Banks are one of the safest places to keep your money. All the same, bank failures do occur from time to time. Our current economy has taught us the realities of banks failing. When a bank failure happens your money is more than likely safe because of FDIC or Federal Deposit Insurance Corporation insurance. Panic that was seen during the Great Depression is likely not to happen and isn’t seen.
Why Banks Fail
Banks go under or fail when they can no longer meet their obligations. They may not be able to meet their bills or a bank failure can transpire because they are not able to provide enough cash when bank depositors demand the cash. Physically destroyed banks are different from a bank failure. Even though the brick and mortar portion of a bank may no longer exist, the bank entity is still intact.
Most banks are FDIC insured. Any depositor that elects to bank with an institution that isn’t FDIC insured is taking a huge risk with their monies. Banks that are FDIC insured and fail will see the FDIC take over their daily functions. When a bank failure occurs the FDIC may sell the bank to another banking institution that is stronger financially or they can also operate the bank for some time as federally owned.
The FDIC will insure a bank up to the maximum allowed by law per depositor. Keeping more than the maximum allowed by law at any one institution is also putting your money at risk. The depositor will see a loss for the difference between their covered accounts and the maximum FDIC coverage. There are a couple of different ways to protect your assets such as retirement accounts and having accounts for different family members instead of everything under one account entity. Make certain you understand the limits of FDIC coverage if you have more than the maximum allowed by law for FDIC at any one bank.
After A Bank Failure
After the announcement of a bank failure business will continue as normal. Customers with banks that fail don’t experience any type of emergency. They will continue to use checks, debit cards and all other services tied to their accounts. At some point in time customers will receive new checks and cards issued by the new bank appointed by the FDIC.
If you would like to use a new bank instead of the FDIC choice, you do have that option. If the FDIC does not find a successor bank the FDIC will send you a check for your deposits up to the maximum insured by law shortly. This usually occurs within a couple of banking days.
There is no specific timeframe for the FDIC resolving a bank failure. History has shown that if a bank failure does occur the FDIC has been able to have customer funds available within one business day. Generally the FDIC will close a bank on Friday and have business as usual by Monday morning. There may be individual situations for a bank that require more time by the FDIC to take care of things at the failed bank to have business revert to run as normal.
Bank failures are typically not announced ahead of time. Bank rating services will help you to avoid any banks that are weak or not safe. Also observing the FDIC limits will help you protect your monies against any bank failures and avoid any unnecessary risks.