Uninsured Deposits Surge 48% at Major US Banks

Customers of JPMorgan Chase, Wells Fargo, and Bank of America are increasingly depositing funds into accounts that exceed the Federal Deposit Insurance Corporation (FDIC) coverage limit of $250,000. The latest quarterly Call Reports submitted to the Federal Financial Institutions Examination Council (FFIEC) reveal that these three major banks collectively hold $2.62 trillion in uninsured deposits. This trend underscores a broader shift in consumer behavior, as Americans are pouring cash into accounts that are not fully protected by the FDIC.

The surge in uninsured deposits is not an isolated phenomenon. Uninsured deposits at U.S. banks grew across all asset size groups in the fourth quarter of 2024. This increase of $126.6 billion in uninsured deposits significantly outpaced the $43.7 billion rise in insured deposits during the same period. This trend highlights a growing risk for depositors, as funds exceeding the FDIC coverage limit are vulnerable to loss in the event of a bank failure.

The implications of this trend are stark. In 2023, the FDIC invoked a systemic risk exception to protect all uninsured depositors at Silicon Valley Bank (SVB), ensuring no losses despite over $100 billion in uninsured funds. However, at smaller banks like Republic First Bank, which failed in July of last year, uninsured depositors faced losses and received only partial recovery from asset sales since no systemic risk was declared. This disparity underscores the heightened risk for depositors at smaller institutions.

The growth in uninsured deposits coincides with strong earnings numbers across the banking industry. The reported total net income of $66.8 billion for the quarter reflects robust financial performance, but it also raises questions about the sustainability of this trend. As more depositors opt for uninsured accounts, the potential for significant losses in the event of a bank failure increases, posing a risk to both individual depositors and the broader financial system.

The trend of increasing uninsured deposits is driven by a variety of factors, including higher interest rates and the perception of safety among larger banks. However, it is crucial for depositors to understand the risks associated with uninsured accounts. While larger banks may be perceived as more stable, the potential for losses remains, as evidenced by the failure of Republic First Bank. Depositors should carefully consider their options and ensure that their funds are adequately protected, especially in light of the growing trend of uninsured deposits.