Monitoring Bank Safety On-Line

    by AAII Staff

    Bank failures and the ongoing turmoil in the financial markets have many individuals concerned about the stability of their own banks. Of course, even in the face of a bank failure, investors have some protections. The Federal Deposit Insurance Corporation FDIC guarantees deposits at federally insured banks while the National Credit Union Administration NCUA covers deposits at credit unions.

    Another measure of bank safety is the financial strength of your bank. There are several entities that measure the safety and financial strength of various banks.

    If you want to find out if your bank is safe, and to learn more about the FDIC and NCUA, these Web sites can help.

    Government Agencies

    Federal Deposit Insurance Corporation

    The FDIC’s Web site offers information about deposit insurance, a list of insured banks, articles, FAQs, consumer reports and more. The Deposit Insurance section helps you determine if your bank funds are federally insured; the Bank Find tool lets you search for insured banks, view branch locations, find merger and acquisition information, and learn about your bank’s history; another tool called EDIE helps you estimate the coverage of your deposits. You can also see which types of investments are not covered and learn about international deposit insurance. The regularly updated Industry Analysis page provides bank data and statistics, research and analysis on national banking trends, and information on failed banks. You can also call the FDIC help desk (877/275-3342) if you have questions not answered on the site.

    National Credit Union Administration

    The National Credit Union Administration (NCUA) is the equivalent of the FDIC for credit unions. Their site provides information about NCUA insurance policies (which mirror the FDIC). You can also read about the NCUA’s insurance coverage rules and regulations. The Resources for Consumers area includes a search tool that lets you find credit unions by state. Each credit union listed includes a detailed data page with contact information. The Share Insurance area includes a tool to determine if your credit union is covered by federal insurance as well as a tool that estimates your total coverage amount.

    Bank Ratings provides a wealth of data on bank-related products. The site is updated regularly with interest rate data as well as editorial and educational content. An interesting feature is the site’s Safe & Sound ratings for banks. These ratings are based on the relative financial strength and stability of U.S. banks and credit unions. Twenty-two factors measure profitability, asset quality, capital adequacy and liquidity. Banks are rated with stars, where one star denotes the lowest rating and five stars indicates a superior rating. In addition to the star ratings, prepares written reports for each institution with at least four quarters of historical financial data. To learn about a bank’s Safe & Sound rating and to read the accompanying report, go to the “Checking & Savings” area and look for the “Safe & Sound ratings” link.

    BauerFinancial Inc.

    BauerFinancial analyzes banks and credit unions using a star rating. To find star ratings for specific banks, you can search by state and bank name. You will be shown the star rating and find links to various reports. The star ratings are based on capital ratio, profitability and loss trends, level of delinquent loans, market versus book value of investment portfolios and more. A highlights report costs $10, a summary report costs $20, an analytical report is $40 and the Llamas Report (which combines the analytical and summary report with additional analysis) costs $49.’s Banks and Thrifts Screener Ratings Screener publishes financial-strength ratings on over 8,000 banking institutions on a quarterly basis. Criteria are based on adequate capital and earnings and the quality of the institution’s assets. Choose “Portfolio & Tools” from the top menu bar and then “Banks and Thrifts Screener” to view the quarterly ratings. The tool allows you to search by bank name, type, state and rating (A-excellent, B-good, C-fair, D-weak, and E-very weak). Clicking the bank name from the results list brings up a link for a one-page report discussing the bank’s overall rating (A to E), and ratings of more specific factors like capitalization, asset quality, liquidity, profitability and stability.