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AIG Bank Is Closing Down Their Deposit Accounts As Of September 30, 2013

Saturday, July 27, 2013 - 11:39 AMAIG Bank - Details
From bankaholic website:

 

AIG Bank Shutting Its Doors To Savers  

Posted by Charles Rechlin
July 27, 2013 06:00 AM


 AIG Bank has advised depositors that, as of Sept. 30, it will no longer service retail deposit accounts.

 According to a just-released letter, existing accounts will be closed as of that date and deposits “including all interest due on your account(s) will be returned.”

 The bank will be converted to “a trust-only organization.”

 AIG’s letter indicates that savings and money market accounts, whether closed automatically on Sept. 30 or earlier by the depositor, will receive interest through the date of closure.

 Account processing (including honoring of checks) will be discontinued on Sept. 13. 

The letter states that CDs having a maturity date after Sept. 30 will be closed on that date, and the accounts credited with “accrued interest, plus all interest which would have been earned had the account remained on deposit for the full term …” (emphasis in original).

 You can close a CD prior to Sept. 30 without penalty, but only with interest accrued through the closure date. 

For CDs maturing between Aug. 26 and Sept. 30, “the CD will not renew automatically and the funds will not continue to earn interest after the maturity date.” (emphasis in original)

 The letter seems to indicate (not terribly clearly) that these CDs also may be closed by the customer prior to maturity, with no penalty and with interest through the date of closure. 

Presumably, the Aug. 26 date was chosen to meet the Truth in Savings Act requirement that depositors receive at least 30 days’ advance notice of adverse account changes.

 The letter doesn’t explicitly address early closure or renewal of CDs maturing on or before Aug. 26 (as my three CDs do!). 

However, the bank is allowing me to close my CDs early, with no penalty and interest accrued to closing. 

I strongly encourage AIG CD depositors to contact the bank to make sure they understand the available options.

 There’s no explanation of why AIG is abandoning its deposit business.

 However, regulatory considerations, including implementation of Dodd-Frank financial reforms, have undoubtedly played a significant role.

 I’m going to miss this bank.

 For a long time, AIG offered competitive nationally available CD rates and followed a practice of periodically offering existing depositors special CD deals at premiums over posted rates.

 Plus, it has a knowledgeable and friendly customer service staff.

 And that makes low deposit rates a whole lot easier to stomach.

 
3
FARFAR92 posts since
Feb 26, 2013
Rep Points: 329
1. Saturday, July 27, 2013 - 11:42 AM
Yuck!  Is this a sign of what's to come from other banks??  I'm glad I don't have any deposits with AIG.  I wonder who is next in line to do this to depositors?
3
paoli2paoli21,146 posts since
Aug 10, 2011
Rep Points: 5,113
2. Saturday, July 27, 2013 - 3:12 PM
"The letter states that CDs having a maturity date after Sept. 30 will be closed on that date, and the accounts credited with “accrued interest, plus all interest which would have been earned had the account remained on deposit for the full term …” (emphasis in original)."


If this means that a 1yr or longer CD that was recently opened will be afforded the interest of the Full Term its a heaven
sent blessing!!
1
RicochetRicochet131 posts since
Jan 19, 2010
Rep Points: 358
3. Saturday, July 27, 2013 - 3:29 PM
 

I do not have any cd accounts at AIG so would be interested to hear from someone that does. Call me skeptical but say you recently opened a five year cd, do I understand AIG will hand you four plus years of interest on September 30! Sounds like the old proverb “If it sounds too good to be true; it probably is not true”.  There must be a catch.

