Question

Describe the functions of the FDIC and NCUA and why these institutions are important to the sound functioning of the US banking system.

Answer 1

Functions of FDIC:-

• FDIC promotes belief in the US banking system by monitoring risks to the deposit.
• It maximizes the effect on the Economy.
• FDIC was created in 1933 after the stock market crash of 1929.
• It indicates the government's commitment to ensure the bank trouble do not effect citizens.
• FDIC earns Interest on its investment in US treasury bonds.
• It is an independent agency of the federal government.

Functions of NCUA:-

• All federal credit unions function under the administration of the NCUA,a federal agency charged with controlling their activities.
• The important role of NCUA is to impact Individual depositors, in running an Insurance program called NCUSIF.
• National credit union share insurance fund deposit from NCUA member.
• NCUSIF pays each member credit union, a dividend corresponding to its share in the fund.
• NCUA is governed by three member board of directors who are directly appointed by the president of the US.

1. FDIC supervises financial institutions for safety and soundness.
2. It performs consumer protection functions.
3. Manages Banks in Receiverships of failed banks.
4. FDIC maintains banks seized by regulatory and the assuming institutions .
5. FDIC carries its mission through three major programs.

The insurance program encompasses the activities by the FDIC to administer the deposit insurance fund.

The supervision program encompasses the activities by FDIC promote sound operations with lending, protection to the consumers etc.

The receivership management program encompasses activities by FDIC in capacity as receiver to solve Failed IDIS to maximize net recoveries to the creditors of Receiverships.

1. NCUA is an agency of US federal government
2. It shares insurance fund which is the greatest responsibility of the agency.
3. Accounts insured in NCUA insured institutions are savings,draftsman or checking money markets etc.
4. NCUA is Same as FDIC that insures deposits in US banks at the time of bank failures.
5. It maintains public confidence and encourages stability in the financial system through the promotion of sound banking practices..