Federal Deposit Insurance Corporation (FDIC)

The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation, created in 1933 during the Great Depression, that insures deposits held at member banks against loss resulting from bank failure. If an FDIC-insured bank fails, depositors are protected up to the applicable insurance limit per depositor, per ownership category, per insured bank, without needing to file any claim themselves in most cases.

The FDIC also directly examines and supervises many banks for safety and soundness, and manages the resolution process when a bank does fail, typically arranging for a healthy bank to assume the failed bank's insured deposits so customers retain uninterrupted access to their money.

The FDIC exists so that an ordinary depositor does not need to personally assess whether their bank is financially sound before trusting it with their savings. As long as a bank is FDIC-insured and the deposit falls within coverage limits, the government guarantees that money will be made available even if the bank itself collapses.

This guarantee was created directly in response to the wave of bank runs and failures during the Great Depression, when depositors lost savings en masse after losing confidence in banks — confidence the FDIC was specifically designed to restore and maintain going forward.

FDIC insurance covers deposit accounts — checking, savings, money market deposit accounts and certificates of deposit — at member institutions, up to the insurance limit per depositor, per ownership category, per bank. It does not cover investment products such as stocks, bonds or mutual funds, even if purchased through a bank.

When a bank fails, the FDIC most commonly arranges a purchase-and-assumption transaction, where a healthy acquiring bank takes over the failed bank's insured deposits and often many of its branches, typically allowing customers to access their money the next business day with minimal disruption.

The FDIC is funded primarily through insurance premiums paid by member banks rather than direct taxpayer appropriations under ordinary circumstances, maintaining a deposit insurance fund specifically designed to cover expected bank failures over time.

A depositor can actually obtain coverage above the standard per-bank limit by holding funds across different ownership categories, such as individual accounts, joint accounts and certain retirement accounts, each of which is separately insured up to the applicable limit at the same institution, a structuring strategy larger depositors sometimes use to maximize their total FDIC protection.

Beyond insuring deposits, the FDIC also directly supervises many state-chartered banks that are not members of the Federal Reserve System, conducting regular examinations of these institutions' safety and soundness alongside its separate role managing the resolution process when a bank ultimately fails.

FDIC insurance does not cover losses from investment products such as mutual funds, stocks, bonds, annuities or cryptocurrency, even when purchased through an FDIC-insured bank, and it does not protect against losses from fraud committed by the depositor themselves, limiting its protection specifically to deposit accounts at the insured institution.

The FDIC's deposit insurance fund is built up through risk-based assessments charged to member banks, with institutions judged riskier by the FDIC's own supervisory ratings generally paying a higher assessment rate, aligning each bank's contribution to the fund more closely with the actual risk it poses to the broader insurance system.

This risk-based pricing structure gives banks a direct financial incentive to maintain stronger capital and risk management practices, since a lower supervisory rating translates fairly directly into a higher ongoing cost of deposit insurance.

• Federal Deposit Insurance Corporation