What is a bank failure? A bank fails when it's unable to meet its financial obligations to its depositors (like you) or its creditors. If this happens, a federal or state regulator will close it. If it's your bank that fails, what happens to your money? If the bank is insured by the Federal Deposit Insurance Corporation (FDIC), your money is covered up to $250,000 per depositor (e.g., a joint account with your spouse would be covered up to $500,000).