Concerns about the stability of some U.S. banks and safety of customer deposits have dominated headlines. The recent failure of IndyMac, with photos of customers lining up to withdraw funds has had a chilling effect on public confidence, and conjures up scenes from the movie “It’s a Wonderful Life.”
However, it is important to look beyond the headlines and dire predictions, differentiate between types of financial institutions and look at the overall strength of the banking system. First, consider that the Federal Deposit Insurance Corporation (FDIC), established in 1933, and the National Credit Union Insurance Fund, established in 1970, are backed by the full faith and credit of the U.S. Government.
All deposits are insured up to the first $100,000 and no insured depositor has ever lost a penny of insured deposits. In these turbulent times, depositors are well advised to consider insured deposits as a safe haven.
No one can predict the future, but we want consumers to know what steps the Department of Regulatory Agencies” (DORA) Divisions of Banking and Financial Services are taking to protect depositor funds.
Our mission of consumer protection is accomplished through rigorous examinations of regulated institutions, and the prompt initiation of enforcement actions to correct problems at an early stage if weaknesses are detected.
Comprehensive on-site examinations are conducted every 12 -18 months depending on size and financial condition. Weaker institutions may be examined more frequently, and the financial reports of all banks and credit unions are monitored by DORA staff every quarter.
If adverse trends are detected, a target examination may be conducted. In addition, we communicate directly with the regulated institutions to assess economic conditions and risks.
DORA’s actions, in close cooperation with federal regulators, ensure that Colorado citizens have access to strong, healthy and competitive financial institutions deserving of the public’s confidence.
IndyMac was a federally chartered savings association heavily invested in risky residential real estate loans.
Conversely, Colorado banks have limited exposure to residential real estate loans, and have remained more focused on their core business of commercial lending.
While we can’t speak to the financial condition of federally chartered institutions, we can say with complete confidence that none of the 112 state-chartered banks or 57 credit unions with combined assets of over $50 billion are considered a failure threat at this time.
While we are not unrealistic or naive about the challenges facing the U.S. economy, we do believe it is important that all residents of Colorado know that their federally insured deposits are safe and that we are regularly working to make sure that Colorado-chartered institutions, both credit unions and banks, are sound and secure.
Richard Fulkerson is the state bank commissioner of DORA’s Division of Banking, and Chris Myklebust is commissioner of DORA’s Division of Financial Services.
