Bank Roulette

At 98 and counting, the number of bank failures this year is beginning to rival the number of institutions shuttered in 1992, at the finale of the savings-and-loan crisis. Fortunately, when a bank goes belly up, most customers have a seamless transition to a new bank. The Federal Deposit Insurance Corp. currently covers $250,000 per depositor per bank. And most often, a failed bank is bought by another bank, assets are transferred immediately, and customers have uninterrupted access to funds in their accounts.

As of mid October, the FDIC had been able to find buyers for 87 of the banks that have failed this year. But headaches ensue when the FDIC can’t find a buyer. For example, Platinum Community Bank of Rolling Meadows, Ill., failed Friday, September 4. The FDIC mailed customers checks for their insured deposits on Tuesday, September 8. In the interim, Platinum customers did not have access to their money, ATM cards did not work, and checks bounced. Customers who received direct deposits from the federal government, such as Social Security payments and veterans benefits, had to go to a branch of MB Financial Bank in neighboring Palatine, Ill., to collect their money.

But situations such as the Platinum failure are rare. More likely, the FDIC will set up a temporary bank for 30 days to allow customers to transfer their funds in person or electronically to another bank. After 30 days, the agency mails checks to those who haven’t moved their money.

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CD rate cuts. For savers, bank failures can mean lower rates on certificates of deposit. That’s because banks on shaky financial ground often offer higher-than-average CD rates in an effort to raise capital. When the bank goes under, you may be stuck with lower yields at another bank.

The acquiring bank can change the rate at any time and often cuts it. But accidental depositors can withdraw their money penalty-free and reinvest elsewhere. When Security Bank of Macon, Ga., failed July 24, it was bought by State Bank & Trust Co. State Bank lowered rates on old Security Bank CDs on September 30Ñexcept for customers with at least two accounts at State Bank. New customers could accept the lower rate, open another account or move their CD money to another bank penalty-free.

Even with today’s more-generous deposit-insurance levels, an estimated $64 million in uninsured deposits has been lost this year. FDIC insurance limits will revert to $100,000 for most accounts in 2014 if Congress doesn’t extend them. To calculate whether you are over your insured limit, use EDIE, the FDIC’s deposit-insurance estimator, at www.fdic.gov/edie.

If you’d rather avoid depositing your cash in a struggling bank, go to www.fdic.gov before you open an account to see whether the FDIC has issued any enforcement actions that require the bank to change risky practices or to raise more capital.