#SVB #bankcollapse #Binance #crypto2023
What was the recent collapse of SVB about?
The recent collapse of Silicon Valley Bank (SVB), which was the second-largest bank failure in US history. SVB primarily served tech businesses and saw an increase in deposits due to low-interest rates. However, SVB faced a problem as banks typically make money through loans rather than deposits and low interest rates made it difficult to earn a significant profit. To counter this, SVB invested in US Treasury bonds to achieve a slightly higher interest rate on its loans. Unfortunately, interest rates hiked causing the value of SVB’s bond portfolio to plummet and their old US Treasury bonds now paid out lower interest rates.
This significant loss created a challenging situation for SVB as they had invested a majority of their depositors’ funds in long-term bonds that had significantly depreciated in value. In addition to this, the higher interest rates made it harder for tech businesses to borrow money which led them to draw upon their cash reserves at SVB. In the process of meeting their own liquidity needs, they drained SVBs.
Risks of having over $250,000 in a single entity bank account
It's essential to assess your risk by knowing how much your deposits are insured for and how easily and often you can withdraw; considering diversification by holding different asset classes or holding deposits in multiple banks; and doing your due diligence by researching before making any financial decisions. The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to maintain stability and public confidence in the nation’s financial system. The FDIC insures deposits; examines and supervises financial institutions for safety, soundness, and consumer protection; makes large and complex financial institutions. The FDIC protects and reimburses your deposits up to the legal limit of $250,000 if your FDIC-insured bank fails.
What happens to those that have more than $250,000 in an individual bank account?
Some wonder what happens if you have more than $250,000 in an individual bank account. However, If you have over $250,000 in individual accounts at one bank, the amount over $250,000 is considered uninsured and financial advisors recommend that you move the remainder of your money to a different financial institution. Another way to protect your money is to deposit it in different account categories or open accounts with different banks, essentially moving away and diversifying.
Simple tips for protecting your assesets/funds
Some steps you can take include not clicking on attachments or links sent by unknown sources, never giving out your personal information like Social Security number or driver’s license number. Checking your bank account daily and credit card accounts at least once a month. Using strong passwords and two-factor authentication for all online accounts and being careful about where you access financial accounts. You can also keep your money liquid by investing in various types of banking products or fixed-income securities backed by large stable organizations like corporations and the government or in stable and well diversified platforms such as Binance.
