1

U.S. SELF-ASSESSMENT AGAINST THE 

CORE PRINCIPLES FOR EFFECTIVE 

DEPOSIT INSURANCE SYSTEMS

2019

IMPORTANT: This document reflects the U.S. framework as of March 2019 and has 

not been updated to include changes since that time. 
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Contents

Abbreviations............................................................................................................................................................................ 3

Preamble..................................................................................................................................................................................... 4

Core Principles and Compliance Assessment....................................................................................................... 9

Principle 1 PUBLIC POLICY OBJECTIVES....................................................................................................... 9

Principle 2 MANDATE AND POWERS ...........................................................................................................13

Principle 3 GOVERNANCE..................................................................................................................................18

Principle 4 RELATIONSHIPS WITH OTHER SAFETY-NET PARTICIPANTS...................................24

Principle 5 CROSS-BORDER ISSUES ..............................................................................................................28

Principle 6 DEPOSIT INSURER’S ROLE IN CONTINGENCY PLANNING AND CRISIS 

MANAGEMENT................................................................................................................................29

Principle 7 MEMBERSHIP..................................................................................................................................33

Principle 8 COVERAGE........................................................................................................................................36

Principle 9 SOURCES AND USES OF FUNDS ...............................................................................................40

Principle 10 PUBLIC AWARENESS....................................................................................................................48

Principle 11 LEGAL PROTECTION ....................................................................................................................56

Principle 12 DEALING WITH PARTIES AT FAULT IN A BANK FAILURE ..........................................59

Principle 13 EARLY DETECTION AND TIMELY INTERVENTION.........................................................63

Principle 14 FAILURE RESOLUTION................................................................................................................72

Principle 15 REIMBURSING DEPOSITORS.....................................................................................................81

Principle 16 RECOVERIES ....................................................................................................................................87
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Abbreviations

AI assuming institution

AML/CFT anti-money laundering/combatting the financing of terrorism

CFPB Consumer Financial Protection Bureau

C.F.R. Code of Federal Regulations

CP Core Principle

DIF Deposit Insurance Fund

DINB deposit insurance national bank

EC Essential Criterion

EDIE Electronic Deposit Insurance Estimator

EGRPRA Economic Growth and Regulatory Paperwork Reduction Act

FDI Act Federal Deposit Insurance Act

FDIC Federal Deposit Insurance Corporation

FFIEC Federal Financial Institutions Examination Council

FSOC Financial Stability Oversight Council

FTCA Federal Tort Claims Act

GAO Government Accountability Office

GSIB global systemically important bank

GSIFI global systemically important financial institution

IAP institution-affiliated parties

IDI insured depository institution

OCC Office of the Comptroller of the Currency

OCOM Office of Communication (FDIC)

OIG Office of Inspector General

P&A purchase and assumption

PCA Prompt Corrective Action

U.S.C. United States Code
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Preamble

I. BACKGROUND INFORMATION ON THE ASSESSMENT

The Federal Deposit Insurance Corporation (FDIC) conducted this self-assessment of 

compliance with the International Association of Deposit Insurers Core Principles for 

Effective Deposit Insurance Systems (Core Principles or CPs). An interdisciplinary team 

with representation from across the FDIC’s divisions performed the assessment.

II. METHODOLOGY USED FOR THE ASSESSMENT

The evaluation of compliance with the Core Principles adhered to the methodology in 

the International Association of Deposit Insurers “Handbook for the Assessment of 

Compliance With the Core Principles for Effective Deposit Insurance Systems.” The 

assessment was based on a review of laws, regulations, policies, and practices governing 

the U.S. deposit insurance system.

This assessment includes a review of the preconditions for effective deposit insurance 

systems, including an overview of the organizational structure and the division of 

responsibilities among the U.S. agencies with authority over regulation and supervision 

of the U.S. banking sector, and a detailed assessment of compliance with each of the 

Core Principles.1

III. INSTITUTIONAL AND MACROECONOMIC SETTING

AND MARKET STRUCTURE OVERVIEW

Macroeconomic Stability

The current U.S. economic expansion that began in June 2009 is now the longest on 

record since the 1850s, according to the National Bureau of Economic Research 

business cycle dating committee.

2 The consensus among business cycle forecasters is 

for the U.S. economy to continue to expand over the near-term, with GDP growth 

forecasts generally ranging from 2 percent to 3 percent per year.3 Standard economic 

indicators, including disposable personal income, consumption, and investment have 

recorded steady growth.

4 A strong labor market with historically low unemployment 

 1 For the purposes of this self-assessment, the meaning of the term bank is limited to a bank (or a savings association) 

that is insured by the FDIC and does not include credit unions or uninsured deposit-taking institutions or entities.

Institutions that are insured by the FDIC may also be termed insured depository institutions (IDIs).

2 U.S. Business Cycle Expansions and Contractions Data, National Bureau of Economic Research business cycle dating 

committee, https://www.nber.org/cycles/cyclesmain.html.

3 Blue Chip Economic Indicators, https://developers.refinitiv.com/content/blue-chip-economic-indicators%C2%AE.

4 U.S. Bureau of Economic Analysis, data on personal income, personal consumption expenditures, and business 

investment, https://www.bea.gov/data.
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rates and sustained gains in payrolls has helped support consumer spending.5 U.S. equity 

market indices have performed well during the cycle, with the Dow Jones Industrial 

Average up more than three times its level ten years earlier as of June 2019.6

Overall, economic growth during this cycle has been weaker than in previous cycles, 

with weaker business investment and consumption spending. This trend is a 

continuation of slower economic growth during each of the recent expansions and 

reflects factors such as slower productivity growth and an aging population. Interest 

rates are at historically low levels in many countries, including the United States, 

posing challenges to the banking sector.

In the event of recession, historical data suggest there will be an increase in loan losses 

and some deterioration in banking conditions, including generally weaker financial 

performance. Based on the experience of past crises, the FDIC and other federal banking 

agencies are sensitive to the importance of identifying potential asset bubbles or other 

imbalances that could contribute to a more disruptive end to the expansion.

The FDIC Chairman is a member of the Financial Stability Oversight Council (FSOC). One 

responsibility of the FSOC is to monitor potential systemic risks and vulnerabilities in the 

U.S. economy and financial system. An issue identified by the FSOC in recent annual 

reports is the increase in leveraged lending and an increasing proportion of leveraged 

loans without strong protective covenants. 

Banking Industry Performance

The banking industry has reported strong financial results over the past five years.7

Adjusting for the effects of recent tax reform, the annual growth rate for net income was 

close to 14 percent, which reflects strong growth in net interest income and noninterest 

income. The average return on assets was 1.35 percent in 2018, the highest level since 

2003. During 2018, eight new bank charters were added and there were no bank

failures. At year-end 2018, the number of problem institutions declined to 60, which is 

the lowest since first quarter 2007.

FDIC-insured institutions have extended credit to borrowers to support economic 

activity. Since 2014, the average annual growth rate for loan and lease balances was 

almost 5.2 percent. Most of this growth was driven by business loans, commercial real 

estate loans, and consumer loans, which include credit card loans.

Asset quality indicators have improved since 2014. Nonperforming loans as a 

percentage of total loans have declined since 2014 and were less than 1 percent as of 

 5 Labor market indicators are from U.S. Bureau of Labor Statistics, https://www.bls.gov/bls/newsrels.htm.

6 Equity indices include the S&P 500 Index and the Dow Jones Industrial Average.

7 FDIC data from Reports of Condition and Income (Call Reports), https://cdr.ffiec.gov/public/.
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first quarter 2019. Net charge-offs as a percentage of total loans have remained 

relatively stable since 2014 and are now well below crisis levels.

Community banks also have reported strong results.8 In 2018, their net income totaled 

$26.1 billion and the percentage of unprofitable community banks was the lowest on 

record. Even after adjusting for effects of tax reform, their net income grew by almost 

11 percent in 2018. Loan growth at community banks continues to outpace the industry. 

In 2018, loan and lease balances grew by 6.5 percent at community banks, led by 

commercial real estate loans, residential mortgages, and business loans.

Until recently, the banking industry has benefited from the rise in short-term interest 

rates, but is now challenged by a flatter yield curve. The average net interest margin for 

all FDIC-insured institutions has risen from just more than 3.1 percent at year-end 2014 

to 3.4 percent at year-end 2018, but is largely unchanged for the first quarter of 2019. 

Larger financial institutions have benefited more than community banks from the rise 

in short-term rates, as larger institutions hold a greater share of assets that reprice 

more quickly.

The banking industry today is better capitalized and holds more liquid assets than it did 

pre-crisis. However, an extended period of low interest rates and an increasingly 

competitive lending environment have led some institutions to “reach for yield” by 

increasing the maturities of their loan and investment portfolios and sometimes by 

relaxing loan standards. These factors have led to heightened exposure to interest-rate, 

liquidity, and credit risk. With the relatively recent flattening of the yield curve, new 

challenges may emerge for institutions in lending and funding. Competition to attract 

loan customers remains strong, and therefore banks must maintain their underwriting 

discipline and credit standards. They must prudently manage the risks they face to 

sustain lending through the downside of this economic cycle when it occurs.9

Sound Governance of Authorities Comprising the Financial Safety-Net

The United States operates under a “dual banking system.” A bank charter may be 

issued by the federal government or by a state. Federal bank charters for “national 

banks” and “federal savings associations” are issued by the Office of the Comptroller 

of the Currency (OCC). A banking authority in each state may also issue a charter

under its own laws and regulations. Entities with a state charter are generally called 

“state banks” or “state savings associations” and are supervised by the state

regulatory authority in coordination with the applicable primary federal regulator.

 8 Community banks refers to banks that meet the criteria that were developed for the FDIC Community Banking Study, 

published in December 2012.

9 FDIC, Opening Statement First Quarter 2019 Quarterly Banking Profile, 

https://www.fdic.gov/news/news/speeches/spmay2919.html.
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All banks, whether chartered under state or federal law, are subject to regulation, 

supervision, and examination by a primary federal regulator. Three agencies (hereafter 

called the “federal banking agencies”) provide primary federal supervision over banks:

 the OCC supervises national banks and federal savings associations

 the Federal Reserve System (Federal Reserve) supervises state banks that choose to 

be members of the Federal Reserve (state member banks)

 the FDIC supervises state banks that choose not to become members of the 

Federal Reserve (state nonmember banks) and state savings associations.

The FDIC is the provider of deposit insurance for these institutions regardless of the 

type of bank charter.

Holding companies that own banks are supervised by the Federal Reserve, regardless of 

the nature of the bank charters of their subsidiaries. Foreign banking organizations may 

operate in the United States with the prior approval of the Federal Reserve. Under the 

International Banking Act of 1978 and the Foreign Bank Supervision Enhancement Act 

of 1991, the Federal Reserve has broad supervisory oversight of a foreign banking 

organization’s U.S. banking operations. Depending on the charter or license granted to a

foreign banking organization, the Federal Reserve generally relies on either the OCC or 

state banking authorities to examine and supervise these institutions. The Consumer 

Financial Protection Bureau (CFPB) examines institutions with more than $10 billion in 

assets for consumer protection compliance issues. Credit unions in the United States are 

supervised and separately insured by the National Credit Union Administration.

In addition to its role as the deposit insurer for all banks and the supervisor of state 

nonmember banks, the FDIC may accept appointment and act as conservator or receiver 

for any insured depository institution (IDI) under the Federal Deposit Insurance Act (FDI 

Act) and, in cases in which the financial stability of the United States may be at risk, the 

resolution authority for financial companies under Title II of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act (the Dodd-Frank Act). It is important to note that 

Title II of the Dodd-Frank Act expressly excludes banks from resolution under Title II; the 

FDI Act remains the resolution regime for banks in all cases. The responses in this selfassessment focus on the FDIC’s roles as they relate to banks and deposit insurance.

However, when reference to the Dodd-Frank Act is relevant to a particular Core Principle 

or Essential Criterion, such reference is included for the purpose of completeness.

Legal Framework

The United States has a well-developed legal framework. The rule of law is firmly 

established and legal authorities proceed from the U.S. Constitution, which establishes 

separation of powers between the executive, legislative, and judicial branches of 

government. Federal legislation is enacted by the U.S. Congress and implemented by the 

executive branch of government; the powers of each are constrained by the Constitution 

and their actions are subject to review by and the binding decisions of the federal 

judiciary. There is a defined legal basis for regulation and supervision of banks
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operating in the United States. Agency rulemaking is subject to procedural requirements 

intended to foster public and stakeholder participation in the formulation of standards.

The U.S. federal banking agencies issue and regularly update regulations and guidelines 

implementing their statutory authority and supplement these with policy statements, 

formal and informal interpretations, and supervisory guidance and manuals.

The statutes and regulations provide for chartering banks and, among other things,

address permissible bank and nonbank affiliations, acquisitions, and activities. The 

statutes and regulations establish a framework of minimum prudential standards that 

banks must meet. For example, standards address capital adequacy, internal controls 

and audits, accounting, liquidity, and anti-money laundering and combatting the 

financing of terrorism (AML/CFT) efforts. Bank holding companies and financial holding 

companies (collectively referred to herein as holding companies) also are subject to 

prudential requirements under statutes and regulations consistent with the principle 

that holding companies should serve as a source of financial and managerial strength 

for insured bank subsidiaries.10

 10 Under the Bank Holding Company Act, a bank holding company may elect to be a financial holding company. In 

addition to banking, a financial holding company offers non-bank financial products.
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Core Principles and Compliance Assessment

PRINCIPLE 1 PUBLIC POLICY OBJECTIVES

The principal public policy objectives for deposit insurance systems are to protect 

depositors and contribute to financial stability. These objectives should be formally 

specified and publicly disclosed. The design of the deposit insurance system should reflect 

the system’s public policy objectives.

Essential Criterion 1 The public policy objectives of the deposit insurance system are 

clearly and formally specified and made public, for example 

through legislation or documents supporting legislation.

