Bank Insurance

Bank Insurance
A guarantee by the Federal Deposit Insurance Corporation (FDIC) of deposits in a bank. Created in 1989, the Bank Insurance Fund is the federal fund used to insure bank deposits of national and state banks, that are members of the Federal Reserve System. Bank Insurance helps protect individuals who deposit their savings in banks, against commercial bank insolvency. Each depositor is insured to at least $250,000 per bank.

The FDIC, an independent U.S. government corporation, was initiated under the Glass-Steagall Act of 1933. Its purpose was to insure bank deposits against loss and to regulate banking practices. The collapse of a great majority of banks in the United States, during the Great Depression, prompted the creation of the FDIC.

Explicit deposit insurance is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due. Deposit insurance systems are one component of a financial system safety net that promotes financial stability.