The Federal Deposit Insurance Corporation (FDIC) was established in 1933 to protect the deposits of banks. The Great Depression had created a massive crisis in confidence in the banking system in the United States at the time, and the FDIC came about as a response to that crisis. Its primary purpose is to ensure that bank deposits are considered safe by insuring those deposits and monitoring banks.
The FDIC operates an insurance fund for banks in the United States. The insurance fund is financed by banks that pay premiums on deposit insurance coverage. The FDIC insures almost every bank and thrift institution in the country. Currently, checking and other deposit accounts are insured up to $250,000 per depositor. This amount will drop to $100,000 per depositor as of January 1st, 2014.
The FDIC directly supervises about half the banks in the country. The other half are supervised by other regulatory agencies, including the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. The primary regulator of state-chartered banks that do not join the Federal Reserve system, the FDIC is also the back-up supervisor for the remaining banks and thrift institutions primarily regulated by other federal institutions.
Traditional types of bank accounts, including savings, checking, trust, certificates of deposit, and retirement accounts, are always insured by the FDIC. In addition, money market deposit accounts are also insured. Investment products such as mutual funds, life insurance, stocks and bonds, and annuities are not insured by the FDIC. The contents of safe-deposit boxes are also not insured by the FDIC.
Beyond insuring deposits, the FDIC also monitors the financial health of banks. In the case of bank failure, the FDIC will help liquidate the bank’s assets and ensure that its failure does minimal damage to the health of the United States banking system.
