Banking Practice Exam

The Federal Deposit Insurance Corporation, commonly known as the FDIC, is the entity that typically insures deposits for commercial banks. It was established in 1933 to restore public confidence in the banking system following the Great Depression by protecting depositors and ensuring the stability of the financial system. The FDIC insures deposits up to a certain limit, which is currently set at $250,000 per depositor, per insured bank. This insurance covers various types of accounts, such as savings accounts, checking accounts, and certificates of deposit. The role of the FDIC is crucial in promoting financial stability and consumer confidence, as it protects individuals against bank failures. When banks fail, the FDIC steps in to pay depositors within a short time frame, minimizing the impact on individuals and the overall economy. This makes it a pivotal organization in the banking landscape, especially concerning risk management for depositors. In contrast, while the Federal Reserve plays a key role in monetary policy and regulating banks, it does not insure deposits. The National Credit Union Administration insures deposits for credit unions, not commercial banks. The Office of the Comptroller of the Currency primarily oversees national banks but is not involved in deposit insurance. Thus, the FDIC stands out as