LITTLE ROCK, Ark. – Over the weekend, the United States government was forced to take emergency measures, amid the second and third-largest bank failures in U.S. history, to prevent a widespread banking crisis.
Friday regulators with the Federal Deposit Insurance Corporation ordered the closure of Silicon Valley Bank and seized all of its assets. They said all insured depositors will have full access to their deposits no later than Monday.
The banking emergency happened after Silicon Valley Bank, which caters to the tech industry, experienced a dramatic increase in cash withdrawals, which eventually rendered it insolvent.
The FDIC, the Federal Reserve and the U.S. Treasury Department guaranteed all deposits at Silicon Valley Bank, as well as Signature Bank of New York, which also had its assets seized on Sunday. All deposits were guaranteed above and beyond the limit on insured deposits, which is $250,000.
SVB’s collapse was the largest bank failure since the 2008 financial crisis.
According to the FDIC, since 1934, no depositor has lost a single penny of insured funds due to bank failure, but there are limits to their protection.
For instance, the agency does not protect 401(k) retirement funds that are not invested in bank products. The FDIC also does not protect losses in stocks, bonds, mutual funds, annuities, insurance products and crypto assets.
However, for customers whose funds are managed by a company that has gone out of business, help can still come in the form of the Securities Investor Protection Corporation.
According to information provided by the Poynter Institute, if a firm closes, SIPC protects the securities and cash in a customer’s brokerage account up to $500,000. The $500,000 protection includes up to $250,000 protection for cash in the account.
SIPC protects customers whose brokerage firm is an SIPC member, customers with securities at the brokerage firm, or if the customer has cash at the brokerage firm on deposit in connection with the purchase or sale of a security.
Protection is only available if the brokerage firm fails and SIPC steps in.
SIPC does not protect investments if the firm is not an SIPC member, market loss, promises of investment performance, or commodities or futures contracts, except under certain conditions.
When you put money in an FDIC-insured bank product, it is protected up to $250,000. If you are unsure if your broker is SIPC insured, check out the list of its 3,500 insured members.