Federal Deposit Insurance Corporation (FDIC)

The FDIC was created by the Banking Act of 1933, during the Great Depression, after thousands of US banks failed and depositors lost their savings. Deposit insurance aimed to restore confidence and prevent bank runs.

The FDIC insures deposits at member banks up to a set limit per depositor, per bank, per ownership category. If an insured bank fails, the FDIC pays depositors their insured deposits, usually within a few days, or transfers their accounts to another bank. Since the FDIC was created, no depositor has lost insured funds.

The FDIC is funded mainly by insurance premiums paid by banks, not by taxpayers. It also supervises state-chartered banks that are not members of the Federal Reserve System and acts as receiver for failed banks, selling their assets and handling their liabilities.

For example, when Silicon Valley Bank failed in March 2023, the FDIC took control of the bank. Authorities used a special exception to protect all depositors, including those with deposits above the insurance limit, to prevent wider panic.

Credit union deposits in the United States are insured separately by the National Credit Union Administration.