What type of bank does the FDIC primarily insure?

The Federal Deposit Insurance Corporation (FDIC) primarily insures commercial banks, which are the institutions that provide checking and savings accounts, offer loans, and perform a wide range of financial services to both individuals and businesses. Commercial banks are fundamental to the banking system and the economy because they accept deposits from customers and use those deposits to fund loans, which in turn helps facilitate economic activity.

The primary purpose of FDIC insurance is to protect depositors in the event of a bank failure, ensuring that they do not lose their insured deposits, typically up to a certain limit per depositor per bank. This insurance promotes public confidence in the financial system.

In contrast, investment banks, universal banks, and merchant banks typically engage in different kinds of banking activities, such as securities underwriting, mergers and acquisitions, or corporate finance. These institutions do not focus on traditional deposit-taking and therefore are not insured by the FDIC. This distinction is crucial in understanding the FDIC's role in maintaining stability and protecting consumers in the banking sector.