My sister lives in Florida and was recently alarmed to read about a bank closing in her community. Apparently many depositors with that bank lost their savings because the bank was not registered with the FDIC. This served as a wake up call to her and many people in her community to research their own banks and make sure their deposits were safe. If you are looking at finding a new bank, consider the following before opening an account:
- Bank Ratings. There are bank rating systems available through federal regulators. They rank banks from a superior ranking to a troubled ranking based on their reported financial position. In general, institutions are required to maintain a tangible capital ratio of at least 4% and a total risk-based capital ratio of at least 8%. The rating system also looks at profitability trends, the level of delinquent loans, the market versus book value of the investment portfolio and other historical liquidity data.
- Safeguards. The Federal Deposit Insurance Corporation (FDIC) insures deposits at banks and savings and loans. Single Accounts (with one person), Joint Accounts (with two or more persons) and IRAs and other retirement accounts are all insured up to $250,000 per owner. The base limit for savings accounts was temporarily increased from $100,000 to $250,000 per depositor through the end of 2009. The National Credit Union Administration (NCUA) regulates credit unions. The National Credit Union Share Insurance Fund (NCUSIF) insures all federal credit unions and most state-chartered credit unions. Brokerage accounts are insured (up to a limited amount usually $500,000 for cash and securities) by the Securities Investor Protection Corporation (SIPC). You should look for the Member SIPC symbol on your brokerage's publications.
- Research Your Bank. Remember to look for the familiar FDIC logo to make sure your deposits are protected. You can also search for your bank through the FDIC website. You should be aware that not all banks are insured by the FDIC, especially if you are banking through an internet bank. Some banks operating on the Internet are chartered outside the U.S.
Protect your hard earned dollars and research your bank. If you are looking to switch banks, be sure to look for the FDIC logo to ensure your deposits will be protected. If you have trouble with your bank in resolving issues such as identity theft, you should change your bank.
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