What You Should Know if Your Bank is in Trouble
FAQ’s from Executive Coaching Organization, Vistage International
October 2, 2008 SAN DIEGO– Here are some frequently asked questions about what happens to business deposits in FDIC-insured banks that fail. The answers are provided by veteran financial consultant, Edmond P. Freiermuth.
What does it mean if a bank is on the FDIC’s watch list?Typically this means the bank needs significant injections of capital to continue lending. If your bank is on the watch list, it might reduce your revolving credit line, decline to make you a term loan, or increase your interest rate.
How should businesses with more than $100,000 in FDIC-insured deposits in a single bank protect their assets?The FDIC insures business deposits on a per-taxpayer-ID basis up to $100,000. To fully protect bank deposits over $100,000 you can transfer funds in excess of $100,000 to other banks.
How can individuals protect more than $100,000 in an FDIC-insured bank?Individuals can get more coverage by designating different ownership categories to their accounts at the same bank. Spouses can qualify for $600,000 in total FDIC coverage at one bank by opening individual accounts, trust accounts and a joint account.
Are there any warning signs when a bank might be in trouble? The single greatest warning sign that indicates that bank is in financial trouble is when regulators issue a “cease and desist order” to the bank.
What happens when a bank fails?
The FDIC seizes control of the bank and resumes operations, or it attempts to find a buyer for the bank.
What happens to my business loan if my bank fails?
Your payment method or loan terms may change. In the worst-case scenario your loan may be called in, forcing you to find a new lender. It’s good planning to always have a back-up line of credit for your business.When the FDIC takes over a bank, how long do businesses have to wait before they can access their money?You should be able to gain full access to your insured funds (up to $100,000) within a few days. If your accounts are above the limit, it could take much longer and the exposure to loss could be significant for the excess amount.
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Media Contact: Lois Arbogast, Vistage International- 858.509.5861