Good Morning.
Two weeks ago, I talked about uncertainty in the banking system. This is a follow-up based on questions about trust assets held at a bank.
Banks that manage trust assets either have a trust department or a separate trust company that holds large trust assets in addition to their normal banking assets (checking, savings, CDs, etc). But what happens to those trust assets if the bank fails?
Thankfully, not much.
According to an article from WealthManagement.com, "Trust assets held by a bank are not held as the bank’s own assets and are not available to the bank’s creditors." That's true if a bank has a separate trust company or its own trust department.
In addition, trust assets are often diversified investments like stocks and bonds, rather than large amounts of cash.
If the bank where the trust assets were housed no longer exists, the assets would be transferred to another bank's trust department or trust company as determined by the federal Office of the Comptroller of the Currency or the state's division of banking.
So basically, there is nothing to worry about with trust assets held at a bank.
In further banking news, Silicon Valley Bank (SVB) and Signature Bank New York (SB) went under FDIC management earlier this month. SVB and has since been acquired by First-Citizens Bank, and SB has been acquired by Flagstar Bank.
And unfortunately, billions of dollars of deposits have gone from the local or regional banks to the large banks the government deems "too big to fail" because depositors are now afraid if their bank fails, the government might not guarantee their deposits if they're above $250,000.
So, we'll have to keep being mindful of how this plays out even though this won't directly affect anything we do.
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Thanks and have a great weekend.
Tim
P.S. Hit reply to reach out with any questions or concerns!
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