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Depositors in American banks and savings institutions are insured by the Federal Deposit Insurance Corporation (FDIC), an independent agency of the federal government. The FDIC was established in 1933 in reaction to the Great Depression's numerous bank failures with the objectives of regaining public trust in the banking sector and stopping further bank runs.
Banks and savings institutions that are FDIC members contribute to its funding by paying insurance premiums. In the event of a bank failure, the agency's main job is to safeguard depositors by insuring deposits up to a specific sum. By 2021, each account ownership category will have standard insurance coverage of $250,000 per depositor, per insured bank.
The FDIC also works to advance the security and stability of the American banking system in addition to performing insurance-related duties. As part of this, member banks and savings institutions are routinely examined to make sure they are running securely and soundly, and corrective action is taken as needed. By offering technical support and resources to smaller institutions, the FDIC also works to strengthen community banking.
The FDIC is governed by a five-member board of directors, of whom two are chosen by the FDIC Board of Directors and three are chosen by the President of the United States. The organization has regional offices across the country and its headquarters are in Washington, D.C.
The FDIC is essential in preserving trust in the American banking system and safeguarding depositors from losses in the event of bank failure. The stability of the American banking system, which is essential to the operation of the larger economy, is supported by its insurance function and regulatory control.
