FDIC Insurance Information
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Created by the Glass-Steagall Act of 1933, the Federal Deposit Insurance Corporation (FDIC) provides deposit insurance which guarantees the safety of checking and savings deposits in member banks, currently up to $250,000 per depositor or titled account. It is commonly known that the FDIC was put into place because of the huge number of bank runs and bank failures during the Great Depression. The FDIC insures accounts at individually charted banks separately. A person can keep $250,000 in accounts at two separate banks, provided they are not branches of the same bank, and be insured for a total of $500,000. Also, accounts in different ownerships (such as beneficial ownership, joint accounts, etc.) are considered separately for the $250,000 insurance limit. The Federal Deposit Insurance Reform Act signed into law in 2005, raised the amount of insurance for an Individual Retirement Account (IRA) to $250,000. To offer the benefit of FDIC Insurance, banks that become members of the FDIC must follow certain liquidity and reserve requirements. Banks are classified in five groups according to their risk-based capital ratio:
Special note: all banks in the MaxSafe program are deemed "well capitalized". When a bank becomes undercapitalized the FDIC issues a warning to the bank. When the risk-based capital ratio drops below 6% the FDIC can change management and force the bank to take other corrective action. Lastly, when a bank becomes critically undercapitalized the FDIC declares the bank insolvent and can take over management of the bank.
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