This weekend, American’s witnessed the collapse of two banks (Silicon Valley Bank & Signature Bank). This has led to the understandable concern of consumers in regards to the security and accessibility of their money at their financial institutions. Let’s take a look at both what has occurred over the weekend, as well as the truth behind your money’s security and your access to it.
Background on Silicon Valley Bank
At the end of 2022, Silicon Valley Bank’s total assets were $209 billion, with a total investment portfolio of $117 billion. Roughly 44% of their investment portfolio ($52 billion) was tied up in long-term residential mortgage-backed securities. Additionally, $151 billion of Silicon Valley Bank’s $173 billion in deposits were uninsured. This is due to a majority of their deposits being made up of a small group of customers.
What happened to Silicon Valley Bank
On March 9, Silicon Valley Bank (SVB) experienced a run-on deposit where over $42-billion were withdrawn from the financial institution. This run resulted in the withdrawal of roughly 25% of deposits from SVB was caused by a multitude of reasons:
- Reported losses on securities
- A quick stock offering to cover losses
- Recommendations be numerous Silicon Valley venture investors telling their portfolio companies to immediately remove their funds from the financial institution
When investments began to slow this year, Silicon Valley Bank (SVB) needed to liquidate its investment portfolio to fund withdrawals. In order to meet cash needs for withdrawals, SVB sold $21 billion of their investments, which led to a $1.8 billion loss. It has since been determined that SVB implemented ineffective Asset Liability Management (ALM) reporting and advice which was overseen by an ineffective ALM committee.
The culmination of poor liquidity and a massive outflow of funds led to the closure of SVB on March 10, 2023, by the California Department of Financial Protection and Innovation.
What happened to the money of Silicon Valley Customers
In order to protect insured depositors of SVB, the Federal Deposit Insurance Company (FDIC) created a new bank, Deposit Insurance National Bank of Santa Clara (DINB). When SVB was closed, the FDIC transferred all insured deposits to the new bank (DNIB) for depositors to have access to by March 13, 2023. All SVB locations were also reopened on March 13 under the DINB name and customers were able to have quick access to insured funds.
Is my money secure at my credit union?
The quick and easy answer is YES! Much like how banks are federally insured by the FDIC, credit unions are insured by the National Credit Union Association (NCUA). Each member is insured to at least $250,000. Meaning should anything ever happen, your money is secure. In fact, no one has ever lost of dime of NCUA-insured deposits (up to $250,000).
Additionally, T&I Credit Union remains well capitalized and well positioned to continue serving our members and community. We have been chartered for 68 years and look forward to continuing the service we provide to our members for generations to come.
What makes T&I Credit Union different from Silicon Valley Banks?
T&I Credit Union is in a very different position than Silicon Valley Bank. Our first focus has been and will continue to be the prioritization of the security of our members funds and interest.
- Our deposits are nearly 100% insured, unlike those of SVB who had 90% of their deposits uninsured.
- Our membership base is very diverse, whereas SVB had little to no diversification
- A majority of SVB deposits were very large deposits, from a small group of big depositors.
- Silicon Valley Bank’s growth was unreasonable, while ours has been tempered.
- T&I Credit Union takes extensive steps to ensure the continued growth of our credit union is both reasonable and sustainable.
- This is done by continuous review and monitorization by both our management team, as well as our board of directors (who are also members of our credit union, much like yourself).
- Our liquidity is strong. SVB did not manage their liquidity or concentrations in a thoughtful or caring manner.
Important information to know
- The NCUA operates virtually identical as the FDIC, It’s just for CUs instead of banks. It’s just as strong, stable and it has never cost taxpayers a cent.
- Silicon Valley Bank’s failure will not impact the share insurance fund.
- Share insurance only comes into play if a financial institution fails.
- T&I Credit Union is exceptionally strong and our financials are always posted in our lobby.
- While the failure will not directly affect the T&I Credit Union, management is monitoring the situation and is poised to act if economic conditions are impacted.
- We will continue to keep members apprised of any changes to their share insurance coverage.
- IRA deposits are insured for a separate maximum of $250,000.
Where can I find more information?
- Members can estimate their share insurance at http://www.mycreditunion.gov/
- Online brochure of “How You Accounts are Federally Insured” – https://ncua.gov/files/publications/guides-manuals/NCUAHowYourAcctInsured.pdf
Final Thoughts
What happened to Silicon Valley Bank is terrible to see. However, T&I Credit Union remains in strong standings and ready to keep your money secure. For additional information in regards to your money or what we do to keep it safe:
- Please call our office at (248) 588-6688
- Ask our knowledgeable staff members on this.
