Financial experts weigh in on Silicon Valley Bank collapse and what it could mean for your money

Despite the Biden Administration trying to calm panic surrounding the bank collapse, many people have expressed worry about what could happen if "their" bank we
Published: Mar. 13, 2023 at 6:48 PM EDT
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RICHMOND, Va. (WWBT) -Financial experts say that what drove the Silicon Valley Bank collapse was when people started to pull their money out of the bank after it announced it was having financial difficulties.

Banks are only required to have a small percentage of the money you deposit into it at any given time. SVB didn’t have the money to give back to all of those people who were trying to pull their deposits.

That ultimately caused the bank to collapse.

Experts here in Richmond say that this likely wouldn’t happen here in Virginia because most people or groups who put money into SVB were tech startups, meaning the bank took on too many big-level deposits. SVB also failed to manage its interest rate risk properly.

“So this is not an apples-to-apples comparison with any Virginia bank. The banking system in Virginia and in the nation remains strong and stable. The FDIC insurance does the vast majority of most people’s deposits,” said Whitehurst, who is the CEO of the Virginia Bankers Association.

The good news is, if you have money in a bank right now, you’re guaranteed by federal law to get 250,000 dollars back even if the bank goes under.

However, bad consumer behavior could still put a bank at risk. If too many people start pulling their money out of banks, that could create a problem in which the bank can’t pay everyone back, causing it to collapse.

That’s what the Biden Administration is trying to prevent by showing good faith in giving depositors who had money in SVB all of their funds back even though most went over the 250,000 dollar federally insured amount.

With some uncertainty still looming about the SVB situation, some worry this could be a repeat of the 2008 financial crisis. But experts say that wouldn’t happen because the 2008 crisis was a widespread problem, and this situation only involved a few banks with unusual business models.

“What we have now is some singular events based on very unique circumstances that I believe are quite different,” said Whitehurst.