Is the Money Safe?

Executive summary:

  • In the event of any further stresses in banks, the U.S. government is very likely to raise the FDIC coverage limit for banks that fail
  • A repeat of the 2008 financial crisis is very unlikely
  • Regulators have made the necessary moves to keep issues in the global banking system idiosyncratic, rather than systemic

Are my deposits secure?

This is an understandable question I’ve fielded from countless concerned investors ever since the sudden demise of Silicon Valley Bank on March 10 and the collapse of Signature Bank two days later. Worries about the health of the overall banking system have led to a drawdown in deposits, with investors yanking nearly $100 billion in deposits from U.S. banks during the week that ended March 15.1 What’s more, there are fears that the stresses in the banking sector could be the start of the next financial crisis.

Before I get too far into the weeds, let me address these concerns by emphatically stating that:

  1. If you are with an FDIC insured bank and your account balances are below $250,000, your money is safe.
  2. If you have deposits in excess of $250,000, it is likely that the U.S. government will guarantee those deposits as well—as it has in the case of the three bank failures.
  3. A repeat of the 2008 financial crisis is highly unlikely.

Let’s dive in to the nitty gritty to understand why.