Is the collapse of Silicon Valley Bank (SVB) reason to be alarmed? Press the play button to learn more about what happened and why there's likely no reason for you to panic.
Although this was the largest failure of a U.S. bank since the 2008 economic crisis, SVB was kind of unique in the banking industry. Unlike most banks that loan money to local residents, small businesses, and corporations, SVB lent to a very exclusive group of companies: tech startups and venture-backed health care companies. The uniqueness of this customer base suggests that the SVB event is an isolated incident rather than a sign of widespread weakness in the banking industry.
This incident brings two cautionary tales to the forefront. First, remember that while we cannot control the direction of either markets or interest rates, we can control our exposure to their risks. Always focus upon risk. Second, don’t underestimate the limits placed upon FDIC insurance. The expression “as good as money in the bank” does have its qualifications.
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