Where We Keep Our Money | Top 8 Safest US Banks To Keep Your Money 2024

Summary

This video update for 2024 discusses the top eight safest banks in the US, unchanged from last year, focusing on their status as Global Systemically Important Banks (G-SIBs) which receive more government backing. It explains the five key indicators for bank health, including profitability and capital liquidity, and emphasizes the importance of FDIC insurance and G-SIB status for safety. The video also touches on the low number of bank and credit union failures so far in 2024, suggesting a stable banking environment.

Takeaways

• 🏦 The video discusses the top eight safest banks in the US for 2024, focusing on changes since the previous year's banking crisis.
• 📈 The script outlines five key indicators used to assess bank health: profitability, provisions for loan losses, capital and liquidity, unrealized losses, and credit ratings.
• 🔒 Safety of banks is determined not only by financial metrics but also by government backing, including FDIC insurance and GIP status, which indicates systemic importance.
• 🌐 GIP status is crucial as it signifies that the government will intervene to prevent the bank's failure to protect the broader financial system.
• 🏷️ The list of GIPs is provided by the Financial Stability Board and is updated annually, with banks ranked into buckets based on the additional capital they must hold.
• 🏦 JP Morgan Chase is the only bank in the highest bucket, requiring an extra 2.5% capital, indicating its systemic importance and government backing.
• 🏛️ Bank of America and Citigroup are in the next bucket, requiring an extra 2% capital, followed by Goldman Sachs in the subsequent bucket at 1.5%.
• 🏦 The remaining banks in the list include Bank of New York Mellon, Morgan Stanley, State Street, and Wells Fargo, each requiring an extra 1% capital.
• 📉 The video also covers the current state of bank failures, with only one bank failure in 2024 so far, indicating a stable banking environment.
• 💡 The video concludes by encouraging viewers to consider the safety and other factors like customer service when choosing a bank, and mentions the availability of bond investing courses.

Q & A

What is the main topic of the video?

The main topic of the video is an update on the top eight safest banks in the US for the year 2024, discussing changes since the last year's banking crisis, and providing insights into bank safety.

What are the three main topics covered in the video?

The three main topics covered are: 1) Whether the personal list of the top eight safest banks in the US has changed since last year, 2) The inclusion of other institutions in the list of the safest banks, and 3) What the latest bank and credit union failure numbers indicate.

What are the five important indicators used to determine the health of a bank?

The five important indicators are profitability, provisions for loan and other potential losses, capital and liquidity, unrealized losses, and the bank's credit rating by independent agencies.

What does NIM stand for and what does it represent?

NIM stands for Net Interest Margin, which represents the difference between what a bank pays its depositors and what it charges its loan customers.

What is the role of FDIC insurance in bank safety?

FDIC insurance is a government-backed program that insures deposits up to $250,000 per depositor per insured bank for each account ownership category, providing a safety net for depositors' funds.

What is a GIP and why are they considered safer banks?

A GIP, or Global Systemically Important Bank, is a bank that the government will do everything they can to keep from going under due to its systemic importance to the economy. They are considered safer because of the implicit government backing and stricter regulations they are subject to.

What happened with Credit S in Switzerland in 2023?

In 2023, Credit S in Switzerland experienced a bank run with customers withdrawing their deposits rapidly. The Swiss government and National Bank intervened by providing emergency liquidity and facilitating a takeover by UBS to prevent a global financial crisis.

Which bank holds the top position in terms of additional capital required and why is this significant?

JP Morgan Chase holds the top position in terms of additional capital required, which is significant because it indicates that it should be most able to manage financial losses and external shocks due to its higher capital reserves.

How does the ownership of Merrill Edge and E*TRADE relate to the safety of these institutions?

Merrill Edge is owned by Bank of America and E*TRADE is owned by Morgan Stanley, both of which are GIPs. This implies that if these subsidiaries face financial difficulties, their parent companies, with deeper pockets and GIP status, would be there to support them, providing implicit government backing.

What is the current status of bank and credit union failures in the US as of the video's recording?

As of the video's recording, there has been only one bank failure in 2024, Republic First Bank, and one credit union in conservatorship, First Choice Credit Union. Both failures were relatively small and the deposits and assets were taken over by other institutions, ensuring no loss to depositors.

What does the video suggest about the safety of larger banks in the current financial environment?

