The banking industry is among the most heavily regulated in the nation, and bank failures are rare. But that doesn't mean all financial institutions are created equal.

One of the easiest ways to assess the fiscal health of a bank, savings and loan or credit union is by using Bankrate.com's Safe and Sound ratings guide.

We use publicly available data from the Federal Deposit Insurance Corporation (FDIC) to rate financial institutions based on capitalization, asset quality, earnings and liquidity.

Institutions are then assigned a rating -- superior, sound, performing, below industry average, weak, complete data not available. This information can help you make a safe and sound decision when selecting a financial institution.

Banks and thrifts are regulated by federal and state agencies. Among other things, the agencies monitor loan and investment portfolios, funds management, earnings, liquidity, compliance with consumer banking laws, internal controls and the ability to identify and manage risk.

How you're covered
Here is an overview of the network that's been created to protect your money.

The Federal Deposit Insurance Corporation insures deposits of virtually all U.S. banks and savings and loan institutions up to $100,000 per customer (individual or business) in the event of a bank failure.

Here is what is covered by FDIC insurance:

• Checking accounts, Negotiable Order of Withdrawal, also called NOW accounts (checking accounts that earn interest), and Money Market Deposit Accounts, also called MMDAs (savings accounts that allow a limited number of checks to be written each month.)
• Savings accounts that you can add to or withdraw from at any time.
• Certificates of deposit (CDs), which generally require you to keep funds in the account for a set period -- the maturity.

Here is what is not covered by FDIC insurance:

• Stocks, bonds and mutual funds.
• Investments backed by the U.S. government, such as Treasury securities and Savings Bonds.
• The contents of safe deposit boxes. Even though the word deposit appears in the name, under federal law a safe deposit box is not a deposit account -- it's a well-secured storage space rented by an institution to a customer. If you are concerned about the safety or replacement of items you put into a safe deposit box, ask your insurance agent whether your homeowner's or renter's insurance policy covers your safe deposit box against damage or theft.
• Losses due to theft or fraud at the institution. These situations are often covered by special insurance policies that banking institutions buy from private insurance companies.
• Errors made in your accounts. In these situations, there may be remedies for consumers under state contract law, the Uniform Commercial Code, and some federal regulations, depending on the type of transaction.
• Insurance and annuity products, such as life, auto and homeowner's insurance.

Two products that are easy to confuse because they have similar names are Money Market Deposit Accounts and money market mutual funds. MMDAs are deposits and, as mentioned, are covered by FDIC insurance. Money market mutual funds are funds that invest primarily in short-term corporate bonds or government securities and are not deposit accounts insured by the FDIC.

While the basic federal insurance amount is $100,000, you can receive more than $100,000 of coverage if your funds are maintained in different ownership categories, according to the FDIC. For example, you can have coverage of up to $100,000 for your individual accounts at the bank, another $100,000 for your share of joint accounts at the same bank, and yet another $100,000 for your retirement accounts there.

You can also protect more than $100,000 by dividing the money among different financial institutions, with no more than $100,000 in any of them.

Be aware that some FDIC-insured CDs being offered by financial institutions or sold through deposit brokers have unusual features that may result in the FDIC protecting only the principal during the term of the CD.

An example is a five-year CD whose interest rate isn't fixed but varies with the ups and downs of the stock market; that has no guaranteed minimum interest rate; and pays only when the CD matures in five years instead of accruing interest on a daily or monthly basis. The FDIC says federal insurance would cover only your principal, not any interest, because there is no specific, guaranteed interest earned under terms of the contract.

Banking in brief
The Federal Reserve is the country's Central Bank. It controls the flow of money in and out of banks and maintains the stability of the financial system. All national banks must be members of the Federal Reserve. Membership is optional for state banks.

National banks are chartered, regulated and supervised by the Office of the Comptroller of the Currency, headquartered in Washington, D.C. National banks have "National" or "N.A." in their name.

State banks are chartered, regulated and supervised by their state's banking division. The FDIC is the federal regulator of state-chartered banks that don't belong to the Federal Reserve System.

The Office of Thrift Supervision is the primary regulator of all federal and many state-chartered thrift institutions, which include savings banks and savings and loan associations.

Credit Unions are non-profit, cooperative financial institutions owned and controlled by their members, the people who use its services. Generally, there's a common bond, such as where people work or worship, that qualifies someone for membership. The membership owns and controls the credit union. The vast majority of credit unions in the United States are federally chartered or state chartered credit unions that are federally insured.

The National Credit Union Administration is the federal agency that insures deposits in federal credit unions and state credit unions that are federally insured. Deposits of member institutions are insured up to $100,000 per customer (individual or business.)

Online banks that are simply extensions of brick and mortar parent banks will have the same charter and FDIC coverage as the parent banks. Online banks that have no physical offices other than a headquarters may or may not be federally chartered. You need to check.

Most bank Web sites have an "About Us" page that describes the institution. Look for information regarding the official name and address of the bank's headquarters and information about its insurance coverage from the FDIC.

The FDIC warns that not all banks operating on the Internet are insured by the FDIC. Many banks that are not FDIC-insured are chartered overseas. If you choose to use a bank chartered overseas, it's important to know that the FDIC may not insure your deposits. Check with your bank or the FDIC if you're not certain.