Should I pull my money out of the bank? What to know about bank failures | CNN Business (2024)

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Is my money safe? That’s the question on many bank customers’ minds after the stunning failures of Silicon Valley Bank and Signature Bank in the past week, along with the takeover of Credit Suisse — though the Swiss bank’s issues are very different from what took down the two US regional banks.

Traders work on the floor of the New York Stock Exchange (NYSE) on March 16, 2023 in New York City. Spencer Platt/Getty Images Global banking crisis: What just happened?

A bank run on Silicon Valley Bank led the Federal Deposit Insurance Corporation to take control of the bank last Friday in the second-largest bank failure in US history. Two days later, the FDIC also took over Signature Bank.

The FDIC insures depositors up to $250,000, but many companies used SVB as their bank and so had a lot more than that in their accounts. US customers held at least $151.5 billion in uninsured deposits by the end of 2022, SVB’s latest annual report said. Foreign deposits reached at least $13.9 billion and are also uninsured.

But before markets opened this week, the Biden administration took an extraordinary step, guaranteeing that SVB and Signature customers would have access to all their money starting Monday, even their uninsured deposits.

Do I have to worry about cash stored in my bank?

In short, if you have less than $250,000 in your account at an FDIC-insured US bank, then you almost certainly have nothing to worry about.

Each deposit account owner will be insured up to $250,000 — so, for example, if you have a joint account with your spouse, your money will be insured up to $500,000.

If you bank through a federally insured credit union, your deposits are insured at least up to $250,000 by the National Credit Union Administration, which, like the FDIC, is backed by the full faith and credit of the US government.

Banking customers in Europe also have deposit protections.

Silicon Valley Bank headquarters in Santa Clara, California, US, on Thursday, March 9, 2023. SVB Financial Group bonds are plunging alongside its shares after the company moved to shore up capital after losses on its securities portfolio and a slowdown in funding. Photographer: David Paul Morris/Bloomberg via Getty Images David Paul Morris/Bloomberg/Getty Images Reuters: US regulators are working to bail out SVB customers

In the United Kingdom, through the Financial Services Compensation Scheme, depositors can have up to £85,000 ($102,484) returned if their bank goes under, doubling to £170,000 ($204,967) for joint accounts. The FSCS is funded by financial services firms, including banks, which pay an annual levy.

In the European Union, customers of failed banks are promised €100,000 ($105,431) of their deposits back under a Deposit Guarantee Scheme, which is funded wholly by banks. Joint account holders can receive a combined €200,000 ($210,956) in compensation.

In Switzerland, Swiss deposits are insured by the regulator FINMA up to 100,000 Swiss francs.

Should I pull my money out of my bank?

It doesn’t make sense to take all your money out of a bank, said Jay Hatfield, CEO at Infrastructure Capital Advisors and portfolio manager of the InfraCap Equity Income ETF. But make sure your bank is insured by the FDIC, which most large banks are.

“I don’t think people should panic, but it’s just prudent to have insured deposits versus uninsured deposits,” Hatfield said.

But the collapse is a good reminder to be aware of where your money is held.

“[It’s] is a wake-up call for people to always make sure their money is at an FDIC-insured bank and within FDIC limits and following the FDIC’s rules,” said Matthew Goldberg, a Bankrate analyst.

The FDIC has different resources on its site. The “bank suite” tool offers a list of FDIC-insured banking institutions and the Electronic Deposit Insurance Estimator calculates the insurance coverage of different deposit accounts at banks.

People line up outside of the shuttered Silicon Valley Bank (SVB) headquarters on March 10, 2023 in Santa Clara, California. Silicon Valley Bank was shut down on Friday morning by California regulators and was put in control of the U.S. Federal Deposit Insurance Corporation. Prior to being shut down by regulators, shares of SVB were halted Friday morning after falling more than 60% in premarket trading following a 60% declined on Thursday when the bank sold off a portfolio of US Treasuries and $1.75 billion in shares to cover declining customer deposits. Justin Sullivan/Getty Images How does a bank collapse in 48 hours? A timeline of the SVB fall

Hatfield’s advice was to split up your money between banks.

“Why not? If you have a million, why not have four accounts and have them insured,” Hatfield said. “Why worry about it?”

That said, it is also worth noting that you may already be insured for more than $250,000 at your current US bank if you have more than one deposit account there or if you have a joint account.

How do I know if my bank is failing?

As an individual customer it would be nearly impossible.

“[Customers] would need to be keeping track of their bank’s financial statements, regulatory filings, audit statements and other such materials to be able to identify red flags,” said Marbue Brown, a former JP Morgan Chase customer experience executive who now works as a Fortune 500 executive consultant.

Plus, much of the information that would help you truly gauge the health of your bank is not public, such as deposit inflows and outflows, credit losses and funding sources. And to the extent they are reported, it is on a lagged basis at the end of each quarter.

So if a bank does run into trouble, those privy to the bank’s books are the most likely to see it coming first.

Is this 2008 all over again?

The banking sector should be, theoretically, more stable due to the regulatory reforms put in place after the crisis in 2008.

The US government’s actions at the weekend were also an attempt to prevent the next SVB from happening, further stabilizing the sector after a chaotic week. Rising interest rates meant cheap Treasury bonds SVB and other banks invested in years ago crumbled in value — last week’s bank run was triggered by SVB selling those securities at a steep loss to to help pay customers’ deposit withdrawals after people started pulling their money out of the bank.

The Fed also said it will offer bank loans for up to a year in exchange for US Treasury bonds and mortgage-backed securities that lost value. The Fed will honor the debt’s original value for the banks that take the loans.

