My Perspective on Recent Industry Events

March 16, 2023

Recent news about two regional bank failures – Silicon Valley Bank and Signature Bank – can be unsettling and so I am reaching out to you to highlight how Charles Schwab is fundamentally different in so many ways from those banks in the news. I know you’ll find these points reassuring:

The Charles Schwab Corporation (“Charles Schwab”)

• Charles Schwab does not have any direct business relationship with Silicon Valley Bank or Signature Bank, so we do not have exposure to any direct credit risk from either.
• Charles Schwab has a large national clientele. We are headquartered in Texas and serve a diverse, broad base of customers and our business is not concentrated in any particular region of the country or industry such as California’s Silicon Valley.
• Charles Schwab is regulated by the Federal Reserve and the Texas Department of Savings and Mortgage Lending, and its subsidiaries are subject to stringent rules of other regulators.
• There are several sides to our business, most notably our brokerage and banking businesses, which are each separately regulated for safety and soundness.

Brokerage - Charles Schwab & Co., Inc. (“Schwab”)

• Customer brokerage investments at Schwab such as stocks, bonds, mutual funds, exchange traded funds, and money market funds are held at third party depository institutions and custodians such as the Depository Trust Company and Bank of New York for the exclusive benefit of clients. With Federal Reserve supervision, we have additional regulation that goes beyond that of just brokerage or mutual fund company regulation.   
• In the very unlikely event that Schwab should become insolvent, these segregated securities are not available to general creditors and are protected against creditors' claims. 
• Brokerage assets are covered by SIPC insurance, which works to restore to customers their securities and cash – such as stocks and bonds – held by a customer at a financially-troubled SIPC-member brokerage firm. The limit of SIPC protection is $500,000 for each separate legal account, which includes a $250,000 limit for cash held in a brokerage account. Of the few times SIPC insurance has been used in the securities industry, 99% of eligible client claims got all their assets back.
• Schwab also maintains excess SIPC insurance protection of up to a combined total of $600 million for additional client protection. 
• Schwab has served its brokerage clients for 50 years through all financial environments and has always remained solvent.

Banking - Charles Schwab Bank, SSB (“Charles Schwab Bank”)

• Charles Schwab Bank was established 20 years ago with the singular purpose of serving Schwab investor clients with straightforward, convenient banking products and services like checking, savings, CDs, and mobile banking.
• Schwab brokerage investments are separate from Schwab customer cash deposited at Charles Schwab Bank.  
• Charles Schwab Bank does not offer commercial deposit accounts that provide businesses with payroll and other business-oriented cash management services.
• All Charles Schwab bank deposit accounts are protected by FDIC insurance up to FDIC limits.  Through our three bank charters, we are able to provide our clients with $250,000 in FDIC insurance, per depositor, per bank.
• Because of the type of clients we serve, and with our multiple charters, over 80% of client cash held at Charles Schwab Bank is insured dollar-for-dollar by the FDIC. That percentage is among the highest of the top 100 U.S. banks. As a comparison, at the two banks in the news the last few days, just between 2% and 20% of their deposits were insured.
• We maintain capital well in excess of regulatory requirements, held in a high-quality and relatively small amount of well-collateralized loans and a conservative investment portfolio that is 80% comprised of securities backed by the U.S. Treasury and various government agencies. 
• As a further safeguard, Charles Schwab Bank has access to substantial borrowing capacity under a range of credit facilities.  That borrowing capacity helps provide the firm significant access to liquidity if needed.

I wanted to personally take this opportunity to reassure you that Charles Schwab will remain a safe port in a storm, driven by a conservative balance sheet, a strong liquidity position, and a diversified base of 34 million+ account holders who invest with Charles Schwab every day.

I am confident in our approach and in our ability to help clients through all kinds of economic environments. We stand ready to help you in any way you may need.

Charles R. Schwab
Founder and Co-Chairman
The Charles Schwab Corporation