The video suggests that in the current environment, larger banks, particularly GIPs, are considered safer due to their greater resources, risk management experience, capital reserves, and the implicit government backing they receive.

Outlines

00:00

🏦 Top Eight Safest Banks in the US for 2024

This paragraph introduces the video's focus on the safest banks in the US for the year 2024, following the banking crisis. It addresses viewers' concerns about their bank's health and outlines three main topics: changes in the list of safest banks since last year, the criteria for bank safety, and the implications of being a Global Systemically Important Bank (GIP). The paragraph emphasizes the importance of government backing, FDIC insurance, and GIP status as indicators of a bank's safety.

05:02

🌐 GIPs: The Safest Banks with Government Support

The second paragraph delves into the concept of GIPs, explaining their significance in the global financial system and the additional government backing they receive. It details the Swiss government's intervention to prevent the collapse of Credit Suisse, illustrating the protective measures taken by authorities to safeguard depositors and the economy. The paragraph also lists the GIPs in the US, categorized by the buckets that determine their capital requirements, and discusses the implicit government backing they enjoy.

10:03

📈 GIPs and Their Parent Companies: A Safety Net for Financial Products

This paragraph discusses the relationship between GIPs and their subsidiaries, such as Merrill Edge and E*Trade, and the implicit government backing they receive through their parent companies. It argues that the GIP status of Bank of America and Morgan Stanley would protect their respective financial platforms in times of financial distress. The paragraph also touches on the broader business operations of these companies and the potential support they could provide to their subsidiaries.

15:04

📊 Global List of Safest Banks and Current Bank Failure Rates

The final paragraph provides an overview of the global list of GIPs, including banks from Europe and Asia, and their categorization based on additional capital requirements. It then shifts focus to the current state of bank and credit union failures in the US, highlighting the low number of failures in 2024 compared to the previous year. The paragraph concludes with an invitation for viewers to engage with the content and learn more about bond investing in times of market uncertainty.

Keywords

💡Safest Banks

The term 'Safest Banks' refers to financial institutions that are considered to have the lowest risk of failure and are best suited for customers to deposit their money. In the video, the theme revolves around identifying these banks in the US for the year 2024, taking into account recent changes in the banking sector and the importance of government backing for safety.

💡Banking Crisis

A 'Banking Crisis' is a situation where one or more banks face severe financial difficulties, potentially leading to bank runs or failures. The script mentions a recent uptick in concern about the health of banks, indicating the relevance of discussing the safest banks in the context of a potential or ongoing crisis.

💡FDIC Insurance

FDIC stands for the Federal Deposit Insurance Corporation, which provides deposit insurance to protect depositors' funds up to $250,000 per depositor per insured bank. The script emphasizes the importance of FDIC insurance as a form of government backing that contributes to a bank's safety.

💡Global Systemically Important Banks (G-SIBs)

G-SIBs are banks that are so significant to the global economy that their failure could cause a systemic collapse. The video explains that G-SIBs have more government backing and are subject to stricter regulations, which makes them among the safest banks.

💡Capital and Liquidity

Capital and liquidity refer to the financial resources a bank has available to cover losses and maintain operations. The script discusses these as key indicators of a bank's health, with G-SIBs required to hold more capital and liquidity than non-G-SIBs.

💡Unrealized Losses

Unrealized losses are losses that a bank would incur if it had to sell securities before their maturity due to liquidity issues. The video script uses this term to illustrate a potential risk factor in assessing a bank's health.

💡Credit Rating

A 'Credit Rating' is an evaluation of a bank's creditworthiness by independent agencies like Moody's, Standard & Poor's, and Fitch. The script mentions credit ratings as one of the factors used to assess a bank's health and safety.

💡Bank Failure

A 'Bank Failure' occurs when a bank cannot meet its obligations and is closed by the regulatory authority. The video provides statistics on bank failures in the US, showing a comparison between 2023 and 2024, indicating a decrease in failures.

💡Merrill Edge and E*TRADE

Merrill Edge and E*TRADE are online trading platforms owned by Bank of America and Morgan Stanley, respectively. The script discusses these platforms in the context of their parent companies' status as G-SIBs, suggesting that they benefit from the same government backing and safety measures.

💡Credit Union

A 'Credit Union' is a member-owned financial cooperative that provides banking services to its members. The video mentions credit unions as an alternative to banks, noting that while they may lack the same level of resources as G-SIBs, they can offer better customer service.

