Safe Luxury

does the bank have to hold the full amount insured of an insurance policy in their vault?

or do they hold just a bit of it?

Public Comments

1. are you kidding me???? they 'hold' no amount in their vault, it's all on paper, and I don't mean money paper......it's a shell game.....that is what has caused this meltdown; yes they should have had assets to cover the policy; they didn't and now they are all going bankrupt except for you and I are bailing them out.....they took the money in the form of payroll and bonuses and parties and benefits...the money they should have had to cover the insurance policies.....they used it...fraudulently...that is why we are in the mess we are in.
2. Banks are required to hold a small percentage of their customers' deposits. This is called the "reserve requirement". They loan out the rest. Normally, it is not necessary to hold all the money because people generally only withdraw small amounts at a time. The system is called "fractional-reserve banking". The purpose of FDIC insurance is to avoid the situation where people withdraw all their money because they are afraid they will lose it. This is called a "bank run". Since the bank only holds a small percentage of deposits, there would be a huge problem if many people wanted to withdraw all their money.