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March 20, 2020

Amid major cash withdrawal attempt, CT banking commish says depositor money is safe in banks, CUs

Despite what you may have heard, Connecticut banks and credit unions have no shortage of cash amid volatility in the financial markets due to the COVID-19 coronavirus outbreak, according to state Department of Banking Commissioner Jorge Perez.

The state banking department is reassuring residents their deposits at federally insured banks and credit unions are safe after at least one Connecticut woman inquired about withdrawing hundreds of thousands of dollars from a small, unidentified bank branch, Perez told HBJ in an interview Thursday.

The woman, who ultimately decided against withdrawing the funds, had been misinformed about bank cash shortages, Perez said, echoing other incidents where residents have falsely claimed concern over whether banks would be “going out of business.” 

The commissioner said he’s also reminding residents that since 1933, no depositor has lost money at banks insured by the Federal Deposit Insurance Corp. (FDIC), which insures up to $250,000 per depositor. Moreover, depositors can have more than $250,000 insured depending on how they structure their accounts, Perez said.

Meantime, there are elaborate schemes being reported to the banking department where residents are being advised by scammers over the phone to withdraw their money and purchase gold because of bank/credit union volatility claims.

PHOTO | Contributed
Connecticut Banking Commissoner Jorge L. Perez.

“We expect that people may want to have more cash on hand -- it happened in the 2008/2010 crisis, it happened in the 9/11 crisis …,” he said. “But this is not new to us. One of the safest places there is to put money in is credit unions and/or banks.”

[Read HBJ’s coronavirus coverage here]

Elsewhere in the U.S., however, a handful of banks and credit unions have run low on cash, according to a report by the Wall Street Journal. There’s no reliable data yet on how many large withdrawals (hundreds of thousands) have been requested nationally, but many of the incidents have occured in affluent cities like New York City and Seattle, it said.

Perez late Thursday said he has not been informed of any cash shortages by banks or credit unions in-state or changes on withdrawal limits.

He also reiterated the dangers of residents safeguarding cash at home, as dollars can be lost to fires, robberies or other incidents.

“Before the [COVID-19 coronavirus] crisis, especially at credit unions, there are contracts that dictate how large of withdrawals can be made,” he said. “That hasn’t changed.”

The commissioner’s call to quell concerns comes days after the banking department asked Connecticut’s state-chartered banks and credit unions to provide relief to businesses and residents where possible.

On Tuesday, he encouraged lending institutions to ease credit terms for new loans, waive overdraft and late-payment fees as well as withdrawal penalties for certificate of deposit accounts.

The department said such actions should be “consistent with safe and sound banking practices.”

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