Washington State Department of Financial Institutions

DFI Director: “FDIC Insured Bank Deposits Are Safe"

Temporary Increase In Deposit and Share Insurance Coverage

The standard insurance amount currently is $250,000 per depositor. The $250,000 limit is permanent for certain retirement accounts, which includes IRAs. The $250,000 limit is temporary for all other deposit accounts through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except certain retirement accounts, which will remain at $250,000 per depositor.

Scott JarvisEvents in financial markets have impacted us all. We have witnessed the failure of several large national financial institutions, ranging from the GSEs Fannie Mae and Freddie Mac, to investment banks like Lehman Brothers, the insurance company AIG, and banks and thrifts such as Indymac and Washington Mutual. Regional and community banks have not been immune, with some 140 banks having closed in 2009, including several banks in Washington State.

Such failures are painful and they have consumers questioning the stability of the financial services industry, their local bank and the solvency of the FDIC insurance fund.

In times such as these when emotions run high, it is important to stand back and take stock in the facts of the situation, as well as the difficulties they involve. With that in mind, let me start with the most fundamental bedrock facts and work forward.

First, banks are protected by the FDIC Insurance Fund. No insured depositor has EVER lost money in the history of the FDIC and they will not lose money this time.

Second, the FDIC Insurance fund is NOT at risk. This FDIC fund is supported by the banks and exists precisely for times such as these. To the extent additional resources are required, the FDIC fund is backed by the full faith and credit of the US Government which stands ready to lend to the Fund as necessary.

Third, and perhaps most importantly, the banking system is NOT GOING ANYWHERE. This country has a very diverse banking system with over 8,300 institutions. This diversity is a source of strength during times of stress as concentrations of credit and risk are dispersed.

Fourth, the preponderance of the 8,300 banks in this country are sound and well capitalized – in fact, the majority of the country’s banks are currently profitable despite the difficult environment we are in.

Washington has 78 state chartered banks. Each bank is examined and monitored by both the Washington State Department of Financial Institutions (DFI) and federal banking agencies. The examination process includes on- and off-site reviews to ensure that banks remain well capitalized and have adequate asset quality, earnings, and liquidity. Between examinations, DFI performs quarterly analysis to identify any issues that may arise between examinations.

As regulators, we work diligently with bank management to prevent problems and address difficulties as they emerge.

Finally, for those institutions that do experience problems in 2010 – and some around the nation will – the majority will not fail in the traditional sense. Instead, these troubled institutions will be absorbed by healthier players, and customers will see very little, if any, disruption in their business affairs.

In all these instances, insured depositors will be fully covered. I encourage consumers to work with the online tools provided by the FDIC and their institutions to ensure maximum insurance coverage.

Ultimately, we will come through this crisis as we have overcome disruptions in our past. We will emerge with a safer, sounder, and better-positioned banking system than before the current market commotion. Through the haze of the current crisis, we are already beginning to witness the re-affirmation of traditional banking – investment banks are disappearing or being acquired while consumers turn once again to their local community bank; non-bank mortgage origination is shrinking; old-school underwriting standards are re-emerging; and the traditional bank functions of making loans and taking deposits are returning to the forefront.

A safe and sound banking system is the foundation for economic growth and a strong economy. Bank supervision is an ongoing and cooperative effort with the federal banking agencies. We are in tune with the condition and performance of the banks and any challenges they face. To that end we are prepared to work with our federal regulatory counterparts to address weaknesses and restore and maintain confidence in our financial system.


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