9/15/2022
Many nations have a series of mechanisms and institutions responsible for ensuring the proper functioning of their economy. In the US context, there are several specific organizations that contribute to strengthening the financial stability of the state.
Like the Federal Reserve or the CFPB, the FDIC does a critical job, about which we'll talk in more detail.
What does the FDIC stand for?
The Federal Deposit Insurance Corporation, is an independent government entity created in 1933 as a protection measure.
Given the multiple bankruptcies of banking entities during the financial crises of the 1920s and 1930s, this solution was implemented so that no depositor would suffer the loss of their funds again.
The FDIC can be considered as a compensatory mechanism that has the purpose of maintaining the economic stability of the institutions, promoting good financial practices and preserving the confidence of the people.
In general, this agency offers an insurance of up to $250 thousand dollars per account, as long as the banks or savings entities are associated with it.
This federal agency is headquartered in Washington DC and has a variety of regional offices. The direction of the FDIC is handled by a board of 5 directors, which are appointed by the president and ratified by the senate.
This entity does not receive appropriations from Congress, but rather premiums paid by the institutions for coverage of deposits and profits from their investments in US Treasury assets.
Importance of the Federal Deposit Insurance Corporation
It is natural to think that when money is deposited in a bank or any other financial entity, it will be 100% safe and that there is little chance that something bad will happen. However, these institutions use these funds to obtain dividends.
This allows them to give you earnings in the form of interest, just like savings accounts, certificates of deposit (CDs) and other instruments. Their investments include personal loans and other more complex products.
Although banks use a conservative approach, they have no guarantee that they will always make a profit. When, for some reason, investments lose too much money, the bank could become illiquid, preventing customers from withdrawing or using their money. The moment it fails financially, the FDIC comes to the rescue to protect your savings.
What role does the FDIC have?
Insured institutions that run out of capital or declare bankruptcy are helped by the Federal Deposit Insurance Corporation. As we have already said, each account holder is entitled to receive up to $250,000 dollars per bank. This amount may vary based on ownership, as joint or retirement accounts may receive higher compensation.
In addition to ensuring confidence in the American banking system, these are also FDIC duties:
- Protect the consumer. This federal agency ensures that these entities comply with the legal provisions to protect the rights of individuals. This includes complying with regulations such as: Fair Credit Billing Act, the Fair Credit Reporting Act, the Truth-In-Lending Act, and the Fair Debt Collection Practices Act, to name a few.
- Surveillance work. On the other hand, it exercises the function of monitoring more than half of the banks and savings institutions that make up the system, which are 4 thousand. The FDIC is responsible for reviewing the safety of procedures, good operation and is the first regulator of banks assigned by the state that does not belong to the Federal Reserve.
What does it cover?
This agency responds immediately when a savings institution or bank fails to comply with its clients. When we talk about protection, it is important to know that not all financial instruments are insured. This organism is responsible for deposits, so it includes:
- Money Market Accounts.
- Savings and checking accounts.
- Term deposits, such as CDs.
- Official payments issued by affiliated banks, such as money orders and cashier's checks.
On the contrary, there are other assets that do not receive the protection of this agency. In this category we find stocks, bonds, mutual funds, municipal securities, annual products, exchange-traded funds (ETFs), life insurance or the contents of safe deposit boxes.
How to check if the bank is a member of the FDIC?
In case you are comparing institutions in Busconómico and want to verify this information, it is a simple procedure. Just visit the Federal Deposit Insurance Corporation website and use the search function.
You enter the name, address and other relevant information. Typically, insured entities have the FDIC logo somewhere on their website and offices and have a certificate number, which they give you if you ask.
Major banks that are members of the FDIC
The vast majority of banks in the United States are members of the FDIC, something that gives them customer confidence. Here we compile some of the most important, by volume of assets and by number of customers in the United States:
- Ally Bank
- American Express National Bank
- Ameriprise Banc, FSB
- Bank of America
- BNY Mellon
- BMO Harris Bank
- Capital One Bank
- Charles Schwab Bank
- CIT Bank
- Citibank
- Comerica Bank
- Deutsche Bank Trust Corp
- Discover Bank
- E*Trade Financial Corp
- Fifth Third Bank
- Goldman Sachs
- HSBC Bank USA
- Huntington Bank
- JPMorgan Chase & Co
- KeyBank
- M&T Bank
- Morgan Stanley
- Northern Bank
- PNC Bank
- Principal Financial Group
- Regions Bank
- Santander Bank
- State Street Corp
- TD Bank
- Truist Bank
- U.S. Bank
- Union Bank
- USAA
- Wells Fargo
- Zions Bank
Español: Qué es la FDIC