How safe are credit unions amid bank turmoil? (2024)



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The failure of Silicon Valley Bank (SVB) and other institutions in recent weeks sparked fear that contagion could catch on, leading many depositors to move their funds to major banks for safety.

However, two regulatory experts say credit unions are actually safer places for folks to put their money than traditional banks, pointing to how the institutions – which largely cater to individuals rather than companies – are much less vulnerable to bank runs or liquidity issues.

How safe are credit unions amid bank turmoil? (2)

Experts say credit unions are a safer place for individuals to park their money than banks. (iStock / iStock)

Credit unions – which are owned by their members – have their own regulator, the National Credit Union Administration (NCUA), which is very much like the Federal Deposit Insurance Corporation (FDIC) that regulates banks. The NCUA insures depositors' funds up to the same threshold as the FDIC, $250,000.

Just like banks, deposits above the $250,000 mark at credit unions are uninsured, But unlike banks, credit unions do not have the same level of risk exposure to the factors that took down SVB and other troubled lenders.


Mark Treichel, who spent 33 years at the NCUA and served as executive director of the agency, points out the recent bank runs have been driven by uninsured deposits, and it is "substantially less likely" for that to happen to a credit union.

Treichel, who now assists credit unions with the NCUA via his company, Credit Union Exam Solutions, points out that the banks that have failed recently – namely SVB, Signature and Silvergate – all held a large percentage of uninsured deposits, with SVB's uninsured deposits upwards of a whopping 90%.

How safe are credit unions amid bank turmoil? (3)

A worker, middle, tells people that the Silicon Valley Bank headquarters is closed on March 10, 2023 in Santa Clara, California. Silicon Valley Bank hit with a bank run amid a liquity crisis. (Justin Sullivan/Getty Images / Getty Images)

When several uninsured depositors became alarmed over SVB's liquidity issues, many scrambled to pull out their money, causing regulators to step in and stop the bleeding.

However, credit unions are much less likely than banks to have that problem, given that they cater to working people and their depositors are largely individuals whose accounts are lower than $250,000.

Treichel says data shows that the largest 800-or-so banks in the U.S. have an average of roughly 36% of their deposits uninsured. However, even the largest credit unions with more than a billion dollars in assets only have around 9% of their deposits uninsured.


Dr. Angela Vossmeyer, associate professor of economics at Claremont McKenna College and faculty research fellow at the National Bureau of Economic Research, agrees that on the liability side, credit unions are in a much better place than banks because a greater percentage of their deposits are insured.

On the asset side of things, credit unions and banks alike could run into the same problem SVB had by investing in long-term Treasury securities that end up underwater as the Federal Reserve hikes rates.

How safe are credit unions amid bank turmoil? (4)

Federal Reserve Chair Jerome Powell attends a press conference in Washington, D.C., the United States, on Nov. 2, 2022. The central bank has hiked interest rates nine consecutive times since last spring as it aims to rein in inflation. (Photo by Liu Jie/Xinhua via Getty Images / Getty Images)

However, Vossmeyer says the new Bank Term Funding Program set up by regulators in the aftermath should provide the liquidity institutions need in the instance of that occurring moving forward, and both banks and credit unions have access to the program.

It is important to note that credit unions can fail, and have, even prior to the current banking crisis. However, their depositors are made whole from payouts from the NCUA insurance fund.


Vossmeyer says most credit unions are regulated by the NCUA, but any members concerned about the safety of their deposits can check to be sure their institution is covered by that insurance fund.

In the meantime, she reiterated that a full-fledged "bank" run on a credit union would be highly unlikely, telling FOX Business, "It would take a lot of odd stuff to happen."

How safe are credit unions amid bank turmoil? (2024)


How safe are credit unions amid bank turmoil? ›

While credit unions don't receive FDIC protection, member funds are generally insured up to $250,000 by the National Credit Union Administration. (All federal credit unions and most state credit unions offer this coverage.)

