Frequently Asked Questions

What does it mean for a bank to fail?

When a bank "fails," it means the institution can no longer meet its financial obligations to customers and creditors.

Is my money safe during a banking crisis?

FDIC insurance protects your deposits up to $250,000 per depositor, per bank, per ownership category.

Different account types—like business accounts, joint accounts, and certain retirement accounts—may have their own separate coverage limits.

What typically causes bank runs and liquidity crises?

A "bank run" occurs when many customers withdraw their funds simultaneously due to concerns about the bank's stability.

This can happen when a bank has too many non-performing loans, insufficient cash reserves, mismatched interest rates on assets and liabilities, or during broader market uncertainty.

The digital banking era has accelerated these events, allowing withdrawals to happen much faster than in the past—as demonstrated during the Silicon Valley Bank collapse in 2023.

What warning signs preceded the 2023 regional banking crisis?

Before the failures of Silicon Valley Bank, Signature Bank, and First Republic in 2023, several warning signs were evident: high concentrations of uninsured deposits (over 90% at SVB), significant unrealized losses in investment portfolios due to rapidly rising interest rates, customer bases concentrated in specific volatile industries, and inadequate interest rate risk management.

What market risks are banks facing in 2025?

Since 2023, banks have faced several significant challenges: declining deposits, customer shifts toward higher-yielding accounts, reduced cash reserves, and increased reliance on wholesale funding (borrowed money).

Total U.S. deposits fell by approximately $380 billion (2.1%), with uninsured deposits declining while insured deposits grew.

Community banks face particular pressure as their liquid assets have dropped to the lowest level since 2008 (just 17% of total assets).