The FDIC was created by Congress to protect depositors and 

maintain stability and public confidence in the nation’s financial 

system.11 The FDIC promotes financial stability through its statutory 

functions as deposit insurer, supervisor, and as receiver or 

conservator of failed IDIs under the FDI Act and failed financial 

companies under Title II of the Dodd-Frank Act.12

Essential Criterion 2 The design of the deposit insurance system is consistent with 

the system’s public policy objectives.

The design of the deposit insurance system is consistent with the 

system’s policy objectives. Congress granted the FDIC statutory 

authority consistent with its mission, as discussed in greater detail in 

CP-2. Among other things, the FDIC is authorized to approve 

applications for deposit insurance, collect assessments and maintain 

a fund, hire staff, prescribe regulations, examine banks, compel 

banks to comply with their legal obligations under the deposit 

insurance system, and manage receiverships and conservatorships 

of failed banks. The FDIC also has the authority to examine for 

insurance purposes any bank, either directly or in cooperation with 

state or other federal supervisory authorities.13

 11 FDI Act §§ 1(a), 5(a), 11(a); 12 U.S.C. §§ 1811(a), 1815(a), 1821(a). See generally FDI Act, 

12 U.S.C. § 1811 and following. Legislative history also confirms these policy objectives: “Added coverage may 

help in achieving more fully both of the major objectives of deposit insurance—protection of the individual 

depositor and promotion of stability in the economy as a whole through protection of the money supply and 

maintenance of public confidence in banks.” Amendments to Federal Deposit Insurance Act: Hearings Before 

the S. Subcommittee on Federal Reserve Matters, 81 Cong. 108 (1950) (statement of Thomas McCabe, 

Chairman, Board of Governors of the Federal Reserve).

12 FDI Act § 10, 11(c)-(d), 12 U.S.C. §§ 1820, 1821(c)-(d); Section 210 of the Dodd-Frank Act, 12 U.S.C. § 5390.

13 FDI Act § 10(b)(3), 12 U.S.C. § 1820(b)(3).
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Essential Criterion 3 There is a review of the extent to which a deposit insurance 

system meets its public policy objectives. This involves both an 

internal review conducted on a regular basis by the governing 

body and an external review conducted periodically by an 

external body (e.g. the body to which the deposit insurer is 

accountable or an independent entity with no conflicts of 

interest, such as an auditor general). Any review must take into 

consideration the views of key stakeholders.

The U.S. deposit insurance system is subject to regular internal and 

external reviews to ensure that it is satisfying public policy objectives.

Internal Reviews—The FDIC Board of Directors publicly reports

annually on the FDIC’s performance on policy objectives for each of 

its major program areas, including deposit insurance, supervision, 

and receivership management.14 The FDIC’s performance is 

evaluated against measurable targets—for example, whether 

insured depositors of a failed bank were able to access their funds 

within one business day. The Board of Directors uses a variety of 

similar performance objectives to evaluate the FDIC’s performance 

of each of its major functions.15

External Reviews—The FDIC Office of Inspector General (OIG) is an 

independent unit established by the Inspector General Act of 1978 as 

amended.16 The FDIC OIG conducts audits, evaluations, investigations, 

and other reviews of FDIC programs and operations. The FDIC OIG’s 

mission is to promote the economy, efficiency, and effectiveness of 

FDIC programs and operations, and to prevent, deter, and detect 

waste, fraud, abuse, and misconduct in FDIC programs and operations. 

The FDIC OIG aims to prompt and encourage improvements and 

efficiencies, to help preserve the integrity of the agency and the 

banking system, and to protect depositors and financial consumers. 

Under Section 5 of the Inspector General Act of 1978, the FDIC OIG 

reports to the U.S. Congress semiannually on the FDIC’s performance, 

including problems or deficiencies in FDIC programs and operations, 

and provides recommendations for corrective action.17 The FDI Act 

 14 The Board produces and publishes these annual reports as required by several federal statutes, including 

the Government Performance and Results Act of 1993 and the FDI Act § 17(a), 12 U.S.C. § 1827(a).

15 See for example 2018 FDIC Annual Report, Section II, Performance Results Summary.

16 5 U.S.C. App. § 1 and following.

17 Pub. L. No. 95-452, 92 Stat. 1101 (1978), 5 U.S.C. App. Section 5 (a) of the Inspector General Act of 1978 provides 

that the scope of the FDIC OIG’s review is not limited to the items enumerated in the statute. The FDIC OIG’s reports to 

Congress are available online at: https://www.fdicoig.gov/semiannual-reports.
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also requires that if the FDIC is appointed receiver of a bank that 

failed, and the failure caused a material loss to the Deposit Insurance 

Fund (DIF), the Inspector General of the institution’s supervising 

federal banking agency must review the failure and prepare a material 

loss review report.18

The FDIC is also subject to external reviews conducted by the 

Government Accountability Office (GAO), an independent, nonpartisan 

agency. The GAO supports the U.S. Congress in efforts to improve the 

performance and ensure the accountability of the federal government. 

The GAO publishes reports that are intended to help Congress make 

effective oversight, policy, and funding decisions.19

The reviews described above and the periodic testimony required of 

FDIC officials at Congressional hearings support Congressional 

oversight of the deposit insurance system and the FDIC. Every year

the FDIC must submit a full report of its operations, activities, 

budget, receipts, and expenditures for the preceding 12 months. This 

information is contained in the FDIC Annual Report and is submitted 

to the President of the United States and the U.S. Congress.

Essential Criterion 4 If additional public policy objectives are incorporated, they do not 

conflict with the two principal objectives of protecting depositors 

and contributing to the stability of the financial system.

As discussed in EC-1, the FDIC’s mission is to protect depositors and 

maintain stability and public confidence in the nation’s financial 

system. Aside from the FDIC’s responsibilities under the FDI Act, as 

noted above the FDIC may in certain circumstances be appointed 

receiver of a systemically important financial company under Title II 

of the Dodd-Frank Act. In its role as receiver under Title II, the FDIC’s 

mandate is to resolve failing financial companies that pose a 

significant risk to the financial stability of the United States in a 

manner that mitigates such risk and minimizes moral hazard, and to 

do so in a manner that best fulfills this purpose so that:

 creditors and shareholders will bear the losses of the financial 

company

 management responsible for the condition of the financial 

company will not be retained

 the FDIC and other appropriate agencies will take all steps 

necessary and appropriate to assure that all parties, including 

 18 FDI Act § 38(k), 12 U.S.C. § 1831o(k).

19 GAO reports are available online at https://www.gao.gov/.
12

management, directors, and third parties, that have

responsibility for the condition of the financial company bear 

losses consistent with their responsibility, including actions for 

damages, restitution, and recoupment of compensation and 

other gains not compatible with such responsibility.

This mandate is consistent with the policy objectives described in 

the response to EC-1 above.
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PRINCIPLE 2 MANDATE AND POWERS

The mandate and powers of the deposit insurer should support the public policy objectives 

and be clearly defined and formally specified in legislation.

Essential Criterion 1 The mandate and powers of the deposit insurer are formally 

and clearly specified in legislation, and are consistent with 

stated public policy objectives.

The FDIC’s enabling statute, the FDI Act, clearly articulates the 

FDIC’s mandate as a risk minimizer and provides the FDIC with the 

powers necessary to fulfill this mandate and the policy objectives 

discussed under CP-1 (please see the response to EC-3 below and the 

responses in CP-14 for detailed discussion of the FDIC’s powers).

Essential Criterion 2 The mandate clarifies the roles and responsibilities of the 

deposit insurer and is aligned with the mandates of other 

safety-net participants.

The objective of the federal banking agencies is to promote safe and 

sound banking practices in the United States and to maintain 

stability and public confidence in the banking system.

The FDIC’s roles and responsibilities are congruent with the 

mandates of other U.S. safety-net participants, including the Federal 

Reserve and the OCC. The FDIC’s mandate to maintain stability and

confidence in the U.S. financial system aligns with the Federal 

Reserve’s mandate to provide the nation with a safer, more flexible, 

and more stable monetary and financial system and with the OCC’s 

mission to ensure a safe-and-sound federal banking system.

Each bank, whether chartered under state or federal law, is subject to 

regulation, supervision, and examination by a primary federal banking 

regulator who shares responsibility for determining the safety and 

soundness of the U.S. banking system. Depositor protection and 

resolution are within the scope of the FDIC’s responsibilities.

As discussed in more detail in the responses under CP-4, the federal 

banking agencies maintain a formal and comprehensive framework 

for coordination, including through the Federal Financial Institutions 

Examination Council (FFIEC).20 The FFIEC is a formal interagency 

body empowered to prescribe uniform principles, standards, and 

report forms for the federal examination of financial institutions by 

 20 Financial Institutions Regulatory and Interest Rate Control Act of 1978, Pub. L. No. 95-630, 92 Stat. 3641, 3694 

(codified at 12 U.S.C. 3301 and following).
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the Federal Reserve, the FDIC, the OCC, and certain other federal 

financial regulatory agencies. In 2006, a State Liaison Committee, 

composed of five representatives of state agencies that supervise 

financial institutions, was added to the Council as a voting member.

The FFIEC makes recommendations to promote uniformity in the 

supervision of financial institutions.

Essential Criterion 3 The powers of the deposit insurer support its mandate and 

enable the deposit insurer to fulfill its roles and responsibilities.

The FDIC has appropriate powers to support its mandate to maintain 

stability and public confidence in the nation’s financial system and to 

fulfill its roles and responsibilities as deposit insurer, bank examiner 

and supervisor, and receiver or conservator of failed IDIs.

Deposit Insurer Powers

The FDI Act provides the FDIC powers and authorities to carry out 

its role as deposit insurer, including powers to:

 review and approve or deny applications for deposit insurance 

from banks engaged in the business of receiving deposits,

other than trust funds, or any insured branch of a foreign bank 

which is not a federal branch21

 terminate a bank’s deposit insurance based upon any unsafe or 

unsound practice or condition or any violation specified in the 

required notice22

 make determinations of amounts of insured deposits that are 

due any depositor.23

The FDI Act contains a broad array of deposit insurance powers 

discussed more fully in EC-4.

Bank Supervisory Powers

As discussed in EC-1, the FDIC has the authority to:

 examine state nonmember banks

 examine any bank for insurance purposes through the FDIC’s 

secondary examination authority24

 take direct enforcement action or recommend that another 

federal banking agency take enforcement action against a bank

 21 FDI Act § 5, 12 U.S.C. § 1815.

22 FDI Act § 8, 12 U.S.C. § 1818.

23 FDI Act § 11(a), 12 U.S.C. § 1821(a).

24 FDI Act § 10(b)(3), 12 U.S.C. § 1820(b)(3).
15

in appropriate circumstances and may take such action directly 

against the bank if the other agency does not take action.25

Receivership and Resolution Powers

As discussed in greater detail in CP-14, the FDIC is statutorily 

required to accept appointment to act as the receiver for a failed 

federally chartered IDI.26 In all other cases, the FDIC may accept 

appointment as conservator or receiver for any IDI.27 The FDIC is 

provided a number of powers as receiver or conservator, including 

succeeding to all rights, titles, powers, and privileges of the 

institution; conducting the business of the institution; merging the 

institution with another IDI; or transferring assets or liabilities of the 

institution to another IDI or to a bridge depository institution.28

Corporate Powers

The general corporate powers of the FDIC enable the FDIC to fulfill 

its roles and responsibilities, including those of deposit insurer. 

These include the powers to:

 make contracts

 sue and be sued, and complain and defend, by and through its 

own attorneys, in any state or federal court of law or equity

 hire officers and employees

 conduct business

 exercise all powers specifically granted by the provisions of the 

FDI Act, and incidental powers necessary to carry out the 

granted powers

 make examinations of and require information and reports 

from insured banks

 act as receiver

 prescribe such rules and regulations as it may deem necessary 

to carry out the provisions of the FDI Act or of any other law 

which it has the responsibility of administering or enforcing.29

Essential Criterion 4 The powers of the deposit insurer include, but are not limited to:

(a) assessing and collecting premiums, levies, or other charges

(b) transferring deposits to another bank

(c) reimbursing insured depositors

 25 FDI Act § 8, 12 U.S.C. § 1818 and FDI Act § 8(t), 12 U.S.C. § 1818(t).

26 FDI Act § 11(c)(2)(A)(ii), 12 U.S.C. § 1821(c)(2)(A)(ii).

27 FDI Act § 11(c)(1), 12 U.S.C. § 1821(c)(1).

28 FDI Act § 11(d), 12 U.S.C. § 1821(d).

29 FDI Act § 9(a), 12 U.S.C. § 1819(a).
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(d) obtaining directly from banks timely, accurate, and 

comprehensive information necessary to fulfill its mandate

(e) receiving and sharing timely, accurate, and comprehensive 

information within the safety-net, and with applicable 

safety-net participants in other jurisdictions

(f) compelling banks to comply with their legally enforceable 

obligations to the deposit insurer (e.g. provide access to 

depositor information), or requesting that another safetynet participant do so on behalf of the deposit insurer

(g) setting operating budgets, policies, systems, and practices

(h) entering into contracts.

The FDIC’s authority includes each of the powers listed in EC-4 above:

(a) Any institution that becomes insured by the FDIC must pay the 

FDIC any fee that the FDIC may by regulation prescribe to 

maintain the reserve ratio of the DIF.30 The FDIC is statutorily 

required to establish by regulation a risk-based assessment 

system for banks, and each institution must pay assessments 

imposed under such system.31 See the responses to CP-9 

(Sources and Uses of Funds) for further discussion of the 

deposit insurance assessment system.

