Homeowner and condominium associations are responsible for managing significant community funds, and protecting those funds should always be a top priority. Even though bank failures are relatively rare, they can occur, and associations should take proactive steps to minimize financial risk and ensure their deposits are fully protected.
The Federal Deposit Insurance Corporation (FDIC) provides deposit insurance coverage for checking, savings, certificates of deposit (CDs), and money market deposit accounts up to $250,000 per account holder (not per account). The FDIC is an independent agency of the U.S. government that protects depositors against the loss of their insured deposits if an FDIC-insured bank fails.
To limit financial risk, association boards should evaluate where their community’s funds are held and how those deposits are structured. The best practice is to ensure that the association banks with an FDIC-insured institution and maintains no more than $250,000 in any one bank at a time.
If the association’s deposits exceed $250,000, consider spreading the funds across multiple FDIC-insured banks so that all deposits remain fully protected. Additionally, boards should periodically review their bank’s financial health and maintain awareness of any changes that may signal instability.
To confirm if a financial institution is FDIC-insured, look for the FDIC sign displayed at your bank or use the FDIC’s online BankFind tool. More information about FDIC insurance can be found on the FDIC’s website at www.fdic.gov/resources.
If your association has questions regarding FDIC insurance or best practices for safeguarding association funds, please contact our firm at info@mulcahylawfirm.com.
