Since the Federal Deposit Insurance Corporation (FDIC) was created in 1933, no bank customer has lost a penny in insured deposits, even during the darkest days of the 2008-09 financial crisis.
But that didn’t prevent some savers from breaking into a cold sweat in March when Silicon Valley Bank failed and regulators assumed control. It was the largest bank failure since the financial crisis, and it was followed by a cascade of unnerving banking news, including the collapse of Signature Bank. But unless you have a large amount of money in the bank, that is probably something you can cross off your worry list.
The FDIC insures traditional bank deposits—such as checking and savings accounts, money market deposit accounts, and certificates of deposit—for up to $250,000 per depositor, or $500,000 for joint accounts, per bank. The National Credit Union Administration (NCUA)—also a federal agency—provides the same coverage with the same limits for credit unions.
If for some reason you need to stash more than $250,000 in the bank, there are ways to protect funds that exceed that limit. If you like your bank and want to keep all your business there, you can boost coverage by setting up multiple accounts that are titled differently. For example, a married couple could have a joint account insured up to $500,000; two individual accounts, each insured up to $250,000; and two retirement accounts, each covered up to $250,000. That would bring their total FDIC coverage to $1.5 million.
Bank failures have been relatively rare in recent years, and banking leaders say the recent turmoil doesn’t signal a broader malaise. SVB primarily served technology start-ups and venture capitalists, and more than 93 percent of its deposits were uninsured. When the bank reported nearly $2 billion in investment losses, word spread quickly on social media, prompting customers to withdraw $42 billion in 24 hours. The panic spilled over to Signature Bank, which served many private and cryptocurrency customers and had a large percentage of uninsured deposits.
Investors can take comfort in assurances from many market experts that the regional banking panic of 2023 seems unlikely to morph into anything like the great financial crisis of 2008. But the risk of recession is undoubtedly higher, and continued market volatility is a given.