Managing your bank account(s) after the collapse of SVB
"Banking is very good business if you don't do anything dumb." -- Warren Buffett
The events of the last week have shown the importance of working with FDIC regulated institutions. The US Govt takes this very seriously and protected ALL SVB depositors. There was uncertainty initially after the SVB failure on Friday, but Monday was business as usual. The US financial system relies on the FDIC/OCC/Fed etc. serving as backstops in crisis situations - but they only step in to help institutions that are regulated by them.
During the financial crisis the US Govt made emergency moves to make GS, MS, Amex and others "bank holding companies", so that they could help them through the crisis. They did not do this with Lehman Brothers.
So given the new world how should one setup their banking strategy both personally and for their business?
In the past, I always recommended working with the banking partner of your choice for your operating account, but now I would recommend using one that is regulated by a US Govt agency to reduce both financial & operational risk. This past week also highlighted the importance of bank branches, as folks were able to walk in and open accounts same day, and access funds via cashiers checks. Having multiple providers for your financial accounts is best.
For any cash in excess of 3-6 months of operations, I recommend directly buying and holding short term US treasury bills for safety, liquidity and market rates of return. Money Market Funds are also fine, but they add in a 3rd party provider who holds the underlying US Treasury securities on your behalf, rather than them being held directly in your name. If you are going to use a Money Market Fund, be sure to vet the sponsor of the fund & the fees being charged, as well as verifying that the fund is in fact meeting it's mandate and not investing in securities you are not comfortable with. There are several providers of these services that do a great job - banks, asset managers & independent RIAs.
An often over looked benefit of buying and holding treasury bills directly in your name is that it's one of the few securities where you have a direct claim on the US Govt even if the security is held at a bank or a brokerage, so the level of protection can't be beaten.
If you want to discuss your individual situation and brainstorm plans, feel free to reach out.
