In light of the events in the banking market over the last few years, there have been calls from some quarters for investors to move their money from the larger banks, so they are no longer "too big to fail".

If you withdraw your money from one of the giant banks and move it to a smaller, local bank. Are you at any more risk investing putting your money in the smaller bank, or does the same level of insurance apply? How do you know you are covered?

I'm in the UK, but the same question applies for other countries too.

3 Answers 3


In the UK I believe the first £50,000 in each bank are secured by the government, so are very safe but one has to check what 'each bank' means as some are members of the same 'group'.

See the FSCS

  • There is a similar thing in the US. As noted in another answer, The FDIC insures depositors up to $250,000 US per financial institution. It is often not obvious that several "smaller" banks are in fact just re-branded branches of a larger bank, so you should take care to verify that - and re-verify from time to time. On the other hand, if you're the kind of person who keeps a quarter of a million dollars in deposit accounts, then you probably already have a much better financial adviser than me - and if not, get one!
    – Istanari
    Nov 9, 2016 at 22:32

In the US, I would say the risk is exactly the same. If your accounts are withing the FDIC amount (currently $250,000) your balance is 100% covered in case of a failure.

You are giving up a larger network of ATMs in some cases. You are also perhaps giving up the number of branches you can visit, the hours the bank is open and maybe how well the website works. The features might be less, but the protection for your deposits is the same.

  • interesting, in the UK, most banks are members of the LINK network, so you can use other bank's ATMs without charge. Is there not a similar system int he US? Jan 25, 2010 at 11:39
  • Not to that scale. Most credit unions belong to a network, and some smaller banks do that I am aware of, but most large institutions will charge you a fee to use a non branded ATM. The awesome thing is, you get a fee from your bank AND the ATM you take money from.
    – MrChrister
    Jan 25, 2010 at 16:41

Liquidity risk. FDIC (USA) insures money on deposit but does not insure liquidity. Usually the failed bank is taken over and everything is the same for insured depositors the next day. But sometimes the insured money is returned to the account holders via checks. The account holders do not have access to their money between the time when the bank failed and when they received their checks. This is rarely the case, but it is only ever the case with small banks. "Here’s what happens when your bank is liquidated"

  • I don't know why this got downvoted. This is an important: just because your money is insured, and you are guaranteed to eventually get your money back, doesn't mean that there isn't any cost, especially if you need the money immediately. May 4, 2018 at 22:18

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