(b) The FDIC may, as resolution authority of a bank, transfer any 

asset or liability of the institution in default (including assets 

and liabilities associated with any trust business) without any

approval, assignment, or consent; however, a transfer to a bank

other than a new institution established pursuant to 

12 U.S.C. § 1821(m) or a bridge bank requires the approval of 

the appropriate federal banking agency.32

(c) In case of liquidation, closing, or winding up of the affairs of 

any bank, payment of the insured deposits in the institution 

shall be made by the FDIC as soon as possible either by cash or 

by making available to each depositor a transferred deposit in

a new bank in the same community or in another bank in an 

amount equal to the insured deposit of such depositor.33

(d) As a general matter, the FDIC has access to information in 

connection with its responsibility to conduct examinations of 

banks and its authority to take enforcement actions against 

 30 FDI Act § 5(d), 12 U.S.C. § 1815(d).

31 FDI Act § 7(b)-(c), 12 U.S.C. § 1817(b)-(c) and 12 C.F.R. § 327.9.

32 FDI Act § 11(d)(2)(G), 12 U.S.C. § 1821(d)(2)(G), 12 C.F.R. § 360.1(b); FDI Act § 11(d)(2)(G)(ii), 12 U.S.C. § 

1821(d)(2)(G)(ii).

33 FDI Act § 11(f)-(g), 12 U.S.C. § 1821(f)-(g) and 12 C.F.R. §§ 360.3-360.4.
17

banks, bank holding companies, and affiliates under statutorily 

prescribed conditions.34 Each insured state nonmember bank 

and each foreign bank having an insured branch which is not a 

federal branch shall make to the FDIC reports of condition and 

include their deposit liabilities as directed in those reports. The 

FDIC may occasionally require additional reports.35 As 

discussed in the response to (e) below, the FDIC has access to 

reports of examination made by, and reports of condition made 

to, the OCC, the Federal Housing Finance Agency, any Federal 

Home Loan Bank, and any Federal Reserve Bank.36

(e) The FDIC shall have access to reports of examination made by, 

and reports of condition made to, the OCC, the Federal Housing 

Finance Agency, any Federal Home Loan Bank, or any Federal 

Reserve Bank. The FDIC may accept any report made by or to 

any commission, board, or authority having supervision of a 

depository institution (including state banking entities), and 

may furnish to the OCC; the Federal Housing Finance Agency;

and any Federal Home Loan Bank, Federal Reserve Bank, 

commission, board, or authority reports of examination made 

on behalf of, and reports of condition made to, the FDIC.37

(f) Any bank which fails to make or publish any report required 

within the period of time specified by its primary federal 

banking supervisor or submits or publishes any false or 

misleading report or information shall be subject to a penalty 

for each day during which such failure continues or such false 

or misleading information is not corrected.38

(g) As discussed in EC-3, the FDIC has the power to conduct business, 

prescribe rules and regulations, and the ability to exercise 

incidental powers necessary to carry out its statutory powers.39

(h) As discussed in EC-3, the FDIC’s power to make contracts is 

one of the statutory powers enumerated in the FDI Act.40

 34 See FDI Act, §§ 8 and following, 10(b) 12 U.S.C. §§ 1818 and following, and 1820(b).

35 FDI Act § 7(a), 12 U.S.C. § 1817(a); 12 C.F.R. § 304.3.

36 FDI Act § 7(a)(2)(A), 12 U.S.C. § 1817(a)(2)(A).

37 FDI Act § 7(a), 12 U.S.C. § 1817(a); 12 C.F.R. § 304.3.

38 12 U.S.C. §§ 161, 164 (for national banks); Federal Reserve Act § 9, 12 U.S.C. § 324 (for state member banks); FDI Act 

§ 7, 12 U.S.C. § 1817 (for insured state nonmember commercial and savings banks).

39 FDI Act § 9(a), 12 U.S.C. § 1819(a).

40 FDI Act § 9(a), 12 U.S.C. § 1819(a).
18

PRINCIPLE 3 GOVERNANCE

The deposit insurer should be operationally independent, well-governed, transparent, 

accountable, and insulated from external interference.

Essential Criterion 1 The deposit insurer is operationally independent. It is able to 

use its powers without interference from external parties to 

fulfill its mandate. There is no government, central bank, 

supervisory, or industry interference that compromises the 

operational independence of the deposit insurer.

The FDIC is empowered to act without interference from external 

parties to fulfill its mandate.

The management of the FDIC is vested in a Board of Directors 

consisting of five members. One is the Comptroller of the Currency. 

One is the Director of the CFPB. Three are independent directors 

appointed by the President with the advice and consent of the Senate 

for terms of six years. Not more than three Board members may be 

of the same political party. One of the appointed members is 

designated by the President, with the advice and consent of the 

Senate, as Chairman of the Board.41

In addition, the FDIC receives no Congressional appropriations. It is 

funded by premiums that banks pay for deposit insurance coverage 

and from earnings on investments in U.S. Treasury securities.

Essential Criterion 2 The governing body of the deposit insurer is held accountable 

to a higher authority.

The FDIC is managed by a five-member Board of Directors and is 

primarily accountable to the U.S. Congress.42 FDIC management 

regularly testifies at oversight and other hearings before 

Congressional committees. The GAO, an independent, nonpartisan 

agency that works for Congress, conducts periodic audits of the FDIC. 

The FDIC OIG conducts regular internal audits of the agency.43

Essential Criterion 3 The deposit insurer has the capacity and capability (e.g. human 

resources, operating budget, and salary scales sufficient to 

 41 FDI Act § 2, 12 U.S.C. § 1812.

42 FDI Act § 2, 12 U.S.C. § 1812.

43 The OIG’s mission is to prevent, deter, and detect waste, fraud, abuse, and misconduct in FDIC programs and 

operations and to promote economy, efficiency, and effectiveness at the agency. See Inspector General Act of 1978, 

5 U.S.C. App.
19

attract and retain qualified staff) to support its operational 

independence and the fulfillment of its mandate.

The FDIC is not subject to the congressional budget process or 

congressional appropriations. The FDIC Board ensures that the FDIC 

has the capacity and capability to support its operational 

independence and fulfill its mandate. The operations of the FDIC 

acting in its corporate capacity (including that of deposit insurer) are 

generally funded by the DIF, which is funded through regular 

assessments on banks. The operations of the FDIC as receiver of 

failed banks are funded by the assets of the failed institution and, if 

necessary, the DIF.44

Essential Criterion 4 The deposit insurer is well-governed and subject to sound 

governance practices, including appropriate accountability, 

internal controls, transparency and disclosure regimes. The 

institutional structure of the deposit insurer minimizes the 

potential for real or perceived conflicts of interest.

The FDIC complies with the Government Performance and Results 

Act of 1993, which requires federal agencies, in consultation with the 

U.S. Congress and outside stakeholders, to prepare a strategic plan 

covering a multiyear period and to submit an annual performance 

plan and performance report.45 The performance plan and report are 

incorporated in the FDIC annual report, which is required to be 

made public. The FDIC also reports annually on regulatory and 

supervisory actions taken during the year. These requirements 

provide transparent measures of agency performance against 

statutory and stated performance targets. Moreover, federal 

agencies, including the FDIC, are subject to the Freedom of 

Information Act, which gives the public the right to access certain 

federal government records.46 Finally, as discussed in the response 

to EC-2, the GAO, an independent, nonpartisan agency that works for 

Congress, may conduct periodic audits of the FDIC and the FDIC OIG

conducts regular internal audits of the agency.

The FDIC requires that its agency heads and all staff maintain high 

professional standards and exhibit high integrity. Federal laws and 

regulations, including the Standards of Ethical Conduct for 

 44 FDI Act § 13(d), 12 U.S.C. § 1823(d).

45 5 U.S.C. § 306; 31 U.S.C. § 1115.

46 Freedom of Information Act, 5 U.S.C. § 552.
20

Employees of the Executive Branch and the Supplemental Standards 

of Ethical Conduct for Employees of the Federal Deposit Insurance 

Corporation, help to ensure these standards are met.47 For example, 

FDIC employees are prohibited from acquiring, owning, or 

controlling stock in any FDIC-insured institution or holding company

owning an FDIC-insured institution. Senior examination staffs of the 

FDIC generally are subject to a one-year post-employment cooling 

off period for entities they supervised.48 Violators are subject to civil 

monetary penalties, can be removed from office, and can be 

prohibited from participating in the affairs of the supervised entity 

for up to five years.

Examiners also are prohibited from accepting loans or gratuities 

from banks they examine.49 These standards are reinforced by a 

number of criminal statutes, including those prohibiting corruption, 

bribery, theft, and fraud by agency employees. Members of the FDIC 

Board of Directors are prohibited from holding any office, position, 

or employment in any bank or holding company that owns a bank

during their time in office and for two years after they leave office, 

subject to certain exceptions.50

Essential Criterion 5 The deposit insurer operates in a transparent and responsible 

manner. It discloses and publishes appropriate information for 

stakeholders on a regular basis.

The FDIC has instituted a ‘Trust through Transparency’ initiative to 

foster a deeper culture of openness with stakeholders. The initiative 

unites each business area across the FDIC behind the goals of being 

accessible, understandable, and responsive. A key feature of the

initiative is the publication of performance metrics, such as 

turnaround times for examinations and bank charter applications, 

call center usage and response times, and data on the status of 

supervisory and assessment appeals.

The FDIC continues to provide information and resources to 

promote better understanding of the way it does business, including, 

as discussed in the response to EC-4, preparation of a multiyear 

strategic plan, an annual performance plan, and a performance 

report, which are incorporated into the FDIC annual reports and 

 47 5 C.F.R. §§ 2635, 3201.

48 See for example FDI Act § 10(k), 12 U.S.C. § 1820(k).

49 18 U.S.C. § 213.

50 FDI Act, § 2, 12 U.S.C. § 1812.
21

made public. The FDIC also reports annually on regulatory and 

supervisory actions taken during the year. Together, these reports 

provide responsible and transparent measures of agency 

performance against statutory and stated performance targets. The 

FDIC holds Board meetings that are open to the public and the FDIC 

has placed much information about FDIC operations on its website. 

The FDIC also communicates regularly with its stakeholders and the 

public through a variety of means, including conferences, bankers’

meetings, press releases, policy statements, guidance, and frequently 

asked questions. Finally, federal agencies, including the FDIC, are 

subject to the Freedom of Information Act, which gives the public the 

right to access certain federal government records.

Essential Criterion 6 The governing statutes or other relevant laws and policies 

governing the deposit insurer specify that:

(a) the governing body and management are “fit and 

proper” persons;

(b) members of the governing body and the head(s) of the 

deposit insurer (with the exception of ex officio 

appointees) is/are subject to fixed terms and the fixed 

terms are staggered;

(c) there is a transparent process for the appointment and 

removal of the members of the governing body and 

head(s) of the deposit insurer. Members of the governing 

body and head(s) of the deposit insurer can be removed 

from office during their term only for reasons specified or 

defined in law, internal statutes, or rules of professional 

conduct, and not without cause; and

(d) members of the governing body and employees are subject 

to high ethical standards and comprehensive codes of 

conduct to minimize the potential for real or perceived 

conflicts of interest.

The FDIC is managed by a five-member Board of Directors, all of 

whom are appointed by the President and confirmed by the Senate. 

No more than three members may be from the same political party. 

One Board member is the Comptroller of the Currency and one is the 

Director of the CFPB. The three remaining Directors are appointed 

from among individuals who are citizens of the United States and 

serve for a fixed term of six years, although one of the appointed 

members is designated by the President to serve as Chairman for a 

five-year term. One appointed Director must have state bank 

supervisory experience. There is no expectation that the appointed 
22

FDIC Directors, including the Chairman, will resign at the conclusion 

of the term of the President who appointed them.51

As discussed in the response to EC-4, the FDIC requires that its 

agency heads and all staff maintain high professional standards and 

exhibit high integrity. FDIC employees are subject to both the 

Standards of Ethical Conduct for Employees of the Executive 

Branch and the Supplemental Standards of Ethical Conduct for 

Employees of the Federal Deposit Insurance Corporation. 

Additionally FDIC Board of Directors are subject to restrictions 

during and after service.52 While serving, no Board member can be 

employed by or hold stock in an insured institution or holding 

company that owns an insured institution.53

Essential Criterion 7 The deposit insurer is regularly assessed on the extent to which 

it meets its mandate, and the deposit insurer is subject to 

regular internal and external audits.

As discussed in the response to EC-2, the FDIC is primarily 

accountable to the U.S. Congress. The FDIC is also subject to periodic 

audit by the GAO, an independent, nonpartisan agency that works for 

Congress. The FDIC OIG conducts regular internal audits of the agency.

Essential Criterion 8 The composition of the governing body minimizes the potential 

for real or perceived conflicts of interest. In order to maintain 

operational independence, representatives of the other 

financial safety-net organizations that participate in the 

governing body do not serve as Chair or constitute a majority.

As discussed in the response to EC-6, the FDIC is managed by a fivemember Board of Directors appointed by the President and 

confirmed by the Senate. No more than three members shall be of 

the same political party. One Board member is the Comptroller of the 

Currency and one is the Director of the CFPB, neither of whom may 

serve as Chairman. One of the three remaining appointed Directors is 

designated by the President as Chairman for a five-year term.

No Board member can be employed by or hold stock in an insured 

institution or holding company that owns an insured institution

during their service.54

 51 FDI Act § 2, 12 U.S.C. § 1812.

52 FDI Act § 2, 12 U.S.C. § 1812; 5 C.F.R. §§ 2635, 3201.

53 FDI Act § 2(e), 12 U.S.C. § 1812(e).

54 FDI Act § 2(e), 12 U.S.C. § 1812(e).
23

Essential Criterion 9 The governing body holds regular meetings to oversee and 

manage the affairs of the deposit insurer (e.g. on a quarterly 

basis and more frequently as deemed necessary).

The FDIC Board of Directors meets regularly in both open and closed 

sessions. These meetings typically take place monthly, or as 

necessary to manage the FDIC’s affairs.
24

PRINCIPLE 4 RELATIONSHIPS WITH OTHER SAFETY-NET PARTICIPANTS

In order to protect depositors and contribute to financial stability, there should be a formal 

and comprehensive framework in place for the close coordination of activities and 

information sharing, on an ongoing basis, between the deposit insurer and other financial 

safety-net participants.

Essential Criterion 1 Ongoing information sharing and the coordination of actions is 

explicit and formalized through legislation, regulation, 

memoranda of understanding, legal agreements or a 

combination thereof.

