When walking into your bank you’ve probably noticed but maybe never really thought of what FDIC meant. The FDIC is forms of financial insurance for you as a customer should the bank become insolvent. The FDIC is a federal guarantee and it stands for the Federal Deposit Insurance Corporation.

The Origin

The FDIC is an independent agency of the federal government and it regulates right about 5,300 banks within the United States. Back in the 20’s and 30’s the banking system was plagued with failures in the thousands and Americans started becoming leery of making any deposits. In 1933 Congress passed the Glass-Steagall Act and on January 1^st, 1934 the FDIC officially began operations.

The Charter

The FDIC’s charter is the maintenance of public confidence in the banking system to be achieved through the providing of insurance to depositors as well as taking preemptive measures in order to minimize bank failures.

Depositors are guaranteed their funds up to $100,000 for both the savings and checking should the bank fail and the FDIC will reimburse up to that $100,000 amount to all depositors. Member banks proudly display the membership emblem and like before I’m sure you’ve seen it almost every time you’ve went into the bank.

FDIC Funding

Funding for the FDIC is completely from member banks. The member banks must meet specific standards when it comes to both liquidity and reserve requirements. Examiners make sure that member banks are meeting and complying with all established guidelines by making regular visits to the banks.

If the bank should fail to meet guidelines they will first be issued a warning by the FDIC. If they continue to fail meeting guidelines the FDIC has authority to make changes in management and can force the bank to take corrective action. There are instances, although very rare, that the FDIC will take steps indirectly leading to the closure of the bank.