News Talk 94.1/AM 1600 Where The Upper Cumberland Talks
Concern about the collapse of the Silicon Valley Bank should not drive individuals to participate in bank runs.
That’s according to Tennessee Tech Finance Associate Professor Alma Nunez. She said the concern about banks failing and withdrawing funds can actually lead to the failure of the banks themselves.
“What we have now is called deposit insurance,” Nunez said. “So the federal deposit insurance corporation makes sure that depositors’ money is protected so you don’t feel the urge to go an withdraw your money from a bank. Even if a bank runs into trouble, your money is safe because the federal government is backing it up.”
Nunez said even if banks are having struggles because of rising interest rates, the average person’s money is not at stake. She said the FDIC is well-funded and is able to handle those kinds of losses.
In addition to that, Nunez said as a result of what we’ve seen the last week there is a new protection program called the Bank Term Funding Program. She said that will allow banks that need to give depositors their money back the opportunity to do so through a loan.
“Your money is not at risk especially if your deposits are below the insurance amount of $250,000,” Nunez said. “Now should you keep an eye on what’s going on with your bank? Sure. But also keep in mind that at the peak of the crisis in 2008 a lot of our community banks were performing solidly and were not the banks that were getting into trouble.”
“So at this point, even the concerns that we see from a financial standpoint are not as critical as they were in the last banking crisis and it is very likely that most of our community banks are managing their risks appropriately and while we should keep an eye on it, we definitely do not need to panic.”