Are credit unions safe if banks collapse? ›

If the bank fails, you'll get your money back. Nearly all banks are FDIC insured. You can look for the FDIC logo at bank teller windows or on the entrance to your bank branch. Credit unions are insured by the National Credit Union Administration.

Are credit unions safer than banks during recession? ›

Both can be hit hard by tough economic conditions, but credit unions were statistically less likely to fail during the Great Recession. But no matter which you go with, you shouldn't worry about losing money. Both credit unions and banks have deposit insurance and are generally safe places for your money.

Are any credit unions in financial trouble? ›

National Credit Union Administration (NCUA) credit unions had seven conservatorships/liquidations in 2022 and two so far in 2023. While credit unions have experienced several failures in 2022, there were no Federal Deposit Insurance Corp.

What is the downside of banking with a credit union? ›

Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.

How safe is my money in a credit union? ›

Which is Safer, a Bank or a Credit Union? As long as you are banking at a federally insured institution, whether it is a credit union insured by the NCUA or a bank by the FDIC, your money is equally safe. Credit unions are owned by the members—your savings account at a credit union is a share of ownership.

What happens if a credit union goes bust? ›

If a credit union is placed into liquidation, the NCUA's Asset Management and Assistance Center (AMAC) will oversee the liquidation and set up an asset management estate (AME) to manage assets, settle members' insurance claims, and attempt to recover value from the closed credit union's assets.

What are the biggest risks facing credit unions? ›

Credit unions face a multitude of risks including risks related to credit, interest rates, liquidity, transactions, compliance, strategy, and protecting their reputation.

Why do banks not like credit unions? ›

For decades, bankers have objected to the tax breaks and sponsor subsidies enjoyed by credit unions and not available to banks. Because such challenges haven't slowed down the growth of credit unions, banks continue to look for other reasons to allege unfair competition.

Is my money safer in a credit union than a bank? ›

Generally, credit unions are viewed as safer than banks, although deposits at both types of financial institutions are usually insured at the same dollar amounts. The FDIC insures deposits at most banks, and the NCUA insures deposits at most credit unions.

What happens to my money if a credit union fails? ›

When a credit union fails, the NCUA is responsible for managing and closing the institution. The NCUA's Asset Management and Assistance Center liquidates the credit union and returns funds from accounts to its members. The funds are typically returned within five days of closure.

Why are credit unions struggling? ›

Regulatory Environment

Navigating the regulatory environment is an ongoing challenge for credit unions. They operate within a complex framework to ensure financial stability, protect consumers, and uphold the financial system's integrity.

Are credit unions in decline? ›

Over the past decade, the number of credit unions has declined by 30 percent, but the amount of credit union assets has more than doubled, from $1.02 trillion to $2.17 trillion.

Should I move all my money to a credit union? ›

What Are the Major Advantages of Credit Unions? Credit unions typically offer lower closing costs for home mortgage loans, and lower rates for lending, particularly with credit card and auto loan interest rates. They also have generally lower fees and higher savings rates for CDs and money market accounts.

Should I put my money in a bank or credit union? ›

If you want higher deposit rates and don't need access to branches across the country, for example, you might prefer a credit union. If you want access to in-person services and don't mind lower interest rates, a bank might be more suitable.

Are credit unions safe from bank runs? ›

Just like banks, credit unions are federally insured; however, credit unions are not insured by the Federal Deposit Insurance Corporation (FDIC). Instead, the National Credit Union Administration (NCUA) is the federal insurer of credit unions, making them just as safe as traditional banks.

Can a bank run happen at a credit union? ›

Typically, a bank run hits just one financial institution. However, a single bank run might help trigger bank runs at other institutions. But since the Great Depression, bank runs have been unusual, thanks in large part to federal insurance of deposits at banks and credit unions.

What banks are safe from collapse? ›

Summary: Safest Banks In The U.S. Of April 2024
BankForbes Advisor RatingLearn More CTA text
Chase Bank5.0Learn More
Bank of America4.2
Wells Fargo Bank4.0Learn More
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Jan 29, 2024


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