What to do in a Failed Bank Situation?
Banks fail and have some level of account 'protection' here in the USA. Our Bank accounts are protected by the Federal Deposit Insurance Corporation (FDIC). Currently accounts are protected up to $250,000. That means IF you are wealthy enough to have enough cash on hand to have over that $250K level you need to move some to another bank to get your balance below that threshold. Yep, so if you have a cool $1Million in cash you need a minimum of 4 banks to spread out your account risk and be under the FDIC protection level. This applies to consumers and business accounts!
Think I am being dramatic? Recently the FDIC Warned that US Customers Holding $7,100,000 in Uninsured Deposits which would be at risk After Sudden Bank Failure.
What do you need to do now to be prepared for bank failure? I put together a quick checklist to help you get ready.
Bank Failure Checklist
#1 - Know your account balance - you don't need to monitor it hourly/daily/weekly but you want to have an idea as Banks make mistakes and fail. You want to know how close you are to the FDIC insurance limit of $250,000.
#2 - Keep track of your bank records, yeah the bank probably won't accept them and they will balk claiming they are fake even though it own their letterhead.
#3 - Know you accounts FDIC Coverage (trust but verify)
#4 - Keep a little faith, banks fail all the time and the FDIC is efficient at this process until they aren't (you need to read between the lines here)...
4a. Meet your new bank, see when FDIC closes your Bank on Friday they already have a buyer for all the failed banks assets and liabilities.
4b - You ATM will still work as will your checks.
4c - You are STILL responsible for your loan payments.
4d - Your Direct Deposits will continue on, again the backend FDIC will immediately appoint the new Bank to accept those payments. Expect that info to change overtime.
#5 - Check the health of your new bank! I use this link, but I am sure others exist. And again know you accounts FDIC Coverage (trust but verify)
#6 - Perhaps split money between US Banking sector and Credit Union as credit unions have a different 'insurance' program. So you would be de-risking to a small degree.
How to check for failed banks? Easy check this on Friday after markets close as this is typically when FDIC posts the Bank takeover info. Don't doubt it check it out this list goes bank to the year 2000.
Disclaimer - I am NOT a financial planner nor advisor, this is not financial advice. I am just providing some common sense steps everyday people can take to ensure their hard earned money is protected!
Summary
FDIC provides account protections for consumers and business accounts. However, it still seems we have a lot of money in accounts ($7.1M) above the $250K threshold. Take sometime and ensure your accounts are covered and de-risked as much as possible.
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