Deposits are insured up to $250,000 per depositor, per ownership category
Cookeville – On March 10, a banking crisis the country hasn’t seen since 2008 was playing out in real time before our eyes. The struggle was real as Silicone Valley Bank’s (SVB) customers pulled their money, and U.S regulators looked to intervene and take control of the situation.
That same day the Federal Deposit Insurance Corp. (FDIC) did take control of SVB. The situation snowballed, and the market collapsed. Huge sums of emergency cash from central banks and some of the industry’s strongest players calmed the storm, but questions remain. The struggles strained smaller banks and financial institutions across the country. Locally, people are left wondering what to do with their money.
Should we bury it in coffee cans in the backyard?
Should we pull everything we have from our banks just in case?
Financial uncertainty is the worst, but David Kinchler, President and CEO of Cookeville’s One Bank of Tennessee said the media often exacerbates the problem.
“Unfortunately, anytime there is a bank failure, the media tends to overreact, creating undue anxiety among depositors of not only the failed institution but every financial institution regardless of their financial condition,” Kinchler told the Upper Cumberland Business Journal. “Since 1934, no depositor has lost insured funds due to a bank failure. The FDIC guarantees 250,000 per depositor, but that amount can actually be much higher depending on the set up of the account.”
Kinchler said The FDIC website better explains how insurance rules apply to a specific group of deposit accounts.
“I have personally seen where a customer can have over 1 million dollars guaranteed by the FDIC,” said Kinchler.
You can visit the FDIC HERE.
Ian Robson, Financial Center Manager of First Bank in Cookeville, understands how concerning a bank collapse can be, but says customer confidence seems strong.
“Local customer activity has been relatively normal at FirstBank and reports from most of our peer banks have been similar,” said Robson. “The credit for this goes to local customer confidence, trusting in the bank and our associates. FirstBank was founded in 1906 in Tennessee and is rooted in the communities we serve – vastly different from the west coast-based banks with a niche business model”.
Kinchler said the impact on banks is felt on several levels.
“The FDIC has already let banks know there will be an extra assessment this year to the FDIC’s deposit insurance fund, which is on top of the normal insurance fees banks pay regularly,” said Kinchler. “The special assessment will cost community banks hundreds of thousands and larger banks into the millions.”
Banks are seeing fewer deposits because of fear that banks may not be safe.
“They are withdrawing their funds and taking the cash home to lock in their safe or to another bank in hopes that spreading out their deposits to several banks will mitigate their risk,” said Kincher.
Government overreach from a regulatory point of view is another issue from situations like these.
“The banking industry is already one of the most regulated businesses in the country,” said Kinchler. “Now politicians are calling for even more oversight.”
Locally, Kinchler said the banking industry is strong.
“Overall, the banking industry is strong,” said Kinchler. “The communities in the Upper Cumberland region need to know that our local banks are financially strong. It’s important to not overreact and I would strongly encourage everyone to talk with their bankers if they have any questions or concerns.”
The key is to be informed and understand the differences between what is happening with your money locally and what is happening nationally, according to Robson.
“While staying informed is key, we hope the community understands the two failed banks were outside the norm of a “typical” bank,” said Robson. “Silicon Valley Bank worked with nearly half the venture-backed startups in the U.S., while Silvergate was a crypto-focused bank. In contrast, FirstBank has a wide deposit base made up of both commercial and retail deposits spread out over many customers, diverse geography and many business types. We are a healthy, financially conservative, local bank tied in closely with our community. We know our customers in the Upper Cumberland and our customers know us.”
Kinchler and Robson understand the concerns about the safety of money and investments.
“One Bank of Tennessee prides itself on being a very conservative bank, and we make certain we operate with the regulatory guidelines,” said Kinchler. “Our employees are aware of the panic many people are experiencing and are ready to talk with our customers to ensure them their deposits are safe and sound.”
Robson said the local landscape and the national landscape are different.
“Our team continues to monitor the financial landscape,” said Robson. “Our business model focuses on local loans and deposits. Our branch associates are proactively working with our customers to understand their needs, offer products that will keep their money safe and explain the sound foundation that FirstBank provides.”
Deposits are insured up to $250,000 per depositor, per ownership category. Personal accounts and business accounts can be insured up to $250,000 separately.
“You and your spouse could have individual accounts that would also be insured up to $250,000 each,” said Robson. “There are several avenues customers can take to ensure deposits over $250,000 are covered even outside of account ownership. At FirstBank, we offer both ICS (insured cash sweep) for money markets and DDAs and CDARS (CD Account Registry Service) for CDs.”
So, should we bury our money in that coffee can?
“Visit the FDIC website or talk with your banker,” said Kinchler. “They can help you understand how to protect your deposits without burying your cash in the backyard or mattress.”
The market is shaky, but don’t grab that coffee can just yet.
Image by jcomp on Freepik