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Federal Deposit Insurance Corporation (FDIC)


The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the U.S. government to maintain stability and public confidence in the nation’s financial system. Established in 1933 during the Great Depression, the FDIC provides deposit insurance to the customers of banks and savings institutions by insuring deposits up to a specified limit. This protection helps minimize the risk of loss for depositors if a bank or financial institution fails.


The phonetics of the keyword “Federal Deposit Insurance Corporation (FDIC)” can be provided in the International Phonetic Alphabet (IPA) as follows: ˈfɛdərəl dɪˈpɒzɪt ɪnˈʃʊrəns ˌkɔr.pəˈreɪʃən (ˌɛf.diː.aɪˈsiː)

Key Takeaways

  1. The Federal Deposit Insurance Corporation (FDIC) is a government agency that was created in 1933 to maintain stability and public confidence in the United States banking system by insuring depositors’ funds in banks and savings institutions.
  2. FDIC insurance covers up to $250,000 per depositor, per insured bank, for each account ownership category. This insurance covers deposit accounts such as checking accounts, savings accounts, money market accounts, and certificates of deposit (CDs).
  3. The FDIC also helps protect consumers by regularly examining and supervising thousands of banks and savings institutions, enforcing consumer protection laws, and managing the receivership of failed banks to ensure the prompt payment of insured deposits.


The Federal Deposit Insurance Corporation (FDIC) is vital in the business and finance realm as it instills confidence in the US banking system by safeguarding depositors’ funds. Established in 1933 in response to the bank failures during the Great Depression, the FDIC offers insurance coverage for individual bank accounts up to a certain limit, currently $250,000. This protection ensures that depositors can recover their insured deposits in case of bank failures. By guaranteeing the security of deposits, the FDIC helps maintain public trust in financial institutions, promotes stability in the banking system, and encourages economic growth by fostering a healthy environment for savings and investments.


The primary purpose of the Federal Deposit Insurance Corporation (FDIC) is to promote public confidence and stability within the United States financial system through safeguarding depositors’ funds. Established in 1933 in response to the bank runs and failures during the Great Depression, the FDIC provides insurance coverage for deposit accounts at insured banks, mitigating the risk for depositors and discouraging large-scale withdrawals during times of financial uncertainty. By instilling trust in the banking system, the FDIC plays a crucial role in maintaining the smooth functioning of the economy.

Apart from deposit insurance, the FDIC is also responsible for the supervision and examination of financial institutions to ensure they adhere to regulations and maintain sound operational practices. In cases where banks fail or face the threat of failure, the FDIC acts swiftly, monitoring the troubled institutions, and orchestrating their resolutions, all while minimizing the impact on the financial system and the economy as a whole. Furthermore, in its broader mission to protect consumer rights, the FDIC works in collaboration with other federal and state agencies to develop and enforce regulations, thus ensuring a safe and equitable financial environment for both consumers and financial entities.


1. Washington Mutual Bank Collapse (2008): Washington Mutual, once the largest savings and loan association in the United States, faced a severe liquidity crisis in 2008 during the height of the financial crisis. Unable to meet its customers’ demands for withdrawals, the bank was taken over by the FDIC, which facilitated the sale of its assets and operations to JPMorgan Chase. The FDIC ensured that the depositors were protected, and customers were able to access their accounts without disruption.

2. IndyMac Bank Failure (2008): IndyMac Bank was a significant mortgage lender in the U.S. that faced financial difficulties in 2008 due to its aggressive lending practices and a decline in housing values. As a result of the bank’s inability to meet the needs of its depositors, the FDIC stepped in and seized control of IndyMac. The FDIC established a new institution, IndyMac Federal Bank, to manage the failed bank’s assets and operations and later sold these to OneWest Bank. Depositors insured by the FDIC did not lose their funds, as they were fully protected up to the FDIC insurance limits.

3. Bank of the Commonwealth (2011): Bank of the Commonwealth, a regional bank located in Norfolk, Virginia, was shut down by the FDIC in 2011 due to its high-risk lending practices and deteriorating financial condition. The FDIC was appointed as the receiver and arranged for Southern Bank and Trust Company to assume all of the deposits and purchase most of the assets of the failed bank. The transition was seamless for depositors, who were protected by the FDIC insurance, and they were able to access their accounts as usual without any disruptions.

Frequently Asked Questions(FAQ)

What is the Federal Deposit Insurance Corporation (FDIC)?

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that provides deposit insurance to protect depositors in case of a bank failure. It was created in 1933 as a response to bank failures during the Great Depression.

How does FDIC insurance work?

If an FDIC-insured bank fails, the FDIC ensures that depositors can access their insured deposits up to the insurance limit. The FDIC often takes control of the failed bank’s assets and sells them to another bank or manages the bank’s liquidation process.

What is the FDIC insurance coverage limit?

The FDIC insurance coverage limit is $250,000 per depositor, per insured bank, for each account ownership category. This means that an individual can have multiple insured accounts at the same bank and still be fully insured up to $250,000 per account category.

What types of accounts are covered by FDIC insurance?

FDIC insurance covers a variety of deposit accounts, including checking accounts, savings accounts, money market deposit accounts, and Certificates of Deposit (CDs).

Are investments like stocks, bonds, and mutual funds insured by the FDIC?

No, the FDIC only insures deposits accounts, not investments such as stocks, bonds, or mutual funds. Securities and investments are covered by the Securities Investor Protection Corporation (SIPC), not the FDIC.

How can I check if my bank is FDIC-insured?

You can use the FDIC’s BankFind tool ( to search for your bank and verify its FDIC insured status. You can also look for the FDIC logo displayed prominently at your bank’s physical location or on its website.

Can I increase my FDIC insurance coverage beyond the $250,000 limit?

Yes, you can increase your coverage limits by holding accounts at multiple FDIC-insured banks or by having different types of ownership for your accounts (e.g., individual accounts, joint accounts, trust accounts) at the same bank.

What happens to my FDIC insurance coverage if I have accounts at two different banks that merge?

If you have accounts at two FDIC-insured banks that merge, your accounts are separately insured for six months after the merger. After six months, the combined deposits are insured up to $250,000 per account ownership category.

Related Finance Terms

  • Bank Insurance
  • Deposit Protection
  • Financial Institution Regulation
  • Bank Failures
  • Insured Deposits

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