1 Valuable Lesson the SVB Collapse Taught Growth Investors
The banking industry, government regulators, and investors alike are still processing the March 10 collapse of SVB Financial, the parent company of Silicon Valley Bank (SVB). It was the second-largest bank failure in U.S. history, with $175 billion in customer deposits on the line.
But this crisis had one unique (and worrying) feature: Just 6% of those deposits fell within the $250,000 deposit insurance limit mandated by the Federal Deposit Insurance Corporation (FDIC). Most of SVB's customers were technology companies, investors, and high-net-worth individuals, which meant the majority of them faced the prospect of a total loss.
Thanks to prudent regulations that prevent banks like SVB from using customer funds to make risky investments, there actually wasn't an asset shortfall at all -- in other words, the bank was in a position to cover all deposits, it just had to liquidate its investment portfolios (it had an estimated $209 billion in assets at the time of failure).
Source Fool.com