The $752 million dollar Columbian Bank and Trust of Topeka was shut down on Friday. It became the ninth such bank closure this year. Compared to only 3 closures in 2007, that seems like an awful lot of closures. But, should we be worried?
Not really. With the implementation of the FDIC and NCUA, the Government has taken away a lot of the sting of a bank or credit union closure. There’s still plenty of inconvienences, but the insurance has you covered for most losses. Your account is insured for up to $100,000, and there are some circumstances where it could be more. But keep $100,000 as the baseline to worry about. As long as you have less than that amount, you have nothing to fear. Your money is insured and relatively safe. The only inconvience will be delays in getting to your money if your institution should fail.
Another thing to keep in mind is that having this many closures, while not normal, isn’t unheard of. In 2002, the FDIC closed 10+ banks. Those were most likely a result of a little too much enthusiasm lending to dot com startups instead of real estate loans, but the effect was the same. And if you’re thinking that Credit Unions are safer than Banks, you’d probably be only slightly right. There have been 8 credit union closures this year so far.
So, should we be worried about bank failures? Maybe a little, but not enough to lose sleep over. And banks and credit unions are still much safer than bundles of cash in your mattress or under the old oak in the back yard.