There have been three bank failures in the United States this year alone—a significant cause for concern. As economic conditions continue to wane and recent bank failures weigh fresh on the minds of consumers, businesses, and individuals are looking for ways to secure their money better.
One of the best ways to keep your money safe is to deposit it with a local community bank.
Chances are that you know the primary benefits of working with a local bank over a large national chain. They typically come with lower fees, higher savings interest rates, and a more welcoming atmosphere. But did you know they’re often safer than their large national counterparts?
Community Banks Are Generally More Conservative
In most cases, community banks are more conservative and better capitalized than large national banks, and for good reason. Smaller community banks must manage risks on a day-to-day basis, not just when reports are due, or something significant happens in the markets.
These smaller banks constantly work to manage interest rate and liquidity risk regardless of the market environment, and they need to be able to explain how they model and manage those risks at any given time. Moreover, community bank holdings are often more diversified than the holdings at larger banks. That means they don’t put all of their eggs in one basket, which could lead to increased risk.
A Deep Commitment to the Community
Community banks aren’t just financial institutions. Many of them serve as the financial bedrock of their communities. These banks have a deep commitment to the local community and often go above and beyond to serve the needs of underbanked local populations.
That’s not just a benefit of working with a community bank; it adds a level of security.
Janet Yellen, Secretary of the United States Treasury, made an important statement in response to the recent failure of SVB. Yellen explained that her department had no interest in supporting banks beyond the current FDIC limits unless failing to do so would create systemic risk and financial consequences.
That’s crucial for community banks that serve as critical financial figureheads because their failures could cause systemic risk with significant financial consequences. As such, the Treasury may provide assistance above and beyond current deposit insurance limits if these banks fail.
The Bottom Line
The bottom line is that bank failures are scary, but they don’t have to be. First and foremost, protect your funds by working with smaller, more conservative community banks. Moreover, keep an eye on your deposit account balances and keep them within deposit insurance limits for maximum protection. At InterBank, we have a track record of keeping your money safe and secure. Talk to a banker today about any of our personal and business banking products and services.