FREQUENTLY ASKED QUESTIONS (FAQs) ABOUT BANKS
1. Are my deposits in Arizona banks safe?
Yes. In Arizona, all state-chartered and nationally-chartered banks are required to have deposit insurance provided by the Federal Deposit Insurance Corporation (FDIC).
The FDIC —the chief insurer of bank deposits — is an independent agency of the United States government. The FDIC protects against the loss of your deposits if an FDIC-insured bank fails. The basic insurance amount is $100,000 per depositor per insured institution. Certain retirement accounts, such as Individual Retirement Accounts (IRAs), are insured up to $250,000 per depositor per insured bank. This means if you have deposited funds with a bank, up to $100,000 of your deposit and $250,000 of certain retirement accounts are insured against loss.
For additional information regarding FDIC insurance, please see the FDIC's website at www.fdic. gov. The FDIC website has a feature that enables you to calculate insurance coverage (EDIE — Electronic Deposit Insurance Estimator, www.fdic.gov/edie). In addition, the FDIC has a toll-free number (877-275-3342) operated from 8:00 a.m. to 8:00 p.m. (EST) where a customer service representative can be reached to discuss deposit insurance coverage.
Note: The Governor’s website, www.azgovernor.gov, also has a link to the FDIC website.
2. What does it mean that the First National Bank of Arizona (which was merged into the First National Bank of Nevada on June 30, 2008) is in receivership?
If a bank fails, it is closed by its primary federal or state regulator. The FDIC is then named as the receiver of the institution. Usually there is an assuming bank which enables the closed bank to be reopened immediately after the failure. In the typical transaction, the deposits – and sometimes the loans – are purchased by the new bank. If the FDIC is unable to obtain an acquirer for the loans, they will be handled by the FDIC, which will continue to market them for sale. For a period of time, borrowers may have to make their loan payments to the FDIC.
3. What is the difference between a receivership and the conservatorship?
The goal of a receivership is the orderly administration of the failed bank’s assets and liabilities. The goal of the conservatorship is to preserve the value of the failed institution as an operating bank until the assets and liabilities can be sold. IndyMac Bank was placed in conservatorship because there was no buyer for the bank’s deposits.
4. How are Arizona’s banks doing?
Customers of Arizona state-chartered banks have little to worry about as these banks overall remain well-capitalized and well-managed. The Arizona Department of Financial Institutions charters and regulates 34 banks in Arizona.
5. How are banks chartered and regulated?
Charter
Bank organizers have a choice of a state or federal charter which allows them to open and operate their bank. Organizers that choose to be regulated by the state are chartered by the Arizona Department of Financial Institutions. They can apply for a federal charter with the OCC or the Office of Thrift Supervision (“OTS”). All banks operating in Arizona are insured by the FDIC. All national and savings banks (including Wells Fargo Bank, Bank of America, Chase Bank and Washington Mutual Bank) are supervised by the OCC or the OTS. All bank holding companies are regulated by the Federal Reserve System.
Regulation
State and federal regulators conduct periodic examinations that ensure that the Board of Directors and bank management have adequate policies and procedures in place to operate the bank in a sound and safe manner. Regulators examine for capital adequacy, asset quality, management, earnings, liquidity and sensitivity to market risk. Banks are required to report the condition of their institution in considerable detail within 30 days after the end of each quarter. Those reports are public and can be accessed on the Federal Financial Institution Examination Council (FFIEC) website (www.ffiec.gov).
6. What is included in a bank examination and how often are they conducted?
A typical two-week safety and soundness examination of a state chartered bank assesses the risks facing the individual bank under review. Examiners review:
- A sample of the assets including loans and securities to determine a borrower's ability to repay the debt and the issuer's ability to redeem the security.
- The level of capital and earnings to ensure the adequacy of both to support the growth of the bank.
- The liquidity on the bank's balance sheet to determine that adequate levels exist to operate the bank on a daily basis.
- Compliance with federal and state anti-money laundering regulations.
- The bank's internal controls to prevent internal and external fraud.
All findings of the examination are discussed with management and the Board of Directors. Banks are examined every 12 to 18 months, depending on their condition, the size of their institution and how long they have been open.
7. What is a "Cease & Desist Order?"
A Cease and Desist Order ("Order") is a formal action taken by bank regulators that requires bank management and the Board of Directors to stop certain practices or activities that could hurt the public. If the practices or activities are not stopped by the bank, then the bank regulator can take additional enforcement actions. The Order contains provisions requiring the bank to take specific steps within a period of time to correct all identified deficiencies noted during an examination of an institution. In Arizona, Towne Bank, a state-chartered bank, is currently the subject of an FDIC Order. The Bank is working to comply with the Order. The issuance of an Order does not necessarily mean that a bank is in imminent danger of failure. Banks usually meet the conditions required by the Order.
8. When was the last time a bank was operating under a public Cease & Desist Order in Arizona?
In 2002, when NextBank, N.A. (a federally-chartered credit card bank) was closed by the OCC.
9. When was the last time a bank failed in Arizona?
In 2002, NextBank, N.A., in Phoenix, was closed by the Office of the Comptroller of the Currency (“OCC”) and liquidated by the FDIC. In 1992, three banks, The Bank of Verde Valley, Fountain Bank and Columbia Bank, were closed and placed into receivership with the FDIC.
10. Will financial concerns at Fannie Mae and Freddie Mac have an impact on Arizona?
Because housing and mortgage lending are important segments of Arizona’s economy, Fannie Mae and Freddie Mac are indeed important to Arizona and Arizonans. However, any financial problems they may experience can only be solved by the federal government not the states.
Both Fannie Mae and Freddie Mac are privately held corporations created by the federal government to facilitate mortgage lending. They own, or have packaged and sold, a substantial share of mortgages outstanding in the United States. Their continued viability is vital to the housing and mortgage industry nationwide.
11. Who can I contact for additional information on Arizona banks?
Arizona Department of Financial Institutions
2910 N. 44th Street - Suite 310
Phoenix, AZ 85018
(602) 255-4421 or (800) 544-0708
Web Site: www.azdfi.gov
- Federally-chartered national bank
Office of the Comptroller of the Currency
1301 McKinney Street - Suite 3450
Houston, TX 77010
(800) 613-6743
Web Site: www.occ.treas.gov
- Federally-chartered savings bank
Office of Thrift Supervision
P. O. Box 7165
San Francisco, CA 94120 Telephone: (650) 746-7000
Web Site: www.ots.treas.gov
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07.18.2007