Insured Bank

Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority and you can order it here)

A bank covered by the benefits of federal deposit insurance under the provisions of the Federal Deposit Insurance Act of September 21, 1950 (64 Stat. 873; 12 U.S.C. 1811-1831), formerly Section 12B of the Federal Reserve Act enacted June 16, 1933.

Banks eligible for deposit insurance and/or required to be insured are as follows.

1. All national banks (except those in the territories of the United States, Puerto Rico, Guam, and the Virgin Islands) are required to be insured banks.

2. All state banks that are members of the Federal Reserve System are required to be insured banks.

3. All state banks and national banks that are not members of the Federal Reserve System may become insured banks upon application to the FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) and compliance with statutory requirements.

Before approving any such application, the corporation's board of directors shall give consideration to the following factors:  the financial history and condition of the bank; the adequacy of its capital structure; its future earnings prospects; the general character of its management; the convenience and needs of the community served by the bank; and whether or not its corporate powers are consistent with the purposes of the Federal Deposit Insurance Act.  In addition to considering these factors, the corporation's board of directors shall determine upon the basis of a thorough examination of the applying bank that its assets in excess of its capital requirements are adequate to enable it to meet all its liabilities to depositors and other creditors as shown by the bank's books.

State nonmember banks and national nonmember banks may terminate their status as insured banks and still continue to operate, but a state bank cannot continue as a member of the Federal Reserve System, and a national member bank cannot continue to operate, if its insurance is voluntarily or involuntarily terminated.

Since 1934, the number of commercial banks in the United States has remained approximately stable, reflecting mergers and consolidations as well as relatively well controlled granting of new charters, but the number of their branches have expanded over time.  In 1934, there were approximately 15,000 banks and 3,000 branches in operation, with about 90% f these banks insured by the Federal Deposit Insurance Corporation.  As of December 31, 1985, the 14,936 commercial banks had 41,909 branch offices, of which 98% of all commercial banks were insured by the Federal Deposit Insurance Corporation.  In addition, 324 mutual savings banks with 2,516 branches were insured by the Federal Deposit Insurance Corporation, of the total of 463 mutual savings banks and their 2,865 branches.

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