How to Manage Bank Financial Risk

Not all banks are alike. Some banks are more aggressive by offering higher savings interest rates or lower lending rates. This puts some institutions at higher risk for insolvency issues if economic condition become one where loan default numbers increase. The FDIC insures consumer deposits up to $250,000 per beneficiary, which is an assurance, but the only way to mitigate risk with banks.

Instructions

1. Review all bank's accounts to determine if they are held at FDIC member banks. FDIC, Federal Deposit Insurance Company, is the government agency that ensures deposits per beneficiary at member institutions. Beneficiaries are best described as tax identification numbers: personal, trusts or corporations.

2. Total the amount of deposit accounts at each institution. The aggregate value of all deposits at any one institution should not exceed the $250,000 per beneficiary. So if a person has a checking, saving and time certificate, the total over $250,000 is not covered by FDIC.

3. Move deposit accounts to other FDIC member banks if the aggregate value at one institution exceeds the $250,000 limit. FDIC does not limit the number of institutions that deposits can be held at since each member bank is covered per beneficiary.

4. Check with the FDIC regarding Consumer Protection Information found at their web portal under Consumer News & Information. Stay away from banks that are under investigation to limit any potential issues that possibly prevent access to funds.

References

• FDIC