U.S. banking regulators have established a formal and 

comprehensive framework that ensures effective information 

sharing and close and routine coordination. Information sharing and 

inter-agency coordination is routine, explicit, formalized through a 

long history of practices governed by interagency agreements, and 

supported by statutory powers.

The federal banking agencies are statutorily authorized, at their 

discretion, to disclose any report of examination or other confidential 

supervisory information concerning any depository institution or 

other entity examined by such agency under authority of any federal 

law, to any other federal or state agency or authority with supervisory 

or regulatory authority over the depository institution or other entity, 

and any other person that the Federal banking agency determines to 

be appropriate.55 The five supervisory agencies that comprise the 

FFIEC (the OCC, the FDIC, the Federal Reserve, the CFPB, and the 

NCUA), in addition to the Securities and Exchange Commission, the 

Federal Trade Commission, and the Commodity Futures Trading 

Commission, are authorized to exchange financial records, 

examination reports and other information with respect to a financial 

institution, holding company or any subsidiary of a depository 

institution or holding company.56 In addition to interagency 

cooperation agreements with other federal and foreign bank 

authorities, the FDIC maintains agreements with each of the state

banking regulatory agencies.57 These agreements govern information 

sharing and alternate examination programs for state-chartered 

institutions that are not members of the Federal Reserve.

 55 FDI Act, 12 U.S.C. § 1817(a)(2)(C).

56 See 12 U.S.C. § 3303(a). 12 U.S.C. § 3412(e).

57 The agreements with state banking regulatory agencies are maintained by the Internal Review and Control 

Section of the Division of Risk Management and Supervision of the FDIC.
25

Essential Criterion 2 Rules regarding confidentiality of information apply to all 

safety net participants and the exchange of information among 

them. Confidentiality of information is protected by law or 

through agreements so as not to prevent information sharing 

within the safety net.

There are no impediments to information sharing between the FDIC 

and relevant safety-net participants and the confidentiality of 

privileged information is well-guarded.

The U.S. federal banking agencies have broad statutory powers that 

allow them to share information with other domestic and foreign 

banking authorities.58 The importance and necessity of maintaining 

the confidentiality of the information are highlighted in several 

statutory and regulatory provisions, as is the requirement that the 

information be used for lawful supervisory purposes.59

Federal banking agencies and the CFPB, in any capacity, are allowed 

to share information without waiving privilege. Each of the U.S. 

federal banking agencies has promulgated rules and policies 

implementing the civil and criminal statutes relating to the 

treatment of confidential supervisory and bank information.60

The confidentiality of sensitive bank information is protected by law 

and in practice. Unless authorized by law, it is a crime for an employee 

of the U.S. government to divulge, disclose, or make known in any 

manner trade secrets or other confidential business information 

collected in the course of employment or official duties.61

The federal banking agencies are subject to a general statutory 

prohibition on disclosing certain types of confidential financial 

information unless such sharing is specifically authorized by law.62 In 

addition, each agency’s regulations, which have the force of law, require 

confidential treatment of a broad range of non-public information.

 58 See for example FDI Act § 7(a)(2)(A), (C), 12 U.S.C. § 1817(a)(2)(A), (C) (sharing with FDIC, a state or 

federal agency with supervisory or regulatory authority over the bank or other entity, or any appropriate 

person). See also International Banking Act of 1978 § 15(a), 12 U.S.C. § 3109(a).

59 FDI Act § 11(t), 12 U.S.C. 1821(t).

60 12 C.F.R. Part 4 (OCC); 12 C.F.R § 211.27 and 12 C.F.R. Part 261 (Federal Reserve Board); 12 C.F.R. § 309.6 

and 12 C.F.R. § 347.207 (FDIC); and 12 C.F.R. Part 1070 (CFPB).

61 18 U.S.C. § 1905.

62 18 U.S.C. § 1905.
26

Essential Criterion 3 Safety-net participants exchange information on an ongoing 

basis, and in particular when material supervisory actions are 

being taken in respect of member banks.

Domestically, the U.S. federal banking agencies collaborate and share 

information with each other, including in matters involving routine 

prudential supervision and in the event material supervisory actions 

have been considered.63

Information sharing between safety-net participants occurs 

throughout the life cycle of a bank. Coordination typically begins at 

the formation of a banking group, authorization of a new activity, or 

changes in a banking group’s structure where the primary federal 

(or state) banking authority considers applications to obtain a bank 

or savings association charter or license. Information sharing 

continues throughout normal supervisory activities, where 

examination findings are shared between the agencies, as 

appropriate, and agencies refer suspected criminal violations to law 

enforcement authorities. Additionally, interagency collaboration and 

coordination occurs in crisis situations, including when material 

supervisory actions are taken.

Monthly interagency meetings are held among the FDIC and the 

other federal banking agencies to discuss problem banks. Quarterly, 

the Financial Risk Committee, an interagency group composed of the 

FDIC and other federal banking agencies, meets to exchange 

information on banks at risk of failing.

Information exchange is reciprocal. The Federal Reserve, for 

example, as prudential supervisor for holding companies, provides 

information to other bank regulatory agencies and functional 

regulators regarding the financial condition, risk-management 

policies, and operations of regulated holding companies that may 

have a material impact on an individual regulated subsidiary. Other 

bank regulatory agencies make information about bank subsidiaries 

of holding companies available to the Federal Reserve and to each 

other. The U.S. federal banking agencies exchange information with 

functional regulators, such as the Securities and Exchange 

Commission and the Commodity Futures Trading Commission, 

related to securities companies that are part of a banking group or a 

financial conglomerate that includes a bank.

 63 International information sharing and coordination is discussed under CP-5.
27

Essential Criterion 4 In situations where there are multiple deposit insurers 

operating in the same national jurisdiction, appropriate 

information sharing and coordination arrangements among 

those deposit insurers are in place.

The FDIC is the sole federal insurer of bank deposits in the United 

States.64 In the state of Massachusetts, two private insurance funds 

provide coverage for deposits in excess of the FDIC deposit insurance 

limit.65 These programs do not affect the FDIC’s deposit insurance 

regulations or coverage. FDIC has agreements with the private 

insurers that facilitate the determination of the amount of excess 

deposits and the payment of insurance by the private insurers.

 64 A separate authority—the National Credit Union Administration—charters, regulates, insures, and resolves 

federally insured credit unions. It is also an independent federal agency.

65 For more information about the two insurance funds in Massachusetts, see http://www.coopcentralbank.com/ and 

https://www.difxs.com/dif/home.aspx.
28

PRINCIPLE 5 CROSS-BORDER ISSUES

Where there is a material presence of foreign banks in a jurisdiction, formal information 

sharing and coordination arrangements should be in place among deposit insurers in 

relevant jurisdictions.

Essential Criterion 1 Where there is a material presence of foreign banks (i.e. foreign 

bank subsidiaries or branches), formal information sharing and 

coordination arrangements are in place among relevant deposit 

insurers and relevant safety net participants, subject to 

confidentiality provisions.

The U.S. federal banking agencies have broad authority to share 

information with foreign banking authorities and formal information 

sharing and coordination arrangements in place to facilitate sharing 

and coordination.66

The FDIC is a party to a number of Memoranda of Understanding, 

Statements of Cooperation, and other agreements establishing 

frameworks for cooperation and the exchange of information with 

foreign authorities. These agreements contain a number of provisions 

governing confidentiality. These provisions generally cover

information sharing to the extent reasonable, subject to relevant 

statutes or regulations; grounds for denial; restricting use to lawful 

supervisory purposes; holding information confidential; requesting 

prior consent before sharing with third parties; disclosures required 

by statute or legal process; and consenting to onward sharing with 

stated authorities pursuant to lawful supervisory responsibilities.

In addition, the FDIC and other relevant federal banking agencies 

participate as host authorities in crisis management groups (CMGs) 

for certain foreign banking organizations.

Essential Criterion 2 In circumstances where a deposit insurer is responsible for 

coverage of deposits in a foreign jurisdiction, or where more than 

one deposit insurer is responsible for coverage in a jurisdiction, 

bilateral or multilateral agreements exist to determine which 

deposit insurer(s) is/are responsible for the reimbursement 

process, setting levies and premiums, and public awareness.

As discussed in the response to CP-14, EC-7, the FDIC is generally not 

responsible for insuring deposits in foreign jurisdictions.

 66 International Banking Act of 1978, § 15(a), 12 U.S.C. § 3109(a).
29

PRINCIPLE 6 DEPOSIT INSURER’S ROLE IN CONTINGENCY PLANNING

AND CRISIS MANAGEMENT

The deposit insurer should have in place effective contingency planning and crisis 

management policies and procedures, to ensure that it is able to effectively respond to the 

risk of, and actual, bank failures and other events. The development of system-wide crisis 

preparedness strategies and management policies should be the joint responsibility of all 

safety-net participants. The deposit insurer should be a member of any institutional 

framework for ongoing communication and coordination involving financial safety-net 

participants related to system-wide crisis preparedness and management.

Essential Criterion 1 The deposit insurer has its own effective contingency planning 

and crisis management policies and procedures in place, to 

ensure that it is able to effectively respond to the risk of, and 

actual, bank failures and other events.

The FDIC has effective contingency planning and crisis management 

policies and procedures in place that allow it to effectively respond 

to the risk of bank failure, actual bank failures, and other events. The 

FDIC’s ability to deal with bank failures is demonstrated through its 

85 years of experience in the resolution of thousands of banks, 

including during periods when elevated numbers of bank failures 

constituted a system-wide crisis. For example, from 2008 to 2013, 

489 banks failed and were successfully resolved by the FDIC.

In connection with this contingency planning and crisis 

preparedness, the FDIC requires certain banks to submit plans that 

should enable the FDIC to:

 resolve the institution in a manner that ensures that depositors 

receive access to their insured deposits within one business 

day of the institution’s failure (two business days if the failure 

occurs on a day other than Friday)

 maximize the net present value return from the sale or 

disposition of its assets

 minimize the amount of any loss realized by the creditors in 

the resolution.67

In addition, the Large-Bank Deposit Insurance Determination 

Modernization Rule—which applies to banks with at least $2 billion in 

deposits and at least either (1) 250,000 deposit accounts or 

(2) $20 billion in total assets, regardless of the number of deposit 

accounts—requires these banks to have in place practices and 

 67 12 C.F.R. § 360.10.
30

procedures to provide the FDIC at the end of any business day with 

depositor and customer data for all deposit accounts held in domestic 

and foreign offices and interest-bearing investment accounts 

connected with sweep and automated credit arrangements.68

For severely distressed institutions for which failure appears 

imminent, the FDIC develops institution-specific strategies for 

potential resolution of the failed bank under the FDI Act. In advance 

of the failure, FDIC personnel establish an on-site presence in the 

failing institution and begin gathering information and analyzing the 

institution’s financial and operational structure in preparation for 

the potential closing. Through this review, FDIC staff determines the 

optimal type of resolution transaction and, in most cases, begins the 

process of confidentially marketing the institution to potential 

acquirers. The entire resolution process, including the closing event, 

generally takes 90 days or less, not including post-closing activities. 

These processes are more fully explained in the Resolutions 

Handbook.69 Refer to CP-14 for additional information about FDIC 

processes for resolving failed banks.

The FDIC also could be called upon to resolve other types of

institutions under Title II of the Dodd-Frank Act if their failure could 

threaten U.S. financial stability. In the years since enactment of the 

Dodd-Frank Act, the FDIC has made significant progress in 

developing the operational capabilities to carry out a resolution if 

needed and has undertaken institution-specific strategic planning.

Essential Criterion 2 The deposit insurer develops and regularly tests its own 

contingency planning and crisis management plans.

The FDIC regularly tests its contingency planning in a variety of ways 

to ensure that procedures and systems are effective. The most 

effective method of testing is actually resolving failed banks under 

the FDI Act. Other methods include exercises to evaluate the 

effectiveness of existing procedures and systems. The FDIC’s 

extensive experience with resolution of failed banks has provided

the opportunity for testing of its resolution processes. As noted in 

CP-6, EC-1, the FDIC resolved 489 banks between 2008 and 2013. 

The resolution of these failed banks, many of which occurred 

simultaneously, tested many of the components of the FDIC’s 

contingency and crisis management plans.

 68 12 C.F.R. § 360.9.

69 See for example FDIC, Resolutions Handbook, Chapter 3.
31

Aside from actual resolutions, the FDIC employs scenario planning 

and tabletop exercises to test resolution processes. For institutions

whose resolution would be conducted under the FDI Act, the FDIC 

conducts liquidity crisis simulations involving closure of banks with 

assets of $5 billion to $50 billion, and holds planning sessions for 

setting up and running bridge banks. The FDIC also regularly tests 

covered banks’ implementation of the requirements of the LargeBank Deposit Insurance Determination Modernization Rule, 

discussed in the response to CP-6, EC-1 above.

Essential Criterion 3 The deposit insurer is a member of any institutional 

framework for ongoing communication and coordination 

involving safety-net participants related to system-wide crisis 

preparedness and management.

The FDIC is a member of the FFIEC, an interagency body empowered 

to prescribe uniform principles, standards, and report forms for the 

federal examination of financial institutions.70 The FDIC Chairman is 

a voting member of the FSOC, established in 2010 by the Dodd-Frank 

Act, which is responsible for identifying risks to the financial stability 

of the United States, promoting market discipline, and responding to 

emerging risks to the stability of the U.S. financial system. To achieve 

this mission, the FSOC is involved in facilitating coordination and 

information sharing among financial regulators.71

The FSOC also advises Congress and makes recommendations in 

such areas that will enhance the integrity, efficiency, 

competitiveness, and stability of the U.S. financial markets; facilitate 

information sharing and coordination among the member agencies 

and other federal and state agencies; and identify gaps in regulation 

that could pose risks to the financial stability of the United States. 

The FSOC must annually report to and testify before Congress on, 

among other things, significant financial market and regulatory 

developments and potential threats to U.S. financial stability.72

Essential Criterion 4 The deposit insurer participates in regular contingency 

planning and simulation exercises related to system-wide 

crisis preparedness and management involving all safety net 

participants.

