The role of FDIC in Insurance

1. What does the term “bank failure” mean? What role does FDIC insurance play? Bank failure means that the bank was unable to uphold their obligations as a bank to the depositors and others, which leads to closure of the bank (FDIC, 2018).  The FDIC insures depositors’ up to the insured amount if a bank fails and closes.

2. How many banks failures occurred in the United States during the most recent complete calendar year? There were four banks that failed in the U.S. during the most recent complete calendar year.

3. How many banks failures occurred in the United States during 2020? Two bank failures occurred in 2020.

4. How many banks failures occurred in the United States during 2018? No bank failures occurred in 2018.

5. How many banks failures occurred in the United States during 2017? Eight bank failures occurred in 2017.

6. What were the total assets and total deposits held by the banks that failed during 2019? The total assets were $214,000,000.10 and approx. deposits were $195,000,000.20 in 2019.

7. How many banks failed in 1937? There were 77 banks that failed in 1937.

8. How it is possible to prevent bank failure? The FDIC (federal deposit insurance corporation) regularly monitors the performance and enforces regulations of the banks to ensure they are operating with minimal to no risk (FDIC, 2018).

It puts my mind at ease that the FDIC was created and insures depositor’s up to the insured amount.  Banking is also a business, and if the banks do not follow proper regulations or have high risk involved, it is susceptible to closure.  I believe most of our money is in some sort of a bank account, so I am glad that the FDIC exists and we can feel that our funds are secure and insured with an FDIC insured bank.  I think this is also needed to ensure an independent agency is monitoring their operations.  We see audits all the time; for example the Air Force gets audited from an independent agency to review the transactions that were completed and paid, to review their performance and legality of their transactions.  It’s no different for the bank business in my opinion, and it also prevents potential failures.

References:

FDIC. (2018). Failed Bank List. Retrieved September 12, 2020, from https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/

Discussion Reply:

Task 2: 175 words with references

Discussion:

1. What does the term “bank failure” mean? What role does FDIC insurance play?

Bank failure is when a bank is closed by a federal or state banking monitoring agency because it is not able to meet its obligations to depositors and others. The FDIC insurance plays two roles: the first is the FDIC pays the depositors the amount of money they were insured. The second role is to take on the job of collecting/ selling the assets of the bank and resolving its debts.

2. How many banks failures occurred in the United States during the most recent complete calendar year?

In the year 2019 there were four (4) bank failures that occurred in the United States. The four banks were City National Bank of New Jersey, Resolute Bank, Louisa Community Bank, and The Enloe State Bank.

3. How many banks failures occurred in the United States during 2020?

So far in the current year of 2020 there have only been two (2) bank failures: The First State Bank in Barboursville, WV and Ericson State Bank in Ericson, NE.

4. How many banks failures occurred in the United States during 2018?

There were no matching records found for bank failures in the United States during 2018.

5. How many banks failures occurred in the United States during 2017?

In 2017 there were eight (8) bank failures in the United States. Washington Federal Bank for Savings in Chicago, IL; The Farmers and Merchants State Bank of Argonia in Argonia, KS; Fayette County Bank in Saint Elmo, IL; Guaranty Bank in Milwaukee, WI; First NBC Bank in New Orleans, LA; Proficio Bank in Cotton Heights, UT; Seaway Bank and Trust Company in Chicago, IL; and lastly Harvest Community Bank in Pennsville, NJ.

6. What were the total assets and total deposits held by the banks that failed during 2019?

7. How many banks failed in 1937?

In 1937 seventy-seven (77) banks failed according to Table 2-2 Bank Closures* 1934-1979. (Managing the Crisis: The FDIC and RTC Experience – Chronological Overview 2018)

8. How it is possible to prevent bank failure?

“As a regulator, the FDIC strives to prevent bank failures by monitoring the industry’s performance and enforcing regulations intended to make sure financial institutions operate in a safe and sound manner.” (Learning Bank – About the FDIC 2018)

9.  Reflection

I remember as a young girl going to the banks with my mom and depositing money into my savings account. I can recall asking her why we banked with this bank and not the many other banks that lined the parkway where we lived. My mother replied this bank here is a credit union and it is FDIC insured, she told me to always look for that sticker before opening an account with the institution. I asked her what the sticker meant she said that if something happened with the bank that they would give us our money bank up to the amount posted on the sticker. I thought oh free money then she said no we would have to have that much money or more to receive it. (haha) This week reading, and discussion furthermore proves that my mom was correct.

Reference

Failed Bank List. FDIC. (2000). https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/.

Learning Bank – About the FDIC. FDIC. (2018, January 30). https://www.fdic.gov/about/learn/learning/aboutfdic.html.

Managing the Crisis: The FDIC and RTC Experience – Chronological Overview. FDIC . (2018, January 2). https://www.fdic.gov/bank/historical/managing/chronological/1933-79.html.