Alyssa Lane
The Federal Deposit Insurance Corporation (FDIC) is an independent federal government agency that insures deposits in commercial banks and thrifts. Federally chartered thrifts are regulated by the Office of the Comptroller of the Currency (OCC), while state-chartered thrifts are regulated by the FDIC. FDIC deposit insurance protects bank customers in the event that an FDIC-insured depository institution fails. The FDIC manages two deposit insurance funds: the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF). The BIF insures deposits in commercial banks and savings banks up to a maximum of $100,000 per account, while the SAIF insures deposits in savings and loan associations. FDIC deposit insurance covers deposits in all types of accounts at FDIC-insured banks, including checking and savings accounts, money market deposit accounts (MMDAs), and certificates of deposits (CDs). Deposits are typically insured up to $250,000 per depositor, per FDIC-insured bank, and per ownership category.
| Characteristics | Values |
|---|---|
| Name of the insuring organization | Federal Deposit Insurance Corporation (FDIC) |
| Type of Organization | Independent federal government agency |
| Source of Funding | Member banks' insurance dues, interest earned on funds invested in U.S. government obligations |
| Number of Institutions Covered | 4,517 (as of Q3 2024) |
| Deposit Insurance Amount | $250,000 per depositor, per FDIC-insured bank, per ownership category |
| Deposit Types Covered | Checking and savings accounts, money market deposit accounts (MMDAs), and certificates of deposit (CDs) |
| Deposit Types Not Covered | Non-deposit investment products, default or bankruptcy of any non-FDIC-insured institution |
| Role in Bank Failure | Responds as insurer and receiver, pays depositors up to the insurance limit, sells/collects assets of the failed bank |
| Regulatory Authority | Can revoke deposit insurance, close a bank, supervise certain financial institutions, perform consumer-protection functions |
| Deposit Insurance Funds | Bank Insurance Fund (BIF), Savings Association Insurance Fund (SAIF) |
| Insured Institutions | Commercial banks, thrifts, savings and loan associations, savings banks |
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What You'll Learn
The Federal Deposit Insurance Corporation (FDIC)
The FDIC insures deposits at member banks in the event that a bank fails. It also examines and supervises certain financial institutions for safety and soundness, performs certain consumer-protection functions, and manages receiverships of failed banks. The FDIC has a five-member board that includes the Chairman of the FDIC, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, and two public members appointed by the President and confirmed by the Senate.
The FDIC manages two deposit insurance funds, the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF). The BIF insures deposits in commercial banks and savings banks up to a maximum of $100,000 per account. Insured banks pay for deposit insurance through premium assessments on their domestic deposits. Foreign deposits are not insured and are not subject to deposit insurance premiums. The FDIC deposit insurance covers deposits in all types of accounts at FDIC-insured banks, but it does not cover non-deposit investment products, even those offered by FDIC-insured banks.
The FDIC has two common ways to resolve a closed institution and fulfill its role as a receiver: Purchase and assumption agreement (P&A), in which deposits (liabilities) are assumed by an open bank, which also purchases some or all of the failed bank's loans (assets). The second is a deposit payoff: As soon as the appropriate chartering authority closes the bank or thrift, the FDIC is appointed receiver. The FDIC as insurer pays all of the failed institution's depositors with insured funds the full amount of their insured deposits.
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Deposit Insurance Fund (DIF)
The Deposit Insurance Fund (DIF) is managed by the Federal Deposit Insurance Corporation (FDIC) to ensure that deposits at member banks are protected. The money in the DIF is set aside to pay back depositors in the event of a bank failure. The fund is backed by the full faith and credit of the United States government.
The FDIC is an independent federal government agency that insures deposits in commercial banks and thrifts. Federal deposit insurance is mandatory for all federally chartered banks and savings institutions. To qualify for deposit insurance, member banks must follow certain liquidity and reserve requirements. The FDIC has a five-member board that includes the Chairman of the FDIC, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, and two public members appointed by the President and confirmed by the Senate.
The DIF has two sources of funds: insurance premiums from FDIC-insured institutions (assessments) and interest earned on invested funds (such as Treasury notes). As of Q3 2024, the DIF stood at $129.2 billion, or a 1.21% reserve ratio. The FDIC charges premiums based on the risk that the insured bank poses, with small, large, and highly complex banks assessed differently. The FDIC also receives interest income on its securities.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 modified the FDIC's fund management practices by setting requirements for the Designated Reserve Ratio (DRR) and redefining the assessment base, which is used to calculate banks' quarterly assessments. The DRR ratio is the DIF balance divided by estimated insured deposits. The FDIC Board adopted a 2% DRR and works to maintain a positive fund balance even during a banking crisis.
The FDIC deposit insurance covers deposits in all types of accounts at FDIC-insured banks, up to $250,000 per account. It's important to note that FDIC insurance does not cover non-deposit investment products or the default or bankruptcy of any non-FDIC-insured institution. Bank failures are unlikely but do happen, and FDIC deposit insurance protects insured deposits if a bank closes.
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Bank Insurance Fund (BIF)
The Bank Insurance Fund (BIF) was a unit of the Federal Deposit Insurance Corporation (FDIC) that provided deposit insurance for commercial banks. The BIF was created as a result of the savings and loan crisis in the late 1980s, also known as the savings and loan "meltdown".
