Federal Deposit
Insurance Corporation

Having Deposits at Two Banks That Become One
Special FDIC insurance rule protects customers with deposits over the $250,000 limit for at least six months after a merger or a closing

The basic FDIC insurance amount is $250,000 per depositor, per insured bank. That means you could have up to $250,000 on deposit at one bank and $250,000 at another bank and it would all be fully insured. But what would happen if those two banks merge? Or, what if one of them fails and is purchased by the other bank?

First, remember that if the combined balance of all of your deposits at the surviving bank is less than $250,000, you have nothing to worry about. Your money would be fully insured. And even if the combined total exceeds $250,000, there's no reason to immediately withdraw money or restructure accounts. That's because the FDIC has a special rule that says when two banks merge, a customer's deposits will be considered to be separately insured — as if the two banks are still operating separately — for at least six months and possibly longer for certificates of deposit (CDs).

"The six-month rule is intended to allow depositors time to review their deposit insurance coverage, so they don't have to rush to the bank after a merger to withdraw amounts over $250,000 from the combined balance," said Martin Becker, an FDIC Senior Deposit Insurance Specialist.

"And with a CD," he said, "the FDIC allows the separate deposit insurance coverage to continue until the CD matures, so that the depositor doesn't have to take a penalty for an early withdrawal. It's only when the CD matures — perhaps years into the future —that the depositor may need to consider moving the excess above $250,000 to another FDIC-insured bank to continue to be fully insured."

Similarly, when a bank fails and it is acquired by another bank, the same six-month rule applies to a customer's deposits at both institutions. One issue that can arise, though, is that the acquiring bank has the right to lower the CD interest rates that the failed institution was paying. If that happens, you can move your money to another financial institution without paying an early withdrawal penalty. For more about what CD owners should know if their bank fails, see What If Your Bank Fails? First, Stay Calm.

For more information about the FDIC's rules after a merger or bank failure, call toll-free 1-877-ASK-FDIC (1-877-275-3342).