Ethan Riley
The Federal Deposit Insurance Corporation (FDIC) provides deposit insurance to protect customers' money in the event of a bank failure. FDIC insurance covers deposits in all types of accounts at FDIC-insured banks, including checking and savings accounts, money market deposit accounts, and certificates of deposit. The FDIC does not cover non-deposit investment products, even those offered by FDIC-insured banks. The standard insurance limit is $250,000 per depositor, per FDIC-insured bank, and per ownership category. While the FDIC does not insure Federal Reserve Banks, it has worked alongside the Federal Reserve and the Department of the Treasury to protect deposits during bank failures, such as in the case of Silicon Valley Bank.
| Characteristics | Values |
|---|---|
| FDIC Insurance Coverage | FDIC insurance covers deposits in all types of accounts at FDIC-insured banks, but it does not cover non-deposit investment products, even those offered by FDIC-insured banks. |
| FDIC-insured banks | As of March 2025, there are roughly 4,400 FDIC-insured banks. |
| FDIC Funding | The FDIC is not supported by public funds. Member banks' insurance dues are its primary source of funding. |
| FDIC Insurance Limit | FDIC insurance covers up to $250,000 per depositor, per institution, and per ownership category. |
| FDIC Role in Bank Failure | In the rare event of a bank failure, the FDIC protects deposit account customers' money up to the insurance limit. It also manages the failed bank's assets and debts. |
| FDIC and Federal Reserve Banks | The FDIC has worked with the Federal Reserve to provide additional funding to eligible depository institutions to meet the needs of depositors. |
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What You'll Learn
FDIC-insured institutions
The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to maintain stability and public confidence in the nation's financial system. The FDIC insures deposits; examines and supervises financial institutions for safety, soundness, and consumer protection; makes large and complex financial institutions resolvable; and manages receiverships. The FDIC provides deposit insurance to protect your money in the event of a bank failure. Your deposits are automatically insured up to at least $250,000 per depositor per FDIC-insured bank.
FDIC deposit insurance protects money you hold at an FDIC-insured bank in traditional deposit accounts like checking and savings accounts, money market deposit accounts, and Certificates of Deposit (CDs). Coverage is automatic when you open one of these types of accounts at an FDIC-insured bank. The FDIC only insures your money if it is in a deposit account at an FDIC-insured bank. Banks offer some financial products and services that are not deposits, and the FDIC does not insure them.
The FDIC is not supported by public funds; member banks' insurance dues are its primary source of funding. The FDIC charges premiums based upon the risk that the insured bank poses. When dues and the proceeds of bank liquidations are insufficient, it can borrow from the federal government or issue debt through the Federal Financing Bank on terms that the bank decides. As of June 2024, the FDIC provided deposit insurance at 4,517 institutions. As of Q3 2024, the Deposit Insurance Fund (DIF) stood at $129.2 billion, or a 1.21% reserve ratio.
The FDIC answers questions about federal deposit insurance coverage and handles complaints and inquiries about FDIC-insured institutions that are not members of the Federal Reserve System. The FDIC provides extensive resources for bankers, including guidance on regulations, information on examinations, legislation insights, and training programs. The FDIC also publishes quarterly reports detailing banks' financial performance, including leverage ratios.
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Federal Reserve System membership
The Federal Reserve System, the central bank of the United States, provides the country with a safe, flexible, and stable monetary and financial system. It performs five general functions to promote the effective operation of the US economy and, more generally, the public interest.
Any financially sound, well-managed state-chartered commercial bank, including a newly formed bank, can become a member of the Federal Reserve System. The 12 regional Reserve Banks supervise state member banks as part of the Federal Reserve System’s mandate to ensure strength and stability in the nation’s domestic markets and banking system. Regional and community banking organizations constitute the largest number of banking organizations supervised by the Reserve Banks.
The Federal Reserve Bank of St. Louis, for example, supervises state member banks in the Eighth District, which includes Arkansas and portions of Illinois, Indiana, Kentucky, Tennessee, Mississippi, and Missouri. Similarly, the Federal Reserve Bank of Philadelphia serves the Third District, covering Delaware, southern New Jersey, and eastern and central Pennsylvania.
The Federal Reserve does not charge community banks fees for examinations or applications. Banks considering membership are encouraged to contact their regional Federal Reserve Bank early in their decision-making process to make a more informed decision about the benefits of membership and identify potential challenges.
