Are US Banks Closing? What Happens to Your Money

Concerns about bank closures often lead to questions about the safety of deposited funds. The U.S. banking system has a robust regulatory framework and protective measures designed to maintain financial stability and safeguard customer deposits.

Current Landscape of US Bank Closures

Bank closures in the United States are not as frequent as they once were, especially when compared to periods of significant financial distress. Following the 2008 financial crisis, bank failures were more common, with hundreds occurring between 2008 and 2012. In contrast, from 2015 to 2020, the U.S. experienced a low average of annual failures, with none in 2021 and 2022. While 2023 saw a few notable failures, the overall trend points to a relatively low number of closures in recent years. As of mid-2025, a few banks have failed, indicating that while rare, closures can still occur.

Reasons for Bank Closures

Banks can face closure due to a variety of factors, often stemming from internal vulnerabilities and external economic pressures. Poor management, including inadequate oversight or improper lending practices, can significantly weaken a bank’s financial position. Excessive risk-taking, such as speculative investments or extending loans unlikely to be repaid, can lead to substantial losses. Economic downturns also play a role, as recessions can increase loan defaults, reduce profits, and raise operating costs for banks. Furthermore, a sudden and large withdrawal of deposits, known as a bank run, can trigger a liquidity crisis, making it difficult for a bank to meet short-term obligations.

Deposit Insurance and Your Funds

The Federal Deposit Insurance Corporation (FDIC), an independent U.S. government agency, protects deposits in insured banks. It provides coverage up to $250,000 per depositor, per insured bank, for each account ownership category. This means that funds in different ownership categories, such as a single ownership account, a joint account, and a retirement account at the same bank, are separately insured up to the $250,000 limit.

This protection automatically applies to deposit products such as checking accounts, savings accounts, money market deposit accounts, and certificates of deposit (CDs). FDIC insurance does not cover investment products like stocks, bonds, mutual funds, or annuities, even if purchased through an FDIC-insured bank. Since its inception in 1934, no depositor has lost insured funds due to a bank failure.

What Happens When a Bank Closes

When a bank faces closure, federal or state regulatory agencies, typically the FDIC, step in to take control. This process usually occurs over a weekend to minimize disruption to customers. The FDIC’s primary goal is to ensure that insured depositors have rapid access to their funds.

The most common resolution method involves the FDIC arranging for a healthy bank to purchase and assume the deposits and often many of the assets of the failed institution. In such cases, depositors automatically become customers of the acquiring bank, and their accounts are seamlessly transferred, usually allowing access to funds within one or two business days. If a purchase and assumption transaction is not feasible, the FDIC will directly pay insured depositors by sending checks or initiating electronic transfers for the insured amounts.

For borrowers, the terms of their loans, such as interest rates and repayment schedules, generally remain unchanged, even if the loan is transferred to a new institution. Loans are considered assets of the bank, and they are typically sold along with other assets to the acquiring institution or to other entities. Borrowers will be notified of where to send their payments, and their obligation to repay the loan continues under the original terms.