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00:00.0
What happened with Silicon Valley Bank or SVB and why should you be concerned with your money in the bank?
00:09.0
So let's first talk about what happened with SVB.
00:12.0
Silicon Valley Bank is the 16th largest bank in the United States with almost 200 billion in deposits.
00:21.0
And it just recently was closed by the FDIC, Federal Depositor's Insurance Corporation.
00:29.0
And that's because there was a bank run.
00:31.0
People and companies were withdrawing their money from the bank because they were panicking.
00:35.0
Now what caused the panic?
00:37.0
It all started when SVB was taking a look at their finances and realized that their bonds,
00:43.0
which was about 21 billion dollars, was only yielding about 1.8 percent annually
00:50.0
compared to the current yield of about 3.9 percent.
00:54.0
Now it's unrealized loss at this point until they decided that they wanted to liquidate this.
01:00.0
And when SVB announced that they were raising capital to the tune of about 2 billion dollars,
01:06.0
that's when the panic started.
01:07.0
All the companies today were trying to withdraw their money all at the same time.
01:11.0
And we're talking about companies that have a lot of money.
01:15.0
These are big tech companies.
01:17.0
And when that happens, banks normally don't have enough reserves to be able to accommodate all the withdrawals.
01:22.0
This is how the bank run started.
01:25.0
And then their share prices collapsed alongside with it because it's a public company.
01:29.0
This problem is not isolated to Silicon Valley Bank.
01:32.0
This is a problem that's actually systemic in the entire financial banking system all over the world
01:38.0
where it's fractionalized.
01:40.0
Now, fractional banking system is actually where banks are not required to hold a large amount
01:47.0
of your deposits in their reserves.
01:49.0
In most banks, the average reserves that banks are only required to hold is about 10 percent of all the deposits.
01:57.0
In the United States, in Canada, in UK, Australia, they actually have zero reserve requirements,
02:03.0
meaning they are not required to hold any reserves of any of the deposits made to the bank.
02:09.0
That means the bank is free to do whatever they want with your money,
02:14.0
to be able to profit from your money.
02:16.0
That's the biggest problem we have with the current banking system.
02:20.0
And that's why I say that the current banking system is broken.
02:24.0
And government legislation actually protects the banks and not really the depositors,
02:29.0
people like you and me.
02:31.0
So what happened with the SVB is not an isolated incident.
02:33.0
And the problem now is if the government will not be able to return the deposits
02:39.0
or the money of all their depositors, at least a majority of it,
02:43.0
it will shake up the confidence of people with the banks.
02:47.0
And we're seeing it right now where bank stocks are actually dipping in price.
02:51.0
So it is in the best interest of the government right now to be able to return the money
02:56.0
of all the depositors beyond what is insured.
03:00.0
Because if that doesn't happen, I assure you, a lot more companies are going to be
03:04.0
a little bit more worried about leaving their money with the banks,
03:08.0
knowing that the banks may have risky portfolios that depositors are not aware of.
03:14.0
Now I know that you're thinking, nah, this is a problem that doesn't affect you.
03:18.0
But this is a problem that affects everyone.
03:20.0
Because this kind of system is all over the world.
03:22.0
And we've seen bank runs happen all over the world, not just in the United States.
03:26.0
And although this hasn't happened in the Philippines lately,
03:29.0
my worry is we don't know how banks are using our money.
03:33.0
We don't know how they're risking our money so that they can profit.
03:37.0
So to be able to increase profit, they will start using our money in higher-risk assets.
03:43.0
And that can be problematic in the long run.
03:45.0
So what I'm hoping will happen is that the banks all over the world,
03:48.0
including the Philippines, are going to look at what happened with Silicon Valley Bank
03:52.0
and be more risk-averse with their investments.
03:55.0
Because they're playing with our money.
03:58.0
As a matter of fact, I don't like the fact that banks play with our money
04:01.0
and they make money off our money.
04:04.0
And how much do we make off our money that's in the bank?
04:08.0
We don't make anything.
04:09.0
That seems a little bit unfair to me.
04:11.0
And I don't see the government stepping in to do anything about it
04:14.0
to protect the consumers and the depositors and to look out for our interest.
04:19.0
And for that reason, I think people should be wary and a little bit careful
04:24.0
about how much money they actually leave in the banks.
04:26.0
And if they're going to leave money in the bank,
04:28.0
make sure it's not higher than what's insured by the government.
04:32.0
So in the Philippines, the insurance for the banks is about 500,000 pesos.
04:36.0
Now, do not put more than 500,000 pesos in one bank account.
04:40.0
And it's a good idea to try to diversify the cash that you have
04:44.0
and put it either in different bank accounts, in different banks,
04:46.0
and in different types of investments.
04:48.0
And for me, the best way to protect your money is to actually have it in self-custody.
04:53.0
Meaning it's not held by anyone and you're holding on to your money.
04:56.0
So I hope you guys learned something from this video.
04:58.0
And if you did, please subscribe to my YouTube channel
05:00.0
and click on the notification bell so you're notified of all my latest videos.
05:04.0
Thanks so much. I'll talk to you guys in the next video.
