Certified Financial Management Specialist Practice Exam

Which organization is known for protecting depositors in U.S. banks?

1. National Credit Union Administration

2. Federal Reserve

3. Federal Deposit Insurance Corporation

4. Securities and Exchange Commission

The correct answer is: Federal Deposit Insurance Corporation

The Federal Deposit Insurance Corporation (FDIC) is the organization primarily responsible for protecting depositors in U.S. banks. It was established in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s. The primary function of the FDIC is to insure deposits made by individuals and businesses at member banks, which means that if a bank fails, the FDIC ensures that depositors will be compensated up to the insured limit, currently set at $250,000 per depositor per bank. This insurance promotes public confidence in the U.S. financial system, as depositors feel more secure knowing their funds are protected. The FDIC also supervises banks to ensure they operate safely and soundly, further enhancing the stability of the banking system. While the other organizations mentioned play critical roles in the financial system—such as the National Credit Union Administration overseeing credit unions, the Federal Reserve managing monetary policy, and the Securities and Exchange Commission regulating the securities markets—they do not focus on protecting bank depositors. Therefore, the FDIC's specific mission to safeguard depositor funds solidifies its identity as the protector of depositors in U.S. banks.