Is the cash in your bank safe?

Earlier this month financial markets were roiled by new of failure of one of the country’s largest banks, Silicon Valley Bank. Federal officials took the extraordinary step of closing the bank on a Thursday in the middle of the day, going outside the typical playbook of shutting it down on a Friday evening. It spoke to the extraordinary speed that this classic bank run was spiraling out of control. Account holders attempted to withdraw about 20% of the total deposits of the bank, which would present a potential death blow to even the most well capitalized banks.

Over that following weekend, depositors still didn’t know that they would be made whole outside of limits offered by deposit insurance. Some Boulder County venture capital firms (and assumedly some local companies) waited to find out if fund investors and portfolio firms would be able to get their cash back. The investor community was heartened to learn of the later unusual decision that weekend by federal officials to protect all deposits with Silicon Valley Bank in addition to other affected institutions.

There is ample opportunity for debate about whether this extraordinary step should have been taken. Was this just another example of well connected technology financiers using the modern bully pulpit of social media to compel federal officials to step in to protect their investments? It’s hard to say and even with some time to reflect on the incident you could make a good case that the run on these major regional banks could have introduced systematic financial instability that would spread far beyond the tech community.

In the wake of these bank closures, you may be wondering if the cash in your bank or credit union account is safe. I’d recommend these steps to verify your cash is safe.

Know your deposit insurance: Bank accounts are generally protected by the FDIC, while most credit union accounts have similar NCUA insurance in place. These institutions were put in place during the Great Depression when many people lost their bank deposits. If you’ve followed news stories of the SVB collapse, you’ve heard about the protected deposit maximum of $250,000. If you own accounts with another person, such as your spouse, it’s likely your protection exceeds this. Look at the FDIC Electronic Deposit Insurance Estimator (EDIE) website to determine how much of your deposits are insured. By holding some accounts in your name, in the name of your spouse, and jointly it’s possible to multiply your deposit insurance coverage.

Additional steps for business owners: One of the compelling narratives voiced by the pro-bailout camp was that there were many companies that had substantial deposits with Silicon Valley Bank in excess of deposit protection that were using the funds to pay their employees. It doesn’t take too large of a business to have needs that exceed $250,000 to pay their employees and also have working capital.

One possible solution to this challenge is offered by Intrafi Funding was formerly known as CDARS (Certificate of Deposit Account Registry Service). The Intrafi Cash Service gives depositors the ability to benefit from the FDIC deposit insurance at several banks without the need to have direct banking relationships with all of those institutions. When you deposit funds in an account with this coverage, behind the scenes your bank is transferring funds to other member institutions to multiply the insurance coverage. From the perspective of the account owner, you shouldn’t no

tice a difference in your ability to deposit and withdraw funds. Again, you just need to bank at one of the member institutions that offer the Intrafi Cash Service and ensure that you’re opening an account with this protection. It’s possible that the cost and features of a protected account will be different than a standard business account as it may need to be a savings or CD account to qualify for this coverage. For more information to go to intrafinetworkdeposits.com/ or check with your local participating bank.

David Gardner is a CERTIFIED FINANCIAL PLANNER™ professional at Mercer Advisors practicing in Boulder County. The opinions expressed by the author are his own and are not intended to serve as specific financial, accounting, or tax advice. They reflect the judgment of the author as of the date of publication and are subject to change. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors.

The above link is being provided as a convenience and for informational purposes only. Mercer Global Advisors Inc. is registered with the Securities and Exchange Commission and delivers all investment-related services. Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services.