Is Yet Another Bank at Risk of Crumbling?

In March, Silicon Valley Bank collapsed in the biggest bank failure since the Great Recession. Just a few days later, Signature Bank succumbed to a similar fate. And just earlier this week, First Republic failed, leaving its customers reeling and stock investors with serious losses on their hands.

Now, PacWest Bank, which is based in California, has confirmed that it's exploring different options to shore up its finances. And if yet another bank fails, it could spell disaster for the industry on a whole.

A precarious situation

PacWest Bank's stock value plunged after it announced that it was considering a sale. The bank is looking at different options that include splitting up the company or trying to raise capital to address its financial shortcomings. 

Now, the good news is that according to PacWest Bank, as of May 2, 75% of its deposits were insured. But still, the last thing the banking industry and economy need right now is yet another bank failure.

Consumers are already wary of bank failures, and smaller banks in particular are at risk of failure when customers withdraw their funds in short order. But just as investors tend to react to panic, so too might consumers with money in various banks opt to do the same if yet another bank goes under. 

Meanwhile, investors in bank stocks could get hurt if the industry continues to experience its share of upheaval. This applies even to investors who own shares of larger banks that aren't at risk of shuttering anytime soon.

Is your money safe?

No matter what bank you keep your money at, it's important to do what you can to safeguard the cash in your savings account. Your best bet is to make sure you're banking at an institution that holds FDIC insurance.

With FDIC insurance, your deposits of up to $250,000 are guaranteed on a per-bank basis. This means that if you have $500,000 in savings, but you've split it evenly across two different FDIC-insured banks, you're fully protected from losses even if both of those banks go under. 

What's more, you should know that the $250,000 FDIC insurance limit doubles for joint account holders. So if you and a spouse, for example, have a joint account at the same bank, you're protected for up to $500,000 in deposits at that bank.

Should you be worried if you have your money at a smaller bank?

Smaller banks don't have the same vast financial resources as larger ones. A bank run -- where consumers withdraw money all at once at a rapid clip -- is more likely to hurt a smaller bank than a larger one. 

But that said, even if your bank is smaller, as long as it's FDIC-insured and your deposits aren't over the $250,000 limit ($500,000 for a joint account), then there's really nothing to worry about. And since many people have a lot less money than that in the bank, it's fair to say the typical consumer who banks at an FDIC-insured institution really doesn't have to lose any sleep, despite the recent upheaval the banking industry has experienced.