Bank Ratings

by Dual Income No Kids on September 16, 2008 · 0 comments

A friend of mine contacted me, as many of your are, concerned with whether she was at risk for her bank folding. She banks with Wachovia. She had recently requested a student loan through them, and faced on hassle in getting the final check, so she was wondering if there was a cash flow issue going on.

I decided to look into how banks are rated and how to research whether or not you are at risk.

First, the FDIC, while it ensures banks, it won’t provide any information on solvency or risk of banks. I guess they don’t want to be the wants to fink and pay out when a bank sinks. is one of the places to research how your specific bank rates. There are too many to go over all banks, but I did research some of the top national banks. Here are links to get you right to credit unions or banks/thrifts, and find your bank.

The rating system is done by two measurements: Rating: On a 1 to 5 scale with five as the best
Safe & Sound® CAEL® (Capitalization, Asset quality, Earnings and Liquidity): With the opposite rating of 5 to 1; One being the best.

Basically banks fell into two categories, some doing okay, and some doing terribly. I couldn’t find any bank at higher that a 3 and 3 rating.

Here are the banks that look like they are still hanging in there:

ING Direct – who all of my money is with – rated 3 stars and 3 on the Safe & Sound. This was the highest rating I could find on any bank, so at least that is better than my initial impression.

Wachovia – 3 Stars and 3 on the Safe & Sound

Bank of American – 3 Stars and 3 on the Safe & Sound

PNC – 3 Stars and 3 on the Safe & Sound

Umpqua Bank – 3 Stars and 3 on the Safe & Sound
(since we hold some shares, I also looked at them)

Here are the banks that are clearly having issues:

Wells Fargo – 4 stars but 2 on the Safe & Sound® CAEL – These ratings are on par with Lehman Brothers and WaMu, so I’d be watching out for them.

Chevy Chase, a bank local to DC, was rated at 4 stars and 2 on the Safe & Sound scale – also not looking pretty.

Washington Mutual had two different entries, with very different ratings, there wasn’t a national option like the others:

WASHINGTON MUTUAL BANK FSB PARK CITY, Utah – 4 Stars and 2 Rating (good rating that is scary for where it is at)

WASHINGTON MUTUAL BANK HENDERSON, Nevada – 1 Star and 5 Rating (as bad as it gets)

Lehman Brothers were on par with WaMu’s FSB rating of 4 stars but 2 on the Safe & Sound® CAEL

Here is where things get interesting, a rating among the best but still facing issues:

AIG – 3 Stars and 3 on the Safe & Sound – This one is this scary part, as AIG has been in the news for facing troubles. If their rating is still up there with the best I could find, we have a problem Houston.

Given the current bank crisis, it does make sense to pay attention to where you are banking with. Make sure that you are comfortable with their rating and hold them accountable to for continuing their good service. If customers don’t do it, who will?



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