First National Bank of Lindsay, Oklahoma (FNBL) was told to close the doors to its one location on Friday, October 18th, 2024. The Office of the Comptroller of the Currency said in a statement that it had found:
“false and deceptive bank records and other information suggesting fraud”
which of course isn’t great.
At the same time, the FDIC announced that First Bank & Trust of Duncan, also Oklahoma, would step in and assume the insured deposits from FNBL.
If the about $7MN of deposits that were uninsured, only 50% would be made available, and there was no guarantee that any more would come about as assets were sold, which is also not great.
Remember, that the FDIC insures deposits up to $250,000, anything beyond that and the bank (and ultimately the depositor) is on their own.
Some will say that is how insurance works; if you have it, you’re covered, if you don’t, you’re not.
Others—specifically the uninsured depositors—might find that a little unfair because they actually put more of their money into the bank than others.
In rare cases the FDIC has agreed with them and covered all deposits (hello, SVB!) because not doing it could cause systemic ripples which are the FDIC’s least favorite kind of ripples.
And the series of unfortunate bank events last year reopened the comment section on whether smaller or larger or all deposits should be insured, if other deposit metrics are necessary, and, of course, who should pay for it—to which Team Bank said: “Not us!”
In the aftermath it has occurred to the FDIC that they might be better at tailoring their response to bank failures if they knew a little bit more about the deposit composition of the member banks before they were on the brink of a run.
Currently, only banks with more than $1BN in assets (which would not by any stretch have included FNBL) are required to report an estimate of uninsured deposits. Therefore, the FDIC has sent out a request to banks to tell them more and more regularly about this.
And as with all risk measures, reported or not, knowing what you have on your books is probably not a bad idea.
Regitze Ladekarl, FRM, is FRG’s Director of Company Intelligence. She has 25-plus years of experience where finance meets technology.
This article is part of the FRG Risk Report, published weekly on the FRG blog. To read other entries of the Risk Report, visit frgrisk.com/category/risk-report/.