Over the weekend, a mix of Silicon Valley investors and California politicians called on the FDIC to make all depositors, including ones with uninsured amounts, whole. Saturday afternoon, California Gov. Gavin Newsom issued a statement saying he had been in touch with the Biden administration and other Washington officials about SVB.
“Everyone is working with FDIC to stabilize the situation as quickly as possible, to protect jobs, people’s livelihoods, and the entire innovation ecosystem that has served as a tent pole for our economy,” Newsom said.
But Ricks said that in order for the FDIC to use public money to help uninsured depositors, it must declare a "systemic risk exception" — something that requires two-thirds of the Federal Reserve Board of Governors, two-thirds of the board of the FDIC, and the Treasury Secretary, in consultation with the president, to approve.
"That seems to me extremely unlikely," Ricks said.
For the average person or business, the collapse of SVB sets a troubling precedent, Ricks said. While it never hid its financial issues, for a bank of the size, scale and reputation of SVB to go down suggests customers should have been more acutely aware of the problems, a concept Ricks finds "ridiculous."
"Most businesses don’t want to be in the business of evaluating financial institutions' balance sheets — it's not their comparative advantage," Ricks said.
Going forward, he said, more firms and individuals are likely to take their business to too-big-to-fail banks that they know would receive governmental support in a worst-case scenario.
"That's unfortunate for our financial system," Ricks said.
If you're someone who does not plan to bank at a major bank going forward, Ricks said: Start boning up on bank safety and soundness.
"That's the whole theory of it," he said. "I think it’s sort of silly — it's a silly way to manage our monetary system."
Rob Wile
Rob Wile is a breaking business news reporter for NBC News Digital.
FAQs
The FDIC has now transferred all deposits – both insured and uninsured – and substantially all assets of SVB to a newly created, full-service FDIC-operated 'bridge bank' – Silicon Valley Bank, N.A. The FDIC confirmed that "All depositors of the institution will be made whole."
What will happen to depositors of Silicon Valley Bank? ›
Silicon Valley Bank is closed, so the FDIC formed the Deposit Insurance National Bank of Santa Clara to consolidate insured and uninsured deposited into one institution. All deposits of SVB were transferred to the National Bank of Santa Clara, and insured depositors had access to their funds on March 13.
Will SVB depositors get their money back? ›
“Depositors will have access to all of their money starting Monday, March 13,” the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. said in a joint statement. “No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”
What happens to your savings if the banks collapse? ›
If your bank closes, the FDIC will either try to move your money to another bank in good standing or mail you a check for up to the insured amount.
Will Silicon Valley Bank collapse affect other banks? ›
Banks affected were First Republic Bank, PacWest Bancorp, Regions Financial and Zions Bancorporation. Even shares of big banks lost ground in the aftermath of the SVB and Signature collapses, including Wells Fargo, JPMorgan Chase and Citigroup.
Will FDIC cover Silicon Valley Bank? ›
On Sunday, March 26, 2023, the Federal Deposit Insurance Corporation (FDIC) entered into a purchase and assumption agreement for all deposits and loans of Silicon Valley Bridge Bank, N.A., with First-Citizens Bank & Trust Company, Raleigh, NC.
Did anyone lose money from SVB? ›
To be sure, SVB was allowed to fail and shareholders are projected to lose $850 million collectively. But both insured depositors — with up to $250,000 in the bank — and uninsured depositors will not lose money.
Where is the safest place to put money if banks collapse? ›
1. Federal Bonds. The U.S. Treasury and Federal Reserve (Fed) would be more than happy to take your funds and issue you securities in return. A U.S. government bond still qualifies in most textbooks as a risk-free security.
Can you lose all your money if a bank fails? ›
If your bank fails, up to $250,000 of deposited money (per person, per account ownership type) is protected by the FDIC. When banks fail, the most common outcome is that another bank takes over the assets and your accounts are simply transferred over. If not, the FDIC will pay you out.
Is my money safe how to protect yourself from a bank collapse? ›
How You Can Protect Your Money in the Wake of Banking Collapses
- Don't Panic. ...
- Research Your Bank's Solvency. ...
- Ensure Your Bank Is Insured. ...
- Don't Exit the Markets. ...
- Don't Exceed the FDIC Limit at Any One Bank. ...
- Consult a Financial Advisor.
Silicon Valley Bank (SVB) failed because of a textbook case of mismanagement by the bank. Its senior leadership failed to manage basic interest rate and liquidity risk. Its board of directors failed to oversee senior leadership and hold them accountable.
Which banks are failing in 2024? ›
Republic First Bank reported unrealized securities losses in excess of its equity as early as June 2022. State regulators closed Republic First Bank in April 2024, marking the first bank failure of the year.
Are banks on the verge of collapsing? ›
A report posted on the Social Science Research Network found that 186 banks in the United States are at risk of failure or collapse due to rising interest rates and a high proportion of uninsured deposits.
What do banks do with customer deposits? ›
The bank lending process
Only a small portion of your deposits at a bank are actually held as cash. The rest of your money (the majority of the bank's assets) is invested by the bank into vehicles such as consumer or business loans, government bonds and credit cards. Borrowers have to pay the bank back with interest.
Can we still use Silicon Valley Bank? ›
Is SVB now a part of First Citizens Bank? Silicon Valley Bank was acquired by First Citizens Bank on March 27, 2023. Silicon Valley Bank is open and operating as a division of First Citizens Bank serving the same investor and innovation economy clients that it has for the past 40 years.
Is the US taking emergency measures to protect all deposits at Silicon Valley Bank? ›
WASHINGTON – The Federal Deposit Insurance Corporation (FDIC) today transferred all deposits—both insured and uninsured—and substantially all assets of the former Silicon Valley Bank of Santa Clara, California, to a newly created, full-service FDIC-operated 'bridge bank' in an action designed to protect all depositors ...
What happened to signature bank depositors? ›
After federal regulators closed the failed New York-based Signature Bank on March 12, all deposits were transferred to the newly formed Signature Bridge Bank, N.A. Depositors have access to their money in the same manner as before, including the use of debit cards, ATMs and check writing.