 70 For information about the FFIEC’s structure, purpose, and ongoing activities see https://www.ffiec.gov/about.htm.

71 More information about the FSOC is available at https://www.treasury.gov/initiatives/fsoc/Pages/home.aspx.

72 See Dodd-Frank Act § 112(a)(2), 12 U.S.C. § 5322(a)(2).
32

The FDIC participates in regular contingency planning and 

simulation exercises related to system-wide crisis preparedness and 

management. The FDIC, as deposit insurer and receiver and 

conservator for IDIs, participates in monthly interagency meetings 

with banking supervisors to discuss troubled banks. In addition, the 

FDIC meets frequently with both state and federal chartering 

authorities to discuss resolution processes and to ensure 

appropriate contacts are maintained.

Given the size of the U.S. banking sector, it is possible that a systemwide crisis may also involve the exercise of the FDIC’s authority as 

resolution authority for financial companies under Title II of the 

Dodd-Frank Act. In this regard, the FDIC collaborates with other 

relevant authorities to discuss processes and ensure mechanisms for 

coordination during times of crisis are in place.

Essential Criterion 5 The deposit insurer participates in the development of pre- and 

post-crisis management communication plans involving all 

safety-net participants, to ensure comprehensive and consistent 

public awareness and communications.

Given the FDIC’s long history of resolving failed banks, the FDIC 

Office of Communications (OCOM) has developed standardized 

practices for providing information to the public upon placement of 

an institution into resolution under the FDI Act. For every bank

failure, including during crisis situations, the FDIC executes a 

comprehensive public communications strategy.73 This includes 

issuing press releases, use of social media, providing detailed 

information and frequently asked questions on the FDIC website

(http://www.fdic.gov/), and establishing a customer service hotline.

In crisis situations, FDIC has used other tools, including:

 press conferences

 public service announcements

 television, radio, and print advertisements

 video news releases.

In crisis periods, the FDIC engages with other safety-net participants 

to develop press releases and participates in briefings to inform the 

public about actions to address the crisis. More detailed information 

regarding communication strategies is in the response to CP-10.

 73 The FSOC would also coordinate communication strategies among the federal banking agencies during a 

widespread financial crisis. There have been no systemic crises since the creation of the FSOC in 2010.
33

PRINCIPLE 7 MEMBERSHIP

Membership in a deposit insurance system should be compulsory for all banks.

Essential Criterion 1 Membership in a deposit insurance system is compulsory for all 

banks, including state-owned banks (with or without explicit 

guarantees), and all banks are subject to sound prudential 

regulation and supervision.

State and federal agencies that charter banks condition approval of a 

new bank on receiving deposit insurance coverage.Often, chartering 

authorities and the FDIC will conduct joint reviews of related 

chartering and deposit insurance applications. 

Essential Criterion 2 If, upon entry to a newly established deposit insurance system, 

a bank does not comply with all the supervisory or membership 

requirements and is allowed entry into the system, it is 

required to have a credible plan to address any deficiencies 

within a prescribed time frame (e.g. one year).

This EC is not applicable because there is no newly established 

deposit insurance system.

Essential Criterion 3 The conditions, process, and time frame for attaining 

membership are explicitly stated and transparent.

The conditions for attaining membership in the deposit insurance 

system are explicitly stated in federal law.74 The FDIC website 

provides several resources that detail the conditions, process, and

time frame for attaining membership, including a handbook that 

organizers of new banks can consult on the deposit insurance 

application process.75

 74 FDI Act § 6, 12 U.S.C. § 1816. Factors to be considered by the FDIC in authorizing deposit insurance coverage are:

(1) the financial history and condition of the depository institution

(2) the adequacy of the depository institution's capital structure

(3) the future earnings prospects of the depository institution

(4) the general character and fitness of the management of the depository institution

(5) the risk presented by such depository institution to the DIF

(6) the convenience and needs of the community to be served by such depository institution

(7) whether the depository institution’s corporate powers are consistent with the purposes of the FDI Act.

75 See https://www.fdic.gov/regulations/applications/depositinsurance/ and the Deposit Insurance Applications 

Procedures Manual, https://www.fdic.gov/regulations/applications/depositinsurance/procmanual.pdf.
34

Essential Criterion 4 If the deposit insurer is not responsible for granting 

membership in the deposit insurance system, the law or 

administrative procedures describe a clear and reasonable time 

frame within which the deposit insurer is consulted or informed 

in advance, and is given sufficient information about an 

application for a new license.

The FDIC grants membership in the deposit insurance system.76

Essential Criterion 5 When membership is cancelled upon the revocation or 

surrender of a bank’s license, immediate notice is given to 

depositors to inform them that existing deposits will continue 

to be insured up to a specified deadline.

When a bank’s charter is revoked or surrendered and deposit 

insurance is terminated either voluntarily or involuntarily, the FDI 

Act and FDIC regulations provide for notice to depositors and the 

public. The FDI Act establishes statutory requirements for the 

voluntary termination of insurance by a bank without its deposit 

liabilities being assumed by another institution.77 FDIC regulations 

provide for prior written notice to depositors, subject to prior 

approval of the FDIC.78 These regulations also incorporate a form of 

notice to depositors, which includes an explicit reference to the

effective date of termination of FDIC insurance.79

Upon closure of the financial institution, it is the policy of the FDIC to 

publish and to mail proper notices to creditors and depositors 

advising how they may receive payment of their insured deposit 

accounts and the process of claiming their remaining balances under 

federal law and regulations.80

Essential Criterion 6 When membership is terminated by the deposit insurer, 

arrangements are in place to coordinate the immediate 

withdrawal of the bank’s deposit-taking license by the relevant 

authority. Upon termination, immediate notice is given to 

depositors to inform them that existing deposits will continue 

to be covered up to a specified deadline.

 76 FDI Act § 5, 12 U.S.C. § 1815.

77 FDI Act § 8(a)(1), 12 U.S.C. § 1818(a)(1)(voluntary termination of insurance); FDI Act § 8(p),

12 U.S.C. § 1818(p)(institution that is not in the business of receiving deposits).

78 12 C.F.R. § 307.3(a)-(b).

79 12 C.F.R. § 307.3(c); 12 C.F.R. § 307, App. B.

80 See CP-10, EC-2 for more information on depositor notification in the event of a bank failure.
35

Arrangements are in place to coordinate the termination of deposit 

insurance, the withdrawal of a bank’s charter, and the notice to 

depositors. In some instances, the FDIC can terminate deposit 

insurance before the chartering agency revokes a bank’s charter.81

These actions are rare. The FDIC also is required to provide timely 

notice to the institution of its intention to terminate insurance.82 The 

FDIC may publish notice of termination and the depository 

institution must give prompt notice to each of its depositors and 

publish notice in a newspaper of general circulation.83 After 

involuntary termination of insured status, deposits of each depositor 

on the date of termination continue to be insured for a period of six

months to two years, depending on the type of deposit.84

 81 FDI Act § 8(a), (w), 12 U.S.C. § 1818(a)(2), (w).

82 FDI Act § 8(a)(2)(B), 12 U.S.C. §§ 1818(a)(2)(B).

83 FDI Act § 8(a)(6), 12 U.S.C. §§ 1818(a)(6); 12 C.F.R. § 308.123. See discussion of notice to depositors under EC-5.

84 FDI Act § 8(a)(7), 12 U.S.C. §§ 1818(a)(7).
36

PRINCIPLE 8 COVERAGE

Policymakers should define clearly the level and scope of deposit coverage. Coverage should 

be limited, credible, and cover the large majority of depositors but leave a substantial amount 

of deposits exposed to market discipline. Deposit insurance coverage should be consistent 

with the deposit insurance system’s public policy objectives and related design features.

Essential Criterion 1 Insured deposits are clearly and publicly defined in law or 

regulation and reflect the public policy objectives. This 

definition includes the level and scope of coverage. If certain 

types of deposits and depositors are ineligible for deposit 

protection, they are clearly specified, easily determined and do 

not affect the speed of reimbursement.

Insured deposits are clearly and publicly defined in laws and 

regulations and reflect the public policy objectives. Deposits that 

are ineligible for deposit protection are clearly specified and easily 

determined. The standard deposit insurance coverage limit is 

$250,000 per depositor, per institution, for each account 

ownership category.85

Statute or regulation defines ownership categories, including single 

accounts, joint accounts, certain retirement accounts, revocable trust 

accounts, irrevocable trust accounts, business accounts, employee 

benefit plan accounts, mortgage servicing accounts, accounts held by a 

depository institution as trustee of an irrevocable trust, annuity 

contract accounts, public bond accounts, custodian accounts for Native 

Americans, government accounts, and accounts deposited by a bank

pursuant to the Bank Deposit Financial Assistance Program of the 

Department of Energy.86

Essential Criterion 2 The level and scope of coverage are limited and are designed 

to be credible, so as to minimize the risk of runs on banks and 

do not undermine market discipline. The level and scope of 

coverage are set so that the large majority of depositors across 

banks are fully protected while leaving a substantial 

proportion of the value of deposits unprotected. In the event 

that a substantial proportion of the value of deposits is 

 85 FDI Act § 11(a), 12 U.S.C. § 1821(a); 12 C.F.R. § 330.

86 FDI Act §§ 7(i)(3), 11(a), 12 U.S.C. §§ 1817(i)(3), 1821(a); 12 C.F.R. § 330 and FDIC, “Financial 

Institution Employee’s Guide to Deposit Insurance,” 25, 

https://www.fdic.gov/deposit/diguidebankers/documents/financial-institution-employees-guideto-deposit-insurance.pdf.
37

protected, moral hazard is mitigated by strong regulation and 

supervision, as well as by the other design features of the 

deposit insurance system

Statute and regulation limit the level and scope of coverage to 

provide appropriate levels of protection without creating moral 

hazard or undermining market discipline. The level and scope of 

coverage are set to fully protect the large majority of depositors, 

while leaving a substantial proportion of the value of deposits 

unprotected. As of December 31, 2018, the value of total 

deposits in domestic offices was $12.61 trillion and the value of 

total FDIC-insured deposits was $7.53 trillion, or 59.7 percent of 

total domestic deposits.87

Essential Criterion 3 The deposit insurer applies the level and scope of coverage 

equally to all its member banks.

The FDIC applies the level and scope of coverage (as discussed in the 

responses to EC-1 and EC-2 above) equally to all member banks.

Essential Criterion 4 The deposit insurer does not incorporate co-insurance.

The FDIC does not incorporate co-insurance.

Essential Criterion 5 The level and scope of coverage are reviewed periodically 

(e.g. at least every five years) to ensure that it meets the public 

policy objectives of the deposit insurance system.

The FDIC reviews the level and scope of coverage every five years to 

ensure that they meet the public policy objectives of the deposit 

insurance system and to ensure parity between insured banks and 

insured credit unions. The Board of Directors of the FDIC and the 

Board of Directors of the National Credit Union Administration 

jointly consider the factors set forth under the law. If they determine 

that an inflation adjustment is appropriate, they jointly prescribe the 

amount by which the standard maximum deposit insurance amount 

should be increased.88

Essential Criterion 6 In the event of, or prior to, a merger or amalgamation of 

separate banks that are members of the same deposit insurance 

system, depositors of the merged or amalgamated banks enjoy 

 87 FDIC, Quarterly Banking Profile, Fourth Quarter 2018, 

https://www.fdic.gov/bank/analytical/qbp/2018dec/qbp.pdf.

88 FDI Act § 11(a)(1)(F)(i), 12 U.S.C. § 1821(a)(1)(F)(i); Federal Credit Union Act § 207(k), 12 U.S.C. § 1787(k).
38

separate coverage (up to the maximum coverage limit) for each 

of the banks for a limited but publicly stated period, as defined 

in law or regulation. Merging banks must be held responsible 

for notifying the affected depositors, including informing them 

of the date on which the separate coverage will expire.

The separate insurance of deposits that are assumed in a merger 

continues for six months from the date the merger takes effect or, in 

the case of a time deposit, the earliest maturity date after the sixmonth period.89 In the case of time deposits which mature within six 

months of the date that the deposits are assumed, and which are 

renewed at the same dollar amount, and for the same term as the 

original deposit, the separate insurance applies to the renewed 

deposits until the first maturity date after the six-month period. 

Time deposits that mature within six months of the deposit 

assumption and that are renewed on any other basis, or those that 

are not renewed and thereby become demand deposits, are 

separately insured only until the end of the six-month period.

The FDIC provides online and printed brochures that explain deposit 

insurance coverage. The FDIC provides the brochures for free to any 

member bank or depositor. Banks also distribute FDIC brochures to 

the public. One brochure explains the separate deposit insurance 

coverage that applies after two banks merge, and states that 

depositors need to restructure their accounts to maintain full 

insurance coverage.90

See CP-10, EC-1 for discussion of the FDIC’s public awareness efforts.

Essential Criterion 7 The residency status or nationality of depositors has no effect 

on coverage.

U.S. laws and regulations do not limit the availability of deposit 

insurance to citizens and residents of the United States.91 All deposits 

in banks located within the United States and its territories are 

covered by deposit insurance up to the specified limits.

Essential Criterion 8 In situations where there are multiple deposit insurers 

operating in the same national jurisdiction, any differences in 

coverage across banks operating within that jurisdiction do not 

 89 FDI Act § 1, 12 U.S.C. § 1811; 12 C.F.R. § 330.4.

90 FDIC, “Your Insured Deposits,” 24, https://www.fdic.gov/deposit/deposits/brochures/your-insureddeposits-english.pdf.

91 FDI Act § 1, 12 U.S.C. 1811; 12 C.F.R. § 330.3.
39

adversely affect overall deposit insurance system effectiveness 

and financial stability.

The FDIC is the only federal insurer of bank deposits operating in the 

United States. See CP-4, EC-4, in which the two private deposit insurers 

in Massachusetts, which provide excess coverage, are discussed.

Essential Criterion 9 Foreign currency deposits are insured if they are widely used in 

a jurisdiction.

