LO 5.2.1: Explain the functions of banks and FDIC deposit insurance. Flashcards
What is a bank
An organization chartered by the federal or a state gov’t.
What does a bank do
- Accept deposits and, depending on the type of account, pay interest on deposits.
- Make various types of loans.
- Invest customer funds in securities.
- Honor instruments drawn on accounts.
- Issue cashier’s checks.
- Provide safe-deposit boxes.
The 3 independent federal agencies that regulate national banks
- Office of the Comptroller of the Currency (OCC)
- Federal Reserve Board
- Federal Deposit Insurance Corporation (FDIC)
Office of the Comptroller of the Currency (OCC)
This agency charters, supervises, and regulates national banks and federal branches of foreign banks located in the U.S.
Federal Reserve Board
“The Fed”
This group makes monetary policy.
Federal Deposit Insurance Corporation (FDIC)
The FDIC insures deposits is U.S. banks and savings and loan associations against bank failures.
What regulates state-chartered banks
State banking commissions or departments
What regulates state banks that are not members of the Federal Reserve System
The FDIC.
Who does the FDIC insurance protect
All individuals with a deposit at a U.S. financial institution.
Does FDIC insurance cover deposits payable overseas
No, FDIC only covers deposits that are payable in the U.S.
What kind of assets are covered by FDIC insurance
Only cash and cash-equivalent deposits.
Does the FDIC cover securities mutual funds, and other types of investments
no.
Does the FDIC cover money market mutual funds offered by investment companies (not the same as mmkt deposit accts)
no.
What is the basic FDIC-insured amount of a depositor
$250,000
Does the FDIC insure accounts registered in different categories of ownership
yes; a depositor can have more than $250,000 FDIC insurance coverage in a single institution if the funds are owned in different ownership categories.
