Hi there – with the news of Silicon Valley Bank (SVB) making headlines, I’d like to share with you some key points of what you should know…

What happened to SVB?

• Founded in 1983, SVB had worked with many venture capital-backed startups and was a key engine for the tech industry’s success.
• As startups raised money, in recent years, some of these loans were both funded by and deposited into SVB.
• With considerable cash on hand, SVB utilized deposits to buy long-dated asset-backed securities purchased at low interest rates.
• Interest rates rose, meaning that SVB’s long-term fixed-rate securities decreased in value and posed liquidity issues until reaching their maturity date.
• With less venture capital money coming in, startups began drawing down their deposits to finance their daily operations – money that was tied up in long-term securities.
• SVB announced that it needed to raise $2.25 billion to shore up its operations. Its stock price plunged, and an old fashioned bank run was spurred where customers swiftly withdrew funds.
• SVB was shut down by regulators this past Friday, March 10.

What is the fallout?

• Most banks are insured by the Federal Deposit Insurance Corporation (FDIC), which provides coverage up to $250,000 per depositor, per bank, in each ownership category. However, in light of recent events the federal authorities have intervened, taking aggressive action to dispel uncertainty and panic. The FDIC has agreed to backstop all depositors of SVB, guaranteeing that SVB’s depositors will have access to all of their money.
• The Federal Reserve is creating a new Bank Term Funding Program aimed at safeguarding deposits. Through the program, it will offer banks, saving associations, credit unions, and other institutions loans up to one year. 

What does this mean for you?

• Patience and understanding is important amid SVB worries. Key to understanding the SVB situation is that panic was a main trigger in SVB’s collapse. The actions of federal authorities indicate their commitment to taking swift action to ensure the safety of depositors’ savings and avoid a potential financial crisis. 
• At Certus Wealth Management, Schwab is the custodian we use to hold client investments. Schwab utilizes three banks, thereby providing higher coverage limits than FDIC and offering further protection to clients. 
• At Certus Wealth Management, we are mindfully monitoring what is happening in the market and banking sector. We continue to diligently work to help our clients develop, adjust, and maintain strategies in the context of their long-term goals. 

As always, we are committed to keeping you informed and are here for any questions or concerns that you may have. Please feel free to reach out to discuss your unique situation and goals.

Certus Wealth Management