How does the FDIC manage bank failures?

The FDIC manages bank failures through a structured process aimed at ensuring minimal disruption to the financial system and protecting depositors. This process includes assessing the failed institution, securing depositors’ funds, and finding a suitable resolution plan, which could involve facilitating the sale of the bank or transferring its deposits and assets to another financial institution.

This method not only helps maintain public confidence in the banking system but also minimizes potential losses to the Deposit Insurance Fund, which covers insured depositors. The goal is to stabilize the banking sector during a failure, ensuring that bank operations can continue smoothly for customers and minimizing the impact on the broader economy.

While other options might suggest different operational strategies during a bank failure, they do not present the comprehensive and systematic approach that the FDIC employs, which is essential for maintaining trust and stability in the financial system.