How can you tell whether your bank is in hot water?
More people have been asking that question since the collapse of Pasadena mortgage giant IndyMac Bank in July. After the government took over the bank, many customers had to wait in line for hours before they could speak to anyone about their deposits.
Sidney Eisenberg would like to avoid that inconvenience.
"Who wants to stand in line to do the paperwork, or find out because you didn't dot an 'i' or cross a 't' some bureaucrat doesn't want to give you your money? Life is too short to engage in any more hassles than necessary," said Eisenberg, 62, of Rowland Heights, whose investments include bank certificates of deposit as well as stocks and bonds.
The Federal Deposit Insurance Corp. says that when a bank fails, most customers who are covered by deposit insurance don't lose access to their money at all. IndyMac customers who didn't want to stand in line at a branch were still always able to access their accounts online or at an ATM, the agency says.
But when it comes to money, some people don't want to take any chances. Even if you know that your account is 100% insured, you still may want to check on the soundness of your bank or credit union.
Where do you start?
Eisenberg, a retired General Motors executive, clicked on a "security" link on the website of his bank, Citibank, but found only "a bunch of trivial info about 'phishing' and online security scams."
Regulators rate the soundness of financial institutions but don't disclose the resulting grades. Savvy consumers, however, can turn to ratings generated by private firms that wade through the oceans of numbers that banks report to regulators.
The Federal Deposit Insurance Corp.'s website lists 11 firms that rate banks and thrifts and provide reports online, by mail or even over the phone. That information can be found at www.fdic.gov/bank/individual/bank/index.html.
The firms generate their ratings by feeding data taken from the banks' quarterly reports to regulators into proprietary computer programs. Information on banks and thrifts that is made available includes net worth (also known as capital), problem loans, profit or losses, cash on hand and reserves for losses.
Some of these services are expensive and oriented toward financial professionals. But Bankrate Inc. and BauerFinancial Inc. give free access to their ratings on all 17,000 U.S. banks, savings and loans and credit unions. Most institutions get three or four stars, with five best.
