The FDIC (Federal Deposit Insurance Corporation) is an independent agency of the U.S. government that protects against the loss of insured deposits if an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the U.S. government. FDIC deposit insurance covers the depositors of a failed FDIC-insured depository institution dollar-for-dollar, principal plus any interest accrued or due to the depositor, through the date of default, up to at least $250,000.
The Depositors Insurance Fund (DIF) is a private, industry-sponsored excess deposit insurance company. Created by a special act of the Massachusetts legislature in 1932, the DIF began operations as a primary insurer in 1934. Today, the DIF insures all deposits in its member banks that are in excess of the FDIC limits.
DIF insurance is available only on deposits in Massachusetts-chartered savings and co-operative banks. By combining FDIC primary insurance and DIF excess deposit insurance, banks which are members of both organizations provide their depositors with full insurance.
Frequently Asked Questions about DIF
My bank displays both the FDIC and DIF logos. What does membership in these organizations mean?
- As a member of both the Federal Deposit Insurance Corporation (FDIC) and the Depositors Insurance Fund (DIF), your bank provides full insurance for its customers’ deposits and accrued interest without limit or exception. Each depositor is insured by the FDIC to at least $250,000. All deposits above the FDIC insurance amount are insured by the Depositors Insurance Fund (DIF).
Are all types of deposit accounts fully insured in a bank providing both FDIC and DIF insurance?
- Yes. All types and classes of deposit accounts, both personal and business, are covered including savings accounts, checking and NOW accounts, certificates of deposit (CDs), money market deposit accounts, and retirement deposit accounts.
Does the DIF insure investments in bank mutual funds or annuities?
- No. Both the FDIC and the DIF insure only bank deposits, and do not insure bank mutual funds or annuity products.
How financially strong is the DIF?
- No depositor has ever lost a penny in a bank insured by both the FDIC and the DIF. The DIF has approximately $500 million in assets. During the recession of the early 1990s, the worst financial period in the history of the Massachusetts savings bank industry, the DIF paid out more than $50 million to protect over 6,500 depositors in 19 failed member banks. Yet the DIF emerged from this period financially stronger than before the recession began.
Is the DIF a federal or state agency?
- No. The DIF is a private, industry-sponsored insurance company and is not backed by the federal government or the Commonwealth of Massachusetts.
How are the assets of the DIF invested?
- Massachusetts law and the DIF’s investment policies restrict the DIF to investments suitable for an organization that insures the public’s deposits, primarily U.S. Treasury and federal agency obligations, and obligations fully guaranteed by the U.S. government. DIF investments are regularly reviewed by its Board of Directors to assure conformity with both the law and DIF investment policies. As a depositor in this bank, all your deposits and accrued interest are insured in full, without limit or exception.
Does the DIF monitor the financial condition of its member banks?
- The DIF receives financial reports from its member banks on a quarterly basis. In addition, formal examinations are
conducted regularly by the FDIC and the Massachusetts Division of Banks. The DIF meets regularly with officials of
both agencies to review and evaluate the condition of its member banks.
Is the DIF subject to any form of regulatory scrutiny?
- Yes. The DIF is examined annually by the Massachusetts Division of Banks and audited by an independent auditor.