Federal Deposit Insurance Corporation (FDIC)

The Federal Deposit Insurance Corporation or FDIC by its name in English (Federal Deposit Insurance Corporation) is a state entity whose main function is to insure, up to a maximum amount, bank deposits in the United States. That is, it offers coverage to the saver in case the bank goes bankrupt.

In other words, the FDIC is an institution that guarantees that US citizens will not lose their deposit funds. This, even if your bank declares bankruptcy.

The FDIC, according to its official website, covers (at the time of writing the article), 4,914 commercial banks.

The FDIC is managed by a five-person board of directors that includes the Comptroller of the Currency and the Director of the Consumer Financial Protection Bureau. All members of the board are appointed by the President of the United States and confirmed by the Senate. Also, no more than three directors may belong to the same political party.

Federal Deposit Insurance Corporation (FDIC) coverage

Federal Deposit Insurance Corporation (FDIC) coverage is $250,000 per depositor, per insured bank.

The objective of the coverage is to generate confidence in the financial sector of the United States, as well as to promote its stability.

It is worth noting that the FDIC does not insure securities, mutual funds, or other types of investments that banks and savings institutions may offer. Only deposits are covered.

The balance of the Deposit Insurance Fund, or DIF for short, was $121.9 billion as of September 30, 2021.

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Other FDIC Duties

Other functions of the Federal Deposit Insurance Corporation (FDIC), in addition to coverage for savers, are:

  • The FDIC is the primary supervisor of state-chartered banks that are not part of the Federal Reserve System (FED). In this sense, we must explain that banks can be authorized by the states or by the Office of the Comptroller of the Currency, OCC, which is an independent office of the United States Department of the Treasury. Thus, those banks authorized by the states have the option of joining the FED, that is, they do not always do so. Therefore, those banks that are not part of the FED are regulated by the FDIC.
  • The FDIC responds immediately when a bank or savings institution under its supervision fails. Thus, it has several options to resolve the situation of the clients of the failed company, but the most common is to sell the deposits and loans to another entity. The clients of the bankrupt firm then automatically become clients of the institution acquiring the savings and loans. In most cases, the user’s transition from one company to another is smooth, says the FDIC.

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