What is the FDIC?
You may hear or see the phrase “Member FDIC” when banking with Westfield Bank – but what does FDIC mean? The Federal Deposit Insurance Corporation (FDIC) is an essential part of our financial system; however you might not know its history and the role it plays in ensuring financial security.
What is the FDIC?
The FDIC is an independent agency created by Congress in 1933. It is best understood as insurance for a bank and its customers. The FDIC protects deposits, assesses security, promotes access to banking, and examines and resolves failed banks. Since its creation, no one has lost a single cent of insured deposits due to bank failure.
The Banking Act of 1933 brought the FDIC into existence in the wake of a financial crisis caused by an increase in bank failures. That year alone, 4,000 banks failed. On March 6, then-president Franklin Delano Roosevelt declared a nationwide banking holiday, closing every bank in the country. Under the Emergency Banking Act, no banks were allowed to open again until they had been assessed by financial regulators.
The FDIC was originally created as a temporary agency, but public support for deposit insurance was so strong, President Roosevelt signed the Banking Act of 1933 into law, making the FDIC a permanent fixture. It began insuring deposits the following year, covering up to $2,500, which was almost three times the average person’s salary at the time.
What does the FDIC do?
Now, the standard deposit insurance coverage limit is $250,000 per depositor, FDIC-insured bank, or ownership category. All deposits held in different ownership categories are separately insured, even if held at the same financial institution by the same depositor.
In addition to managing the deposit insurance fund, the FDIC monitors banks to assess risk and ensure that they are operating properly. These examinations ensure a bank is safe and complies with customer protection laws.
If a bank is likely to fail, the FDIC puts that bank’s assets and deposits up for bidding from other banks. If a buyer cannot be found, the agency pays insured customers directly.
The FDIC is also an important resource of banking education. It provides financial information to consumers and banking professionals and responds to customer inquiries.
Westfield Bank is proud to be a Member FDIC, and prioritize your financial safety and security – we work with the FDIC to protect your checking and savings accounts, certificates of deposit, and more. You can learn about more financial security resources on our website.