Deposits denominated in a foreign currency are insured.92 Deposit 

insurance for such deposits shall be determined and paid in the 

amount of U.S. dollars equal in value to the amount of the deposit 

denominated in the foreign currency as of close of business on the 

date of default of the bank. The exchange rates to be used for such 

conversions are the “noon buying rates for cable transfers” quoted 

for major currencies by the Federal Reserve Bank of New York on 

the date of default of the bank, unless the deposit agreement 

specifies that some other widely recognized exchange rates are to be 

used. In that case the rates specified will be used for conversions.93

Essential Criterion 10 In cases where there is a blanket guarantee in place, there is a 

credible plan to transition from the blanket guarantee to a 

limited coverage deposit insurance system. This includes:

(a) an assessment of the economic environment as it affects 

the financial system, which is conducted before a 

jurisdiction begins the transition from a blanket 

guarantee to limited coverage.

(b) the pace of the transition to limited coverage is consistent 

with the state of the financial industry, prudential 

regulation and supervision, the legal and judicial 

framework, and accounting and disclosure regimes.

(c) policymakers have effective communication strategies to 

mitigate adverse public reaction to the transition.

(d) where there is a high level of capital mobility, and/or a 

regional integration policy, the decision to lower coverage 

limits and/or scope considers the effects of different 

jurisdictions’ protection levels and related policies.

No blanket guarantee is in place.

 92 12 C.F.R. § 330.3(c).

93 12 C.F.R. § 330.3(c).
40

PRINCIPLE 9 SOURCES AND USES OF FUNDS

The deposit insurer should have readily available funds and all funding mechanisms 

necessary to ensure prompt reimbursement of depositors’ claims, including assured 

liquidity funding arrangements. Responsibility for paying the cost of deposit insurance 

should be borne by banks.

Essential Criterion 1 Funding for the deposit insurance system is provided on an 

ex ante basis. Funding arrangements are clearly defined and 

established in law or regulation.

By law, the FDIC is required to maintain the DIF, which shall be used 

to carry out its insurance purposes.94 As of March 31, 2019, the DIF 

balance was $104.9 billion.

The DIF is funded primarily by assessment income, supplemented by 

investment returns on securities held by the DIF. Banks pay 

assessments based on the particular bank’s risk to the DIF, including 

the probability that the institution will cause a loss to the DIF, and 

the likely amount of any loss.

When setting assessments, the FDI Act requires the FDIC to consider:

 the DIF’s estimated operating expenses

 the DIF’s estimated case resolution expenses and income

 the projected effects of the payment of assessments on the 

capital and earnings of banks

 risk factors and other factors taken into account under 

Section 7(b)(1) of the FDI Act when establishing the risk-based 

assessment system, including the requirement under that

paragraph to maintain a risk-based system

 any other factors the FDIC Board of Directors may determine 

to be appropriate.95

FDIC regulations set forth the rules for the implementation of the 

risk-based assessment system.96

Essential Criterion 2 Funding the deposit insurance system is the responsibility of 

the member banks.

 94 FDI Act § 7(b)(3)(B), 12 U.S.C. § 1817(b)(3)(B) and FDI Act § 11(a)(4)(A), 12 U.S.C. § 1821(a)(4)(A).

95 FDI Act § 7(b)(2)(B), 12 U.S.C. § 1817(b)(2)(B).

96 12 C.F.R. Part 327.
41

The FDI Act requires that each bank pay assessments imposed under a 

risk-based assessment system established by the FDIC.97 All amounts 

assessed against banks by the FDIC must be deposited into the DIF.98

Essential Criterion 3 Initial “start-up” or “seed” funding (e.g. from government or 

international donor organizations) is permitted to help 

establish a deposit insurer. Any start-up funding provided by a 

government should be fully repaid before the deposit insurer 

reduces any or all bank premiums.

The Banking Act of 1933 established the FDIC with initial capital 

from the U.S. Treasury and the 12 Federal Reserve Banks.99 All of the 

initial capital was repaid by 1948.100

Essential Criterion 4 Emergency funding arrangements for the deposit insurance 

system, including pre-arranged and assured sources of liquidity 

funding, are explicitly set out (or permitted) in law or 

regulation. Sources may include a funding agreement with the 

government, the central bank or market borrowing. If market 

borrowing is used it is not the sole source of funding. The 

arrangement for emergency liquidity funding is set up in 

advance, to ensure effective and timely access when required.

The FDIC may borrow from the U.S. Treasury, banks, and Federal 

Home Loan Banks. The FDIC also has the authority to impose special 

assessments on banks.

The FDIC has the authority to borrow from the U.S. Treasury under 

two separate statutory provisions. First, with the Secretary of the 

Treasury’s approval, the FDIC may borrow up to $100 billion on an 

interest-bearing basis from the U.S. Treasury.101 This borrowing 

authority requires an agreement to be in effect between the 

Secretary of the Treasury and the FDIC which (a) provides a 

schedule for the repayment of the outstanding amount of any 

borrowing and (b) demonstrates that income to the FDIC from 

assessments will be sufficient to amortize the outstanding balance 

within the period established in the repayment schedule and pay 

 97 FDI Act § 7(c)(2), 12 U.S.C. § 1817(c)(2).

98 FDI Act § 11(a)(4), 12 U.S.C. § 1821(a)(4).

99 Banking Act of 1933, Pub. L. 73-66, 48 Stat. 162, 168 (1933); FDIC, “A Brief History of Deposit Insurance in the 

United States,” 28 (1998).

100 “A Brief History,” 59.

101 FDI Act § 14(a), 12 U.S.C. § 1824(a).
42

the interest accruing on such balance.102 The Secretary of the 

Treasury and the FDIC are required to consult with the Financial 

Services Committee of the House of Representatives and the 

Committee on Banking, Housing, and Urban Affairs of the Senate on 

the terms of any repayment schedule agreement.103 Second, the 

FDIC may borrow up to $100 billion from the U.S. Treasury’s 

Federal Financing Bank.104

The FDIC may also borrow from banks or, with concurrence of the 

Federal Housing Finance Agency, from a Federal Home Loan 

Bank.105 Borrowing from banks or Federal Home Loan Banks, while 

available under statute, has not occurred. The FDIC’s “maximum 

obligation limitation” limits the amount of obligations the DIF can 

incur to the total of the sum of its cash, 90 percent of the fair 

market value of other assets, and the amount authorized to be 

borrowed from the Treasury.106

In addition to these borrowing authorities, the FDIC has the authority 

under Section 7(b)(5) of the FDI Act to impose special assessments on 

banks if necessary to repay amounts borrowed from the Treasury as 

discussed above, to repay amounts borrowed from banks, or for any 

other purpose that the FDIC deems necessary.107

Essential Criterion 5 After establishing an ex ante deposit insurance fund:

a) the target fund size is determined on the basis of clear, 

consistent and transparent criteria, which are subject to 

periodic review; and

b) a reasonable time frame is set to achieve the target fund size.

Section 7 of the FDI Act requires the FDIC Board to annually 

establish and publish a designated reserve ratio.108 The current 

designated reserve ratio is 2.0 percent.109 In setting the designated 

 102 FDI Act § 14(c), 12 U.S.C. § 1824(c).

103 FDI Act § 14(c)(2)(A), 12 U.S.C. § 1824(c)(2)(A).

104 FDI Act § 14(b), 12 U.S.C. § 1824(b). Under section 14(b) of the FDI Act, the FDIC is authorized to sell the 

Corporation’s obligations, on behalf of the DIF, to the Federal Financing Bank. On December 15, 2006, the FDIC 

entered into a Note Purchase Agreement with the Federal Financing Bank that provides a contingency borrowing line 

of $40 billion. The parties amended this agreement on September 16, 2008, to increase the borrowing line to $100 

billion. The agreement is extended on an annual basis and currently runs through September 30, 2019.

105 FDI Act § 14(e), 12 U.S.C. § 1824(e).

106 FDI Act § 15(c)(5), 12 U.S.C. § 1825(c)(5).

107 FDI Act § 7(b)(5), 12 U.S.C. § 1817(b)(5).

108 FDI Act § 7(b)(3)(A), 12 U.S.C. § 1817(b)(3)(A).

109 12 C.F.R. § 327.4(g).
43

reserve ratio each year, the FDIC Board is required to:

 take into account the risk of losses to the DIF that year and 

future years, including historic experience and potential and 

estimated losses from banks

 take into account economic conditions generally affecting 

banks to allow the designated reserve ratio to increase during 

more favorable economic conditions and to decrease during 

less favorable economic conditions, notwithstanding the 

increased risks of loss that may exist during less favorable 

conditions, as determined to be appropriate by the FDIC Board

 seek to prevent sharp swings in the assessment rates for banks

 take into account other factors the FDIC Board may determine to 

be appropriate, consistent with these requirements.110

The FDIC Board’s consideration of these criteria is described each 

year as part of the publication establishing the targeted or 

designated reserve ratio.111 As of March 31, 2019, the DIF’s actual

reserve ratio was 1.36 percent. Section 7 of the FDI Act 

establishes requirements for a restoration plan when the reserve 

ratio of the DIF falls below 1.35 percent. The restoration plan is 

required to be completed within eight years of implementation, or 

longer if necessary if there are extraordinary circumstances.112

Essential Criterion 6 The deposit insurer has responsibility for the sound investment 

and management of its funds. The deposit insurer has a defined 

investment policy for its funds that aims at ensuring:

a) the preservation of fund capital and maintenance of

liquidity; and

b) that adequate risk management policies and procedures, 

internal controls, and disclosure and reporting systems 

are in place.

The FDIC’s Corporate Investment Policy defines how the FDIC 

invests funds in the DIF. The policy outlines the legal basis for the 

Corporate Investment Program, investment objectives and 

guidelines, and reporting requirements.113 The policy is consistent 

with Section 13(a) of the FDI Act, which requires that the DIF funds 

 110 FDI Act § 7(b)(3)(C), 12 U.S.C. § 1817(b)(3)(C).

111 For example, see Notice of Designated Reserve Ratio for 2019, 84 Fed. Reg. 716, January 31, 2019.

112 FDI Act § 7(b)(3)(E), 12 U.S.C. § 187(b)(3)(E).

113 FDIC, FDIC Annual Report (2018), p 100, 

https://www.fdic.gov/about/strategic/report/2018annualreport/2018ar-final.pdf.
44

be invested in obligations of the United States or in obligations 

guaranteed as to principal and interest by the United States.114 The 

Secretary of the Treasury must approve all such investments in 

excess of $100,000 and has granted the FDIC approval to invest the 

DIF funds only in U.S. Treasury obligations that are purchased or 

sold exclusively through the Treasury’s Bureau of the Fiscal Service’s 

Government Account Series program.115

Essential Criterion 7 The deposit insurer may hold funds in the central bank. The 

deposit insurer establishes and complies with rules to limit 

significant investments in banks.

Under Section 13(b) of the FDI Act, the depository accounts of the FDIC 

must be kept with the U.S. Treasury or, with the approval of the 

Secretary of the Treasury, with a Federal Reserve Bank or a depository 

institution designated as a depository or fiscal agent of the United 

States. The Secretary of the Treasury has the authority to waive this 

requirement. The FDIC may also temporarily hold up to $50,000 in 

depository accounts at any one bank, and may establish or maintain 

depository accounts at a bank to facilitate the paying of insured 

deposits, or making loans to, or purchasing of assets of, a bank.116

Essential Criterion 8 Where the deposit insurer is not the resolution authority, it has 

the option within its legal framework to authorize the use of its 

funds for resolution of member institutions other than 

liquidation. In such situations the following conditions are met:

(a) the deposit insurer is informed and involved in the 

resolution decision-making process;

(b) the use of the deposit insurer’s funds is transparent and 

documented, and is clearly and formally specified;

(c) where a bank is resolved through a resolution process 

other than liquidation, the resolution results in a viable, 

solvent and restructured bank, which limits the exposure 

of the deposit insurer to contribute additional funding in 

respect of the same obligation;

(d) contributions are restricted to the costs the deposit insurer 

would otherwise have incurred in a payout of insured 

depositors in a liquidation net of expected recoveries;

(e) contributions are not used for the recapitalization of resolved 

institutions unless shareholders’ interests are reduced to 

 114 FDI Act § 13(a)(1), 12 U.S.C. § 1823(a)(1).

115 FDI Act § 13(a)(2), 12 U.S.C. § 1823(a)(2).

116 FDI Act § 13(b), 12 U.S.C. § 1823(b).
45

zero and uninsured, unsecured creditors are subject to parri 

passu losses in accordance with the legal claim priority;

(f) the use of the deposit insurer’s funds is subject to an 

independent audit and the results reported back to the 

deposit insurer; and

(g) all resolution actions and decisions using the deposit 

insurer’s funds are subject to ex post review.

FDIC is the resolution authority for all IDIs.

Essential Criterion 9 Should deposit insurer income/revenue (e.g. premiums received, 

recoveries from failed banks and interest accrued on investment 

funds) be taxed by the government, it is at a rate which is neither 

punitive nor disproportionate to other corporate taxation, nor 

unduly hinders the accumulation of the deposit insurance fund. 

Any remittances to the government by the deposit insurer are 

limited to repayment of government-provided start-up funding 

and government-provided liquidity funding.

The FDIC is not subject to corporate taxation.

Essential Criterion 10 If the deposit insurer uses differential premium systems:

(a) the system for calculating premiums is transparent to all

participating banks;

(b) the scoring/premium categories are significantly 

differentiated; and

(c) the ratings and rankings resulting from the system 

pertaining to individual banks are kept confidential.

The Federal Deposit Insurance Corporation Improvement Act of 

1991 mandated that the FDIC adopt a risk-based assessment system.

As codified in Section 7 of the FDI Act, the FDIC must base a bank’s

assessment on:

(i) the probability that the DIF will incur a loss with respect to 

the institution, taking into consideration the risks 

attributable to:

(I) different categories and concentrations of assets

(II) different categories and concentrations of liabilities, 

both insured and uninsured, contingent and 

noncontingent

(III) any other factors the FDIC determines are relevant to 

assessing such probability
46

(ii) the likely amount of any such loss

(iii) the DIF’s revenue needs.117

The FDIC’s risk-based assessment system is transparent to the 

public and all participating banks. Modifications to the risk-based 

assessment system are made only after public notice and 

opportunity for comment.

