Ask Dr. Don
By Don Taylor, Ph.D., CFA • Bankrate.com
Internet banking
Dear Dr. Don,
I am considering banking over the Internet with Telebank of
Arlington, Va. I am concerned about banking with an institution
with no physical plant and am also concerned about security issues.
Can you tell me anything about Telebank and about Internet banking
in general?
Cautious Claudia
Dear Claudia,
Bankrate.com maintains ratings on banks. You can review Telebank's
rating in depth in the Safe
& Sound CAEL section of this site. CAEL stands
for Capitalization, Asset quality, Earnings and Liquidity. I'll
tell you that I'd rather have a bank with $10 million in capital
than $10 million in bricks and mortar, and that any bank you use
should be FDIC-insured. Bankrate.comSM offers a comprehensive
guide to Internet
banking that should help you decide if this approach to banking
is right for you.
Telebank has a 3 Safe & Sound CAEL
rating and a ллл Safe & Sound
star rating. You have to decide if that is
an acceptable risk profile for your financial institution.
|
| Safe &
Sound CAEL rating |
What
they mean |
Safe
& Sound
star rating |
| 1 |
Superior |
ллллл |
| 2 |
Sound |
лллл |
| 3 |
Performing |
ллл |
| 4 |
Below
industry average |
лл |
| 5 |
Weak |
л |
| No
Report |
Complete
data
not available |
No
Report "U" |
Insurance for brokerage accounts
Dear Dr. Don,
I understand that money invested in a money market or holding
account at a brokerage firm isn't FDIC insured. Does that mean in
the event of a national or global financial meltdown that money
invested in a bank money market fund or savings account would be
safer than money invested in a brokerage (i.e. Fidelity, Schwab,
etc.) money market fund or holding account? How do brokerage firms
insure investments? I know that the FDIC insures depositors for
up to $100,000 held in a bank account.
Randy Repent
Dear Randy,
The Securities
Investor Protection Corp. insures the money held in brokerage
accounts. This insurance protects an investor if her brokerage firm
fails, much like the Federal Deposit Insurance Corp. protects a
depositor if his bank fails. The SIPC has the same $100,000 limit
for insuring cash in a brokerage account that the FDIC has for insuring
deposits in a bank account. The SIPC also insures securities holdings
in an account for up to $500,000. The $500,000 insurance includes
the $100,000 cash coverage. The insurance does not protect the investor
from losses in his securities.
The SIPC is not a government agency, but a group
of brokerage firms contributing to an insurance fund. In the unlikely
event of a global financial meltdown, I'll take the federal government
agency, so the FDIC insured wins, hands down.
Bankrate.com writers base their answers on our
editorial content and advice of financial professionals. We make no
claims or representations about the accuracy, timeliness or completeness
of such content, advice or the answers provided to you. Our content,
advice and answers are intended only to assist you with your financial
decisions. However, by its nature such information is broad in scope.
Your financial situation is unique, and our content, advice and answers
may not be appropriate for your situation. Accordingly, we recommend
that you get different opinions and seek the advice of your accountant
and other financial advisers before making any final decisions or
implementing any financial or investment strategy.
-- Posted: Nov. 24, 1999
|
