After the collapse of Silicon Valley Bank in March, small banks in the US faced the risk of losing customers to larger banks. US banking rules guarantee deposits up to $250,000, so customers with larger holdings could lose money if their bank fails. Some small banks, like Leader Bank of Massachusetts and Heritage Bank of Minnesota, have found a solution to this problem by using a technology platform run by fintech company IntraFi. This platform allows banks to guarantee deposits up to $100 million by distributing the funds among a network of large and small banks.
Although this system of reciprocal deposits has been criticized by some, it can help reduce the risk of bank runs and provide a safer option for customers with large deposits. Since the Silicon Valley Bank failure, there has been discussion about raising the $250,000 FDIC limit, but no consensus has been reached yet. In the meantime, small banks are starting to advertise their reciprocal deposit programs to attract more customers and assure them that their money is safe.
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