💡Regulatory Expectations

Regulatory expectations refer to the standards and requirements set by regulatory bodies for banks to ensure they operate safely and effectively. The script indicates that G-SIBs are subject to higher supervisory expectations, which contribute to their safety.

Highlights

The top eight safest banks in the US for 2024 have been updated, reflecting changes since last year's banking crisis.

Concerns about bank health have led to an increase in inquiries, particularly regarding Merrill Edge and E*TRADE.

The video covers three main topics: changes in the list of safest banks, the addition of new institutions, and the latest failure numbers.

Five key indicators are used to assess bank health: profitability, provisions for loan losses, capital and liquidity, unrealized losses, and credit ratings.

Government backing, through FDIC insurance and G-SIB status, is crucial for bank safety, providing a safety net for depositors.

G-SIBs are subject to stricter regulations, including higher capital and liquidity requirements, and more rigorous supervisory expectations.

The list of G-SIBs is updated annually by the Financial Stability Board and is ranked according to the amount of additional capital required.

JP Morgan Chase is the only bank in the highest bucket, requiring an extra 2.5% of capital.

Bank of America and Citigroup are in the next bucket, requiring an extra 2% of capital.

Goldman Sachs is in a bucket requiring an extra 1.5% of capital, along with other European and Asian banks.

Merrill Edge and E*TRADE are owned by Bank of America and Morgan Stanley, respectively, which are G-SIBs and thus offer implicit government backing.

The video discusses the global list of G-SIBs, which includes banks from Europe and Asia with a presence in the US.

The video provides a link to the 2023 list of global systemically important banks for further information.

The FED has proposed changes to the technical rules for calculating G-SIB buckets, but these are refinements and do not alter the overall concept.

In 2024, there has been only one bank failure in the US, Republic First Bank, which was relatively small.

Only one credit union has gone into conservatorship in 2024, with all accounts remaining protected by the share Insurance Fund.

The video concludes with an invitation to learn more about bond investing and building a bond portfolio amidst market uncertainty.

