OnPath Credit Union

Difference Between the FDIC and the NCUA

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Both the FDIC and the NCAU perform the same role – they insure the banking deposits of consumers. The primary difference is the FDIC insures for-profit banks, while the NCAU insures credit unions. Other than this one primary difference the organizations have very similar mandates.

What Types of Banking Accounts Are Insured by the FDIC and NCUA?

The only real difference between the types of accounts insured usually comes down to nomenclature and branding. The FDIC insures certificates of deposits (CDs) and the NCUA insures share certificates, which are just the credit union version of CDs.

More generally, the FDIC and NCUA insure all types of savings and checking accounts, including money market accounts, cash management accounts and any other types of deposits up to $250,000 per account.

The FDIC and NCUA insure more than just single ownership accounts. They also insure accounts in the name of trusts (both revocable and irrevocable), businesses and accounts with joint owners.

Which Banking and Credit Union Accounts Aren’t Insured by the FDIC and NCUA?

Investments generally aren’t insured by the federal government since part of any investment is the assumption of risk. Even if a brokerage account, retirement savings account, life insurance policy, mutual fund or annuity is administered by an FDIC or NCUA-insured institution, those types of accounts will not be insured.

Why Are the FDIC and NCUA Important?

The Banking Act of 1933 (also known as the Glass-Steagall Act) was drafted after the onset of one of the most catastrophic (potentially the most catastrophic) periods in U.S. financial history – the Great Depression. An estimated one in four U.S. banking customers were financially devastated when their bank shuttered between 1929 and 1933. One U.S. representative from Alabama in particular – Henry Steagall – aggressively advocated for bank deposit insurance to prevent such an occurrence from happening again.

It's difficult to overstate how important consumer bank deposits are to the economy and people in general. Banks and credit unions provide a diverse array of lending and saving services to their customers, enabling a whole host of vital activities (from purchasing homes and cars to getting loans to start small businesses to saving for retirement and school).

Faith in banks was essentially shattered by the Great Depression. If you knew there was a one in four chance the money you put in the bank would vanish, would you put your money in one? The creation of the FDIC was hugely important for restoring faith in the banking system as it gave banking customers assurance that even if their local bank failed, their savings would be insured (up to $2,500 at the time of the passage of the Banking Act of 1933).

The other thing the Glass-Steagall Act did was separate consumer banks from Wall Street banks. To put it simply, banks consumers who relied on their financial institutions to safeguard their money couldn’t then take those deposits and invest them in potentially high-risk equities. The act did two important things for U.S. banking customers – it made it less likely banks would engage in risky behavior that might contribute to insolvency and it insured individual accounts so even if a bank did fail, customers wouldn’t lose their life savings.

The National Credit Union Administration (NCUA) was created by congress in 1970 to essentially perform the same role, but for federal credit unions instead of banks.

The NCUA releases quarterly updates on the health and assets of the nation’s credit unions. According to the September 2022 quarterly report, insured federal credit unions had:

  • $1.46 trillion in outstanding loans with an average balance of $16,989
  • $1.69 trillion in insured deposits and shares
  • $18.5 billion in combined net income
  • $2.15 trillion in insured assets

Some other interesting facts in the quarterly report include:

  • Credit unions had $472.1 billion in outstanding auto loans, $305.3 billion of which was for used cars and $166.8 billion for new car purchasers
  • $69.9 billion in credit card balances
  • $7.5 billion in non-federally regulated student loans
  • $132.2 billion in commercial loans

How Do the FDIC and NCUA Work?

FDIC’s Board of Directors has five presidentially appointed and senate confirmed members. There are guidelines pertaining to partisanship and impartiality (no more than three of the directors can be from a single party).

In addition to insuring deposit accounts, the FDIC also serves as a regulatory body that monitors the safety and stability of banking institutions. If banks don’t join the Federal Reserve System, the FDIC acts as the main federal regulator in the Fed’s stead.

A variety of consumer protection laws have been enacted in the past century, and it’s usually the FDIC’s role to enforce compliance with those laws.  

The NCUA has a presidentially appointed and senate confirmed board of three members, no more than two of which can be from the same political party. The NCUA also participates in the Federal Financial Institution Examination Council along with the FDIC and other regulatory agencies.

Are You Looking for a Safe and Reliable Federally Insured Credit Union?

OnPath Federal Credit Union is a well-established institution that takes pride in providing reliable checking, saving, personal loan, auto loan and mortgage services to members throughout the New Orleans area. We encourage any local resident looking for great banking services and rates to consider OnPath FCU membership. Give us a call at (504) 733-7274 for more information or visit a branch near you.