Where does the FDIC’s reserve fund come from?

The Federal Deposit Insurance Corporation’s (FDIC) reserve fund is primarily funded through insurance premiums paid by member banks and savings institutions. These premiums are collected as part of the deposit insurance program, which ensures customer deposits up to a certain limit (currently $250,000 per depositor, per insured bank) in the event of a bank failure. Here’s how the reserve fund is built and maintained:

1. Insurance Assessments: Banks and financial institutions insured by the FDIC pay quarterly assessments. The amount varies based on the size of the bank and its risk profile.
2. Investment Earnings: The FDIC invests its reserve funds in low-risk U.S. Treasury securities. These investments generate returns that help maintain and grow the fund.
3. Recoveries from Bank Failures: When the FDIC takes over a failing bank, it works to recover funds through asset sales and liquidation. These recovered funds are added back to the reserve.

This self-sustaining funding model ensures the FDIC can protect depositors without relying on taxpayer money.