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- SVB was shut down by the FDIC on Friday. Depositors can't withdraw their money yet.
- That's creating a cash crunch across startups and other businesses in Silicon Valley and beyond.
- If you are a depositor of SVB, how much money will you get back in the end?
Silicon Valley Bank was shut down on Friday and customers can't withdraw their money for now. There's a cash crunch happening, so how much will depositors get back in the end?
It's an important question, as many startups and other businesses that relied on SVB have to make payroll and pay other bills soon.
The FDIC insures US bank deposits up to $250,000 per account. But almost 88% of SVB's customer deposits were not insured. So what will happen to this money?
The rating agency Moody's estimated the future of these funds in a note shared late Friday. Moody's, backed by Warren Buffett, specializes in assessing the financial strength of financial institutions, so SVB depositors should pay attention.
Moody's downgraded SVB's long-term bank deposit rating to "Caa2," which reflects "an expected recovery rate of 80-90% for uninsured depositors," the rating agency said.
This is what it means for depositors in simple terms:
- FDIC insurance means that any money you have in an SVB bank account up to $250,000 will be fully covered. You will get all that money back.
- For anything over $250,000 in your SVB bank account, Moody's estimates you will get 80 cents to 90 cents for each dollar deposited.
Analysts, investors, and other finance industry observers expect, or hope, that SVB will be acquired by another financial institution this weekend. That could mean that a newly supported SVB bank might open on Monday morning and depositors will have full access to their accounts.
There's a lot to sort out this weekend if that's going to happen. SVB is the largest bank failure since the 2008 financial crisis. It has more than $200 billion in assets.
After the bank IndyMac failed in the 2008 financial crisis, the FDIC paid uninsured depositors 50 cents of every dollar, according to the agency's records. That is an extreme example. Selling the assets of a collapsed bank during a broad crisis is a lot harder and the prices for those assets were much lower. But it illustrates the risks to uninsured bank depositors.
Late on Friday, Moody's also shared its outlook for uninsured depositors of SVB, predicting customers "will receive a partial payment from the FDIC within the next week and may receive additional payments in the future as the FDIC sells the assets of the bank."