Alyssa Lane
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that insures deposits placed in banks against loss. The FDIC was created in 1933 during the Great Depression to protect bank customers in the event that an FDIC-insured depository institution fails. Since its inception, no depositor has ever lost money on FDIC-insured deposits. The FDIC is funded by insurance premiums paid by banks and interest earned on its Deposit Insurance Fund, which is invested in US government obligations. As of 2024, the FDIC provided deposit insurance at 4,517 institutions, covering deposits up to $250,000 per depositor, per bank, per ownership category.
| Characteristics | Values |
|---|---|
| Name | Federal Deposit Insurance Corporation (FDIC) |
| Type | Independent agency of the United States government |
| Function | Protects bank depositors against the loss of their insured deposits in the event that an FDIC-insured bank or savings association fails |
| Coverage | Automatic for any deposit account opened at an FDIC-insured bank |
| Insured Amount | $250,000 per depositor, per FDIC-insured bank, per ownership category |
| Funding | Funded by insurance premiums paid by banks and interest earned on the FDIC's Deposit Insurance Fund |
| Deposit Insurance Fund (as of Dec 31, 2022) | $128.2 billion or about 1.27% of all insured deposits |
| Target Fund | Aim to reach 2% of insured deposits over the long run to withstand a future crisis |
| Exceptions | Does not cover investments, stocks, bonds, mutual funds, insurance products, or deposits with non-bank fintech companies |
| Contact | 1-877-275-3342 (1-877-ASK-FDIC) |
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![Federal Deposit Insurance Act: [As Amended Through P.L. 117–263, Enacted December 23, 2022]](https://m.media-amazon.com/images/I/517mroyL3UL._AC_UY218_.jpg)
What You'll Learn
The Federal Deposit Insurance Corporation (FDIC)
The FDIC only insures deposits in FDIC-insured banks. Banks offer some financial products and services that are not deposits, and the FDIC does not insure them. These include stocks, bonds, mutual funds, and insurance products. The FDIC also does not insure deposits in non-bank financial institutions, such as fintech companies. If a bank fails, the FDIC is appointed as a receiver and is tasked with protecting depositors and maximizing recoveries for the creditors of the failed institution.
The FDIC is not supported by public funds; member banks' insurance dues are its primary source of funding. The FDIC charges premiums based on the risk posed by the insured bank. When dues and liquidation proceeds are insufficient, the FDIC can borrow from the federal government or issue debt through the Federal Financing Bank. As of June 2024, the FDIC provided deposit insurance at 4,517 institutions, with a Deposit Insurance Fund (DIF) of $129.2 billion.
The FDIC also has regulatory and supervisory responsibilities for certain financial institutions, performs consumer-protection functions, and promotes financial inclusion and economic education. The FDIC is managed by a five-member Board of Directors, including a Chairman, Vice Chairman, Appointive Director, Comptroller of the Currency, and Director of the Bureau of Consumer Financial Protection.
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Deposit insurance coverage
The Federal Deposit Insurance Corporation (FDIC) provides deposit insurance to protect your money in the event of a bank failure. FDIC deposit insurance covers money held at an FDIC-insured bank in traditional deposit accounts. This includes checking and savings accounts, as well as Certificates of Deposit (CDs). Coverage is automatic when you open one of these accounts at an FDIC-insured bank.
It's important to note that FDIC insurance does not cover all financial products and services offered by banks. For example, investment products such as stocks, bonds, mutual funds, crypto assets, life insurance policies, safe deposit boxes, and their contents are not insured by the FDIC. Additionally, deposit insurance coverage is limited to $250,000 per ownership category, per insured bank. Each ownership category, such as an individual account or an LLC account, is treated independently.
Deposit insurance is not just limited to citizens and residents of the United States. Any person or entity that maintains deposits in an Insured Depository Institution (IDI) is eligible for deposit insurance coverage. This includes deposits in foreign currencies, which will be converted to the equivalent value in US dollars using the exchange rate quoted by the Federal Reserve Bank of New York on the date of default of the IDI.
In the event of an IDI failure, the FDIC will rely on the deposit account records to determine ownership and the amount of insurance coverage available. They may request supplemental documentation to substantiate ownership of deposited funds. It's important to note that deposit insurance coverage may also be affected by state laws, such as community property laws, and Federal laws and regulations.
The FDIC provides resources and a calculator on its website to help individuals determine their deposit insurance coverage and find insured banks. Additionally, individuals can call the FDIC to ask specific questions about their deposit insurance coverage.
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Insured deposits
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that insures deposits. The FDIC was created in 1933 during the Great Depression, with operations beginning in 1934. It was established to protect bank depositors against the loss of their insured deposits in the event of an FDIC-insured bank or savings association failure.
Deposit insurance is the government's guarantee that an account holder's money at an insured bank is safe up to a certain amount. This limit currently stands at $250,000 per account. The FDIC does not receive funding from Congress, instead, it is funded by insurance premiums paid by banks and interest earned on its Deposit Insurance Fund, which is invested in US government obligations. The FDIC also has the authority to borrow from the federal government if required.
