Generally, money in the bank is safe—even in a recession or other tough economic times. However, depending on several factors, including your balance and the type of account, your money might not be completely protected. Fortunately, there are things you can do to increase the security of the money you have in the bank.
To start with, understand that your money is not actually in the bank. As soon as your bank receives a deposit, it gives that money to someone else in the form of a loan. By law, banks must hang on to some money, but it’s not much.
Capital requirements vary by institution, but according to the Federal Reserve, it’s around 10% for many big banks. That means 90% of the money your account statement says is at the bank is actually somewhere else, like with an auto dealership that sold a car to someone who borrowed funds from your bank.
The bank takes deposits, makes loans and collects loan payments to replenish its coffers. Meanwhile, its 10% capital reserve supplies cash to people who close their accounts or make withdrawals. As long as there isn’t a run on the bank, there won’t be any problems.
To continue reading the rest of the article, please click on the source link below:
https://www.forbes.com/advisor/banking/is-my-money-safe-in-the-bank/
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