Silicon Valley Bank Proves My Point
Always have more than one bank account
The adage, "Never put all your eggs in one basket," holds regarding financing. Never be reliant on one person or one source. Unexpected things happen. I learned my lesson as I watched Greece institute capital control back in 2015, and it was removed in 2019. Cyprus also introduced austere capital control on their banks as early as 2013. As a result, accounts were frozen, many high-net-worth individuals lost their savings, and businesses needed help transferring funds between foreign suppliers or conducting transactions with overseas customers. Companies were on the brink of bankruptcy because all their capital was frozen in these banks. All their money vanished because of the bank's bad and risky loans.
Now Silicon Valley Bank has locked its doors in the wealthiest area of California—the epicenter of technology start-ups and venture capitalists. According to CNBC, the bank's surprising announcement that it needed $2.25 Billion to shore up its balance sheets on Wednesday, March 8th, 2023, caused many Hedge funds and Venture capitalists to withdraw all their funds. A mass exodus of cash and accounts spiraled uncontrollably until Silicon Valley Bank had to shut its door. Did the venture capitalists and Hedge funds know more than Silicon Valley Bank was willing to admit? Was the problem more extensive than initially advertised? Only time will tell. But many tech companies and small depositors less lucky to withdraw their money may have seen their nest eggs disappear. The FDIC has insured $250,000.00 per depositor per bank. Any funds beyond the limit are not guaranteed. In other words, it may be gone come Monday morning. But will customers have unfettered access to their money? Are there other companies that have seen their cash flow disrupted? Healthy companies that had stashed their money chest with Silicon Valley Bank; are they on the brink of bankruptcy, too?
Please do me a favor and always divide your savings between two or more banks. Do not rely on one financial institution. Even though banks today are better capitalized since the banking crisis of Lehman Brothers on September 15th, 2008. Silicon Valley Bank illustrates how sometimes the financial community can be blindsided unexpectedly. Therefore, as a business, it is even more important to spread your financial network between two or three institutions to counter disruptions.
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