Who backstops your bank, credit union and brokerage accounts?
The Federal Deposit Insurance Corp. headquarters in Washington. Credit: Bloomberg/Al Drago
When the going gets rough, who is backstopping your money?
Customers of banks, credit unions and brokerage firms have to navigate the regulations of agencies created to stabilize the financial system and calm financial panics.
Bank runs, whether at Bailey Brothers Building and Loan in the film "It's a Wonderful Life," or Signature Bank, whose deposits since have been largely acquired by Hicksville's New York Community Bancorp, can whip up fear and spread.
A poll released Wednesday from The Associated Press-NORC Center for Public Affairs Research found that only 1 in 10 U.S. adults say they have high confidence in the nation’s banks and other financial institutions, down from 22% in 2020.
What follows is a look at the agencies whose purpose is to serve as the financial "fire departments:"
Q: What is the FDIC?
The Federal Deposit Insurance Corporation, created during the Great Depression, insures bank deposits "by the full faith and credit of the United States government." At the end of 2022, 4,706 U.S. banks and savings institutions — the vast majority — were insured by the FDIC. To see if your bank is protected by the FDIC, go to bit.ly/409dHPZ.
Q: What does the FDIC insure?
The agency says that since its founding, "no depositor has lost a penny of FDIC-insured funds." The FDIC covers checking accounts, savings accounts, certificates of deposit, cashier's checks, money orders and money market deposit accounts.
Q: What limits apply to FDIC insurance?
The standard deposit insurance amount is $250,000 per depositor, per FDIC-insured bank, per ownership category. That means accounts owned by one person are covered up to account balances of $250,000. Joint accounts owned by two or more people are insured up to $250,000 per co-owner. Business accounts are insured up to $250,000 per corporation or partnership. In the wake of the Silicon Valley Bank and Signature Bank failures, some businesses and individuals considered moving funds to huge money-center banks like JPMorgan Chase, and multiple institutions, to bring their accounts within FDIC coverage limits. For further information about FDIC insurance, see bit.ly/3lspyd3.
Q: What doesn't the FDIC insure?
The FDIC does not cover stocks, bonds, money market mutual funds, annuities, cryptocurrency, insurance policies and safe deposit boxes, even if those assets are held in an FDIC-insured bank. For further information on which deposits are insured, see https://www.fdic.gov/resources/deposit-insurance/financial-products-insured/.
Q: Does FDIC insurance give comfort to Long Island depositors?
Richard Siegelman, who has a decades-long relationship with Roslyn Savings Bank in Plainview, a unit of NYCB, said he was confident in the security of his deposits "especially considering Federal Deposit Corporation insurance."
Siegelman, a retired teacher, said he didn't consider moving his accounts to a giant money-center bank "partly because NYCB is itself so big." NYCB's assets surpassed $100 billion after its acquisition of some loans and deposits from the failed Signature Bank this month.
Q: Are credit union accounts insured?
The National Credit Union Administration, created by Congress in 1970, is a federal agency that insured 4,760 credit unions as of Dec. 31. The NCUA's insurance fund "is backed by the full faith and credit of the United States government." Accounts at nonprofit credit unions regulated by the NCUA are insured up to at least $250,000 per individual depositor. The NCUA does not insure stocks, bonds, mutual funds, life insurance policies, annuities or safe deposit boxes. For details, go to mycreditunion.gov.
Q: Are some credit unions not insured by the NCUA?
Some state-chartered credit unions have private account insurance.
Q: What about my brokerage accounts?
The Securities Investor Protection Corporation, created by Congress in 1970, protects against the loss of cash and securities such as stocks and bonds at member brokerage firms.
Q: What other kinds of investments does SIPC protect?
SIPC protects Treasury securities, certificates of deposit, mutual funds and money market mutual funds.
Q: What are the limits of SIPC protection?
SIPC works to restore to customers their securities and cash when a brokerage firm liquidates. Money market mutual funds, often thought of as cash, are protected as securities. The agency does not protect against bad investment advice or a decline in the value of securities.
The limit of SIPC protection at a troubled brokerage is $500,000, which includes a $250,000 limit for cash.
For further information, go to sipc.org.
Q: Are annuities protected?
If a licensed insurance company in New York is is deemed insolvent and is liquidated by a court, the non-profit Life Insurance Company Guaranty Corporation of New York can step in. Immediate and deferred annuities issued to New Yorkers in a policy that offers fixed benefit guarantees generally are eligible for coverage up to $500,000, according to the state Department of Financial Services website.
Q: What about variable annuities?
In general, non-guaranteed benefits are not covered, according to the LICGCNY website, but a variable annuity contract that includes general account guarantees would be eligible for coverage "subject to applicable limits and exclusions on coverage."
Clarification: FDIC insurance covers money market deposit accounts (also known as money market accounts) at banks, but not money market mutual funds. The SIPC ensures that customers of failing brokerages get access to their money market mutual funds but doesn’t insure value.
Ken Schachter covers corporate news, including technology and aerospace, and other business topics for Newsday. He has also worked at The Miami Herald and The Jerusalem Post.
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