Final answer:
The FDIC insures deposits at member banks up to $250,000 per account category, even if the bank fails. Bank examiners assess financial risk by examining balance sheets, and banks fund this insurance by paying premiums to the FDIC.
Step-by-step explanation:
The Federal Deposit Insurance Corporation (FDIC) plays a crucial role in maintaining public trust in the U.S. banking system.
One of the main responsibilities of the FDIC is to provide deposit insurance, which guarantees that depositors will receive their money up to a certain amount, even if their bank fails. As of the third quarter of 2021, the FDIC insures deposits at about 4,914 banks.
Through the FDIC's deposit insurance program, depositors are covered for up to $250,000 per depositor, per insured bank, for each account ownership category.
This coverage is sufficient for most individuals, but may not cover the total deposits of larger businesses. The implementation of deposit insurance by the U.S. government in the 1930s helped to eliminate the occurrence of bank runs at insured institutions.
In assessing a bank's financial health, bank examiners from the FDIC review the bank's balance sheet, scrutinizing the values of assets and liabilities to determine the risk level.
Banks contribute to the FDIC's insurance fund by paying a premium, which varies according to the bank's size and the riskiness of its operations.