Association for Financial Professionals (AFP) Practice Exam

The Federal Deposit Insurance Corporation (FDIC) plays a crucial role in maintaining public confidence in the U.S. financial system. One of its primary responsibilities is to provide deposit insurance for insured banks, ensuring that depositors are covered up to a certain limit in the event of a bank failure. Additionally, the FDIC supervises and examines certain financial institutions to ensure their safety and soundness.

The role of the FDIC also extends to acting as a receiver for failed banks, which means it manages the bank's assets and liabilities, and may act as a trustee in the event of bank failures, ensuring that the receivership process is handled according to the law.

However, acting as a lender of last resort is typically a function reserved for the Federal Reserve, not the FDIC. The Federal Reserve provides liquidity to the banking system and is responsible for monetary policy, which includes acting in times of financial distress to support banks in temporary need of funds. This distinction helps clarify the unique functions of both entities within the financial system.