What is the Federal Deposit Insurance Corporation (FDIC)?
The Federal Deposit Insurance Corporation (FDIC) is an independent U.S. government agency established in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s. Its primary purpose is to maintain stability and public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions, examining and supervising financial institutions for safety, soundness, and consumer protection, and managing receiverships.
The FDIC protects depositors by insuring deposits at member banks up to a certain limit, currently set at $250,000 per depositor, per insured bank, for each account ownership category. This insurance coverage helps prevent massive withdrawals from banks during periods of financial instability, as it reassures depositors that their money is safe even if their bank fails.
The FDIC plays a critical role in regulating and supervising financial institutions to ensure they adhere to sound banking practices. It also engages in consumer protection activities, helping to educate consumers on financial matters and providing resources for resolving issues with FDIC-insured banks. In cases where banks fail, the FDIC steps in to manage and sell the assets, ensuring an orderly resolution and minimizing the impact on customers and the financial system as a whole.
The FDIC does not receive funding from taxpayer dollars; instead, it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and by earnings on investments in U.S. Treasury securities.