Which agency insures deposits to preserve public confidence in the banking system?

The Federal Deposit Insurance Corporation (FDIC) plays a critical role in safeguarding the financial system by insuring deposits at member banks and savings associations. This insurance promotes public confidence in the banking system, assuring depositors that their money is protected up to the insured limit, currently set at $250,000 per depositor, per insured bank, for each account ownership category.

By backing deposits, the FDIC helps prevent bank runs, where large numbers of customers withdraw their deposits simultaneously due to fears of insolvency. This stability is essential in maintaining trust in the financial system, especially during economic downturns or crises.

In this context, the roles of the other agencies are different: the Securities Investor Protection Corporation (SIPC) protects customers of brokerage firms in the event of a firm’s bankruptcy; the Financial Industry Regulatory Authority (FINRA) is a self-regulatory organization that oversees brokerage firms and exchange markets; and the Securities and Exchange Commission (SEC) is responsible for protecting investors in securities markets and maintaining fair and efficient markets. Each of these organizations serves important functions, but none provides the specific deposit insurance that the FDIC offers.