Since 2001, there have been 570 bank failures in the U.S., with the largest portion occurring during and directly after the Great Recession. 2009 through 2013 was particularly hard on banks, with 464 going belly-up.
However, it was during this time that new laws and policies were enacted to protect banks -- and bank customers -- from financial losses. In response to the global financial crisis of 2007-2009, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, with the stated goal of reforming the financial regulatory system and preventing bank failures.
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All those "what-ifs"
If you're someone who worries about the money you've worked so hard to earn, you'll be glad to know that at least four things are helping secure the money you keep in a bank.
1. Bank stress tests
Each year, the U.S. Federal Reserve puts large banks' data into a model to see how they would fare under certain circumstances. In the 2025 test scenario, for example, the government modeled what would happen with conditions including increased unemployment, severe market volatility, and a big decline in house prices. The government looks at how the banks operate, what could go wrong, and how (or if) the bank could survive.
It releases findings to the public and uses results to set a "stress capital buffer requirement" for big banks to help them beef up their emergency cushion. Banks also conduct their own stress tests and release those results to the public.
2. Deposit insurance
To prevent unnecessary worry, look for a bank that's insured by the Federal Deposit Insurance Corporation (FDIC), or a credit union insured by the National Credit Union Administration (NCUA). That way, even if things go south, your individual accounts are insured for up to $250,000 per account holder and per account ownership category (for example, individual savings, joint checking, IRA, etc.).
If you bank with a fintech company, make sure it puts your money in an FDIC-insured bank and keep your total deposits across all accounts under $250,000. If you have more money to deposit, open an account with another financial institution.
3. Withdrawal limits
While bank withdrawal limits may be a hassle when you need a large sum of cash, they're in place to help banks meet the demand of all their customers. By imposing a cap on the amount you can withdraw from certain accounts at once, the bank can predict how much it will have on hand at any given time.
4. Support from central banks
Central banks, such as the Federal Reserve, extend credit to maintain liquidity. Even the healthiest banks may need help overcoming a short-term shortage, and when that happens, they have somewhere to turn.
Each time the economy hits a significant downturn, measures are implemented to help prevent a recurrence. As far as bank safety is concerned, that may be a silver lining.
