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U.S. ECONOMY > State & Federal Finance > Federal Departments and Regulatory Agencies > Federal Deposit Insurance Corporation

Federal Deposit Insurance Corporation

550 Seventeenth Street NW.,
Washington, DC 20429
Phone, 202-736-6000.
Internet, www.fdic.gov

The Federal Deposit Insurance Corporation (FDIC) was established under the Banking Act of 1933 in response to numerous bank failures during the Great Depression. FDIC began insuring banks on January 1, 1934. As of April 1, 2006, the deposit insurance coverage on certain retirement accounts at a bank or savings institution was raised to $250,000. The basic insurance coverage for other deposit accounts remains at $100,000. FDIC does not operate on funds appropriated by Congress. Its income is derived from insurance premiums on deposits held by insured banks and savings associations and from interest on the required investment of the premiums in U.S. Government securities. It also has authority to borrow from the Treasury up to $30 billion for insurance purposes.

Management of FDIC consists of a Board of Directors that includes the Chairman, Vice Chairman, and Appointive Director. The Comptroller of the Currency, whose office supervises national banks, and the Director of the Office of Thrift Supervision, which supervises federally or State-chartered savings associations, are also members of the Board. All five Board members are appointed by the President and confirmed by the Senate, with no more than three being from the same political party.

Activities
FDIC insures about $3.9 trillion of U.S. bank and thrift deposits. The insurance fund is composed of insurance premiums paid by banks and savings associations and the interest on the investment of those premiums in U.S. Government securities, as required by law. Premiums are determined by an institution's level of capitalization and potential risk to the insurance fund.

FDIC examines about 5,245 Statechartered commercial and savings banks that are not members of the Federal Reserve System, called State nonmember banks. FDIC also has authority to examine other types of FDIC-insured institutions for deposit insurance purposes. The two types of examinations conducted are for safety and soundness, and for compliance with applicable consumer laws such as the Truth in Lending Act, the Home Mortgage Disclosure Act, the Equal Credit Opportunity Act, the Fair Housing Act, and the Community Reinvestment Act. Examinations are performed on the institution's premises and off-site through computer data analysis.

A failed bank or savings association is generally closed by its chartering authority, and FDIC is named receiver. FDIC is required to resolve the closed institution in a manner that is least costly to FDIC. Ordinarily, FDIC attempts to locate a healthy institution to acquire the failed entity. If such an entity cannot be found, FDIC pays depositors the amount of their insured funds, usually by the next business day following the closing. Depositors with funds that exceed the insurance limit often receive an advance dividend, which is a portion of their uninsured funds that is determined by an estimate of the future proceeds from liquidating the failed institution's remaining assets. Depositors with funds in a failed institution that exceed the insurance limit receive a receivership certificate for those funds and partial payments of their uninsured funds as asset disposition permits.

As part of its insurance, supervisory, and receivership responsibilities, FDIC also performs other functions relating to State nonmember banks, including:

approval or disapproval of mergers, consolidations, and acquisitions where the resulting bank is an insured State nonmember;
approval or disapproval of a proposal by a bank to establish and operate a new branch, close an existing branch, or move its main office from one location to another;
approval or disapproval of requests to engage as principal in activities and investments that are not permissible for a national bank;
issuance of enforcement actions, including cease-and-desist orders, for specific violations or practices requiring corrective action; and
review of changes in ownership or control of a bank.