NetBank Failure

Oct 1, 2007

NetBank logo It’s not every day that you hear about a bank failure. Prior to NetBank’s failure on Friday, the last was in February and that was the first in two and a half years. Thanks to the Federal Deposit Insurance Corporation (not to be confused with The Fed), the impact of a bank’s dissolution doesn’t have much effect on its customers. As detailed in the above-linked FDIC page on the NetBank failure, ING Direct will take over the accounts of NetBank and anyone with deposits less than the FDIC insurance limit won’t suffer any loss at all. Those with uninsured deposits (the amount exceeding $100,000) can only expect to see half of that amount:

Due to the projected sale of assets of the former bank, the FDIC is in the position to provide each uninsured depositor with an dividend equal to 50% of your uninsured amount. These funds will be deposited directly into your account net of your uninsured portion.

The lesson? This isn’t the depression, but bank failures still happen. If you keep your deposits under the FDIC limit then it’s very much a non-issue; if you exceed those limits, you could sustain significant losses. When Metrobank failed last February those with more than $100k at the bank got lucky because the FDIC was able to cover the relatively small amount of exceeding assets fully. In the case of NetBank, the amount of uninsured assets are great enough that the FDIC isn’t doing that again.