How can you determine whether your bank is financially sound

bankrate.com

They use a five star system that tells you how sound a bank is. It is not very noticeable on their site so you will have to look for it.

1.It must be stable.
2.It has good history background.
3.It has millions of clients!!!

l do not think there is such a thing as a financially sound bank. Banks do not work that way.

All banks r allowed to lend out many times more money they have in their reserves from their depositors through a system called Fractional Reserve Banking. Which means that virtually every bank is insolvent & cannot pay back the money to its depositors if all depositors come at the same time & ask for their money back.

The only reason why most banks do not fail is because their depositors do not usually all come at the same time & ask for their money back. Confidence is the key to every bank is survival. As long as the depositors r confident that they will get their money back when they ask for it. Then most depositors will leave their money in their bank & not worry about it too much.

That is why many governments all over the world have been guaranteeing left & right all kinds of bank deposits. The purpose of these guarantees was to increase confidence among depositors that they will get their money back when they ask for it.

Here r some good articles about how Fractional Reserve Banking works:
http://en.wikipedia.org/wiki/Fractional-reserve_banking
http://lewrockwell.com/rothbard/frb.html