The Ultimate Bank Closure Quiz

By: Staff
Image: refer to hsw

About This Quiz

Most of us feel very comfortable knowing that our hard-earned money is in the bank, safe and secure. But sometimes a bank can fail. What happens then? If the bank is insured with the FDIC, you can rest assured that your money will not be lost. Take this quiz and find out how and why your funds are safe in an FDIC-insured bank.

What is IndyMac?

IndyMac is an American bank that got into financial difficulties in 2008, in addition to several other banks in the country.

In general, what happens to the money that you deposit in a bank?

The bank works to make a profit on the money by investing it wisely and lending it to people and charging them interest on the loans.

When did the US government begin to insure banks?

The government began to insure banks in the 1930s, during the Great Depression.

What is a bank run?

When people are afraid that their bank might close down, there is run on the bank, which means that many clients rush to withdraw their funds.

Who offered the United States the New Deal?

During the Great Depression, when people began to panic and wanted to take their money out of their banks, the banks couldn’t not return all the money to their clients. So in 1933, president Franklin D. Roosevelt stepped in to help by offering the New Deal.

What is the FDIC?

Created in 1933, the FDIC is the Federal Deposit Insurance Corporation, which insures bank accounts against bank failure.

What is a recession?

Although it has been referred to in different terms over the years, a recession is essentially a period of hard economic circumstances.

If your bank is insured with the FDIC, what happens if the bank closes down?

If you have a bank account at a bank that is insured by the FDIC, your money is insured even if your bank closes down.

Who pays the insurance premiums to the FDIC?

The bank pays the premiums for each of its depositors. So the client’s money is protected, even though he or she doesn’t have to pay for the insurance.

How can the FDIC afford to pay back the clients in the case of a bank closure?

The FDIC uses the money from the insurance premiums it receives from the bank to bulk up its deposit insurance fund. When necessary, it uses that money to pay back the depositors.

What is a conservatorship?

A conservatorship is set up when a bank fails and the FDIC comes to the rescue and takes charge of the institution.

What happens during a conservatorship?

Although clients don’t get advance notice about an FDIC takeover, they receive a letter notifying them about the bank’s failure after the fact. In the best-case scenarios, with the FDIC's help the bank carries on its business as usual.

What does the FDIC do after it takes over a failed bank?

Once the FDIC takes over a failed bank, it sells it as quickly as possible to a successful bank that can take over the former bank’s business.

During the transition period from a failed bank to the new one, where do direct deposits go?

During the usually brief period of transition, direct deposits are automatically routed to the client’s account at the new bank. At the same time, clients are generally able to write checks and use the ATM and their debit cards as usual.

What happens if the FDIC can’t immediately find a bank to purchase the failed one?

If the FDIC cannot find a bank willing to take over the failed one, it will send clients a check for the loss up to the insured limit. Clients will also be informed as to what to do about their safety deposit boxes.

How much does the FDIC insure each depositor?

The FDIC insures bank accounts up to $100,000 per depositor, per bank. Clients with a joint account will receive half of it back up to the maximum of $100,000.

How much will the FDIC give back if you have less than the maximum insured amount in your account in a failed bank?

If you have under $100,000 in the failed bank, you will get all of it back. According to the FDIC, it has never failed to return any money that it has insured.

Which one of the following is NOT covered by the FDIC insurance?

While the FDIC insurance covers savings accounts, checking accounts, money market accounts, NOW accounts and CDs, it does not cover such financial vehicles as mutual funds, stocks, bonds or life insurance policies.

How can you insure more money than the maximum amount the FDIC insurance covers?

If you have more than $100,000 in the bank, you can put your money into more than one bank, but make sure they’re not all owned by the same institution. You can also open an IRA (individual retirement account), for example, which is insured up to $250,000.

In the world of banking, what does NOW stand for?

NOW stands for negotiable order of withdrawal. It is an interest-bearing bank account that allows you to write checks against money held in deposit.

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