MARION, IL (WSIL) -- When banks like Silicon Valley and Signature bank collapse, one of the big question people ask is, "can that happen to my bank?" Well, according to Banterra Bank president Jeff May, there's one big difference between those banks and your local bank
"Banks here in southern Illinois, we're almost all funded by insured deposits, and that's the key word insured deposits. whereas those banks were not," said May.
When you walk into your local bank, it's not uncommon to see the sign FDIC. But what is FDIC?
Created in the 1930s, The Federal Deposit Insurance Corporation is a federally backed insurance set during the depression in hopes to bring confidence to consumers to their banks.
Typically, deposits up to $250,000 are insured by the full faith and credit of the United States Government.
May says, what happened with SVB and Signature is a unique situation not seen in the area.
"Both banks grew rapidly and almost exponentially using volatile deposits and uninsured deposits which ultimately led to their downfall," said May
May says, both banks catered more toward a very unique business model.
“One was involved in start-up tech companies and the other was involved in cryptocurrency companies," said May. "That’s something you’d never see in a bank here in southern Illinois.”
May worked 20 years with the FDIC. Therein lies one major difference between those banks and your local community bank.
"Since its existence, there’s not been a single dollar lost to an insured deposit, not one," said May.
The FDIC, besides insuring, is responsible for dealing with these failing banks and resolving the issues.
"These were unique in that the depositors which were uninsured took all their money out so fast they had to handle it differently using bridge banks which they could do but very seldom do," said May.
May does not see any similarities between what happened to SVB and Signature and any local bank.
"It’s just consumer sentiment we have to worry about," says May. "It’s a completely different business model than what you’d see at community banks."
President Biden announced those with deposits at the two banks would be covered through FDIC even deposits over the usual limit of $250,000, however, investors are a different story.
"If you have stock in silicon valley bank right now that stock is worthless," said SIU economics professor Kevin Sylwester. "You basically lost your investment.
"Depositors I think are fine but if you bought stock in these companies. Just like with any company that goes out of business, that stock is worthless."