Crisis has local banks fielding questions

Thursday, October 9, 2008

As large financial institutions across the country are battling the growing credit crisis, local bank officials are voluntarily answering customer questions about insurance coverage and the security of bank deposits.

"In the late 1980s there was a lot of concern about insurance on accounts," said Gary Fields, Security Bank president and chief executive officer. "Not since that time has there been the interest that there is today. We do a lot of explaining, but people still have confidence in their community banks. We are not part of the problem and will be part of the solution."

"Our customers' confidence levels are very good, and the community is strong," said Stan Kelley, Freedom Bank president and chief executive officer. "We have had some individuals who have very large sums of money move some of that money from one FDIC-insured institute to another, but we haven't seen any runs on the bank."

In addition to moving funds between FDIC-insured banks, some customers have opted to re-title their accounts to ensure all of their assets are insured under the FDIC policy, said Kelley.

Although most area residents appear to feel secure with their local banks, officials are experiencing an increase in the number of questions received about FDIC coverage.

"Customers just want clarification on FDIC insurance coverage," said Kelley. "They want confirmation that it is effective and how it could come into play for them."

"We have more questions than anything else," said Fields. "The questions are not just coming from people with large sums of money either."

The recently approved $700 billion rescue plan includes an increase in the amount of insurance individuals receive through FDIC. Coverage will increase from $100,000 to $250,000 through Dec. 31, 2009.

FDIC insurance covers funds in checking and savings accounts, money market deposit accounts and certificates of deposit (CDs). The insurance policy does not cover stocks, bonds, mutual fund shares, life insurance policies, annuities or municipal securities.

Basic FDIC deposit insurance coverage limits include: $250,000 per owner for single accounts; $250,000 per co-owner for joint accounts; $250,000 per owner of IRAs and certain other retirement accounts; and $250,000 per owner or beneficiary on trust accounts.

"Overall, for the banking system and customers, the increase will be beneficial," said Kelley. "It will help the level of confidence because now the FDIC will insure up to $250,000. It is a protective measure that will make sure that people who work hard for their money will be protected."

Although each FDIC-insured bank will acquire additional premium costs associated with the increased insurance coverage, Kelley feels the cost is worth the increased level of confidence customers will feel.

"The down side is that it will increase the exposure of the FDIC insurance fund," said Fields. "The up side is that it does provide additional peace of mind for the depositor.

"The concept that people think they have to rely on FDIC coverage is not true though," said Fields. "The bank has to lose all of its capital before FDIC steps in. Our local banks are still making money."

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