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What happened with Silicon Valley Bank or SVB and why should you be concerned with your money in the bank?

So let's first talk about what happened with SVB.

Silicon Valley Bank is the 16th largest bank in the United States with almost 200 billion in deposits.

And it just recently was closed by the FDIC, Federal Depositor's Insurance Corporation.

And that's because there was a bank run.

People and companies were withdrawing their money from the bank because they were panicking.

Now what caused the panic?

It all started when SVB was taking a look at their finances and realized that their bonds,

which was about 21 billion dollars, was only yielding about 1.8 percent annually

compared to the current yield of about 3.9 percent.

Now it's unrealized loss at this point until they decided that they wanted to liquidate this.

And when SVB announced that they were raising capital to the tune of about 2 billion dollars,

that's when the panic started.

All the companies today were trying to withdraw their money all at the same time.

And we're talking about companies that have a lot of money.

These are big tech companies.

And when that happens, banks normally don't have enough reserves to be able to accommodate all the withdrawals.

This is how the bank run started.

And then their share prices collapsed alongside with it because it's a public company.

This problem is not isolated to Silicon Valley Bank.

This is a problem that's actually systemic in the entire financial banking system all over the world

where it's fractionalized.

Now, fractional banking system is actually where banks are not required to hold a large amount

of your deposits in their reserves.

In most banks, the average reserves that banks are only required to hold is about 10 percent of all the deposits.

In the United States, in Canada, in UK, Australia, they actually have zero reserve requirements,

meaning they are not required to hold any reserves of any of the deposits made to the bank.

That means the bank is free to do whatever they want with your money,

to be able to profit from your money.

That's the biggest problem we have with the current banking system.

And that's why I say that the current banking system is broken.

And government legislation actually protects the banks and not really the depositors,

people like you and me.

So what happened with the SVB is not an isolated incident.

And the problem now is if the government will not be able to return the deposits

or the money of all their depositors, at least a majority of it,

it will shake up the confidence of people with the banks.

And we're seeing it right now where bank stocks are actually dipping in price.

So it is in the best interest of the government right now to be able to return the money

of all the depositors beyond what is insured.

Because if that doesn't happen, I assure you, a lot more companies are going to be

a little bit more worried about leaving their money with the banks,

knowing that the banks may have risky portfolios that depositors are not aware of.

Now I know that you're thinking, nah, this is a problem that doesn't affect you.

But this is a problem that affects everyone.

Because this kind of system is all over the world.

And we've seen bank runs happen all over the world, not just in the United States.

And although this hasn't happened in the Philippines lately,

my worry is we don't know how banks are using our money.

We don't know how they're risking our money so that they can profit.

So to be able to increase profit, they will start using our money in higher-risk assets.

And that can be problematic in the long run.

So what I'm hoping will happen is that the banks all over the world,

including the Philippines, are going to look at what happened with Silicon Valley Bank

and be more risk-averse with their investments.

Because they're playing with our money.

As a matter of fact, I don't like the fact that banks play with our money

and they make money off our money.

And how much do we make off our money that's in the bank?

We don't make anything.

That seems a little bit unfair to me.

And I don't see the government stepping in to do anything about it

to protect the consumers and the depositors and to look out for our interest.

And for that reason, I think people should be wary and a little bit careful

about how much money they actually leave in the banks.

And if they're going to leave money in the bank,

make sure it's not higher than what's insured by the government.

So in the Philippines, the insurance for the banks is about 500,000 pesos.

Now, do not put more than 500,000 pesos in one bank account.

And it's a good idea to try to diversify the cash that you have

and put it either in different bank accounts, in different banks,

and in different types of investments.

And for me, the best way to protect your money is to actually have it in self-custody.

Meaning it's not held by anyone and you're holding on to your money.

So I hope you guys learned something from this video.

And if you did, please subscribe to my YouTube channel

and click on the notification bell so you're notified of all my latest videos.

Thanks so much. I'll talk to you guys in the next video.