FDIC deposit insurance is automatic for any deposit account opened at an FDIC-insured bank, and it covers a range of deposit products, including checking accounts, savings accounts, money market deposit accounts (MMDAs), and certificates of deposit (CDs). It is important to note that FDIC insurance does not cover all financial products offered by banks, and uninsured products include stocks, bonds, mutual funds, insurance products, and safe deposit boxes.
The FDIC provides resources to help individuals open bank accounts and determine their deposit insurance coverage. It also examines and supervises financial institutions for safety and soundness and performs consumer-protection functions. During the 2008 financial crisis, the FDIC faced its greatest challenge, and in 2023, the systemic risk exception was invoked to cover all deposits of Silicon Valley Bank and Signature Bank.
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Bank failures
The FDIC's role is crucial in maintaining public trust and preventing bank runs, where many customers withdraw their deposits simultaneously, leading to liquidity issues and potential bankruptcy. Since October 1, 2000, several banks have failed, as listed on the FDIC's website. The FDIC steps in during such failures to protect depositors and manage the resolution process.
During the Panics of 1893 and 1907, many banks filed for bankruptcy due to bank runs. These events sparked discussions on the need for deposit insurance. However, it wasn't until the 1920s that the Federal Reserve Act considered nationwide deposit insurance, which was ultimately removed from the final bill. It wasn't until later that the FDIC was established to address this concern.
The FDIC is not funded by taxpayer money but primarily through insurance dues from member banks. The FDIC charges premiums based on the risk posed by the insured bank. In rare cases, when dues and bank liquidation proceeds are insufficient, the FDIC can borrow from the federal government or issue debt through the Federal Financing Bank. During the 2008 financial crisis, the FDIC faced its most significant challenge.
It's important to note that the FDIC only covers deposits in specific accounts at FDIC-insured banks. Fintech financial technology companies and non-bank entities are generally not covered. Additionally, certain financial products like stocks, bonds, mutual funds, and insurance policies are not insured by the FDIC. The FDIC provides resources and information to help bankers and depositors understand their coverage and protect their deposits.
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FDIC funding
The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation supplying deposit insurance to depositors in American commercial banks and savings banks. The FDIC was created by the Banking Act of 1933, enacted during the Great Depression to restore trust in the American banking system. More than one-third of banks failed in the years preceding the creation of the FDIC, and bank runs were common. The insurance limit was initially US$2,500 per ownership category, and this was increased several times over the years. Since the enactment of the Dodd–Frank Wall Street Reform and Consumer Protection Act in 2010, the FDIC insures deposits in member banks up to $250,000 per ownership category. FDIC insurance is backed by the full faith and credit of the government of the United States, and according to the FDIC, "since its start in 1933 no depositor has ever lost a penny of FDIC-insured funds".
The FDIC is a wholly owned government corporation managed by a five-person board of directors appointed by the President and confirmed by the Senate, with no more than three members belonging to the same political party. Day-to-day operations are run by the FDIC chairman, who is appointed by the President and serves a five-year term, with the approval of the Senate, and who also serves as a member of the board of directors. Martin J. Gruenberg is the current chairman of the FDIC, whose term will expire on November 29, 2023.
The FDIC receives no congressional appropriations; it is funded by premiums that banks pay for deposit insurance and from earnings on investments in U.S. Treasury securities. The FDIC also has a US$100 billion line of credit with the Treasury Department. As of the fourth quarter of 2022, the FDIC insured $11.4 trillion in deposits in 4,926 institutions with 52,520 branches. The FDIC has approximately 5,800 employees.
The FDIC insures deposits held in a wide range of banking institutions, including national banks, state-chartered banks, and savings associations. It does not insure financial products offered by similar institutions, such as credit unions, money market funds, mutual funds, or annuities. The FDIC only insures deposits, which include checking and savings accounts, money market deposit accounts (but not money market mutual funds), and certificates of deposit (CDs). It does not insure other financial instruments that banks may offer, such as stocks, bonds, mutual funds, life insurance policies, annuities, or securities.
The standard insurance amount is $250,000 per depositor, per FDIC-insured bank, per ownership category. There are different types of ownership categories, such as single accounts, joint accounts, certain retirement accounts, and trust accounts, each with its own insurance limits and requirements. Depositors can maximize their coverage by having accounts in different ownership categories at the same bank or by spreading their funds across multiple FDIC-insured banks.
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Frequently asked questions
The FDIC (Federal Deposit Insurance Corporation) is an independent agency of the United States government that protects bank depositors against the loss of their insured deposits in the event that an FDIC-insured bank or savings association fails.
The FDIC insures deposits up to <$250,000 per depositor, per FDIC-insured bank, per ownership category.
FDIC deposit insurance covers deposit products such as checking accounts, savings accounts, money market deposit accounts (MMDAs), and certificates of deposit (CDs).
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.
