Is there a banking crisis?
No, the banking industry is safe and sound. Your accounts in commercial banks, thrifts and savings banks carry
FDIC insurance.
What if there is a bank failure?
Customers’ deposits are protected. Not one penny of insured savings has ever been lost by a customer of a federally
insured bank. Deposits are insured by the FDIC for up to $250,000* per depositor per insured bank and up to
$250,000 for retirement accounts.
Are banks prepared for an economic downturn?
Yes, there are 8,500 banks in the U.S. and 98% of those banks are well capitalized, with $1.3 trillion in capital.
Who regulates banks?
This depends on the charter of each bank. Depending on the charter, banks are regulated by The Federal Reserve Board,
the Comptroller of the Currency, the Office of Thrift Supervision, the FDIC or the State Corporation Commission’s
Bureau of Financial Institutions.
But I’m hearing and seeing so much news that keeps talking about the banking crisis. Why is the media talking
about this so much?
With so much media coverage on all topics affecting Americans today, things tend to get skewed or confusing. For
example, the word bank is being used in the media to describe FDIC insured banks (what the VBA calls Banks with a
capital B),investment banks, and mortgage companies. Banks with a Capital B are commercial banks that are heavily
regulated and FDIC insured. Bear Stearns was an investment bank, not a commercial bank, and therefore not subject
to the same heavy regulation as commercial banks. Mortgage companies are also being referred to as banks even
though their purpose, function and most importantly regulation, differ from federally insured depository institutions.
It is important to realize that only commercial banks, thrifts and savings banks carry FDIC insurance.
All of the media coverage on the "economic crisis" is creating a negative buzz around the community. What is
the status of the FDIC insured institutions?
Banks with a Capital B are safe and sound and ready to provide stability in your community. Did you know that the
vast majority or 98% of insured banks today hold more capital than the law requires? Your money is safe in a bank
and banks are ready to make loans to you and to the community.
Given recent events in the financial markets and in Washington, the VBA has received many questions about
the safety of banks, the difference between investment banks and commercial banks, FDIC insurance, etc. This
informational piece was designed to answer many of these questions as well as provide the necessary information
about the strength of the banking industry.
FYI...
- The vast majority of the 8,500 banks in this country are safe and sound.
- The banking industry currently has $1.3 trillion in capital, and 98% of the banks in this country are well capitalized
by regulatory standards.
- Commercial Banks are required to have significant capital and reserves – that is, rainy-day funds for tough economic
times. This is a bank’s first line of defense to cover any losses.
- FDIC insurance provides an additional backstop. The FDIC protects depositors against the loss of their insured
deposits if an FDIC-insured bank or savings association fails. Deposits are insured by the FDIC for up to $250,000*
per depositor per insured bank and up to $250,000 for retirement accounts. (FDIC-insured accounts include savings
and checking accounts, CDs, and money-market deposit accounts.)
- The chances of a bank being taken over by the FDIC are extremely remote. And if that did happen, you would
continue to have access to your insured deposits.
Answers...
What’s the difference between an investment bank and my bank?
Investment banks operate differently from commercial banks and thrift institutions. Their primary purpose is
to facilitate the sale of stocks and bonds. These Wall Street firms operate as advisers and agents for companies
that want to raise capital, often by issuing stock or other securities.
Commercial banks and thrift institutions take deposits for checking and savings accounts from consumers and
businesses. These deposits are insured by the FDIC for up to $250,000* per depositor per insured bank and up to
$250,000 for retirement accounts. These banks lend this money to consumers and companies for autos, homes,
business equipment, etc.
How do I know I won’t lose money?
Customers’ bank deposits are protected. Not one penny of insured deposits has ever been lost by a customer of
a federally insured bank. Deposits are insured by the FDIC for up to $250,000* per depositor per insured bank
and up to $250,000 for retirement accounts. If you need more coverage, your banker can explain your coverage
limits and give you options to ensure that all of your deposits are insured.
Where is the safest place for my money right now?
The safest place for your money is in the bank. It’s earning interest, it’s FDIC-insured and it’s accessible.
Will I still be able to get a mortgage, credit card or other loan?
People with a good credit history will continue to have access to mortgage, credit card and other types of loans.
Appropriately, most banks are taking steps to limit risk in the current economic environment, so they have
tightened lending standards, but they still have money to lend.
* through December 31, 2009
This information was provided by the Virginia Bankers Association.
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