Is Your Money Safe Amid Regional Bank Worries?

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Money managers Vanguard, Fidelity, and BlackRock have soothing words for investors worried that their mutual funds and ETFs hold shares of regional lenders roiled by the collapse of Silicon Valley Bank and Signature Bank: Their exposure is minimal.

Key Takeaways

  • Regional bank shares cratered on Monday after two regional lenders failed.
  • Big money managers say mutual funds and ETFs had minimal exposure to regional banks.
  • FDIC insures up to $250,000 in deposits per depositor held at an FDIC-insured bank.
  • You can estimate your deposit insurance with the FDIC's EDIE tool.

ETFs Hit By Stock Plunge

As of the end of last year, for example, Vanguard had just 0.2% of its $7.2 trillion of assets in SVB Financial Group, owner of SVB, according to spokesperson Jeremy Eisengrein. Its exposure to Signature was even lower—just 0.1%, he said in an email.

"Vanguard and client exposure to those equities is very low," Eisengrein said. "SVB was a member of the S&P 500 Index, which is used as a benchmark in several Vanguard funds. Effective by COB tomorrow, they will be removed."

That's not to say some investors didn't take losses as First Republic Bank (FRC) suffered heavy losses, leading regional banks lower. Shares of SPDR S&P Regional Banking ETF (KRE), Invesco KBW Bank ETF (KBWB), and iShares U.S. Regional Banks ETF (IAT), fell as much as 12% by early afternoon on Monday.

IAT had 4.24% of its assets in First Republic Bank and 1.57% in Western Alliance Bancorp (WAL). Fidelity's Select Banking (FSRBX) fund allocated about 1.72% of its assets to PacWest Bankcorp (PACW).

Fidelity's exposure to SVB was minimal as of Jan. 31, a spokesperson for the money manager told Investopedia. A spokesperson for BlackRock also downplayed its exposure to regional banks, even though most of its equity investments are index-driven.

FDIC Insurance Can Prove a Buffer

Customers of regional banks may have fared better than investors in them. The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 of deposits per client for each lender that it insures.

At brokerage Charles Schwab (SCHW), whose shares plunged 20% today before recovering, the vast majority of its deposits are ensured. The firm sweeps cash balances from brokerage accounts to its bank.

"More than 80% of our total bank deposits fall within the FDIC insurance limits, among the five highest ratios of the top 100 banks in the United States," Schwab said in a statement on Monday.

Still worried? If you have money at a bank— including checking and savings accounts, money market deposit accounts (MMDAs), and Certificates of Deposit (CDs)— you can estimate your deposit insurance by using FDIC’s Electronic Deposit Insurance Estimator (EDIE) tool.

Article Sources
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  1. Vanguard. "Vanguard in a nutshell."

  2. Charles Schwab. "Schwab Reports Monthly Activity Highlights."

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