How Insured are Financial Institutions in 2023?

Do the recent Bank Failures (Silicon Valley Bank) have you on the edge of your seat about the safety of your money in banks? 

In this video Ryan discusses how money at various financial institutions is insured or protected.

Recent bank failures in the United States and Switzerland have created concerns about the safety of money held in various financial institutions. In this video we are discussing the coverage limits of different financial institutions to provide an understanding of how coverage limits work. Silicon Valley Bank was one of the financial institutions that experienced difficulties, and it dealt with a lot of venture capital in the tech sector.

There were 40,000 depositors who had FDIC coverage limits well above the FDIC coverage limits, with most of them being Venture Capital companies. The bank was hit hard when 50 billion dollars of capital left the bank in one day. However, not being discussed in the news is that there were 106,000 depositors at Silicon Valley Bank who were within FDIC coverage limits, and their money was protected.

To ensure that the banking system in the United States is safe and functioning as it should, the FDIC and SIPC insurance have come up with coverage limits. For instance, if a married couple has $500,000 in a savings account at an FDIC-insured bank, each person would be covered, and the joint account would also be covered. However, if they had more than $500,000, the amount above the coverage limit would not be covered.

One could diversify among other financial institutions, move the excess amount above the limit to another bank, and be covered by FDIC insurance. There are over 4,500 FDIC-insured banks, and one can spread their money around and still be covered. There are also bank CD programs that can help diversify among several banking partners and have substantial coverage limits.

The Securities Investor Protection Corporation (SIPC) insurance covers money held in a brokerage account such as TD Ameritrade, Fidelity, Charles Schwab, or Interactive Brokers, and it covers up to $250,000 worth of cash and $500,000 worth of securities. It is there to protect against a brokerage house going under or something like that but not against stock market losses.

In conclusion, understanding coverage limits of various financial institutions is important. The FDIC and SIPC insurance have come up with coverage limits to ensure that the banking system is safe and functioning as it should. One can spread their money around, diversify among several banking partners, and have substantial coverage limits.

Also read: What To Consider Before Retiring In 2023


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