How the FDIC system works after SVB collapse

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How the FDIC system works after SVB collapse

When the federal government announced it would guarantee all accounts at the Silicon Valley Bank and Signature Bank after they became the second and third largest bank failures in U.S. history, it relied on a system put in place almost a century ago.

The Federal Deposit Insurance Corporation, or FDIC, has guaranteed deposits at American banks since the early days of the New Deal in 1933. The agency's operations are intended to reassure depositors that their money is safe in the nation's banking system.

The insurance program helps to prevent a bank failure from turning into a financial panic that jeopardizes others and limits the risk of a contagion effect. The country's broader banking system is rattled but intact after SVB collapse last Friday put depositors and investors on edge, threatening the stability of some other lenders as well.

Americans can feel confident that their deposits will be there when they need them, Treasury Secretary Janet Yellen told lawmakers in testimony Thursday.

Here is how the FDIC's insurance system and the fund that supports it are set up to operate.