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FDIC Watch List

Jodee Redmond
Concept image of bank with cracks through it
FDIC steps in when banks fail.

The FDIC watch list is an internal government document that includes banks that are considered to be in relatively poor financial condition.

What is the FDIC?

The FDIC ("Federal Deposit Insurance Corporation") insures deposits in banks as well as thrift institutions. It doesn't receive any funds from Congress but is financed by premiums paid by financial institutions. The FDIC has a control of a fund worth more than $49 billion; these moneys are used to insure more then $3 trillion in deposits held in banks and thrift institutions across the country.

On October 3, 2008, the deposit insurance was temporarily raised to $250,000 per depositor per bank which includes money held in savings and checking accounts. Retirement accounts (Individual Retirement Accounts and Keoghs) are insured separately for up to $250,000 per depositor per bank.

FDIC Response When a Bank Fails

If a bank or thrift institution should fail, whether it is on the FDIC Watch List or not, this agency takes action immediately. The institution will be closed and the FDIC usually sells the failed bank's deposits and loans to another institution. The failed bank's customers automatically become customers of the institution that acquires their assets.

How to Find Banks on the FDIC Watch List

The FDIC does not release information to the public about which financial institutions it has placed on its Watch List. As a public service, the FDIC will provide a number of companies that rate financial institutions. The FDIC does not publicly endorse or confirm the content of lists prepared by other companies.

Institutions Included on Public Watch Lists

Bank rating companies list the following types of institutions on their Watch Lists:

  • Banks
  • Bank holding companies
  • Savings banks
  • Savings and loans

These financial institutions are rated by way of a letter grade or a number. This designation is used to give the reader an idea of how safe and stable the institution is. The rankings are based on formulas developed by each rating company, and vary from one rating company to the next. Even though the formulas used to rate the financial institutions are not public knowledge, they likely developed based on the CAMELS rating factors, which are:

  • Capital
  • Asset quality
  • Management
  • Earnings
  • Liquidity
  • Sensitivity to market risk

Watch Lists Online

These companies can provide consumers with information about the relative stability of banks and thrift institutions. Depending on the institution's rating, you will be able to get some idea of how well the bank will be able to honor its obligations to anyone who has deposited funds there. Other ratings indicate whether the bank is expected to be able to honor its ongoing obligations, as well as obligations to security holders when they come due. Ratings may be expressed from "aaa" to "d," with "aaa' being the highest possible rating and "d" being the lowest. Other ratings companies will give the bank in question a rating of between one and five stars, with five stars being the highest ranking and one the lowest.

Information may be available online or in print on a subscription basis. Some of them will provide information over the phone about the institutions they rank.

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FDIC Watch List