Federal Deposit Insurance Corporation (FDIC)

 

For Education Only

 

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The Federal Deposit Insurance Corporation (FDIC) preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks for at least $250,000. The FDIC limits the effect on the economy and the financial system when a bank fails.

The FDIC was created in 1933 in response to bank failures, and no depositor has lost a single cent of insured funds as a result of a failure, since the start of the FDIC insurance on January 1, 1934. The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. The FDIC insures deposits only.

To protect insured depositors, the FDIC responds immediately when a bank or fails. Institutions generally are closed by their chartering authority. The FDIC has several options for resolving bank failures, the one most used is to sell deposits and loans of the failed bank to another bank. Customers of the failed institution automatically become customers of the assuming bank. Most of the time, the transition is seamless from the customer’s point of view.

The FDIC is headquartered in Washington, D.C., but conducts much of its business in regional and field offices around the country.

The FDIC is managed by a five-person Board of Directors all of whom are appointed by the President and confirmed by the Senate, with no more than three being from the same political party.

 

Note: The FDIC also insures thrift institutions. They are financial institutions formed primarily to accept consumer deposits and make home mortgages. Typical thrift institutions are mutual banks and savings and loan associations.

 

The federal National Credit Union Administration (NCUA) insures Credit Unions which are financial institutions, like banks, except the members own the credit union. They are nonprofit entities that aim to serve their members rather than seeking to earn a profit. The insurance coverage the NCUA provides is practically the same as the FDIC. Individual accounts are protected up to $250,000.

 

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