To calculate a bank’s quarterly deposit insurance assessment, the 

institution’s assessment rate is multiplied by its assessment base. The 

calculation of assessments and assessment rate schedules are 

transparent and published in regulation. Current initial assessment 

rates range from 3 basis points to 30 basis points.

Participating banks can estimate their risk-based assessment using 

online calculators that describe how assessments are determined.118

Under Section 7 of the FDI Act, the FDIC Board may establish separate 

risk-based assessment systems for large and small institutions.119

The FDIC has separate pricing methods to differentiate risk among:

 small institutions—generally those with less than $10 billion in 

total assets

 large institutions—generally those with $10 billion or more in 

total assets

 highly complex institutions—generally those with $50 billion or 

more in total assets for four consecutive quarters and which are 

controlled by a U.S. holding company with $500 billion or more 

in assets for four consecutive quarters.

Small banks are assigned an individual assessment rate based on a 

pricing method using several financial measures and supervisory 

ratings. Large and highly complex banks are assigned an individual 

assessment rate based on a scorecard, a pricing method that also 

incorporates financial measures and supervisory ratings. Statistical 

analyses performed when each system was adopted show how the 

pricing methodologies improve accuracy in differentiating risk 

among small and large banks.

 117 FDI Act § 7(b)(1)(C), 12 U.S.C. § 1817(b)(1)(C).

118 FDIC, Current Assessment Calculators, https://www.fdic.gov/deposit/insurance/calculator.html.

119 FDI Act § 7(b), 12 U.S.C. § 1817(b).
47

The FDIC’s assessment regulations include restrictions on disclosure 

of an institution’s assessment risk classification.120 The assessment 

systems for large and highly complex institutions and small 

institutions each use confidential supervisory evaluations as an input.

 120 12 C.F.R. § 327.4(d).
48

PRINCIPLE 10 PUBLIC AWARENESS

In order to protect depositors and contribute to financial stability, it is essential that the 

public be informed on an ongoing basis about the benefits and limitations of the deposit 

insurance system.

Essential Criterion 1 The deposit insurer is responsible for promoting public 

awareness of the deposit insurance system, using a variety of 

communication tools on an ongoing basis as part of a 

comprehensive communication program.

Since 1934, the FDIC has promoted public awareness of the deposit 

insurance system using several communication tools to help 

maintain public confidence and stability in the U.S. financial system. 

The FDIC’s comprehensive communication program includes 

information about open and operating banks and information for 

depositors in the event of a bank failure.

The FDIC publishes deposit insurance brochures to explain 

insurance coverage and limits. Examples include Your Insured 

Deposits, Deposit Insurance at a Glance, and When a Bank Fails—

Facts for Depositors, Creditors, and Borrowers.121 The FDIC provides 

brochures online or on paper. The paper copy brochures are 

provided free of charge to any depositor or bank, which often

distribute FDIC brochures to the public. Since 1993, the FDIC has 

published FDIC Consumer News, a free quarterly newsletter that 

promotes deposit insurance and increases financial awareness.122

Today the web-based publication has more than 19,000 subscribers. 

The FDIC has maintained a website since 1995, and in 2018, the 

website received about 15 million visitors and 25 million page views.

The FDIC maintains a toll-free telephone number (1-877-ASK-FDIC) 

so consumers, depositors, and bankers can ask questions about 

deposit insurance coverage. In 2018, the toll-free consumer hotline 

received 96,703 telephone calls, and 38,681 were identified as deposit 

insurance-related inquiries. The FDIC Call Center handled 20,102 

inquiries and deposit insurance subject matter experts handled 

18,579 complex telephone calls identifying a total of 50,548 deposit 

insurance issues. The FDIC also answers written requests about 

deposit insurance coverage from bankers and the public. In 2018, the 

 121 See “Your Insured Deposits,” https://www.fdic.gov/deposit/deposits/brochures/your-insured-depositsenglish.pdf;“Deposit Insurance at a Glance,” https://www.fdic.gov/deposit/deposits/brochures/deposit-insuranceat-a-glance-english.pdf; and “When a Bank Fails—Facts for Depositors, Creditors, and Borrowers,”

https://www.fdic.gov/consumers/banking/facts/.

122 https://www.fdic.gov/consumers/consumer/news/index.html.
49

FDIC received 1,339 written inquiries from consumers and bankers 

that identified a total of 2,248 deposit insurance issues.

The FDIC also promotes public awareness of the deposit insurance 

system by hosting a voluntary webinar for bankers, typically four to 

six times annually. The webinar content is tailored to the bankers

who attend and includes a question and answer session. More than 

300,000 bankers have attended these seminars since 2008.

In 2001, the FDIC created a free financial literacy tool called Money 

Smart to teach consumers about key financial concepts, skills, and safe, 

affordable banking services. The tool fosters greater financial stability 

for people and communities.123 Between 2001 and 2008, more than 

3 million people took the curriculum, and in 2018, Money Smart 

products were ordered or downloaded more than 125,000 times.

In 2008, the FDIC celebrated its 75th anniversary and embarked on a 

public awareness campaign that included public service 

announcements and paid-placement advertising in print media and 

on radio. The agency partnered with a well-known personal finance 

advisor to be the face of the campaign.

In the event of a bank’s failure, the FDIC has additional communication 

tools to promote public awareness of the deposit insurance system. FDIC 

policies and procedures address notifying depositors of record about the 

failure and the FDIC maintains a “Failed Bank List” on the FDIC website.124

The list includes detailed information about each bank failure. 

Essential Criterion 2 In the event of a bank failure, the deposit insurer must notify 

depositors, as appropriate and as described in law, via media 

such as press releases, print advertising, websites and other 

media outlets, of the following details:

(a) where, how and when insured depositors will be provided 

with access to their funds;

(b) the information that an insured depositor must provide in 

order to obtain payment;

(c) if advance or interim payments are being made; and

(d) whether any depositors will lose funds, and procedures 

whereby uninsured depositors can make claims to the 

liquidator for their uninsured portion.

 123 FDIC, Money Smart, https://www.fdic.gov/consumers/consumer/moneysmart/.

124 FDIC, Failed Bank List, https://www.fdic.gov/bank/individual/failed/banklist.html.
50

The FDI Act requires the FDIC to mail notices to the depositors and 

creditors of a failed financial institution.125 The purpose of the notice 

to the depositors is to advise how they may receive payments for their 

insured deposit accounts, and the process of claiming their accounts.

The notice details vary with the type of closing transaction.126 In all 

cases, depositors are notified about the insured status of their 

accounts, whether any portion of their funds are not insured, how to 

access funds, and the procedure for claiming uninsured deposits.

Advance dividends may be approved by the FDIC Board of Directors 

as part of the resolution case.127 Advance dividends are declared and 

paid to uninsured depositors with allowed claims and Receivership 

Certificates. Payment is made shortly after the closing of the bank and 

provides an immediate return of a portion of the uninsured deposit.128

The FDIC also publishes notices in newspapers of general circulation 

in the city or town where the financial institution and branches are 

located. Notices in languages other than English are provided as 

needed. As noted in EC-1, the FDIC maintains the Failed Bank List on 

the FDIC website with detailed information about each bank failure. 

Finally, the FDIC issues a press release for each bank failure to help 

notify the public.129 The FDIC Office of Communications sends bank

failure press releases to media representatives in the cities and towns 

where the bank had branches. The press release is also published on 

the FDIC website and an email notification is sent to almost 90,000 

subscribers, many of whom are members of the media. The FDIC also 

posts information about every failed bank on social media.

 125 FDI Act § 11(d)(3)(B)-(C), 12 U.S.C. § 1821(d)(3)(B)-(C). See also FDIC, Resolutions Handbook, 27, 

https://www.fdic.gov/bank/historical/reshandbook/resolutions-handbook.pdf.

126 Closing transactions include payout, insured deposit purchase and assumption, all deposit purchase and 

assumption, and insured deposit transfer. See FDIC, Resolutions Handbook, 16-22, 

https://www.fdic.gov/bank/historical/reshandbook/resolutions-handbook.pdf.

127 An advance dividend is a payment made to an uninsured depositor after a bank or thrift failure. The amount of the 

advance dividend represents the FDIC’s conservative estimate of the ultimate value of the receivership. Cash 

dividends equivalent to the Board-approved advance dividend percentage (of total outstanding deposit claims) are 

paid to uninsured depositors, thereby giving them an immediate return of a portion of their uninsured deposit. 

Sometimes when it is projected that all depositor claims will be paid in full an advance dividend will be provided to 

unsecured creditors.

128 See FDIC, Resolutions Handbook, 27-28, https://www.fdic.gov/bank/historical/reshandbook/resolutionshandbook.pdf.

129 See for example FDIC, Press Release,“Royal Savings Bank, Chicago, Illinois, Acquires the Insured Deposits of 

Washington Federal Bank for Savings, Chicago, Illinois,” December 15, 2017,

https://www.fdic.gov/news/news/press/2017/pr17096.html.
51

Essential Criterion 3 The public awareness program or activities convey 

information about the following:

(a) the scope (i.e. which types of financial instruments 

and depositors are covered by deposit insurance, 

and which are not);

(b) a list of which banks are members and how they 

can be identified;

(c) deposit insurance coverage level limits; and

(d) other information, such as the mandate of the 

deposit insurer.

As discussed in more detail in the response to EC-1 above, the FDIC’s 

public awareness program and activities are primarily focused on 

defining the scope of deposit insurance coverage and insurance 

limits and explaining the FDIC’s dual role as deposit insurer and 

resolution authority. The FDIC’s deposit insurance brochures and 

on-line materials clearly distinguish deposit products from nondeposit investment products, which are not insured.130

In 1994, the FDIC issued guidance stating that sales of any nondeposit products should be performed away from the FDIC logo, 

with clear disclosures that the non-deposit product is not FDICinsured and may involve loss of principal. The guidance also states 

that banks should have a customer sign a statement when a 

customer opens an investment account, acknowledging that the 

customer has received and understands the disclosures. The 

guidance also states that investment sales personnel should be

properly qualified and trained in the difference between insured and 

uninsured accounts.131

The FDIC’s public awareness program also helps consumers

correctly identify FDIC-member banks. Depositors can use BankFind, 

a database on the FDIC website, to verify whether an entity is an 

FDIC member bank.132 BankFind can be searched by entity name, 

FDIC Certificate number, branch address, or URL. Furthermore, each 

 130 At each FDIC-member IDI, FDIC insurance applies to all deposit products: checking accounts, savings 

accounts, negotiable order of withdrawal accounts, money market deposit accounts, certificates of deposit 

and other time deposits, and official items such as cashier’s checks. The FDIC clearly states that deposit 

insurance coverage does not apply to non-deposit products such as stocks, bonds, mutual funds, annuities, 

safe deposit box contents, or U.S. Treasury bills, bonds, or notes.

131 FDIC, Press Release: Regulators Issue Uniform Guidance on Mutual Fund Sales (1994), 

https://www.fdic.gov/news/news/press/1994/pr9412.html.

132 FDIC, BankFind, https://research.fdic.gov/bankfind/.
52

bank is required to post the FDIC logo in each branch and next to 

each teller station where deposits are accepted.133 Customers do not 

have to apply or sign up for deposit insurance; it is provided 

automatically at no cost to the customer upon opening an account at 

an FDIC-insured institution.

Deposit insurance coverage limits are also discussed in FDIC’s 

brochures and throughout the website. This material is 

supplemented by the FDIC’s Electronic Deposit Insurance 

Estimator (EDIE), which allows depositors to enter non-personal 

information and calculate their insurance coverage.134 EDIE 

generates a printable report showing whether a depositor is fully 

insured or partially uninsured.

Essential Criterion 4 The objectives of the public awareness program (e.g. target 

awareness levels) are clearly defined and consistent with 

the public policy objectives and mandate of the deposit 

insurance system.

The longstanding mission and public policy objective of the FDIC are 

to maintain public confidence and stability in the U.S. financial 

system. For open and operating banks, the FDIC supports this 

objective by promoting public awareness and understanding of FDIC 

deposit insurance coverage and seeking to ensure depositors and 

bankers have ready access to information about deposit insurance 

rules and requirements. The FDIC fosters public confidence in the 

banking system by helping depositors make informed decisions 

about their deposit insurance coverage, which will minimize the risk 

to depositors of uninsured funds should their bank fail.

The objectives of the public awareness program are the same as the 

FDIC’s overall policy objectives: protecting depositors and 

maintaining public confidence and stability in the U.S. financial 

system. The objectives of the public awareness program include 

clearly defined operational goals, such as responding to 95 percent 

of written requests for deposit insurance information within 

14 calendar days.

Essential Criterion 5 The deposit insurer sets a long-term strategy to meet its 

public awareness objectives, and makes budget allocations to 

build and maintain a target level of public awareness about 

deposit insurance.

 133 12 C.F.R. § 328.2(a).

134 FDIC, Electronic Deposit Insurance Estimator (EDIE), https://www5.fdic.gov/edie/.
53

The FDIC’s 2018–2022 Strategic Plan includes a long-term strategy 

to meet its public awareness objectives. Strategic Goal 1.5 is that the 

public and banks have accurate and easily understood information 

about FDIC deposit insurance coverage. As noted in the plan, a 

significant rise in bank failures can undermine confidence and 

increase demand for information about deposit insurance coverage.

For example, in 2008, the FDIC received 18,953 written deposit 

insurance inquiries from consumers and bankers, 360 percent more 

than in 2007. After the sharp increase in the number of inquiries in 

2008, the FDIC allocated a portion of its budget to hire temporary 

staff to, among other things, explain deposit insurance coverage to 

the public and, more broadly, to instill confidence. Public demand for 

information waned in 2009, with total inquiries falling from 100,932

in 2008 to 46,041 in 2009, which allowed the FDIC to reduce 

temporary staffing levels.135

Essential Criterion 6 The deposit insurer works closely with banks and other safetynet participants to ensure the consistency and accuracy of the 

information provided to depositors and to maximize awareness 

on an ongoing basis. Law or regulation requires banks to 

provide information about deposit insurance in a 

format/language prescribed by the deposit insurer.

