Impact Of Merger On FDIC Guarantees?

Bob42 | Apr 17, 2024 | 25 posts since 2019

Assume one has in their IRA 200k in brokered deposits of each of Capital One and Discovery .

Post merger of these FIs, will the prior combined 400k FDIC guarantees be grandfathered?

What about a subsequent purchase of 50k of the survivor entity?

Thank you.

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Answers

MAKNYC | Apr 18, 2024 | 323 posts since 2015

This merger is far from a done deal. But if it does happen…..

https://www.fdic.gov/resources/deposit-insurance/diguidebankers/documents/merger-idis.pdf

Bob42 | Apr 18, 2024 | 25 posts since 2019

Thank you. This is very helpful and reassuring given that I’d be OK through the maturity date of the CDs, some 3 years still away. Then, the onus is on me NOT to renew the nonsurvivor FI’s CDs upon maturity to the extent the combined CDs exceed 250,000. For what it’s worth, Capitol One and Discover were each prolific issuers of brokered CDs at one time, not so much any more. Thank you again. If the merger ensues, I’ll be curious as to the extent to which the FIs communicate the plain deposit rule (the non CD rule) which is governed by the flat 6-month standard.

In any event, presumably little to worry here given the strength of these 2 FIs. Of course, living in Phoenix Arizona, I also presumed,until this week, that we’d have an NHL franchise here in perpetuity!!

txFish1 | Apr 17, 2024 | 476 posts since 2023

Bob42 I have the same issue as your above question about FDIC insurance and while I have not received a definitive answer I will pass along what little info I have been able to gather so far.
1. The merger is not a done deal yet and still has to pass some hurdles with regulators.
2. If the deal does get done it has been said that Discover will remain its own brand but just owned by Capital One. I do not know if that would mean they would both keep normal FDIC insurance limits for each institution but I am still trying to get more answers.

Bob42 | Apr 17, 2024 | 25 posts since 2019

Thank you.

ocsteve | Apr 18, 2024 | 96 posts since 2010

I think the best indication would be if each FI keeps their own charter number after the merger. There are a couple of other bank ownerships that have two different charters and hence are insured individually. Examples are Morgan Stanley Bank and Morgan Stanley Private Bank. State Bank of India has 3 charters (NY, IL, CA). I’d think I came across a Bank Holding Company that had like 11 underlying charters too. Might be a good topic for a future article on maximizing FDIC insurance limits.

These dual charter firms show up sometimes under Brokerage firm CD offerings. That is how I found out about them.

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