10 The US Paradigm: Deposit Insurer as Resolution Authority

Subject(s):

Deposit insurance schemes — Deposit protection schemes — Federal Deposit Insurance Corporation (FDIC) — United States Treasury

Banking crises prompted the United States to make lending of last resort, deposit insurance, and bank resolution federal responsibilities long before banks crossed state lines in large numbers. The US system offers an existing and successful model, whereby the deposit insurance and resolution functions are combined under a single institution, the Federal Deposit Insurance Corporation. The key objective underpinning the FDIC’s choice among different resolution options is that the chosen resolution is that which would result in the least cost to the deposit insurance fund. This chapter sets out the role of the FDIC as the deposit insurer, supervisor, and resolution authority, while also examining some key principles of the US approach to dealing with failing banks.