Financial Industry Insurance Programs
When events like the Silicon Valley Bank (SVB) and Signature Bank failures happen, it's natural to wonder how an institution safeguards your funds.
Fortunately, the government has designed insurance programs for this very reason: to help protect your funds once deposited. With SVB and Signature Bank, banking regulators took the extraordinary step of designating both banks as systemic risks to the financial system, giving regulators flexibility to backstop the uninsured deposits. Regulators hoped that by protecting these deposits, they would bolster confidence in the banking system.
I expect the government’s quick actions should maintain balance in the banking system, yet these events may have an impact on longer-term economic growth.
Here are the most prominent programs offered:
Federal Deposit Insurance Corporation (FDIC)
The FDIC is an independent government agency that protects bank depositors from the loss of uninsured deposits at an FDIC-insured bank. In other words, FDIC insures your money at the bank. The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. All deposits an accountholder has in the same ownership category at the same bank are added together and insured up to the standard insurance amount. If your bank is an FDIC-insured institution, you don't need to apply for FDIC insurance because coverage is automatic.
The National Credit Union Administration (NCUA)
The NCUA federally insures credit unions and offers a safe place for credit union members to save money. The standard share insurance amount is $250,000 per share owner, per insured credit union, for each account ownership category.
Securities Investor Protection Corporation (SIPC)
SIPC protects the cash and securities in your brokerage account up to $500,000. The $500,000 protection includes up to $250,000 protection for cash directly held in your account.
SIPC does NOT protect:
Your investments if the firm is not a SIPC member
Market loss
Promises of investment performance
Commodities or futures contracts
www.fdic.gov
www.ncua.gov
www.sipc.org
