Recently banks in financial distress (SVP, Credit Suisse, etc.) have been in the news, which can create anxious times for bank depositors.
But it is important to note most traditional banks in the United States are FDIC insured, which should provide comfort to some consumers.
During the Great Depression there was a large number of bank failures which left many of the banks depositors unable to recover most if not all of their bank deposits.
The subsequent bank failures created a crisis of confidence in the banking system. In order to help restore confidence and upright a collapsed banking system, the FDIC was established in 1933.
The FDIC provides federal funds to insure consumers deposits up to certain limits — $250,000 at this point in time.**
A bank must apply for the insurance and if it meets the underwriting criteria, it will be accepted for FDIC coverage. This coverage means that, subject to the above mentioned limits and other restrictions, in the event a bank fails, its customers will not lose the funds deposited in that bank. The bank must pay a premium for this coverage and it will be held to strict financial guidelines and requirements in order to maintain it.
When selecting your bank always inquire with a bank representative, look for the FDIC signage, or use the FDIC’s BankFind tool to ensure they have deposit insurance coverage.
It is important to note that there are ways to increase your deposit insurance coverage, depending on the ownership structuring and titling of your accounts.
Also know that credit unions engage a separate organization, the NCUA, to provide deposit protection.
For additional information, please see the helpful FDIC FAQ on deposit insurance.
**$250,000 of deposit accounts per depositor, per institution per owner. The FDIC does not cover safe deposit boxes, investments (stocks, bonds, mutual funds etc.), bank sponsored annuities or life insurance offered through the bank.
Managing Director – Financial Planning
Baldwin & Clarke Advisory Services, LLC
Email: scottlavalley@baldwinclarke.com
