FDIC
Quick Definition
Independent federal agency that insures bank deposits up to $250,000 per depositor, per institution, and supervises financial institutions for safety and soundness.
Key Takeaways
- Insures bank deposits up to $250,000 per depositor, per bank, per ownership category
- Created in 1933 to restore confidence in the banking system during the Great Depression
- Funded by premiums from insured institutions, not taxpayer money
- Supervises state-chartered banks not in the Federal Reserve System
- Manages the resolution of failed banks to protect depositors
What Is FDIC?
The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Banking Act of 1933 (Glass-Steagall Act) to maintain public confidence in the U.S. banking system. The FDIC insures deposits at member banks up to $250,000 per depositor, per insured bank, for each account ownership category. Beyond deposit insurance, the FDIC supervises and examines state-chartered banks that are not members of the Federal Reserve System, manages receiverships of failed banks, and works to maintain stability in the financial system. The Deposit Insurance Fund (DIF) is funded by premiums paid by insured institutions, not by taxpayer money.
FDIC Example
- 1When Silicon Valley Bank failed in 2023, the FDIC stepped in as receiver and ensured all depositors — even those above the $250,000 limit — were made whole.
- 2A married couple can have up to $1 million in FDIC-insured deposits at a single bank by using different ownership categories: $250,000 each in individual accounts and $500,000 in a joint account.
Related Terms
Glass-Steagall Act
A 1933 law that separated commercial banking from investment banking to reduce conflicts of interest and protect depositors.
SIPC
A nonprofit organization that protects customers of failed brokerage firms by recovering cash and securities up to $500,000 per account.
SEC (Securities and Exchange Commission)
The primary U.S. federal agency responsible for regulating securities markets, protecting investors, and enforcing federal securities laws.
Insider Trading
The illegal practice of trading securities based on material, non-public information obtained through a position of trust or confidence.
Fiduciary Duty
A legal obligation to act in the best interest of another party, placing their interests above one's own.
KYC (Know Your Customer)
Regulatory requirement for financial institutions to verify the identity and assess the risk profile of their clients before and during business relationships.
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