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Federal Deposit Insurance Corporation Biography & Facts

The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation supplying deposit insurance to depositors in American commercial banks and savings banks.: 15  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 before the FDIC's creation, and bank runs were common.: 15  The insurance limit was initially US$2,500 per ownership category, and this has been 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 not supported by public funds; member banks' insurance dues are its primary source of funding. The FDIC charges premiums based upon the risk that the insured bank poses. When dues and the proceeds of bank liquidations are insufficient, it can borrow from the federal government, or issue debt through the Federal Financing Bank on terms that the bank decides. As of December 2023, the FDIC provided deposit insurance at 4,587 institutions. As of Q4 2023, the Deposit Insurance Fund stood at $121.8 billion. The FDIC also examines and supervises certain financial institutions for safety and soundness, performs certain consumer-protection functions, and manages receiverships of failed banks. Quarterly reports are published indicating details of the banks' financial performance, including leverage ratio (but not CET1 Capital Requirements & Liquidity Coverage Ratio as specified in Basel III). Membership requirements To qualify for deposit insurance, member banks must follow certain liquidity and reserve requirements. Banks are classified in five groups according to their risk-based capital ratio: Well capitalized: 10% or higher Adequately capitalized: 8% or higher Undercapitalized: less than 8% Significantly undercapitalized: less than 6% Critically undercapitalized: less than 2% When a bank becomes undercapitalized, the institution's primary regulator issues a warning to the bank. When the number drops below 6%, the primary regulator can change management and force the bank to take other corrective action. When the bank becomes critically undercapitalized the chartering authority closes the institution and appoints the FDIC as receiver of the bank. Insurance coverage The FDIC insures deposits at member banks in the event that a bank fails—that is, the bank's regulating authority decides that it no longer meets the requirements for remaining in business. Covered deposits FDIC deposit insurance covers deposit accounts, which, by the FDIC definition, include: checking accounts and negotiable order of withdrawal (NOW) accounts (interest-bearing checking accounts with a hold option) savings accounts and money market deposit accounts (MMDAs, i.e., higher-interest savings accounts subject to check-writing restrictions) time deposits including certificates of deposit (CDs) outstanding cashier's checks, interest checks, and other negotiable instruments drawn on the accounts of the bank accounts denominated in foreign currencies Accounts at different banks are insured separately. All branches of a bank are considered to form a single bank. Also, an Internet bank that is part of a brick and mortar bank is not considered to be a separate bank, even if the name differs. Non-US citizens are also covered by FDIC insurance as long as their deposits are in a domestic office of an FDIC-insured bank. The FDIC publishes a guide entitled "Your Insured Deposits", which sets forth the general characteristics of FDIC deposit insurance, and addresses common questions asked by bank customers about deposit insurance. Items not insured Only the above types of accounts are insured. Some types of uninsured products, even if purchased through a covered financial institution, are: Stocks, bonds, and mutual funds including money funds The Securities Investor Protection Corporation, a separate institution chartered by Congress, provides protection against the loss of many types of such securities in the event of a brokerage failure, but not against a decrease in their values. Exceptions have occurred, such as the FDIC bailout of bondholders of Continental Illinois. Investments backed by the U.S. government, such as Treasury securities The contents of safe deposit boxes. Even though the word deposit appears in the name, under federal law a safe deposit box is not a deposit account – it is merely a secured storage space rented by an institution to a customer. Insurance and annuity products, such as life, auto and homeowner's insurance. Deposit accounts are insured only against the failure of a member bank. Deposit losses that occur in the course of the bank's business, such as theft, fraud or accounting errors, must be addressed through the bank or state or federal law. Deposit insurance also does not cover the failure of non-bank entities that use a bank to offer financial services. Ownership categories Each ownership category of a depositor's money is insured separately up to the insurance limit, and separately at each bank. Thus a depositor with $250,000 in each of three ownership categories at each of two banks would have six different insurance limits of $250,000, for total insurance coverage of $1,500,000. The distinct ownership categories are: Single accounts (accounts not falling into any other category) Certain retirement accounts (including Individual Retirement Accounts (IRAs)) Joint accounts (accounts with more than one owner with equal rights to withdraw) Revocable & Irrevocable trust accounts (containing the words "Payable on death", "In trust for", etc.) Employee Benefit Plan accounts (deposits of a pension plan) Corporation/Partnership/Unincorporated Association accounts Government accounts All amounts that a particular depositor has in accounts in any particular ownership category at a particular bank are added together and are insured up to $250,000. For joint accounts, each co-owner is assumed (unless the account specifically states otherwise) to own the same fraction of the account as does each other co-owner (even though each co-owner may be eligible to withdraw all funds from the account). Thus if three people jointly own a $750,000 account, the entire account balance is insured because each depositor's $250,000 share of the account is insured. The owner of a revocable trust account is generally insured up to $250,000 for each unique beneficiary (subject to special rules if there are more than five of them). Thus if there is a single owner of an account that is specified as in trust for (payable on death to, etc.) three different benefic.... Discover the Federal Deposit Insurance Corporation popular books. Find the top 100 most popular Federal Deposit Insurance Corporation books.