How the Failure of Signature Bank, Silicon Valley Bank, May Affect You

A customer stands outside a closed Silicon Valley Bank (SVB) headquarters in Santa Clara, California, March 10, 2023.

Justin Sullivan | Getty Images

After two bank failures and dramatic action by US regulators to protect depositors, financial advisors have a message for consumers: don’t panic.

The US government on Sunday approved plans to protect depositors and financial institutions hit by Friday’s collapse of Silicon Valley Bank. As a result, consumers have full access to funds from SVB and Signature Bank in New York, which regulators also closed on Sunday.

The federal reserve is also creating a Bank Term Funding Program to protect institutions affected by the instability triggered by the failure of the SVB.

CNBC FA Council members share their strategies for a volatile market

While futures initially surged higher on Sunday night after regulators’ announcement, bank stocks fell when the market opened on Monday.

“Every American should be confident that their deposits will be there when they need them,” President Joe Biden said in a Monday address to allay concerns about the U.S. banking system.

Most consumers don’t need to worry about making deposits

Lee Baker, a certified financial planner and owner of Apex Financial Services in Atlanta, said most consumers don’t have to worry about their bank deposits.

The standard coverage from the Federal Deposit Insurance Corporation is $250,000 per depositor, per bank, and for each account holder category, e.g. B. Individual or joint account holders. And you can split cash between ownership categories and banks to avoid overspending, Baker said.

We will not go down the path of a 40% fall in the broad market.

Lee Baker

Owner of Apex Financial Services

“A cautionary tale” on diversification

However, the bigger issue for some investors may be exposure to the financial sector. While some may have less exposure from an index fund, there may be more risk from funds focused on the financial sector or individual stocks.

“This is kind of a cautionary tale because it’s about diversification issues,” said Baker, who is affiliated with CNBC Financial Advisory Board. “I think this can be an illustrative moment for conversations with customers.”

However, despite mounting fears, he does not believe the bank failures are a repeat of the 2008 financial crisis. “We’re not going down the path of a 40% fall in the broad market,” he said, noting that there’s no reason to make “big portfolio moves and panic at the absolutely wrong time.”

Investors should stick to the process

Ivory Johnson, a CFP and founder of Delancey Wealth Management in Washington, DC, urges clients to “stick to the process,” saying your portfolio should match your goals and risk tolerance.

“If you were conservative before, you should be conservative now,” said Johnson, who is also a member of CNBC’s Advisory Board. But if your strategy told you to buy tech stocks and regional banks in the current market environment, “it’s time to review your process,” he said. How the Failure of Signature Bank, Silicon Valley Bank, May Affect You

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