The Treasury will also provide $25 billion in credit protection to ensure against banks’ losses, which should help banks easily access cash when they’re in need.

Silicon Valley Bank headquarters in Santa Clara, California, US, on Thursday, March 9, 2023. SVB Financial Group bonds are plunging alongside its shares after the company moved to shore up capital after losses on its securities portfolio and a slowdown in funding. David Paul Morris/Bloomberg/Getty Images SVB employees received bonuses hours before bank shutdown, reports say

CNN’s Anna Cooban, David Goldman, Nicole Goodkind, Allison Morrow and Jeanne Sahadi contributed to this report.

Should I pull my money out of the bank? What to know about bank failures | CNN Business (2024)

FAQs

Should I pull my money out of the bank? What to know about bank failures | CNN Business? ›

Yes, if your money is in a U.S. bank insured by the Federal Deposit Insurance Corp. and you have less than $250,000 there. If the bank fails, you'll get your money back. Nearly all banks are FDIC insured.

Do I need to worry about bank failures? ›

“In theory, your money is safe,” Pendergast says. “But that's a bit like saying your house is safe during an inferno if you have fire coverage. It's not a stress-free process to go through.” The main cause for worry during a bank failure would be if the total of your deposits exceeds the FDIC coverage limit.

Where should I put my money if banks fail? ›

If your bank is federally insured
  • Stocks.
  • Bonds.
  • Mutual funds.
  • Annuities.
  • Life insurance policies.
  • Safe deposit boxes.
  • US Treasury bills, bonds or notes.
  • Municipal securities.
Apr 11, 2024

Can banks seize your money if economy fails? ›

Banking regulation has changed over the last 100 years to provide more protection to consumers. You can keep money in a bank account during a recession and it will be safe through FDIC and NCUA deposit insurance. Up to $250,000 is secure in individual bank accounts and $500,000 is safe in joint bank accounts.

Should I take my money out of the bank before a recession? ›

Generally, money kept in a bank account is safe—even during a recession. However, depending on factors such as your balance amount and the type of account, your money might not be completely protected. For instance, Silicon Valley Bank likely had billions of dollars in uninsured deposits at the time of its collapse.

Should I take my money out of the bank now? ›

Should I pull my money out of my bank? It doesn't make sense to take all your money out of a bank, said Jay Hatfield, CEO at Infrastructure Capital Advisors and portfolio manager of the InfraCap Equity Income ETF. But make sure your bank is insured by the FDIC, which most large banks are.

What banks are in danger of failing? ›

7 Banks to Dump Now Before They Go Bust in 2023
SHFSSHF Holdings$0.50
WALWestern Alliance$27.32
ECBKECB Bancorp$11.24
PACWPacWest Bancorp$5.97
FFWMFirst Foundation$4.35
2 more rows
May 8, 2023

What banks are most at risk right now? ›

These Banks Are the Most Vulnerable
  • First Republic Bank (FRC) . Above average liquidity risk and high capital risk.
  • Huntington Bancshares (HBAN) . Above average capital risk.
  • KeyCorp (KEY) . Above average capital risk.
  • Comerica (CMA) . ...
  • Truist Financial (TFC) . ...
  • Cullen/Frost Bankers (CFR) . ...
  • Zions Bancorporation (ZION) .
Mar 16, 2023

Where do billionaires keep their money? ›

Common types of securities include bonds, stocks and funds (mutual and exchange-traded). Funds and stocks are the bread-and-butter of investment portfolios. Billionaires use these investments to ensure their money grows steadily.

How do millionaires protect their money in banks? ›

Millionaires don't worry about FDIC insurance. Their money is held in their name and not the name of the custodial private bank. Other millionaires have safe deposit boxes full of cash denominated in many different currencies.

Are people pulling cash out of banks? ›

Here's Who's Pulling Their Money. Total deposits at commercial banks fell by just over $1 trillion from April 2022 to May 2023. People 40 years old and younger are more likely to pull their money, with 38% of them reporting that they moved deposits compared to 23% of those over 40.

How safe are the banks right now? ›

Most deposits in banks are insured dollar-for-dollar by the Federal Deposit Insurance Corp. This insurance covers your principal and any interest you're owed through the date of your bank's default up to $250,000 in combined total balances. You don't have to apply for FDIC insurance.

Can a bank refuse to give me my money? ›

Yes. Your bank may hold the funds according to its funds availability policy. Or it may have placed an exception hold on the deposit.

Should you keep cash at home during a recession? ›

If you are comfortable with your financial situation, have job stability, and have the cash reserves, big ticket purchases may still be achievable for you. But if you are feeling financially vulnerable to the possibility of an economic downturn, it is worth it to keep more cash on hand.

Can the government take money from your bank account in a crisis? ›

The government can seize money from your checking account only in specific circumstances and with due process. The most common reason for the government to seize funds from your account is to collect unpaid taxes, such as federal taxes, state taxes, or child support payments.

Is Bank of America safe from collapse? ›

Bank of America is just one place below JPMorgan Chase on both the 2023 G-SIBs list and the Federal Reserve's list of the largest U.S. banks, which is why it was chosen in our research as one of the safest banks.

Should I worry about my bank accounts? ›

The FDIC insures deposit accounts up to $250,000 per owner, per bank and per account category. Most banks are protected by the FDIC, so there's no need to panic and withdraw money that is protected.

Are the banks failing right now? ›

There still hasn't been a bank failure in 2024. The last Federal Deposit Insurance Corp. (FDIC) bank to fail was Citizens Bank of Sac City, Iowa. That was the fifth FDIC bank failure of 2023, a year with some of the largest bank failures in U.S. history.

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