The Federal Deposit Insurance Corporation is a United States government corporation providing deposit insurance to depositors in US banks. The FDIC was created by the Banking Act of 1933 in response to the bank failures of the Great Depression.
The FDIC does not insure investments, such as stocks, bonds, or mutual funds. The FDIC is owned by the US government and is therefore not subject to stockholder pressure like a private company.
The FDIC insures deposits up to $250,000 per depositor, per bank. If a bank fails, the FDICSteps in to protect the depositors’ money. The FDIC either finds another bank to take over the deposits, or pays the depositors directly from the FDIC fund.
The FDIC is funded by premiums paid by the banks that it insures. The FDIC also has the authority to borrow money from the US Treasury if needed.
The FDIC is overseen by a board of directors, and the Chairman of the FDIC is appointed by the US President.
The FDIC has been successful in its role of protecting depositors’ funds, and has helped to maintain public confidence in the US banking system.
If you’re like most people, you probably have at least one bank account. And if you have a bank account, there’s a good chance it’s insured by the Federal Deposit Insurance Corporation (FDIC).
But what does that mean, exactly?
The FDIC is a government agency that insures deposits in banks and savings associations. That means if your bank fails, the FDIC will reimburse you for your deposits, up to a certain limit.
The FDIC limit is $250,000 per depositor, per account type, per bank. So, if you have two bank accounts at the same bank – one checking and one savings – each account is insured up to $250,000.
The FDIC does not insure investments in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal bonds.
What’s the history of the FDIC?
The FDIC was created in 1933 in response to the thousands of bank failures that occurred during the Great Depression. Before the FDIC existed, depositors had no guarantee that their money was safe if their bank failed.
The FDIC was designed to restore public confidence in the banking system. And it’s done a pretty good job of that – there have only been four bank failures since 2008, and none since 2016.
How does the FDIC work?
The FDIC is backed by the full faith and credit of the United States government. That means it has the backing of the government if it ever needs to pay out insurance claims.
The FDIC is funded by premiums that banks pay. The premium is based on the amount of deposits the bank has. The FDIC also invests the premiums it collects in U.S. Treasury securities.
The FDIC has a reserve fund that it uses to pay insurance claims. The reserve fund currently has about $100 billion.
The FDIC also has a line of credit with the U.S. Treasury. If the FDIC ever exhausts its reserve fund, it can borrow money from the Treasury up to $500 billion.
How likely is it that my bank will fail?
The probability of your bank failing is actually pretty low. There are about 6,200 FDIC-insured banks in the United States, and the FDIC has a pretty good track record of protecting depositors.
Since 2008, there have only been four bank failures. And since 2016, there have been no bank failures.
How do I know if my bank is FDIC-insured?
All FDIC-insured banks are required to display FDIC insurance signs at their branches. And you should be able to find FDIC insurance information on your bank’s website.
You can also use the FDIC’s BankFind tool to find out if your bank is FDIC-insured.
What happens if my bank fails?
If your bank fails, the FDIC will reimburse you for your deposits, up to the limit of $250,000.
The FDIC will either pay you directly, or it will arrange for your deposits to be transferred to another FDIC-insured bank.
If you have a loan with the bank that fails, you will still be responsible for repaying the loan.
What if I have more than $250,000 in deposits?
If you have more than $250,000 in deposits, you can spread your deposits among different FDIC-insured banks.
You can also open a separately-insured account, such as a brokerage account, at the same bank.
You can also get FDIC insurance on certain retirement accounts, such as IRAs.
What if I have questions about FDIC insurance?
If you have questions about FDIC insurance, you can contact the FDIC directly.