Is your bank safe? Beyond FDIC insurance

Insurance answers most of the safety question. The rest is arithmetic on the dollars above the limit, plus one structural check on whether the insurance attaches to your account at all.

Which of these are you?

• Everything you hold at each bank is under $250,000 per ownership category. Deposit insurance covers you. Confirm the bank is insured on BankFind and stop there. Health indicators matter little to you.
• You hold more than $250,000 at one bank in one category. You have an uninsured balance. Read the sections on exposure and on the indicators, then decide whether to split the money or accept the risk on purpose.
• Your cash sits in a fintech app. The app is not the bank. Read the pass-through section and run the four checks before you rely on any insurance claim.
• You want a "safety score" for a specific bank. Nobody can give you a reliable one from public data. The section on what the public can and cannot see explains why, and lists what to read instead.

What deposit insurance protects, and what it does not

Deposit insurance covers deposits at an insured bank up to the standard maximum: $250,000 per depositor, per insured bank, for each account ownership category, according to the FDIC. It does not cover stocks, bonds, mutual funds, crypto assets, annuities, or U.S. Treasury bills, notes and bonds, all of which the FDIC lists as not insured.

Insurance is triggered by the failure of an insured bank, not by a bad quarter, a downgrade, or a rumor. It is also measured per bank and per category, so the risk you carry is the sum of the excess balances you leave at each institution, not an abstract judgment about whether the bank is "good."

How much of your balance is actually exposed?

The exposure at one bank is the balance in an ownership category minus $250,000, floored at zero. Repeat for each category and each bank, then add. It is a plain subtraction, and it is the only safety number that belongs entirely to you.

Worked example: Exposure at one bank: a hypothetical $400,000 single account

Formula: exposure = max(balance − limit, 0), and uninsured share = exposure ÷ balance.

Variables for a hypothetical saver with one single-owner account:

Split the same $400,000 into $200,000 at each of two insured banks and the exposure is $0 at both, because each balance sits under its own $250,000 limit. Splitting removes the exposure. Its cost is administrative: two logins and two sets of tax forms. A CD ladder can do the splitting for you by design.

To check your own accounts across ownership categories, use the coverage estimator below. It is a screening estimate, not an FDIC determination, and it models one owner per trust entry.

What the public can and cannot see

Regulators grade banks with a confidential system. The CAMELS rating scores capital, assets, management, earnings, liquidity and sensitivity to market risk, on a scale of 1 to 5. The FDIC has stated in its Financial Institution Letter FIL-13-2005 that, except in very limited circumstances, the agencies are prohibited by law from disclosing CAMELS ratings and other nonpublic supervisory information to third parties, under 12 CFR Part 309, and that unauthorized disclosure can carry criminal penalties under 18 U.S.C. § 641.

No public tool shows a bank's CAMELS rating. A website that displays a "CAMELS score" for a named bank is modelling one from public numbers, and the model is not the supervisor's view. Treat those scores as someone's opinion, and read the underlying figures yourself.

What is public, and where:

Two public indicators and one habit

Two Call Report figures do most of the work, and one habit makes them useful. None is a verdict, and each needs a reference point.

1. Capital ratios against the regulatory categories. Federal rules define "well capitalized" for an FDIC-supervised bank as a total risk-based capital ratio of 10.0 percent or more, a Tier 1 risk-based ratio of 8.0 percent or more, a common equity Tier 1 ratio of 6.5 percent or more, and a leverage ratio of 5.0 percent or more (12 CFR 324.403(b)(1)). Adequately capitalized is 8.0, 6.0, 4.5 and 4.0 percent respectively. These are minimums that trigger supervisory action, not marks of safety. A bank far above them has more loss-absorbing cushion. A bank hovering near them has little room.

2. Uninsured deposit share. Banks with $1 billion or more in total assets report estimated uninsured deposits in Call Report Schedule RC-O, and FDIC guidance says collateral does not reduce the amount reported as uninsured. The share is uninsured deposits divided by total deposits. A high share means a large part of the funding is held by customers with a reason to leave quickly if they lose confidence, because they have money at stake above the limit.

