When banks like SVB fail, what happens to deposits when the FDIC takes over? 

The SVB failure shows how important FDIC insurance is.

As we see with the Silicon Valley Bank (SVB) and Signature Bank closures, having an FDIC-insured account keeps your deposits safe in the event that a bank fails. 

On March 10, the Federal Deposit Insurance Corporation (FDIC) announced that Silicon Vally Bank (SVB) was closed by the California Department of Financial Protection and Innovation. Then, two days later, the FDIC announced Signature Bank was closed, too. To protect depositors, the FDIC took over the banks’ assets.  

But what does that actually mean?  

In these situations, the protection extended by the FDIC becomes a lifesaver for your money. 

The standard amount covered by the FDIC is $250,000 per depositor, per ownership category, per FDIC-insured bank. This means that if you have $250,000 or less in an FDIC-insured account, all your money is fully protected. If you have $500,000 in a joint account, your deposits would still be fully insured as each owner is entitled to $250,000 worth of coverage. 

Within 3 days, the FDIC announced that all “depositors will have full access to their money beginning Monday morning,” when Silicon Valley Bridge Bank, N.A., the bridge bank created by the FDIC, opens and resumes normal banking hours and activities, including online banking.   

This bridge bank is essentially the new face of SVB. A bridge bank is a chartered national bank that operates under a board appointed by the FDIC. It takes the deposits and certain other liabilities and purchases certain assets of a failed bank. The bridge bank structure is designed to “bridge” the gap between the failure of a bank and the time when the FDIC can stabilize the institution and implement an orderly resolution. 

Automatically, SVB depositors and borrowers will become customers of Silicon Valley Bridge Bank, N.A., and will have customer service and access to their funds by ATM, debit cards, and writing checks in the same manner as before. Similarly, the FDIC created a bridge bank for Signature Bank, N.A. 

This sequence of events, while not universal, is typical of past bank closures handled by the FDIC.  

What about fintech companies like Save and Chime? What would happen if they close? 

Fortunately, fintech companies offer FDIC insurance due to their partnerships with Member FDIC-insured banks. 

The SVB failure shows how important FDIC insurance is.

Let’s take Save’s Market Savings as an example, which combines the safety of an FDIC-insured deposit account with a variable APY* derived from market investments which is something that traditional savings accounts don’t offer. All Save customers’ Market Savings deposits are 100% FDIC-insured to the maximum amount allowed by law. 

The deposit safety is made possible through the innovative partnership between Save and our partner bank Webster Bank N.A., Member FDIC. Webster Bank is a leading bank in the Northeast that offers digital and traditional financial services to customers and commercial clients.  

FDIC insurance is one of the key benefits of keeping your money in Save’s Market Savings program,while Save’s growth-focused savings approach gives your money a real chance to grow

People are increasingly choosing emerging fintech companies and digital banks over traditional banks because they’re more accessible, convenient, and offer better returns. However, customers shouldn’t have to compromise the safety of their money to get higher returns or more convenience.  

The safety of your deposits is just as important as the return they generate. If you’re looking for an account with high-growth potential, choose one that will keep your money safe.  

FDIC protection is just one of the many benefits offered by Save’s products. Learn more about the perks of banking with Save here.   


Leave a Reply

Filter By Category: Investing
%d bloggers like this: