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Perhaps I'm overly skeptical, but everyone should know that all banks have the risk of 'if everyone takes their money out, the bank won't be able to make it wor
by anon291 4y ago
Perhaps I'm overly skeptical, but everyone should know that all banks have the risk of 'if everyone takes their money out, the bank won't be able to make it work', right?
- barnabee 4y agoYes, but if a bank has to remind people of that, it may be a signal it has already lost.
- WJW 4y agoIt's true that all banks have that problem, but for most banks it is not necessary for the CEO to remind everyone of that fact in a press release. The fact that they feel the need to make this statement makes it clear that SV bank is having much higher withdrawals than normal right now.
- cjensen 4y agoIf the Bank is federally insured, it's not a problem that the bank won't be able to make it work. That's why generally speaking bank runs only happen on uninsured banks in the US. SVB is not, as far as I can see, insured and should definitely be careful in their choice of words.
- mikesun 4y agoFDIC only insures up to $250K
- johnbellone 4y agoPer account. Edit: It seems I am incorrect. > The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category. Deposits held in different ownership categories are separately insured, up to at least $250,000, even if held at the same bank.
- notyourday 4y ago> Per account. Per account "type" and structure. For DDAs if you are married it will be: You: $250k Your+your wife: $250k You POD your wife : $250k Your wife: $250k Your wife POD you: $250k
- jfim 4y agoWhat's POD in this context?
- htrp 4y agoPayable on Death...
- notyourday 4y agoWhat @htrp said - payable on death.
- ryan_j_naughton 4y agoDDAs?
- notyourday 4y agoDemand Deposit Account - the kind of account that allows for cleared funds to be withdrawn without advanced notice. Probably 99.999% of accounts such as checking and savings one can write checks/do ACH payments/send wires/transfer money from fall into this category.
- TMWNN 4y ago>The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC-insured bank, per ownership category My understanding is that this might cause an unwelcome surprise to (for example) someone with a personal account at Bank A, and a sweep account at Brokerage P that sends its funds into accounts at Banks A, B, and C.
- mikeiz404 4y agoThat’s true however there is a limit. > The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. [1] 1: https://www.fdic.gov/resources/deposit-insurance/brochures/deposits-at-a-glance/ https://www.fdic.gov/resources/deposit-insurance/brochures/d...
- toast0 4y agoThey've got an FDIC page, https://www.svb.com/fdic https://www.svb.com/fdic, and they show up in the FDIC bank finder https://banks.data.fdic.gov/bankfind-suite/bankfind/details/24735 https://banks.data.fdic.gov/bankfind-suite/bankfind/details/... Although the Assets, Liabilities, and Capital reporting available if you click "create financial reports for this institution" estimates 5.69% of deposits are insured. Is a corporate account limited to $250K of deposit insurance? If so, I imagine many of them may have much more than that, and the reporting does show almost 75% of the deposits are in accounts with greater than $250K, assuming I'm reading the report correctly.
- silisili 4y agoHow do you mean? SVB is FDIC insured - https://banks.data.fdic.gov/bankfind-suite/bankfind/details/24735 https://banks.data.fdic.gov/bankfind-suite/bankfind/details/...
- deleted 4y ago[deleted]
- anon291 4y agoFDIC insurance is worthless for companies, as most would need more than $250k monthly just to make payroll.
- tempsy 4y agoYou’re kidding right? There’s a limit of like $250k An individual could easily have that much let alone a startup with millions.
- deleted 4y ago[deleted]
- bluGill 4y agoIn a bank? If you have that much you really should invest in something better than a bank account. Banks should be petty cash that you spend in a couple months.
