failures triggered a broader selloff in financial industry stocks. The Treasury statement was aimed at reassuring financial markets and preventing a wider investor panic.
In the US, Thursday was the worst day for the KBW Bank Index since June 2020, as its members shed more than $90 billion of value. The biggest banks in Europe lost more than $40 billion from their market capitalizations today.
As a refresher, the Federal Deposit Insurance Corporation provides $250k of insurance coverage to depositors. It is automatic coverage whenever a deposit account is opened at an FDIC-insured bank or financial institution.
Please Note: Not all products offered by banks are covered by FDIC insurance. Many (not all!) Credit Unions are covered by the National Credit Union Share Insurance Fund (NCUSIF) that also provides $250k of insurance coverage to depositors.
The following are examples of deposit products insured by the FDIC:
- Checking accounts
- Savings accounts
- Money market deposit accounts
- Certificates of deposit (CD)
- Prepaid cards (assuming certain FDIC requirements are met)
The amount of FDIC insurance coverage you may be entitled to, depends on the FDIC ownership category – the manner in which you hold your funds at the bank. FDIC ownership categories include single accounts (checking, savings and money market deposit accounts), certain retirement accounts and employee benefit plan accounts, joint accounts, trust accounts, business accounts as well as government accounts.
Coverage Limit: All single accounts owned by the same person at the same bank are added together and insured up to $250,000. Generally, each person (with a unique social security number) has up to $250k of coverage in total across all accounts.