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Bank mergers can reduce FDIC deposit insurance

By Eric Fleischauer · 340-2435

The merger-mania among area banks could negatively affect federal deposit insurance for some account holders, according to the Federal Deposit Insurance Corp.

The FDIC insures up to $100,000 of an account holder’s money in any given bank. That insurance applies even to banks with foreign ownership, such as Compass Bank and RBC Centura.

The problem arises for customers who have accounts that, combined, exceed $100,000. If those accounts were divided among different banks that since have merged, the amount above $100,000 no longer is insured.

For example, if you had a $75,000 account at Regions and a $75,000 account at AmSouth, your deposits were fully insured before the banks merged.

After the merger, however, FDIC insures only the $100,000 per-bank maximum. That means you have lost your insurance on $50,000.

There is a grace period. Under federal law, you’ll continue to receive the same FDIC insurance coverage as if your accounts were still at separate banks for six months after the merger date. CDs may continue to receive separate FDIC insurance coverage until their first maturity date after the six-month period.

After this date, if your total deposit account balances exceed $100,000, the excess amount may not be covered by FDIC insurance.

Federal law provides for insurance coverage of up to $250,000 for self-directed retirement accounts, including IRAs.

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