Fresh off the 2nd and 3rd largest bank failures in U.S. history (Silicon Valley Bank and Signature Bank, respectively), it seems like it might be a good critical time to do a refresher on FDIC insurance amounts, so that none of us are left holding the bag for a bank mismanaging its risk. But first, let’s do a very quick recap on how we got here.

Silicon Valley Bank (SVB) and Signature Bank were similar in that they both were overexposed to asset classes that have come under concern: SVB with low-interest long-term treasuries that had lost value with rising interest rates; Signature with overexposure to crypto firms. The other common link between the 2 banks was that around 90% of the deposits for each were uninsured (the depositors were over FDIC insurance amount coverage limits) – compared to around 50% or below at many large banks. When the uninsured depositors (mostly businesses) at each bank collectively discovered that their deposits could be at risk of not being returned to them, it prompted a good ole fashion bank run – the kind of which led to the creation of the U.S. Federal Deposit Insurance Corporation (FDIC) agency way back in 1933 after Great Depression bank runs decimated the U.S. financial system.

How did SVB and Signature avoid mismanagement scrutiny until now? Many are pointing to the 2018 rollback of post-financial crisis regulations that were put in place with the Dodd–Frank Wall Street Reform and Consumer Protection Act that was enacted in 2010. The result of the rollback was less stress-testing and regulatory oversight of bank asset management for banks through raising the asset threshold from $50 billion to $250 billion for the increased oversight. Left to their own devices, these large (but technically not large enough to face the scrutiny of increased oversight) banks mismanaged their assets and took on an unhealthy level of uninsured deposits.

The FDIC has moved to restore confidence in the banking system by taking the extraordinary step of fully backing all deposits at SVB and Signature, even the amounts that were uninsured because they were above the standard FDIC insurance coverage limits. You, however, may not be so lucky and should not rely on the same courtesy with your personal deposits now or in the future. If there is 1 lesson that each of us should take from these bank runs, it’s that each of us needs to become more familiar with FDIC insurance limits and protect our bank deposits accordingly. I’ve given an FDIC insurance overview before, but let’s dig in deeper to how FDIC insurance works, what assets are insured by the FDIC, and FDIC insurance limit caps.

How Does FDIC Insurance Work?

Long story short, FDIC member banks pay premiums in to the FDIC insurance fund. In exchange, deposits from depositors at those banks are protected, up to specified limits, in the event that the bank should fail. In theory, everyone benefits:

  • Member banks benefit by limiting the possibility of bank runs by uninsured depositors.
  • Depositors benefit by having their deposits protected, and the peace of mind that provides.
  • The Government benefits by not having to entirely bail out and take over failed banks.
  • The entire financial system benefits from more stability.

How to Find Out if a Bank is FDIC Insured

Most banks are FDIC insured, but here is an FDIC member bank search tool to help you confirm. In recent years, a number of new Fintech companies have offered bank-like products without being FDIC insured, and a few have failed, leaving customers at a loss. As a general rule, always check to see if a financial institution is FDIC, NCUA, or SIPC insured before transferring over any of your hard-earned personal funds to them.

FDIC insurance limit amount