 
1
FARFAR92 posts since
Feb 26, 2013
Rep Points: 329
4. Saturday, July 27, 2013 - 4:12 PM
FAR: I spoke to AIG last week and, yes, indeed, there is a Santa Claus at work here, as the quotation in the Bankaholic post suggests. An AIG CSR also told me that anyone whose CD matures and automatically renews before 8/26 will be entitled to the same "bonanza."  The uncertainty with this renewal scenario is that you don't know today what the renewal rate will be when your CD matures.  AIG is quoting by telephone .30% as the current 12, 18, 24 and 36 month rates, but, if they want, they can lower that to virtually nothing.  Anyway, all this is by way of emphasizing the statement in the post that CD customers should call the bank to make sure they iunderstand what the alternatives are.
2
OldGuyOldGuy34 posts since
Jan 23, 2013
Rep Points: 682
5. Saturday, July 27, 2013 - 4:34 PM
 If this is true, I can't understand how AIG can afford to do this.  If one has a 5 year CD, they will give you all your money back after a certain date plus all the interest you "would have gotten" anyway??  They won't have the deposits to use and yet they will be paying interest on money they can't use?  I must be misunderstanding what is going on here because it makes no business sense to me.  What is AIG getting out of doing this?
3
paoli2paoli21,146 posts since
Aug 10, 2011
Rep Points: 5,113
6. Saturday, July 27, 2013 - 5:35 PM
Look at deposit growth and profitability for the last quarter in Ken's bank health ratings. 
3
AllyAlly785 posts since
Jan 16, 2010
Rep Points: 2,281
7. Saturday, July 27, 2013 - 5:38 PM
AIG was a big investment firm that had annuities, I believe insurance also. I don't believe they have been in banking for very long. Forgot to look at the Ken's site for that. They almost went under a couple of times. I believe maybe it was in the 80's or 90's that a lot of retirees were very nervous. Some of them were my friends. 
4
AllyAlly785 posts since
Jan 16, 2010
Rep Points: 2,281
8. Saturday, July 27, 2013 - 5:45 PM
Found this from July 9th ---click on link





Regulators choose AIG, GE Capital for more oversight 
4
AllyAlly785 posts since
Jan 16, 2010
Rep Points: 2,281
9. Saturday, July 27, 2013 - 5:57 PM
I agree that what AIG is doing makes no financial sense. Also, the account documentation in my possession, which may or may not be up-to-date, indicates that they can close out any account upon "reasonable" mailed notice and by paying the balance only. This would be consistent with the Truth in Savings Act.  The internal bank speculation I got from the CSR is that they are doing this for "image" purposes--i.e., PR.  This mayy be the case, because this action will take their derivatives business out from under the "Volcker" rule, and they may be trying to blunt criticism.  But maybe they just have super-conservative lawyers.  Or maybe some regulator is leaning on them.  Again, customers should call to find out their options. 
4
OldGuyOldGuy34 posts since
Jan 23, 2013
Rep Points: 682
10. Wednesday, July 31, 2013 - 10:31 AM
If a Bank is interested in disposing of a segment of deposits or to voluntary close down, they have under regulations a few options-- (1.) sell/transfer the deposits to another FDIC insured institution or (2.) pay the account balance plus nterest through stated maturity.  I have seen a couple examples of this in the last 5-10 years.

G&L Bank in Florida, which was an internet-based bank with one branch, decided to close after a few years due to their concept never being executed properly and high operating losses, and they paid off my CD's with interest through the stated maturity date.  Another example of this "extreme kindness" was an industrial lender (auto loans) in California (cannot remember the name now) that was winding down business for a couple of years (wanted to close and dividend retained earnings to Parent co.) and paid off depositors with interest through stated maturity date also.  Other healthy banks that want to exist the Banking business would if they had enough liquid cash/investments, just sell the deposits at a small premium to another FDIC insured institution, but the depositors just keep the existing interest rate and stated maturity date.  So, it is a math game--what is least costly to the institution--selling the deposits or closing them and paying them off early so they can close the branches, fire staff, etc.

Just been there, done that in my prior banking life.

OC Steve

 
3
ocsteveocsteve14 posts since
Jan 17, 2010
Rep Points: 58
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