If you happen to be a member of Virtual Bank, there is good and bad news. The bad news is the bank has been seized by federal regulators. The good news is your certificates of deposit or CD rates are still good.
Depositors at Virtual Bank discovered that their bank’s assets were seized by federal regulators and sold. Lydian Private Bank of Palm Beach, Florida which owned and operated Virtual Bank had their assets sold after seizure to Sabadell United Bank of Miami. . Sabadell United Bank is a division of Banco Sabadell which is the fourth largest biggest group in Spain. Sabadell United Bank currently has 25 locations in six different Florida counties.
Bank seizure, believe it or not, is not huge news. In our current economic era of bank troubles this does occur more often than you imagine. It’s happened this year alone more than you think. There have been 70 bank seizures in 2011. CDs are safe for investors that have FDIC or Federal Deposit Incorporation Insurance coverage. Certificates of deposit are covered by the FDIC. Therefore, if you are with a bank that has FDIC coverage, each customer is covered up to $250,000 for their certificates of deposit.
Many customers aren’t even aware their banks are in trouble. On the day Virtual Bank was seized they were still offering great rates for their certificates of deposit. However, the new owner of Virtual Bank which is Sabadell United Bank of Miami is not obligated to honor the great certificate of deposit rates offered by Virtual Bank.
The new owners of Virtual Bank could possibly cut the rates of certificates of deposit going forward. The rates of the certificates of deposit can be slashed on CDs customers have already acquired. The option current customers have if this does occur is to walk away from the lender and their certificates of deposit free of any penalties. Customers walking away can keep their full principal and all interest the CDs have accrued up to that date.
Fortunately former customers of Virtual Bank or the brand-new owners Sabadell United Bank are still extending competitive interest rates through Virtual Bank.
Investors with a $10,000 minimum deposit with Virtual Bank (now Sabadell United Bank) will receive the following rates for their certificates of deposit;
Term APY 3months 0.75% 6months 1.01% 12months 1.16% 24months 1.41%