A New York Times article with the headline “Smaller banks are scrambling as share prices plunge” might have some Kentucky bankers, customers and investors worried. However, John Soper who spent 43 years in the banking industry in central Kentucky, said Kentucky banks should be OK because they’re funded primarily by community members.
“Even our largest banks in Kentucky, like a Community Trust, or a Central Bank, or, you know, banks in Northern Kentucky, they primarily are funded by their depositors, who all fall under the $250,000 FDIC insurance level.”
The Federal Deposit Insurance Corporation was formed during the Great Depression to reassure bank customers their money would be safe. Today, the FDIC insures up to $250,000 per customer, per account. Soper said 90 percent of the deposits in failed banks were not insured by the FDIC.
“These people that had large corporate balances that were uninsured, got nervous and move their money all at once. And like $40 or $50 billion, moved in a matter of hours. And really, no one is structured to be able to handle that type of immediate runoff.”
Soper said the three-bank collapse did identify a weakness in our banking system – the ability to move large amounts of money almost instantly.
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