Savers could end up being big winners after SVB collapse

·3 min read

Some financial institutions are upping the yields on their deposit accounts after the failures of Silicon Valley Bank and Signature Bank (SBNY) sparked fears of potential bank runs.

In an unusual move on Saturday per one industry analyst, Ally Bank (ALLY) increased the annual percentage yield on its 11-month, no-penalty certificate of deposit, or CD, to 4.75% from 4%. On Monday, UFB Direct — the online division of Axos Bank (AX) — hiked the rates on its money market and savings accounts from 4.55% to 5.02%.

And Synchrony Bank (SYF), Discover (DFS), and Charles Schwab (SCHW) all came out with higher rates on brokerage CD offerings on Monday, even though Treasury yields— which those rates tend to follow — fell.

These moves present an opportunity for savers to capitalize on bank jitters by securing higher rates for the money they’re socking away for emergencies or other earmarks.

“It’s interesting,” Ken Tumin, senior industry analyst at LendingTree and founder of by Lending Tree, said of the recent bank moves. “It seems like a proactive way to offset any potential outflow of deposits.”

"We price our products to be competitive with others with the desire to attract new customers," a Synchrony spokesperson told Yahoo Finance. Discover declined to comment, while the remaining banks Yahoo Finance contacted for comment did not immediately respond.

San Diego, CA, USA - July 9, 2022: Axos Bank headquarters in San Diego, CA, USA. Axos Bank is an American federally chartered savings and loan association and direct bank.
San Diego, CA, USA - July 9, 2022: Axos Bank headquarters in San Diego, CA, USA. Axos Bank is an American federally chartered savings and loan association and direct bank.

The rate increases on deposit accounts come after regulators took over Silicon Valley Bank on Friday and Signature Bank over the weekend, marking the second- and third-largest bank failures in U.S. history.

SVB faced a liquidity crisis when its customers — spooked by the uncertainty over the bank’s balance sheet — withdrew their money in droves. But the bank, selling its assets at a loss, couldn’t cover the deposits. Signature Bank, which catered to crypto customers, soon followed.

The collapses triggered sell-offs in regional bank stocks this week, which put those institutions on high alert for subsequent bank raids a la It’s a Wonderful Life.

Raising how much deposit accounts earn is one way banks can incentivize customers to keep their funds in their accounts, Tumin said. Some media outlets reported that the bigger banks saw big inflows in recent days, potentially from customers who lost confidence in other institutions.

Tumin also speculated that some of these banks are raising rates to attract new, smaller-dollar deposits that remain below the FDIC insurance limit of $250,000.

“Banks that have many business accounts or uninsured accounts may want to diversify their deposits and get more small deposits,” he said.

“If their balance sheets include a high percentage of uninsured deposits, that would be scrutinized by investors and probably regulators, too. So, they are encouraged to tactically pursue smaller deposits.”

Whatever the reason, savers can reap the rewards. It pays to shop around in the coming weeks, Tumin said, especially as more banks reconsider their offerings and compete against each other.

One last piece of advice from Tumin when opening a new deposit account: “Keep it under $250,000."

Janna is the personal finance editor for Yahoo Finance. Follow her on Twitter @JannaHerron.

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