Silicon Valley Bank in the U.S. has failed. The
Federal Deposit Insurance Corporation has taken the bank into receivership. Apparently it was the 16th largest bank in the U.S., and media reports are calling it the second largest bank collapse in U.S. history. It’s the first failure of a FDIC insured institution since 2020.
SVB’s official checks will continue to be honored. All deposits up to US$250,000 (per title, not per depositor — for example, a joint account has a separate US$250,000 insurance coverage limit from an individual account) are absolutely protected. Bank branches will reopen Monday morning. ATM cards continue to work. And depositors with more than US$250,000 per account title are receiving immediate partial dividends from the FDIC, and they are expected to receive more as the bank’s assets are worked out. How much recovery they’ll make is unclear.
Bank failures are fairly routine in the U.S., and as you can see the FDIC is a well oiled machine. I was an account holder at a bank that failed. I didn’t lose a penny, and ordinary bank transactions never stopped. Friday is when they close, and Monday is when they reopen (with ATMs still working in between). It’s business as usual for practically everyone, although the folks above deposit insurance limits sweat a bit if they haven’t structured their deposits with multiple account titles that get separate insurance limits.
I doubt this bank’s failure presages any big wave of failures since the available evidence suggests U.S. banks are broadly well capitalized. But we’ll see.
If you have deposits in U.S. banks or credit unions just make sure you stay at or below US$250,000 if you can. Ask your bank how to organize your deposits if you have more. And if you must have a bigger balance in one account consider doing that at a state chartered savings bank in the Commonwealth of Massachusetts. Massachusetts has a state deposit insurance system with unlimited coverage.
Unlike Singapore foreign currency deposits in U.S. banks and brokerages ARE insured. Either the account will be preserved (in an acquiring institution) or you’ll receive a payout in U.S. dollars at the exchange rate when the payment is made. The NCUA insures credit union accounts (same coverage limit rules as the FDIC), and the SIPC insures brokerage accounts (up to US$500,000 per title arrangement, of which up to US$250,000 is the cash limit). You’re not necessarily going to receive promised interest, but you’ll be kept whole within coverage limits. For example, if you have a Certificate of Deposit (equivalent to a fixed deposit) the CD may end will accrued interest instead of running to the end of its original term. For depositors above coverage limits these organizations are fierce in trying to recover your deposits, and you (an account holder) reign supreme in the order of settlement, ahead of every conventional creditor (secured and unsecured). If they have to sell the office coffee machines to raise funds to pay depositors they will.
Make sure your chosen U.S. institution is FDIC, NCUA, or SIPC insured, as the case may be. You can check the various organizations’ lists to figure that out. There are a very few institutions that seem like they should be but aren’t. For example, there’s an online bank based in the U.S. territory of Puerto Rico that isn’t FDIC insured, but they say so pretty clearly.
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