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FDIC Consumer News - Spring 2000

Important Update: Changes in FDIC Deposit Insurance Coverage

The FDIC deposit insurance rules have undergone a series of changes starting in the fall of 2008. As a result, certain previously published information related to FDIC insurance coverage may not reflect the current rules. For details about the changes, visit Changes in FDIC Deposit Insurance Coverage. For more information about FDIC insurance, go to www.fdic.gov/deposit/deposits/index.html or call toll-free 1-877-ASK-FDIC (1-877-275-3342). For the hearing-impaired, the number is 1-800-925-4618.

Is My Bank Healthy?

Thanks to deposit insurance, most consumers don't need to worry about their bank's financial condition, but some people should be generally aware of their bank's strength.

At one time or another you've probably asked yourself: "Is my bank healthy?" Fortunately, most consumers don't need to worry about their bank's financial condition if their funds are deposited in an FDIC-insured institution and are within the $100,000 federal limit. Most banks are very healthy now and aren't in danger of failing. Even so, there are some consumers who should try to be aware of their bank's stability, even if the institution is federally insured. Among them:

  • Consumers or businesses that have chosen to deposit more than the $100,000 insurance limit and thus could lose some of their money in a bank failure;
  • Business owners concerned that if their bank fails they will temporarily lose their "line of credit" (a way for companies to quickly borrow money up to a pre-arranged limit) until they can find a new lender;
  • People who own stock in a bank and risk losing their investment if the institution fails; and
  • Administrators of employee benefit plans, such as pension or profit-sharing plans, who deposit funds at banks. (See Keeping Workers' Nest Eggs Safe .)

Predicting when or if a bank will fail is tricky business, especially if you're not a trained financial analyst. Basic data for each federally insured bank and savings institution can be obtained free of charge at www.fdic.gov/bank/individual/index.html on the FDIC's Web site or, for a fee, it can be ordered by calling 800-945-2186. The average person may have difficulty understanding this financial information. The FDIC does, however, make available a list of private companies that provide their ratings and analyses of individual banks and savings institutions, often for a fee. If you don't have access to the Internet at your home or office, your local library or a friend or relative with Internet access can print out the list for you.

You may wonder why the FDIC and the other banking regulators don't give out their ratings that indicate whether an individual bank is in good shape or not. It's because the government tries to get ailing banks to correct their problems and return to health. Disclosing the name of an institution having financial troubles could cause nervous depositors to remove their funds and, in turn, trigger bank failures that could have been prevented. "The FDIC is very strict about who has access to the regulators' bank ratings," says Serena Owens, an examination specialist with the FDIC's Division of Supervision in Washington. "Even FDIC employees can't get rating information on individual banks unless they need it to do their jobs."

Keeping Workers' Nest Eggs Safe

If you are an administrator of an employee benefit plan—perhaps a 401(k), pension or profit-sharing plan for a corporation, small business or professional office—you may have a special reason to be concerned about a bank or savings institution's financial condition.

By law, if the institution meets the capital levels specified in the FDIC's deposit insurance rules—and most do—each employee's share in these accounts at any one institution is covered for up to $100,000, even if the total account itself equals much more than that amount. But, if the institution doesn't have enough capital (as defined by the institution's primary federal regulator) and it later is closed by the government, those retirement funds will qualify for much less insurance coverage—up to $100,000 in total, not $100,000 for each person in the plan.

"The FDIC requires each insured institution to disclose to administrators, in writing, whether it has met the necessary capital levels and whether the maximum insurance coverage is provided to those deposits," says Joe DiNuzzo, a Washington-based FDIC attorney. "If a banker you're dealing with is unaware of these rules or fails to provide the required disclosures, you may want to consider taking the money somewhere else."

The rules governing employee benefit plan accounts can be complicated, so we encourage interested parties to contact the FDIC's Division of Compliance and Consumer Affairs (See DCA listing) with any questions or concerns.

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Last Updated 1/22/2009 communications@fdic.gov