Transcripts

the top eight safest banks for your

money in the us updated for

2024 what's changed since last year's

banking crisis hello members super

Savers and bour fans I hope you're

healthy and well today's video is the

long awaited update to this safest banks

in the US video from last year because

quite a few of you have asked what's

changed since we published this video

and what hasn't in fact we've seen a

recent uptick in emails from some of our

Diamond nesc regulars who are concerned

with the overall health of their bank so

with that in mind here are the three

topics we'll be covering in today's

video one has our personal list of the

top eight safest banks in the US changed

since last year this section of our

video should be of particular interest

to those of you in our community who've

asked us for deep dives into Merill Edge

and E Trade two which other institutions

make our list of the safest Banks and

three what do the latest bank and credit

union failure numbers tell us as usual

here's our front of video disclaimer for

a detailed disclaimer please refer to

the end of this video Let's dive in now

folks as we often talk about on this

channel these are five of the most

important indicators used in the

industry to determine the health of a

bank first is profitability

how much money a bank makes and how

large are factors like the net interest

margin or Nim the Nim is the difference

between what the bank pays its

depositors and what it charges its loan

customers second is Provisions for loan

and other potential losses for example

how much the bank has already set aside

to cover likely future losses on its

loans because not all borrowers will pay

back 100% of what they initially

borrowed third is capital and liquidity

is a percentage of the balance sheet

meaning how much money is available to

cover any additional losses from Bad

loans or other Misadventures a bank may

experience and that are not already

covered by loan loss Provisions or

similar reserves it also includes how

much money is readily available in

liquid cash fourth is any unrealized

losses for example unheld to maturity

Securities which is a loss that a bank

would incur if it had to sell its

treasury or other debt Securities before

maturity say because depositors are

withdrawing money at a faster rate than

the bank has liquid cash for note that

in good years A Bank may also have

unrealized gains as an additional

reserve and fifth is the bank's credit

rating by independent agencies such as

Moody's standard and pores and Fitch now

all of these factors are informative and

and used often in the industry to assess

A bank's Health we use them here at

Diamond Nest as well but as I've said

before when it comes to bank safety

these numbers alone don't necessarily

tell the full story because they're

often more historical and backward

looking and as such may be less helpful

when you want to predict what will

happen in the future in our mind what

ultimately makes your money and my money

safe is government backing and this

government backing comes in two forms

the first and probably most well-known

is FDIC insurance which nearly all banks

have to have by law FDIC insurance

covers up to

$250,000 per depositor per insured bank

for each account ownership category the

second and often less well-known unless

you're Diamond EST regular and already

watched our last video on the topic is

Gip status gips are global systemically

important banks in layman's terms these

are the banks in our country that the

government will do everything they can

for as long as they can to keep them

from going under the reason being that

one of these Banks failing May draw the

entire banking system into the next

Global financial crisis and the real

economy with it and no one really wants

that in our mind gips are the banks that

have the most government backing and

that is where their safety comes from

because even when a Gip collapses the

government will step in and do whatever

they can to save it and the most recent

example of a government doing everything

it can to prevent a GB from going under

happened last year in Europe but just

still be fresh in our memory for some of

us in March of 2023 Swiss Gip credit s

was basically experiencing a bank run as

customers were withdrawing their

deposits at a fast rate the bank was

quickly burning through the last cash it

had on hand and it looked like it might

fail any day and drag the Swiss

government and potentially the global

economy into a full-fledged banking

crisis now the Swiss government did not

allow a GB under their supervision to

fail as the crisis reached its boiling

point the Swiss federal government and

National Bank stepped in over a weekend

provided emergency liquidity and helped

engineer a take over of failing credit s

by local competitor UBS which by the way

is adesive in its own right no credit s

depositors experienced any losses in

fact all credit s businesses reopened as

usual on Monday and client service

continued uninterrupted now that does

not mean that no one suffered from the

collapse one type of contingent

convertible Bond was cancelled by the

regulator and shareholders while not

completely wiped out had to swallow

dramatic losses but you get the overall

picture the Swiss government stepped in

to make sure that there was minimal to

no impact on credit S's depositors and

clients and they did this to prevent a

global financial crisis and they

presumably would do it again if it

became necessary and that's why our

personal list of the top eight safest

banks in the US comes from this list of

global systemically important Banks all

of which have more government backing

than just FDIC Insurance GBS are subject

to stricter regulation for example

they're required to have more capital

and liquidity on hand than non gips gips

are also subject to higher supervisory

expectations such as how they manage

risk governance and internal controls

and risk management governance and

internal controlling in the current

environment is even more complex given

the uncertainty of around a possible

recession and the pace of future

interest rate movements this list of

global systemically important Banks is

provided by the financial stability

board and they're ranked according to

buckets the higher the bucket the more

globally relevant a bank is and the more

Capital it needs to have on its balance

sheet and this list it is updated

annually but usually not too much

changes unless there is that rare

occasion as with credit tweets and UBS

where Gip gets into a merger or

acquisition scenario which means that

our personal list of the top eight

safest banks in the US has not changed

either thankfully and when you think

about it that is really reassuring

because who want to have a new list of

gips every year so in bucket four at the

very top is the Gip that holds the most

additional capital in percentage terms

in its Coffer meaning it should be most

able to digest and manage Financial

