How Safe Is Your Bank?
In the financial crisis of 2008 and 2009, bank failures became prevalent, shaking consumers' confidence and forcing the government to take action. Improper lending practices and insufficient capitalization are contributing factors to bank instability.
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Failures
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Bank failures tend to increase during times of economic uncertainty. During the savings and loan crisis in the 1980s, hundreds of banks closed or merged. More than 100 banks are listed on the Federal Deposit Insurance Corporation's (FDIC) failed bank list, which tracks bank closures since 2001.
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Insurance
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The FDIC insures deposits for as much as $250,000 in any one bank. People who have more than that invested in one institution should distribute their funds to other banks to preserve their investment.
Research
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The FDIC may post information on its website about troubled banks in advance of their closing. Additionally, Bankrate.com offers a financial-rating service that applies 22 tests to each institution to gauge financial health (see Resources below).
Inquiry
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According to the Los Angeles Times, those concerned about their bank's health shouldn't rely upon the word of a bank's management. Instead, they should obtain independent information to verify what information bank management shares.
Safety
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The FDIC claims that in its 75-year history, no customer has "lost a single penny of insured deposits."
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References
Resources
- Photo Credit "Hey You, Just Be Yourself, Funk and Standard (2 of 3)" is Copyrighted by Flickr user: Tony the Misfit (Tony) under the Creative Commons Attribution license.
