Retirement account in a small bank

[Andy Wilson]

Hi BP,

I have 25K in Huntington bank, which I think is a relatively small local bank. Should I move my retirement account to a bigger bank or wouldn’t it be affected by the potential local bank crisis? I had to move my retirement funds to that small bank when I purchased a property in the past for a better rate.

Thank you for your advice in advance!

[Brian Eastman]

@Andy Wilson

If Huntington is FDIC insured, you have zero risk. FDIC insurance covers up to $250,000. Even if Huntington were to fail, your issue would be a few days where you could not access the funds as the Fed sold Huntington off to another bank like Chase or BofA.

If we all move our dollars to the 6 largest banks that are "too big to fail", (and therefore too big to regulate), we will not have a healthy banking system.

The banks that are currently having difficulties have been poorly run and/or overly focused in a specific niche with a high percentage of accounts over the $250K FDIC cap.

While the banking industry is being pressured by the Fed's attempts to curtail inflation, more of the issue is perception than reality.  If a bank has a strong balance sheet and reasonable liquid reserves, they should be healthy.  But, if retail clients start to panic, pull their deposits, and send them to the mega-banks, that will put unnecessary stresses on even a healthy smaller bank.