The recent takeover of Silicon Valley Bank (“SVB”) and Signature Bank by regulators is troubling to all industries in the U.S., including the HOA/Condo industry.
The demise of SVB and Signature Bank raises important questions regarding the level of protection HOAs and Condos should have in place to keep their bank deposits safe.
Bank failures are rare, but, when it happens, the Federal Deposit Insurance Corporation (“FDIC”) covers checking, savings, CDs and money market deposit accounts up to of $250,000.00 per account holder (not per account). The FDIC is an independent agency of the U.S. Government that insures (or reimburses) a bank customer’s deposits up to the legal limit of $250,000 if your FDIC-insured bank fails.
To limit risk for associations, HOA/Condo board members should take a close look at the association’s bank and the amount of the association’s money in that bank. The best way to limit risk is for an association is to bank with an FDIC-insured bank and have less than $250k of the association’s funds on deposit with that bank at any one time. Also, it is a good idea to keep an eye on the stock price for the bank because a significant decline in the stock price for the bank could be an indicator that the bank is unstable or heading towards a bank failure. To best safeguard your association, it is important to “spread out FDIC insurance” – we recommend that funds be dispersed through various FDIC backed banks if your association has funds exceeding $250,000.
To confirm if a bank is FDIC-insured, you can look for the FDIC sign at your bank or you can use the FDIC’s BankFind tool. For more information on FDIC Insurance, visit https://www.fdic.gov/resources/
If your association has questions related to FDIC insurance and/or banking for HOA/Condos, please contact Beth Mulcahy, Esq. at 623.241.1093.