After two banks failed and the US government took major steps to protect depositors, financial experts have a message for clients: Don’t panic.
The United States government authorized measures on Sunday to protect depositors and financial institutions harmed by the failure of Silicon Valley Bank on Friday. As a consequence, customers will have full access to money from SVB and Signature Bank in New York, which were both closed down by authorities on Sunday.
The Federal Reserve is also making plans for a Bank Term Financing Program to help banks that lost money when SVB went bankrupt.
Although futures initially rose after the news from regulators on Sunday evening, bank stocks dipped when the market opened on Monday.
“Every American should have confidence that their savings will be there if and when they need them,” President Joe Biden said in a Monday speech aimed at assuaging concerns about the United States’ banking sector.
Most consumers don’t need to worry about deposits.
According to Lee Baker, proprietor of Apex Financial Services in Atlanta and a certified financial advisor, most people don’t need to be concerned about their bank balances.
The Federal Deposit Insurance Corporation’s standard coverage is $250,000 per depositor, per bank, for each account ownership type, such as single or joint account holders. Baker says that if you want to stay under the limits, you can also split your money between different ownership types and banks.
‘A Cautionary Tale” on Diversification
Yet, exposure to the banking industry may be a significant risk for certain investors. Although index funds may provide a lower slice of exposure, banking sector-focused funds or particular equities may present a bigger risk.
Investors should ‘stick to the process.”
Ivory Johnson, a certified financial planner and the founder of Delancey Wealth Management in Washington, D.C., advises clients to “stay to the process,” saying that your portfolio should match your objectives and risk tolerance.