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FDIC Consumer News - Fall 2001
Special Report on FDIC Insurance
If a Bank Fails: Answers to Common Questions About an Uncommon Event
What happens to "uninsured" deposits -- those over the $100,000 insurance limit?
First, remember that all deposits within the $100,000 insurance limit are always
fully protected. Also, in most cases, the FDIC will arrange with another institution to acquire your
failed bank, and you will have immediate access to your insured funds by check, automated teller machine, debit
card and other services.
But if your bank fails and you have funds exceeding the $100,000 insurance limit, the FDIC will start by giving
you a document called a "receivership certificate" indicating the amount
of your uninsured deposits. Then, depending on various factors -- including the cost of the
bank failure minus how much the FDIC recovers liquidating your bank's assets -- you still can
recover some or, in rare circumstances, all of your uninsured funds. The liquidation process can take
several years, so it's important for uninsured depositors to make sure the FDIC has your correct
address.
What if I have a cashier's check (or any other official check) from a failed bank?
Until a cashier's check, money order, interest check or other official check is
cashed or deposited elsewhere and it "clears" the bank it is drawn on, the funds are still
considered to be on deposit at that bank. So, if that bank fails before the check clears, the FDIC will combine the
amount of the check with your other deposit accounts in the same ownership category, and the combined
total will be insured to $100,000.
Example: You have a $125,000 savings account at XYZ Bank and you withdraw
$75,000 in the form of a cashier's check. But before you deposit the check at another bank and the check
clears, XYZ Bank fails. Your $75,000 cashier's check from XYZ Bank gets combined with the amount in your
account there for insurance purposes, resulting in a $125,000 balance again and $25,000 uninsured.
What happens to my direct deposits?
If a failed bank is acquired by another bank, all direct deposits, including
Social Security checks or paychecks delivered electronically, will be automatically deposited into your
account at the assuming bank.
If the FDIC cannot find an acquirer for the failed bank, the FDIC will arrange
with another local bank to temporarily process any direct deposits until you can make new arrangements for
direct deposits as well as automatic withdrawals (such as automatic payments to utilities or insurance
companies) with other banks.
How can I access my safe deposit box?
If the FDIC finds a new owner for a bank where you have a safe deposit box, you
will be able to conduct business as usual. If the FDIC cannot find a buyer for your bank, we will mail
instructions to you that will explain how you can remove the contents of your box.
What happens to any loans I have at the failed bank?
You remain liable for any payments due on a loan or credit card. You would continue making payments as you
did before the bank failed until you are instructed to do otherwise in writing by the acquiring bank or the FDIC.
If your bank fails and you have funds exceeding the $100,000 insurance limit, you can still recover some or, in rare circumstances, all of your uninsured funds.
If your loan is delinquent and you have insured deposits at the bank, the FDIC
may "set off" (deduct) the loan balance from your insurance payment. However, the FDIC will only deduct
past-due money if the loan and the deposit account involve the same people. As an example, if you are
delinquent on a loan that is in your name only, the FDIC may not deduct funds from a deposit account
you own jointly with another person.
How can I get more information about what happens when a bank fails?
Start at the FDIC's Web site. Among the special services available online:
updated information about
individual bank failures
dating back to October 2000 and a searchable database of
unclaimed funds from failed financial institutions. Or, you can call or write the FDIC at the addresses or phone numbers listed on "For More
Information".
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