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? ›

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.

Should I pull out my money from the bank? ›

Your money is safe in a bank with FDIC insurance. A bank account is typically the safest place for your cash, since banks can be insured by the Federal Deposit Insurance Corp. up to $250,000 per depositor, per insured institution, per ownership category.

What do you need to know about bank failures? ›

Key takeaways. When a bank fails, the FDIC or a state regulatory agency takes over and either sells or dissolves the bank. Most banks in the US are insured by the FDIC, which provides coverage up to $250,000 per depositor, per FDIC bank, per ownership category.

Should I be worried about bank failures? ›

The Federal Deposit Insurance Corp. (FDIC) insures bank accounts up to $250,000 per depositor, per account category. 1 So, unless your bank is not insured by the FDIC or you have deposited more than the FDIC limit, your money is safe if your bank fails.

What to do with your money if banks fail? ›

In most cases, accounts are sold to another bank, and you will automatically have access to your funds at the new institution. Funds should be available immediately. In the case of FDIC payments, the agency aims to pay out customers as soon as possible after their bank failure.

Can banks seize your money if the economy fails? ›

It indicates an expandable section or menu, or sometimes previous / next navigation options. Your money is safe in a bank, even during an economic decline like a recession. Up to $250,000 per depositor, per account ownership category, is protected by the FDIC or NCUA at a federally insured financial institution.

Should I take my money out of the bank in 2024? ›

First and foremost, it is essential to choose a bank that is insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC insures deposits up to $250,000 per depositor, per insured bank. This means that if your bank fails, you can still get your money back up to the insured amount.

Are banks failing in 2024? ›

State regulators closed Republic First Bank in April 2024, marking the first bank failure of the year. Fulton Bank entered into an agreement with the FDIC to purchase most of Republic First's $6 billion in assets and to assume most of its $4 billion in deposit liabilities.

How to prepare for bank failure? ›

The first step in protecting your savings is to make sure that your bank account is FDIC-insured. FDIC insurance provides coverage to depositors in the event that a bank fails, meaning that even if the bank goes bankrupt, your deposits are safe up to $250,000 per depositor per account.

How many US banks are in danger? ›

Consulting firm Klaros Group analyzed about 4,000 U.S. banks and found 282 banks face the dual threat of commercial real estate loans and potential losses tied to higher interest rates. The majority of those banks are smaller lenders with less than $10 billion in assets.

What banks are going under? ›

Earlier last year Silicon Valley Bank failed March 10, 2023, and then Signature Bank failed two days later, ending the unusual streak of more than 800 days without a bank failure. Before Citizens Bank failed in November 2023, Heartland Tri-State Bank failed July 28, 2023 and First Republic Bank failed May 1, 2023.

Is my money safe in a bank crisis? ›

FDIC Insurance

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.

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.

Is your money protected if a bank collapses? ›

FSCS will pay compensation within seven working days of a bank or building society failing. You don't need to do anything, FSCS will compensate you automatically. More complex cases, including temporary high balance claims, will take longer and you'll need to contact us to request an application form.

What happens to my money if a bank goes bust? ›

When a bank is at risk of going bust, there is usually a run on the bank when the bank's customers try to withdraw the money in their accounts before the bank closes. There is a government scheme in place which will compensate account holders of a bank that has failed, but only up to a limited sum.

Do you still owe money if a bank collapses? ›

So, no, your loans aren't forgiven if your lender goes bankrupt. You're still responsible for making payments, the only difference is that you'll be sending payments to another institution instead of the one that originally gave you the loan.

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

Should you take your money out of the bank during a recession? Probably not. You can withdraw savings to pay bills or reinvest as normal, but banks are somewhat recession-proof. Keep in mind, many banks are FDIC insured: your deposits are protected up to $250,000 per depositor, per bank.

Is my money safe in the bank right now? ›

FDIC Insurance

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

The government can seize money from your checking account only in specific circ*mstances 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.

Why are people pulling money out of the bank? ›

A recent CNBC Select and Dynata Banking Behaviors Survey found that 40% of respondents who reported having withdrawn cash from their savings say they did so to cover fixed bills, such as a car payment. The second most cited reason, at 38%, was to cover variable expenses like groceries.

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