How the Federal Deposit Insurance Corporation Works

FDIC Structure and Practices

Today, the FDIC is overseen by a five-member board of directors. The Chairman is appointed by the President of the United States and is subject to approval by the U.S. Senate. The other board members are a vice chairman, a director, a comptroller of the currency, and a director of the Consumer Finance Protection Bureau (CFPB) [source: FDIC]. The CFPB was created by the Dodd-Frank Act of 2010 [source: CFPB].

The FDIC consists of seven divisions: the Division of Finance, the Division of Information Technology and the Division of Administration provide logistical and administrative support for the corporation [source: FDIC]. The other four divisions handle the FDIC's major responsibilities:

  • Division of Depositor and Consumer Protection: These are the FDIC's police officers, so to speak. This division examines the business practices and investment strategies of insured banks and determines whether they are sound or have potential for failure. The division's compliance examiners conduct studies to make certain banks are following federal banking regulations. Employees of this division visit individual banks to make their assessments [source: FDIC]. In response to the 2010 Dodd-Frank Act, the FDIC created an Office of Complex Financial Institutions (CFI) to police banks and other large financial institutions with assets greater than $100 billion [source: FDIC].
  • Division of Resolutions and Receiverships: When an insured bank fails, these guys swoop in to save the account holders. If there is a bank willing to take the accounts under its wing, the FDIC draws on its insurance fund to essentially re-create the depositors' accounts (up to the insured amount) in the volunteering bank. If no bank will take the accounts, the FDIC directly pays the depositors up to the insured amount of $250,000. For example, if Sarah had $3,345 in her checking account when the bank failed, the FDIC pays Sarah $3,345 within a matter of days. To replenish the FDIC's insurance fund, the DRR sells the failed bank's loans and assets. Assets might include bank offices, office supplies and even office chairs, desks, and computers [source: FDIC].
  • Legal Division: In addition to handling the corporation's litigation, this division enforces federal banking regulations in banks declared in violation by the Division of Depositor and Consumer Protection.
  • Division of Insurance and Research: This division employs statisticians and economists to assess the nation's economic health. These analysts examine business activity, markets, regulatory policy and real estate trends to look for warning signs of bank failure.

The FDIC does not insure every kind of bank account. Find out on the next page what types of accounts the FDIC does and does not insure.