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Deposit insurance coverage
The Federal Deposit Insurance Corporation (FDIC) provides deposit insurance to protect your money in the event of a bank failure. FDIC deposit insurance covers deposits in all types of accounts at FDIC-insured banks, including checking and savings accounts, as well as certificates of deposit (CDs). Coverage is automatic when you open one of these account types at an FDIC-insured bank. Your deposits are automatically insured up to $250,000 per individual, per FDIC-insured bank. This limit applies to the combined balance of all accounts in the same ownership category. However, you may qualify for more than $250,000 in coverage if you have accounts in different ownership categories, such as single and joint ownership accounts or multiple single ownership accounts at different FDIC-insured banks.
The FDIC is not funded by public funds; its primary source of funding comes from insurance dues paid by member banks. The FDIC charges premiums based on the risk posed by the insured bank. When dues and liquidation proceeds are insufficient, the FDIC can borrow from the federal government or issue debt through the Federal Financing Bank. As of Q3 2024, the Deposit Insurance Fund (DIF) stood at $129.2 billion, with a 1.21% reserve ratio. The DIF is invested in Treasury securities, earning interest that supplements the fund. The FDIC is also authorized to regulate and supervise state non-member banks, perform consumer protection functions, and manage receiverships of failed banks.
The history of deposit insurance in the United States dates back to the early 20th century, with several states establishing their own deposit insurance funds after 1907 due to lax bank regulation and the prevalence of financially unstable local banks. The Federal Reserve Act initially included a provision for nationwide deposit insurance, but it was removed before the bill's passage. During the Great Depression, thousands of bank failures highlighted the need for deposit insurance, leading to the creation of the FDIC in 1933. The Banking Act of 1935 made the FDIC a permanent government agency and provided permanent deposit insurance of $5,000 per depositor, which has since increased over time to accommodate inflation.
During the savings and loan crisis and the 2008 financial crisis, the FDIC expended its entire insurance fund but met its insurance obligations by using operating cash or borrowing through the Federal Financing Bank. These crises demonstrated the importance of deposit insurance in protecting depositors' funds during periods of financial instability. The FDIC continues to play a crucial role in ensuring the safety and soundness of the banking system, providing confidence to depositors, and promoting financial stability.
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Bank failures
The FDIC provides deposit insurance to member banks, with the fund standing at $129.2 billion as of Q3 2024. During banking crises, such as the savings and loan crisis and the 2008 financial crisis, the FDIC expended its entire insurance fund. The FDIC acts as the insurer of bank deposits, paying depositors up to the insurance limit, and as the "Receiver" of the failed bank, responsible for selling or collecting the bank's assets and settling its debts.
In the event of a bank failure, the FDIC notifies depositors in writing and through the news media, town meetings, and notices posted at the bank. The FDIC offers loans for sale to healthy financial institutions and, if necessary, packages and offers the remaining loans for sale on the financial market within a few months. The FDIC also establishes a temporary customer service line for each failed bank and encourages borrowers to seek a new lender or refinance their loans.
The FDIC's primary goal is to return loans and other assets to the private sector as quickly and efficiently as possible. It will consider advancing funds or providing emergency funding in limited circumstances, such as to protect collateral or ensure public safety. The FDIC provides resources and guidance to educate and protect consumers, promote economic inclusion, and connect people with financial resources in their communities.
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FDIC funding
The Federal Deposit Insurance Corporation (FDIC) is not supported by public funds. Its primary source of funding comes from member banks' insurance dues. The FDIC charges premiums based on the risk posed by the insured bank. When dues and the proceeds of bank liquidations are insufficient, the FDIC can borrow from the federal government or issue debt through the Federal Financing Bank on terms decided by the bank.
The FDIC also has the option of a direct line of credit with the Treasury, allowing it to borrow up to $100 billion. However, this option has never been utilized. The FDIC's funding mechanisms have evolved over time, informed by data and experiences from two significant banking crises.
The Deposit Insurance Fund (DIF) is another critical source of funding for the FDIC. The DIF is fully invested in Treasury securities, and the interest earned on these investments supplements the premiums. The Dodd-Frank Act of 2010 mandates that the FDIC maintain the DIF at a minimum of 1.35% of all insured deposits. For example, in 2020, with approximately $8.9 trillion in insured deposits, the fund requirement was $120 billion.
The FDIC's funding sources and strategies are designed to ensure the stability and credibility of the U.S. financial system. The FDIC has a comprehensive, long-term management plan for the DIF, aiming to maintain a positive fund balance even during economic downturns and banking crises.
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Frequently asked questions
The Federal Deposit Insurance Corporation (FDIC) is a permanent government agency that provides deposit insurance to protect your money in the event of a bank failure.
Yes, the FDIC covers Federal Reserve Banks.
The FDIC insures up to USD 250,000 per depositor, per institution, and per ownership category.
The FDIC covers deposits in all types of accounts at FDIC-insured banks, but it does not cover non-deposit investment products, even those offered by FDIC-insured banks.