The BIF was formed to keep the administration of bank and thrift insurance programs separate. The two distinct insurance entities were the BIF and the Savings Association Insurance Fund (SAIF). The BIF insured deposits in commercial banks and savings banks up to a maximum of $100,000 per account, while the SAIF provided insurance for savings and loan associations. Insured banks paid for deposit insurance through premium assessments on their domestic deposits.
The BIF was a pool of money created in 1989 by the FDIC to insure the deposits made by banks that were members of the Federal Reserve System. The FDIC has the authority to revoke an institution's deposit insurance, forcing the bank to close. The BIF was also able to borrow from the Federal Financing Bank to strengthen the fund.
In 2005, the Federal Deposit Insurance Act abolished the BIF and the SAIF, merging them into a single Deposit Insurance Fund (DIF). The DIF is funded through quarterly assessments on insured banks and interest income on its securities. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 revised the FDIC's fund management authority, setting requirements for the Designated Reserve Ratio (DRR) and redefining the assessment base.
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Savings Association Insurance Fund (SAIF)
The Savings Association Insurance Fund (SAIF) was a government insurance fund for savings and loans and thrift institutions in the United States. It was created to protect depositors from losses due to institutional failure. SAIF was formed in the aftermath of the savings and loan crisis of the late 1980s, during which poor real estate investments led to the failure of over 1,000 savings and loan institutions in the US, costing taxpayers upwards of $160 billion.
The SAIF replaced the Federal Savings and Loan Insurance Corporation (FSLIC), which had become insolvent during the 1980s savings and loan crisis. FSLIC's reserves were insufficient to pay off the depositors of all the failing thrifts, and it too fell into insolvency. The FSLIC was abolished in 1989 and replaced by the Resolution Trust Corporation (RTC).
The SAIF was administered as a stand-alone fund by the Federal Deposit Insurance Corporation (FDIC) until 2006 when it was combined with another of the agency's banking insurance programs, the Bank Insurance Fund (BIF). Before the merger, SAIF was funded from two revenue streams: interest earned on investments in US Treasury obligations and deposit insurance assessments. Other funding sources included US Treasury loans, the Federal Financing Bank, and the Federal Home Loan Banks.
The Federal Deposit Insurance Reform Act of 2005 provided for the merger of the BIF and the SAIF into a single Deposit Insurance Fund (DIF). The merger of the funds was effective on March 31, 2006.
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Resolution Trust Corporation (RTC)
The Federal Deposit Insurance Corporation (FDIC) is an independent federal government agency that insures deposits in commercial banks and thrifts. Federal deposit insurance is mandatory for all federally-chartered banks and savings institutions. FDIC deposit insurance covers deposits in all types of accounts at FDIC-insured banks, but it does not cover non-deposit investment products, even those offered by FDIC-insured banks. Additionally, FDIC deposit insurance doesn’t cover default or bankruptcy of any non-FDIC-insured institution.
The Resolution Trust Corporation (RTC) was a U.S. government-owned asset management company that operated from 1989 to 1995. It was established by the Financial Institutions Reform Recovery and Enforcement Act (FIRREA) to resolve the savings and loan (S&L) crisis of the 1980s, which resulted in about a third of such U.S. institutions failing. The RTC closed failed financial institutions placed in receivership by selling or merging troubled thrifts and folding their assets back into the Federal Deposit Insurance Corporation (FDIC).
The S&L crisis stemmed from risky investments made in both the 1970s and 1980s by many small and supposedly safe S&Ls. Thousands of them failed after using investors’ passbook savings to buy fixed-rate home mortgages, which were not very liquid. Many institutions made these investments to take advantage of a poor federal policy in which all S&Ls paid the same rate of federal deposit insurance, no matter the riskiness of their underlying assets. This eventually caused the Federal Savings and Loan Insurance Corporation to fail, at which time the FDIC took over its responsibilities.
The RTC was a massive property-management company, cleaning up what was, at the time, the largest collapse of U.S. financial institutions since the Great Depression. The RTC closed a total of 747 failed financial institutions, with total assets of $394 billion. It sought to maximize value from the sale of assets from failed S&Ls while minimizing the impact on real estate and financial markets. The RTC initially emphasized individual and bulk asset sales but later pioneered the use of equity partnerships to help liquidate real estate and financial assets inherited from insolvent thrift institutions.
In 1995, the RTC was merged into the FDIC, and the FDIC became responsible for resolving failed thrifts. Supervision of thrifts became the responsibility of a new agency, the Office of Thrift Supervision.
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Frequently asked questions
The standard deposit insurance amount is $250,000 per depositor, per FDIC-insured bank, per ownership category.
To determine if a bank is FDIC-insured, you can ask a bank representative, look for the FDIC sign at your bank, or use the FDIC's BankFind tool.
In the unlikely event of a bank failure, the FDIC responds in two capacities. First, as the insurer of the bank's deposits, the FDIC pays insurance to depositors up to the insurance limit. Second, as the receiver of the failed bank, the FDIC assumes the task of selling/collecting the assets of the failed bank and settling its debts, including claims for deposits in excess of the insured limit.
The Federal Deposit Insurance Corporation (FDIC) is an independent federal government agency that insures deposits in commercial banks and thrifts.
