SVB Failure – March 2023

We’re sure you’ve heard of the concern of banks defaulting. Here’s a a quick recap of what happened the week of March 10th:

Last week, regulators seized Silicon Valley Bank (NASDAQ: SIVB), the nation’s 16th-largest bank. The bank was declared insolvent after it couldn’t satisfy withdrawals by depositors last Thursday and Friday.

How did a recently thriving financial institution get to this point? There were a number of contributing factors:

• SVB works with a large percentage of tech companies, and activity in the tech sector had dropped off over the past year.
• The bank had its deposits tied up in low-yielding treasuries, which have dropped in value due to higher rates.
• SVB tried to raise cash by selling stock. When that didn’t go well, they had to sell treasuries at a loss.
• Depositors lost confidence in the bank and withdrew their funds, causing the bank to fail.

The FDIC insures deposits up to $250,000, and the majority of SVB customers had more than that deposited in the bank. The U.S. government has said it will waive the deposit cap and all depositors will get their money, allowing tech companies to pay their bills and payrolls.

Regulators also seized New York-based Signature Bank over the weekend. The government plans to make depositors at that bank whole as well.

Are the activities of the last few days a sign of a bigger banking crisis? We don’t think so. Keep in mind that regulators are watching dozens of banks even in normal times. Additional scrutiny is to be expected in light of recent events. However, markets don’t like negative headlines. The recent bank events led markets to drop significantly last week, and we expect markets to remain rocky this week as the situation unfolds.

The latest inflation numbers are also scheduled for release this week, and could add more market drama.

Click here to watch the video update about SVB from our Chief Investment Officer, Joe Maas.

You should know we’re keeping a close eye on these events and how they impact your investments. If
you have questions about what’s happening with your accounts, contact us. We’re here to walk alongside you as we navigate this winding road ahead.

Your team at Sound Planning Group

The information contained herein is general in nature. It does not take into account your particular investment objectives, financial situation, or needs. It is provided for illustrative or informational purposes only, and should not be construed as advice. Our advisors can meet with you to discuss your retirement plan.