Depositors Face Loss Of $4.2 Million On Bank Failure
The closing of Community Bank of Nevada last week came as a very unpleasant surprise to some depositors. The FDIC estimates that there was approximately $4.2 million of uninsured deposits in the bank at the time of closing. The uninsured depositors had savings in the bank in excess of the FDIC insurance coverage limits and could be facing a total loss of their uninsured savings depending on the recovery that the FDIC ultimately realizes from the sale of the failed bank’s assets. In the meantime, the uninsured depositors cannot access their money and could possible never be reimbursed for their losses.
How To Minimize Risk Of Loss
No banking customer has ever lost a penny on FDIC insured deposits at any bank during the FDIC’s 75 year history. Since the FDIC currently provides deposit insurance coverage up to $250,000, the risk of loss is limited to those with very large deposits who have accounts that exceed the FDIC insurance limit. In addition, there are some relatively easy steps that large depositors can take to avoid the potential of loss on their bank deposits.
Given the large number of banking failures this year, anyone who is not sure of the FDIC coverage can take the following steps:
- Discuss your situation with the manager at your bank. There are many ways that FDIC coverage can be expanded to exceed the $250,000 limit at the same bank, such as opening an additional joint account with your spouse.
- Multiple accounts opened at different banks under the same name would also be covered up to the FDIC insurance limit, so it is very easy to have FDIC deposit insurance for relatively large amounts.
- The FDIC web site has a sophisticated calculator that can be used to determine if all of your banking deposits are fully covered by FDIC insurance. The FDIC insurance calculator is called Eddie the Estimator and provides a step by step input process and printable report that lets you know if any of your deposits exceed the FDIC insurance coverage.
- Many banks are members of the CDARS Network which allows large depositors to obtain FDIC deposit insurance on amounts far in excess of the current $250,000 deposit limit. Banks that are members of CDARS can place your funds into CDs issued by other banks in the CDARS network in increments under the $250,000 deposit insurance limit. The CDARS Network reduces the time and effort of opening multiple accounts at different banks and allows a depositor to manage all CDs through a single bank.
For anyone with deposits that potentially exceed the FDIC insurance limits, a little bit of time following the above steps can easily prevent a potential loss of savings.