On March 10, 2023, Silicon Valley Bank (SVB) of Santa Clara, California went under after a bank run caused a significant fall on its deposits. While SVB’s retail client facing operations were relatively small, the bank was a major provider of financial services to startups, tech companies, and private clients, particularly in the San Francisco Bay Area. It represents the second largest bank failure in the history of the U.S., after the fall of Washington Mutual Bank during the 2008 financial crisis.
What this all means for depositors who were not able to withdraw their funds from SBV before the collapse is not clear. The Federal Deposit Insurance Corporation (FDIC) has taken over the operations of the former SVB and insures deposits up to $250,000. Those with higher balances are now very much at risk. While the FDIC has stated that they might be paid eventually via dividends of the newly created National Bank of Santa Clara, the timing and final amounts remain so far unclear. Moreover, Treasury Secretary Janet Yellen has stated that the federal government will not bail out Silicon Valley Bank.
SVB was not a minor fly by night credit union, it was the 16th largest bank in the country. It was not undercapitalized, nor had it failed to follow financial regulations before its collapse. It was simply caught in the middle of an extreme set of factors that led to its collapse. Predictably, other banks have been feeling the stress as depositors become more risk averse and move or withdraw their funds. It is certainly too early to say whether this will be an isolated event or perhaps the first domino to fall in a larger collapse.
At any rate, this debacle should be a wakeup call for anyone that still sleeps soundly assuming that their money is safe at their bank. At Blake Harris Law we have often focused on threats from lawsuits, but as we have seen, dangers to your wealth can come from more unexpected places. If your funds on deposit at a bank exceed the FDIC insurance amount of $250,000, you should be taking a close look at your particular bank and perhaps considering diversifying to safer alternatives.
Instead of diversifying into a different U.S. based bank, you might want to consider a better banking environment altogether, in what is perhaps the safest jurisdiction for your finances, Switzerland. There is a reason this country is so well known throughout the world for its first-rate banking. Switzerland has an incredibly robust financial system. Swiss banks tend to be more conservative and better capitalized than their U.S. counterparts. Some Swiss banks have been around for centuries.
Despite the large number of banks all over the country, bank failures are extremely rare in Switzerland. While Switzerland has its own version of the FDIC, it is always better to trust a stable bank and never have to rely on the government’s depositor insurance. In addition, the Swiss economy continues to demonstrate its strength, as their currency has retained its value and they have been largely immune to the recent rise in inflation we have seen in the U.S. and elsewhere in the world.
Opening a Swiss bank account is perfectly legal for U.S. citizens and is not much different from opening a bank account at a local U.S. bank. For increased protection, you can open your foreign bank account through an offshore trust such as a Cook Islands Trust. Doing so can ensure your funds are protected from any potential legal threats, as well from systemic risk in the U.S. banking system. A Cook Islands Trust can make it incredibly difficult for a plaintiff to reach the trust assets in court, as it generally requires filing a lawsuit in the Cook Islands in order to obtain jurisdiction over the trustees.
At Blake Harris Law, we focus exclusively on asset protection matters, including offshore banking and trusts. If you’re considering opening a Swiss bank account, we can help you navigate the process. Contact Blake Harris Law today at 786-559-1209 to speak with an asset protection attorney.