FDIC Improvement Act (FDICIA): Provisions and Protections

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Updated March 23, 2023
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The Federal Deposit Insurance Corporation Improvement Act (FDICIA) was passed in 1991 in response to the savings and loan (S&L) crisis. From 1980 until the end of 1991, nearly 1,300 commercial banks either failed or required failing bank assistance from the FDIC. The wave of bank failures occurred due to a surge and subsequent collapse in industries including energy, agriculture, and real estate.

Key Takeaways

  • The FDICIA was passed in 1991 to strengthen the FDIC's role in overseeing banks and protecting consumers.
  • The FDICIA was created in response to the savings and loan crisis.
  • The act includes Truth in Savings Act, or Regulation DD, which requires banks to provide disclosures about savings account interest rates.
  • Often referred to as the “FDICIA requirements", Section 36 of the Federal Deposit Insurance Act and Part 363 of the FDIC’s regulations impose annual audit and reporting requirements on insured depository institutions with $500 million or more in consolidated total assets.

Understanding the FDIC Improvement Act (FDICIA)

Signed into law by President George H.W. Bush in December 1991 in response to problems in the banking industry, the FDICIA fortified the role and resources of the Federal Deposit Insurance Corporation (FDIC) to protect consumers. As the FDIC closed insolvent institutions during the financial crisis in the 1980s, it became severely undercapitalized by 1991, leading to the legislation.

The FDIC was established in 1933 as an independent government agency with the passing of the Emergency Banking Act to provide deposit insurance for consumer bank accounts and other qualified assets when and if financial institutions fail. The FDIC divides institutions into three tiers based on consolidated total assets:

  • Institutions with less than $500 million in consolidated total assets
  • Institutions with consolidated total assets between $500 million and $1 billion
  • Institutions with consolidated total assets greater than $1 billion

Numerous financial institutions fell during the savings and loan crisis. The FDICIA established greater oversight and more rigorous audits of the banking industry.

Provisions of the FDICIA

Often referred to as the “FDICIA requirements", Section 36 of the Federal Deposit Insurance Act and Part 363 of the FDIC’s regulations impose annual audit and reporting requirements on insured depository institutions with $500 million or more in consolidated total assets. The act ensures financial institutions:

  • Have annual reporting requirements
  • Provide written statements regarding management's responsibilities in preparing the institution's financial statements
  • Abide by certain audit committee provisions

Institutions that fail to comply with these audit standards could face FDIC civil penalties or administrative actions.

The FDICIA raised the FDIC's U.S. Treasury line of credit from $5 million to $30 million, revamped the FDIC auditing and evaluation standards of member banks, and included the Truth in Savings provision, also known as Regulation DD.

Bank Term Funding Program

Formed in March 2023 following the failure of Silicon Valley Bank, the BTFP was created to make additional funding available to eligible depository institutions to help assure banks can meet the needs of all their depositors. The BTFP offers loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging any collateral eligible for purchase by the Federal Reserve Banks in open market operations.

What Protection Does the Truth in Savings Act Provide?

The Truth in Savings Act, which is part of the FDICIA, forced banks to begin disclosing savings account interest rates, using the uniform annual percentage yield (APY) method. This has helped consumers to better understand their potential return on a deposit at a bank, as well as to compare multiple products and multiple banks simultaneously.

What Reports Are Required by the FDICIA?

The FDIC imposes annual reporting requirements on insured depository institutions known as the FDIC's Annual Independent Audits and Reporting Requirements.

How Did Deregulation Lead to the Savings and Loan Crisis and the FDICIA?

In 1980, the deregulation of savings and loans gave these entities the same capability as banks. Under relaxed oversight, 25% of savings and loans were closed, merged, or placed under management by the Federal Savings and Loan Insurance Corporation (FSLIC) from 1983 to 1990, causing the agency to collapse and it was dismantled under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) in 1989.

The Bottom Line

The Federal Deposit Insurance Corporation Improvement Act of 1991 strengthened the FDIC's role in overseeing banks and protecting consumers. Created in response to the savings and loan crisis of the 1980s and 90s, the act imposed annual audit and reporting requirements on insured depository institutions and established the Truth in Savings Act, or Regulation DD, which requires banks to provide disclosures about savings account interest rates.

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  1. Federal Reserve History. "Federal Deposit Insurance Corporation Improvement Act of 1991."

  2. St. Louis Federal Reserve. "Public Law 102-242," Pages 99–108.

  3. FDIC. "Part 363 - Summary of Filing Requirements."

  4. Code of Federal Regulations. "PART 363 - ANNUAL INDEPENDENT AUDITS AND REPORTING REQUIREMENTS."

  5. Federal Reserve. "Regulation DD."

  6. St. Louis Federal Reserve. "Public Law 102-242," Pages 1, 7–11, and 99–108.

  7. Board of Governors of the Federal Reserve System. "Bank Term Funding Program."

  8. St. Louis Federal Reserve. "Public Law 102-242," Page 100.

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