Federal Deposit Insurance Corporation (FDIC) refers to a self-regulating national agency that insures thrifts and deposits in the US banks if a financial institution fails. The agency was established in 1933 to promote a stable financial system and maintain public confidence by encouraging effective and efficient banking practices (Failed Bank Information, 2019). It accomplishes its mission by ensuring deposits, managing receiverships, facilitating the resolution of complex financial institutions, and examining and supervising the latter for safety.
The agency was created to prevent the incidences of persistent crises in the financial system, such as the one that occurred during the Great Depression, which devastated most organizations. The problem threatened several banks, and the individuals who were worried about the possible closure of the institutions rushed to withdraw their money. Consequently, the fear of losing cash spread, and more customers sought to do the same, making the banks incapable of supporting further withdrawal requests. However, FDIC guarantees all deposits’ safety and allows financial institutions to address their issues under controlled environments.
The agency has enhanced Birmingham’s community confidence in their financial institutions because residents’ money is safe, even after a bank has been closed. For instance, following the 2011 shutting down of Superior Bank in Birmingham, Alabama, FDIC collected customers’ useful information about their relationship with the institution to ensure that no money was lost (Failed Bank Information, 2019). Additionally, FDIC transferred the clients’ deposits to another bank and guided them on how they could withdraw their funds, and ensured that the customers continued to access online and automated teller machine services.
Conclusively, Federal Deposit Insurance Corporation is an important agency in the US that ensures thrifts and deposits in the event of a failure of a financial institution. Its main purpose is to guarantee all deposits’ safety and allow banks to address their issues under controlled environments. It ensures deposits, manage receiverships, and inspect and oversee the latter for safety. Indeed, FDIC has impacted the community positively by guaranteeing a stable financial system.
Reference
Failed Bank Information. (2019). Federal Deposit Insurance Corporation (FDIC). Web.