losses and external shocks bucket 4

needs to hold an extra

2.5% of capital above and beyond what

other non-gps are required to hold and

in this bucket there's only one bank

across the globe it's JP Morgan Chase in

bucket 3 with an extra 2% of capital and

ranked just alphabetically within the

bucket with have Bank of America and

City Group in bucket two with an extra

1.5% of capital we have Goldman Sachs

and in bucket one with an extra 1% of

capital we have an alphabetical order

Bank of New York melon Morgan Stanley

State Street and Wells Fargo do note

that there is in theory a bucket five at

the very very top with additional

Capital requirements of

3.5% but bucket five is empty and has

been empty for quite some time now so

for those of you who've asked us about

how Merill Edge and eade are doing you

should know that Merill Edge is owned by

Bank of America here and eade is owned

by Morgan Stanley here now Never Say

Never but the way I see it if the

government will step in and do whatever

they can to save a GB this implicit

backing for Bank of America should also

protect Merill Edge under its umbrella

if worse ever came to worse and the same

principle means that Morgan Stanley's

ownership should also provide eray

customers with the same implicit

government backing because keep in mind

all these gips have multiple lines of

business that contribute to their bottom

line meaning that Merill Edge is just

one part of Bank of America's larger

business and E trade is just one part of

Morgan Stanley's larger business so if

Merill Edge or E Trade were to ever get

into a temporary Financial slump their

parent company these two gips here with

deeper pockets would be there to support

them in a way that would not be possible

if meril Edge or E Trade were just

Standalone entities like Fidelity

Vanguard and Schwab and of course it

helps even more that in this case both

Bank of America and Morgan Stanley

should both benefit from their status as

gips if you want a deeper dive into

these bucket calculations I've included

the financial stability boards link to

this 2023 list of global systemically

important banks in the first pin comment

below and do note that the FED has

recently proposed some changes to the

technical rules about how these buckets

are calculated and applied but this is

more a refinement of the rules tinkering

and smoothing some edges so to speak and

will not change the overall concept or

ranking of these Banks so to summarize

in the current environment we do think

think bigger is better because these

eight GBS they have more resources more

Risk Managers more experience and more

Capital to weather whatever storms may

lie ahead and they also have more

Regulators looking over their shoulder

to make sure that they are handling our

money properly not to mention the

implicit government backing of course

now that you know our personal list of

the top eight safest banks in the US

let's move on to the next section of

this video

you should know that this full list of

global systemically important Banks

includes not only American Banks but

also European and Asian Banks some of

which have a not insignificant presence

in the US let's quickly go through what

these other safest banks are because I

know that some of you in our Diamond

nested Community have asked about them

here is the full list of the safest

Banks or gips in the world at the time

of this taping again organized by bucket

percentage of additional Capital

required and Bank name again bucket 5

with additional Capital requirements of

3.5% is empty even when we expand our

list globally so let's start with bucket

four with an extra 2.5% of capital and

here also again as we mentioned earlier

we have just JP Morgan in bucket three

with an extra 2% of capital we now have

Bank of America City group and HSBC

ranked alphabetically as in the earlier

table with just the top eight safest

banks in the US in bucket 2 with an

extra 1.5% of capital we have quite a

few European and Asian banks that have

been added to what had previously only

included American based Goldman Sachs

and in bucket one with an extra 1% of

capital we also have added quite a

number of European and Asian Banks

alongside Bank of New York melon Morgan

Stanley stat Street and Wells Fargo so

curious minds want to know do you keep

your hard-earned money with any of these

Banks here if not who are you with and

why what do you love about your bank

drop a comment below and let everyone

know or perhaps you're with a credit

union because while the gips here take

po position in terms of safety in our

opinion they can sometimes be lacking in

other areas customer service and that

extra Personal Touch for example come to

mind in any case now that we've covered

our personal list of the top eight

safest banks in the US as well as some

of the safest Banks across the globe

let's talk about something on the

opposite end of the bank safety

Spectrum so the good news is that the

latest bank and credit union failure

numbers paint quite a nice picture

overall for this year at least so far if

we look at the FDIC bank failure in

brief summary let's scroll down a bit

this was what 2023 looked like and this

is what 2024 looks like the blue bars

show the total assets in millions of the

failed banks for a particular year and

the Red Bar show the total number of

bank failures at the time of this taping

in 2024 there has been Only One bank

failure so far in the US Republic first

bank or Republic Bank in Philadelphia

with $6 billion in assets and $4 billion

in deposits so relatively small by

banking standards as you can see when

you compare these numbers to 2023 which

saw some more substantial bank failures

in the US with Silicon Valley Bank First

Republic and others but back to 2024 it

seems the purchaser of this one failed

bank took over substantially all of the

deposits and substantially all of the

assets of the failed Bank likewise on

the credit union side only one Credit

Union First Choice Credit Union in

Atlanta Georgia has gone into

conservatorship up to this point in 2024

and according to the ncua all accounts

remain protected by the share Insurance

Fund member services unchanged hopefully

things will stay similarly peaceful for

the foreseeable future but as always

we'll keep you posted if things change

or take a turn for the worse all right

members super Savers and bond fans so I

hope you enjoy this video and learn

something new and if you want to keep

learning about the safest easiest and

fastest ways to get started with Bond

investing and building out your bond

portfolio especially in times that may

see continuing Market uncertainty then

check out this video here on our 2024

Bond courses or come join one of our

next live Bond course or YouTube member

sessions in September I've linked all

the details on our bond courses and

YouTube super Super Saver membership

below this video video for your

convenience see you again very soon with

more brand new wealth buing content for

your financial Journey