March 13, 2023
Dear PenChecks Trust Client:
As you undoubtedly know, the past few days have been stressful and highly eventful in the banking world. The failure of three banks, Silicon Valley Bank (SVB) and Silvergate Bank, in California, and Signature Bank, in New York City, have rattled the markets as well as many people’s nerves.Yesterday afternoon, the Treasury Department, together with federal banking regulators, announced steps they’ve taken to protect the depositors in these institutions and to temper the risk that similar concerns take hold among other depositors and thus not spread to the wider banking system.
It’s important to note that each of the failed banks had singular characteristics that proved to be unstable, particularly in the current environment of rising interest rates. What set these banks apart was their high growth rates in recent years, and their concentration of large, uninsured deposits from clients in the technology and/or cryptocurrency industries.
While the government’s actions should put to rest concerns about the ability of the banking industry to fully and timely meet their obligations to every depositor, we felt compelled to share a little about PenChecks Trust and our holdings with partner financial institutions.
First, PenChecks Trust had no funds on deposit with Silicone Valley Bank, Silvergate Bank, or Signature Bank. Accordingly, our customers have no exposure to those banks through PenChecks Trust. Additionally, PenChecks Trust Company is a non-depository trust company, meaning we use other financial institutions who serve as sub-custodians. Our sub-custodians are all large, well-capitalized banks or insurance companies with long, stable foundations that provide PenChecks Trust with very strong liquidity. All our deposits are held in cash or cash equivalents and are fully benefit-responsive.
Furthermore, as a service provider to the retirement industry, PenChecks performs on-going due diligence and analysis over all of its sub-custodians. Our monitoring incorporates daily, real-time review of financial strength, stability and safety/soundness of all our partner institutions. We will continue to diligently monitor and evaluate the banking and financial markets as a whole and we will provide you with updates to keep you informed of any changes or perceived risks that may be identified.
We deeply value the relationships we’ve built with our broad client base, and we will continue to do our best to proactively protect those relationships so we may continue to be a service partner you appreciate and trust.
Spiro G. Preovolos
President & CEO