So, Your Bank Is Failing. Now What?


The Silicon Valley Bank has recently collapsed and it’s sending shockwaves through the banking world. While you might not have any connections to the bank, you may be worried about what happens to customers when their bank fails. Here is a quick explainer.

Your Deposits Should Be Safe

As long as the bank is insured by the Federal Deposit Insurance Corporation, your deposits (whether they are in a checking or savings account) are safe. The FDIC offers coverage for up to $250,000 in deposits. If you have a joint account, that amount goes up to $500,000 in deposits. So, don’t panic about all of your money disappearing into the ether.

What if you’re a customer of a credit union? Credit unions that are insured under the National Credit Union Share Insurance Fund have similar oversights and protections. Your deposits will also be covered up to $250,000.

If you have financial products without that FDIC protection, you could lose out on those investments due to the collapse. Take a look at the FDIC’s list of uninsured financial products.

Your Bank Might Get Replaced

When a bank fails, another bank has the option to swoop in and acquire its assets. It essentially agrees to absorb the failing company and take on its customers. If this happens, the FDIC will notify you of the change through the mail. You will automatically become a member of that new bank. Your deposits will then be transferred into new accounts available through this institution.

If another bank doesn’t take on your failing bank, then you will receive a payout. The FDIC will send you checks for the amount of your insured deposits as soon as possible. You will have to find a new bank to join on your own. Then, you can deposit your payout in one of your freshly opened accounts.

Your Payouts Can Take Time

The FDIC is required by federal law to make payouts as soon as possible. In general, the corporation aspires to have the payments sent to customers within two business days. However, there are some circumstances that can make the process take longer. For example, sometimes customers will need to collect and send supplemental documentation before receiving deposits, which could extend that initial deadline of two business days.

What if it’s an emergency and you can’t receive that money just yet? It’s very unlikely that you’ll get hit with an emergency expense in that short window when you’re waiting for your deposits. But, if it happens, you could try an alternative payment method, like a credit card.

If you have an account with a different bank, but you don’t have enough savings in it to cover the expense, you could consider a personal loan as a solution. Personal loans typically require applicants to have active bank accounts and proof of regular income. With these qualifications, you might be able to borrow what you need online and then make repayments afterward. The moment you get all of your deposits back into your possession, you can use them for loan repayments and get back on track.

Your Pre-Set Payments Won’t Go Through

Any bill payments that you’ve automated through your online banking and paper checks that you’ve mailed out will not be cleared after your bank collapses. This will not be a knock against your consumer credit report, as the bank closure is not your fault.

However, you may want to contact the bill and check recipients to let them know about your bank’s closure. This could give them notice about the state of your payments. Once you’ve opened a new bank account, you can reset automated bill payments and send new checks out.

Bank failures aren’t popular occurrences, but they aren’t unheard of. Know what to expect in case your own bank shuts its doors for good.

Rachel Crib
Rachel Crib
Rachel has lived in Lancaster her whole life. Trish has worked as a journalist for nearly a decade having contributed to several large publications including the Yahoo News and the Lancaster Post. As a journalist for The Tiger News, Cristina covers national and international developments.

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