Worked example: Uninsured deposit share and leverage cushion, hypothetical bank

Formulas: uninsured share = uninsured deposits ÷ total deposits; leverage ratio = Tier 1 capital ÷ average total assets; cushion = ratio − 5.0 percent.

This bank is well capitalized and still has 40 percent of its deposits above the limit. The two facts do not conflict. They tell you the bank is solvent on paper today and would face a fast-moving funding problem if the uninsured customers left together. All numbers here are hypothetical.

3. Change over time. One quarter tells you little. Look at the same three figures over several quarters. A steady ratio is unremarkable. A leverage ratio falling toward 5 percent, or an uninsured share climbing, is worth a question.

What happens if a bank does fail

The FDIC says it usually pays insured depositors within a few days of a closing, typically the next business day, and that it is the agency's goal to make insurance payments within two business days. There are two routes. In a purchase and assumption, a healthy bank takes over the insured deposits, and those customers become the new bank's depositors with access to their insured funds. In a deposit payoff, the FDIC pays by check up to the insured balance, and such payments usually begin within a few days.

Accounts that need documentation take longer. The FDIC notes that trust, fiduciary, and employee benefit accounts can require extra time because the completion of the insurance determination depends on the depositor supplying the documentation. That matters for the next section.

Above the limit the picture is different. The FDIC lists its legal priority as insured depositors, then uninsured depositors, then general creditors, then stockholders. Uninsured depositors may recover part of their money from the sale of the failed bank's assets, but the FDIC states that it can take several years to sell those assets, with periodic pro-rata payments on the remaining claim. The FDIC page carries no guarantee of a recovery percentage, and neither does this chapter.

Put your own timeline on it. If the insured part of your balance would reach you the next business day and the uninsured part could take years, the question to ask is which portion of your Tier 1 and Tier 2 cash you could not live without for a year. That portion belongs under the limit.

Fintech accounts and pass-through insurance

The FDIC states plainly that nonbank companies are never FDIC-insured, and that money you send to one is not eligible for insurance until the company deposits it at an insured bank and other conditions are met. If those conditions are met, you may receive pass-through coverage: insurance that extends through the intermediary to you as the owner.

Under the FDIC's guidance, three conditions apply. The funds must actually belong to you, not to the intermediary. The bank's account records must show the agency nature of the account, for example a title such as "XYZ Company as custodian." And the records of the bank, the third party, or another party kept in the usual course of business must identify both the owners and each owner's interest. The rule underneath, 12 CFR 330.5, says the FDIC recognizes a fiduciary relationship only when it is expressly disclosed in the deposit account records, and that the details and interests must be ascertainable from those records or from records the depositor or designated party keeps in its regular business.

Then comes the arithmetic, which is where readers make mistakes. A pass-through balance is insured based on your actual ownership and is added to your other accounts in the same ownership category at that same bank, up to $250,000.

Worked example: Pass-through plus a direct account at the same partner bank, hypothetical

Formula: insured = min(sum of your single-ownership balances at that bank, 250,000); exposed = sum − insured.

Each balance looked comfortable alone, and together they exceed the limit at the same bank. If the app spreads your money across several partner banks, each bank is counted separately, but you can only rely on that if you know your allocation.

Run four checks before you rely on any fintech balance:

1. Find the named partner bank. If the app will not name one, treat that as disqualifying for anything you cannot afford to have frozen.
2. Confirm the bank on BankFind. Confirm the bank, not the app. You can also call the FDIC at 1-877-ASK-FDIC.
3. Ask whether the money is in your own name or pooled. Check the account agreement for language such as "for the benefit of" and for how records are kept.
4. Add up your balances at each named bank. Use the exposure subtraction above, including any direct accounts you hold there.

You can also use our bank check tool and the fintech safety check as starting points, and the FDIC coverage calculator to screen a balance. It is a screening estimate, not a coverage determination.

A decision rule that fits on a card

You cannot observe supervisory ratings, and you cannot predict a failure. You can control three things: how much sits above the limit at each bank, whether your Tier 1 and Tier 2 cash sits in fully insured, directly titled accounts, and whether you know the partner bank behind every app.

The credit union equivalent works through the National Credit Union Administration, with the same $250,000 standard, and is covered in our NCUA versus FDIC guide.

Record which bank holds which balance as a line on your written liquidity plan.