Ordinarily, when a bank fails, the FDIC steps in to cover any losses and arrange for another institution to take over. Most failed during the Great Recession years of 20. Since 2001, 562 FDIC-insured banks have gone under. The good times may not last, particularly if recent recession predictions are correct. Still, with around 5,000 credit unions operating, that’s no cause for alarm. So far in 2023, two credit unions have met similar fates. In 2021, nine institutions closed or were placed into conservatorship, followed by seven in 2022. history.įor credit unions, which are insured by the National Credit Union Administration (NCUA), recent years have been rockier. There were no failures among the nearly 4,800 institutions the FDIC insured in 2021 or 2022, but that changed in March 2023, when the run on Silicon Valley Bank led to the second-largest bank failure in U.S.

A typical year sees at least a handful of bank failures, according to the Federal Deposit Insurance Corporation, which insures depositors against losses in the event of a bank failure. Bank runs can lead to the collapse of a bank that can’t cover the requested withdrawals.īank runs can be scary, but they don’t always signal economic instability. Historically, however, there have been times when people have lost faith in a bank or the whole banking system, and they’ve lined up in droves to demand their money. As long as there isn’t a run on the bank, there won’t be any problems. Meanwhile, its 10% capital reserve supplies cash to people who close their accounts or make withdrawals. The bank takes deposits, makes loans and collects loan payments to replenish its coffers.

That means 90% of the money your account statement says is at the bank is actually somewhere else, like with an auto dealership that sold a car to someone who borrowed funds from your bank. By law, banks must hang on to some money, but it’s not much.Ĭapital requirements vary by institution, but according to the Federal Reserve, it’s around 10% for many big banks. As soon as your bank receives a deposit, it gives that money to someone else in the form of a loan. To start with, understand that your money is not physically in the bank.

Bank safe deposit box signature card