- tempsy 4y agoi’m not talking about what the savvy thing to do is, just taking issue with the assertion that “it doesn’t matter if a bank fails cause it’s insured” when there’s a limit that the OP either failed to mention or didn’t know about and not that it matters but this is specifically about a startup or business not talking about personal finances of an individual
- kapilvt 4y agoThat’s not quite how payroll works
- bluGill 4y agoRight, but gp was talking about people not businesses
- tempsy 4y agono i wasn’t. i said an individual could easily have $250k in cash to show you that it is not a significant amount of money from a business perspective. nothing about what i said referred to keeping $250k in a non interest bearing account as being a smart decision for an individual
- FormerBandmate 4y agoWashington Mutual and Wachovia were both insured
- kasey_junk 4y agoWashington Mutual and Wachovia were both taken over without touching the FDIC insurance funds.
- jjulius 4y ago>... everyone should know... I'm going to go out on a limb and say that that might not be common knowledge.
- phphphphp 4y agoSure, and everyone knows that their favourite person in the world could just run them over in a car and kill them in seconds, but if your best friend says to you, “you know, I could drive my car into you and you would die… your life could be snuffed out with a moments notice” you may start to question your friendship.
- xboxnolifes 4y agoSounds like a normal conversation with my friends.
- phphphphp 4y agoSounds like you have a ready-made customer base for a bank in crisis.
- burnished 4y agoThis situation isnt like that at all.
- ncallaway 4y agoThe relevant similarity is the *act of making* the statement is what’s problematic. In both cases the statement is true, but the act of making the true statement raises concerns. Obviously there are important differences between the scenarios, but that critical aspect is what‘a relevant in this context.
- dylan604 4y agowaiter, i'd like what they're having
- tshaddox 4y agoWell, the big difference is that the bank CEO's statement doesn't suggest that he will or could do something awful himself. It is indeed quite common to hear aphorisms like "live every day like it's your last" which make the same point as your analogy, but remove the suggestion that the speaker could be a murderer and are thus much more analogous to the bank CEO's statement.
- WeylandYutani 4y agoYes and at that point the boss of the ECB shows up, calmly does a press conference at which he says "whatever it takes" and everyone goes back to sleep knowing the Germans are on the job.
- danielmarkbruce 4y agoEveryone doesn't need to know or care in many cases. The FDIC insures deposits up to $250k. That covers the vast majority of accounts at most banks. So a run won't occur at most banks. There were hardly any runs in 2008 for this reason - the relatively few "run type things" which happened were where big interbank exposures existed. SVB's customers are weighted significantly more towards businesses who will have more than $250k in the bank. So, they have to be ready to take action fast, so a bank run on SVB is much more likely.
- Enginerrrd 4y agoThat FDIC thing is so laughable to me because it's purely symbolic. Even the feds would have some serious trouble absorbing bank-run losses.
- billsnow 4y agoIt’s not symbolic, it’s literally an insurance company that the banks pay premiums to.
- geraldwhen 4y agoThe FDIC does in fact insure up to 250k per account/bank. You can get more insurance by spreading your deposits between banks, a service some financial institutions will do for you. https://archive.fdic.gov/view/fdic/4116 https://archive.fdic.gov/view/fdic/4116
- sillybov3456 4y agoThe problem isn't insuring the losses, that they can do. The problem is will you even be able to buy anything after the chaos if a systemically important financial institution goes under? The banks that hold the most ordinary customer deposits aren't like Lehman Brothers and the fallout from one of them going under would be catastrophic on a level far beyond something like 2008. FDIC was invented for the great depression when banks were not as large or concentrated, nor were they as globally connected and intertwined with day to day business. The reality is that FDIC is far from being sufficient insurance to calm down a collapsing market, that's why we had to do bailouts in 2008, because of what was coming down the road in that regard if the contagion were to spread further.
- deleted 4y ago[deleted]
- rchaud 4y agoThat's why depositor insurance laws were passed. Bank runs for retail-facing institutions are rare in developed countries. Even when they happen, retail deposits are made whole up to the insurance limit, which tends to be well above the national median. A run might be more likely for investment funds like Questrade and Fidelity if their customers liquidate their holdings en mmasse and move to cash deposits and CDs, which would be covered by depositor insurance.