Knowing Your Bank in 2011

Understand your financial institutions in 2011

Given the current state of the economy, it is more important than ever to know with whom you bank. Just as a bank reviews your credit rating prior to extending a loan or credit card to you, you should also check a bank’s rating prior to placing deposits with them.

Given the current state of the economy, it is more important than ever to know with whom you bank. Just as a bank reviews your credit rating prior to extending a loan or credit card to you, you should also check a bank’s rating prior to placing deposits with them.

Banks are required to file financial statements with federal regulators on a quarterly basis. These financial statements are thoroughly analyzed and bank ratings are subsequently published. Although the FDIC does not publish their ratings, they recommend a couple of unbiased, independent bank and credit union sources for obtaining this analyzed information. One such source is BauerFinancial. Searching for an institution’s rating is as simple as going to www.bauerfinancial.com and searching for the institution in question. All banks rated four and five star by BauerFinancial are recommended. Four and five star rated banks have had their financial statements analyzed and have been found to be financially sound, to have adequate capital ratios, and to be in good standing with the FDIC.

Another interesting website you may want to refer to is www.moveyourmoney.com. This website provides you with a listing of well rated community banks in your area.

It is also important that you ensure that your accounts are properly titled. This will guarantee complete protection of your accounts. As of 2009, the FDIC increased single account ownerships coverage up to $250,000. For more information regarding FDIC coverage and limits, you can refer to www.myfdicinsurance.gov, or call 1-877-ASK-FDIC.

The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) today approved a final rule to implement section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Section 343 provides temporary unlimited coverage for noninterest-bearing transaction accounts. This separate coverage will become effective on December 31, 2010, and will end on December 31, 2012.

The final rule revises the FDIC’s deposit insurance regulations to include non-interest-bearing transaction accounts as a new temporary deposit insurance account category. All funds held in such accounts are fully insured, without limit, and this coverage is separate from, and in addition to, the coverage provided to depositors for other accounts at an insured depository institution.

Noninterest-bearing accounts, as defined in the Dodd-Frank Act, include only traditional, noninterest-bearing demand deposit (or checking) accounts that allow for an unlimited number of transfers and withdrawals at any time, whether held by a business, individual or other type of depositor.

The new temporary provision for unlimited coverage of deposit insurance for non-interest-bearing transaction accounts is similar to the FDIC’s Transaction Account Guarantee Program (TAGP), but differs significantly in the definition of “noninterest-bearing transaction account.” The TAGP, which expires December 31, 2010, includes low-interest NOW (negotiable order of withdrawal) accounts and Interest on Lawyer Trust Accounts (IOLTAs). The final rule expressly states that NOW and IOLTA accounts are not covered under the Dodd-Frank Act definition of noninterest-bearing transaction accounts and do not qualify for temporary unlimited coverage.