The FDIC ensures that consistent and accurate information about 

deposit insurance coverage is provided to depositors. The primary 

mechanism is the dissemination of deposit insurance brochures, 

either directly to the public or through banks. Banks, in coordination 

with the FDIC, may reprint FDIC deposit information for their 

marketing material provided they do not alter the substantive 

content. The FDIC also provides a tool called “Brandable EDIE” which 

allows member banks to incorporate the FDIC’s insurance estimator 

on the bank’s website.

To help ensure accuracy and consistency, the FDIC also publishes “The 

Financial Institution Employee’s Guide to Deposit Insurance,” which is 

an in-depth explanation of deposit insurance coverage for bankers 

and financial professionals. As a matter of practice, banks often refer 

depositors directly to the FDIC’s website or publications for 

information on deposit insurance coverage.

 135 FDIC, “FDIC Annual Report” at 41 (2009), 

https://www.fdic.gov/about/strategic/report/2009annualreport/AR09final.pdf.
54

The FDI Act and the FDIC’s regulations describe the official sign of 

the FDIC and prescribe its use by banks.136 The official sign clearly 

states the deposit insurance limit and states that FDIC deposit 

insurance is backed by the full faith and credit of the United States 

government. Part 328 also prescribes the official advertising 

statement banks must include in their advertisements.

Essential Criterion 7 The deposit insurer monitors, on an ongoing basis, its public 

awareness activities and arranges, on a periodic basis, 

independent evaluations of the effectiveness of its public 

awareness program or activities.

Since 1934, the FDIC has refined its public awareness activities to 

ensure the public can easily identify which entities are FDIC

members, distinguish deposit from non-deposit financial products, 

and determine the extent of their deposit insurance coverage. The 

FDIC monitors its public awareness activities on an ongoing basis.

FDIC continuously monitors how quickly it responds to requests for 

deposit insurance information and reports results in its annual 

report to Congress.137 When the FDIC sends a written explanation 

about deposit insurance coverage, the depositor or banker who 

receives the response also receives a survey. Through survey data, the 

FDIC can review direct feedback from depositors and bankers and 

modify its approach to public awareness.

The FDIC offers its most comprehensive deposit insurance brochure, 

“Your Insured Deposits,” free to bankers and depositors in several 

languages, including English, Spanish, Simplified Chinese, Traditional 

Chinese, Korean, Tagalog, and Vietnamese. The English and Spanish 

versions are also available in large print formats. The FDIC tracks 

demand for each language and format. Online distribution is tracked 

by website visits and similar metrics, and the FDIC tracks the number 

of page visits to EDIE, an online insurance estimator used by depositors 

and bankers to calculate insurance coverage.

FDIC deposit insurance specialists who provide the public with 

written explanations of deposit insurance coverage are trained in 

 136 FDI Act § 18(a)(1), 12 U.S.C. § 1828(a)(1) and 12 C.F.R. Part 328.

137 In 2018 the FDIC Call Center received 96,703 telephone calls and 38,681 were deposit insurance-related inquiries. 

The FDIC Call Center handled approximately 20,102 inquiries. Deposit insurance subject matter experts handled 

18,579 complex telephone calls identifying 50,548 deposit insurance issues. The FDIC received 1,339 written inquiries 

from consumers and bankers identifying 2,248 deposit insurance issues. Of these, 100 percent received responses 

within two weeks, as required by corporate policy.
55

plain writing for effective communication. For quality control, each 

draft response is reviewed by senior staff and modified if necessary. 

An internal review function compares responses with the statutory 

requirements in the Plain Writing Act of 2010. More broadly, the 

FDIC tracks the number of deposit insurance inquiries and adjusts 

staffing levels accordingly.

To date, the FDIC has not identified a significant deficiency in its public 

awareness activities that would justify a budgetary expenditure for an 

independent evaluation. 

In addition to internal monitoring, the FDIC is subject to oversight by 

independent, outside entities such as the GAO. See the responses 

under CP-3 for more discussion regarding external oversight.

Essential Criterion 8 Depositors in jurisdictions affected by cross-border banking 

arrangements conducted through foreign bank branches or 

subsidiaries are provided with clear information on the existence 

and identification of the deposit insurer legally responsible for 

reimbursement, and the limits and scope of coverage.

The FDIC’s “Your Insured Deposits” brochure, readily available to all 

consumers, states: “The FDIC protects depositors of insured banks 

located in the United States against the loss of their deposits if an 

insured bank fails.” This statement reflects the FDIC’s regulation on 

deposits payable outside the United States.138

 138 12 C.F.R. § 330.3(e).
56

PRINCIPLE 11 LEGAL PROTECTION

The deposit insurer and individuals working both currently and formerly for the deposit 

insurer in the discharge of its mandate must be protected from liability arising from actions, 

claims, lawsuits or other proceedings for their decisions, actions or omissions taken in good 

faith in the normal course of their duties. Legal protection should be defined in legislation.

Essential Criterion 1 Legal protection is specified in legislation and provided to the 

deposit insurer, its current and former directors, officers, and 

employees and any individual currently or previously retained 

or engaged by the deposit insurer, for decisions made and 

actions or omissions taken in good faith in the normal course of 

their duties.

FDIC current and former employees, officers, and board members

(employees) have legal protections and these protections are specified 

in law. The FDIC and its employees, but not its contractors, are generally 

protected from any liability resulting from claims or lawsuits for acts 

and omissions made while discharging their duties in good faith.

Under the Federal Tort Claims Act (FTCA), no claims can be brought 

against the FDIC or its employees for money damages for injury or 

loss of property or personal injury or death caused by any allegedly 

negligent or wrongful act or omission committed by an employee

within the scope of the employee’s authority or office.139 In FTCA 

cases, the United States, not the FDIC or the employee, is the proper 

defendant. Federal statutory and regulatory provisions authorize the 

United States to defend the FDIC and federal employees sued in tort 

for acts within the scope of their employment.140

Under the FDI Act, employees are immune from liability under the 

Securities Act of 1933 for claims arising out of any act or omission 

within the scope of the person’s employment involving the 

disposition of assets by the FDIC.141

Essential Criterion 2 Legal protection precludes damages or other awards against such 

individuals and covers costs, including funding defense costs as 

incurred (and not just reimbursement after a successful defense).

FDIC employees are generally shielded from liability for legal actions 

brought against them, provided the claim arises from conduct within 

 139 28 U.S.C. § 1346(b)(1).

140 28 U.S.C. § 2679(c); 28 C.F.R. § 50.15.

141 FDI Act § 2(f)(1), 12 U.S.C. § 1812(f)(1), 15 U.S.C. § 77a and following.
57

the scope of their official duties. Tort claims against the FDIC or its 

employees must be filed under the FTCA against the United States.142

If a money damage claim under the FTCA is ultimately proven, the 

FDIC pays the judgment or claim.

In addition to protection an employee might be entitled to under 

federal statutes or by contract, under the FDIC’s indemnity policy, 

the FDIC will indemnify present or past employees against any 

liability and expenses that may be incurred because of any claim for 

wrongful acts resulting from performing their official duties.

Essential Criterion 3 The operating policies and procedures of the deposit insurer 

require individuals with legal protection to disclose real or 

perceived conflicts of interest and to adhere to relevant codes of 

conduct, to ensure that they remain accountable.

The FDIC requires employees to maintain high professional 

standards and exhibit high integrity. Federal laws and regulations 

and individual conflict-of-interest rules and codes of conduct help 

ensure these standards are met. Examples include:

 Current FDIC employees are generally prohibited from owning 

stock in any FDIC regulated entity.143

 Current FDIC employees are prohibited from purchasing the 

assets of failed institutions owned or controlled by the FDIC in 

any capacity.144

 Members of the FDIC Board of Directors are generally prohibited 

from holding any office, position, or employment in any bank or 

bank holding company during their time in office and for two 

years after they leave office, subject to certain exceptions.145

 Senior examination staff generally are subject to a one-year 

post-employment cooling off period for entities they 

supervise.146 Violators are subject to civil monetary penalties, 

can be removed from office, and can be prohibited from 

participating in the affairs of the bank, the bank holding 

company, or any other company for up to five years.

 Examiners are prohibited from accepting loans or gratuities 

from banks they examine.147

 142 28 U.S.C. § 2679(a); Fed. Deposit Ins. Corp. v. Meyer, 510 U.S. 471, 476 (1994).

143 5 C.F.R. §3201.103.

144 5 C.F.R. § 3201.104.

145 FDI Act § 2(e), 12 U.S.C. § 1812(e).

146 See for example FDI Act § 10(k), 12 U.S.C. § 1820(k).

147 18 U.S.C. § 213.
58

Essential Criterion 4 Legal protections do not prevent depositors or other individual 

claimants or banks from making legitimate challenges to the 

acts or omissions of the deposit insurer in public or 

administrative review (e.g. civil action) procedures.

Depositors, individual claimants, and banks are able to legitimately 

challenge the acts or omissions of the deposit insurer in public or 

administrative review (civil action) procedures. Depositors’ primary 

interactions with the deposit insurer occur when a bank fails and the 

FDIC makes determinations regarding claims for insurance coverage. 

A final FDIC determination on a claim for insurance coverage is a 

final agency action reviewable under the Administrative Procedure 

Act.148 A depositor may challenge an insurance coverage 

determination by filing a complaint in federal court.

A claimant’s interactions with the deposit insurer similarly occur 

most commonly when a bank fails and the FDIC, as receiver for the 

failed institution, responds to the claim. Such claims can arise in 

many contexts. For example, the claimant might assert damages for 

the institution’s breach of a contract or an act or omission giving rise 

to a tort claim. Or the claim might concern the receiver’s repudiation 

of a contract or lease, retention of property, or other action. In such 

situations, a claimant may file a claim with the receiver. If the 

receiver disallows the claim, in whole or in part, the claimant may 

sue in federal court to seek a de novo determination of the claim.149

Financial institutions may challenge the FDIC’s acts or omissions, 

provided that the act is not fully committed to agency discretion. 

Final actions affecting a bank will generally be reviewable under the 

Administrative Procedure Act.150 For example, a bank may sue in 

federal court to challenge as arbitrary and capricious the FDIC’s 

decision to issue a cease-and-desist order or to adopt a rule that 

adversely affects the institution.

For some actions, judicial review is authorized by statute. For 

example, if the FDIC terminates an institution’s insured status, the 

institution may seek judicial review by filing a petition for review in 

federal court.151

 148 FDI Act § 11(f)(4), 12 U.S.C. § 1821(f)(4); 5 U.S.C. § 701 and following; 12 C.F.R. § 330.

149 FDI Act § 11(d)(6), 12 U.S.C. § 1821(d)(6).

150 5 U.S.C. § 701 and following.

151 FDI Act § 8(h), 12 U.S.C. § 1818(h).
59

PRINCIPLE 12 DEALING WITH PARTIES AT FAULT IN A BANK FAILURE

The deposit insurer, or other relevant authority, should be provided with the power to seek 

legal redress against those parties at fault in a bank failure.

Essential Criterion 1 The conduct of parties responsible for, or contributing to, the 

failure of a bank (e.g. officers, directors, managers, owners), as 

well as the conduct of related parties and professional service 

providers (e.g. auditors, accountants, lawyers and asset 

appraisers), is subject to investigation. The investigation of the 

conduct of such parties may be carried out by one or more of 

the following: the deposit insurer, supervisor or regulatory 

authority, criminal or investigative authorities, or any other 

professional or disciplinary body, as applicable.

The U.S. resolution framework for failed banks includes tools and 

resources to ensure that parties who may have caused losses to 

banks are investigated for civil claims. Where appropriate, the FDIC 

may make referrals to the federal or state banking or financial 

agency responsible for the failed institution for consideration of 

administrative enforcement action.

The FDIC conducts a professional liability program to “recover funds 

for FDIC receiverships and to hold accountable directors, officers, 

and professionals who caused losses to insured depository 

institutions ... that are later placed in FDIC receivership.”152 The FDIC 

in its receivership capacity investigates potential professional 

liability claims arising from every failure of an IDI. The FDIC pursues

claims that are both meritorious and expected to be cost-effective.153

The investigators may send their results to FDIC in its corporate

capacity or to the federal or state banking or financial agency 

responsible for the failed institution for consideration of 

administrative enforcement action. See EC-2 under “FDIC in Its 

Corporate Capacity” and “Federal Reserve and OCC” for a discussion 

of administrative enforcement actions and under “FDIC OIG” for a 

discussion of criminal investigations.

Essential Criterion 2 The relevant authority takes the appropriate steps to pursue 

those parties that are identified as culpable for the failure of the 

bank. The culpable parties are subject to sanction and/or 

redress. Sanction or redress may include personal or 

 152 Professional Liability Program, https://www.fdic.gov/bank/individual/failed/pls/.

153 Professional Liability Program, https://www.fdic.gov/bank/individual/failed/pls/.
60

professional disciplinary measures (including fines or penalties), 

criminal prosecution, and civil proceedings for damages.

FDIC in Its Capacity as Receiver for Failed IDIs

The FDI Act provides that a director or officer of a failed IDI can be 

held “personally liable for monetary damages in any civil action by, 

on behalf of, or at the request or direction of the” FDIC, including 

when the FDIC is acting as conservator or receiver of the failed 

institution.154 From 1986 through 2018, the FDIC and the Resolution 

Trust Corporation, a former agency responsible for asset 

management during the savings and loan crisis, recovered 

approximately $9.8 billion from professional liability claims at a cost 

of approximately $2.4 billion for the investigations and litigation.

FDIC in Its Corporate Capacity

The FDIC in its corporate capacity is the deposit insurer for all IDIs

and the federal banking agency responsible for supervising statechartered IDIs that are not members of the Federal Reserve and 

FDIC-insured branches of foreign banks. The FDIC’s supervisory 

authority extends to the “institution-affiliated parties” of these 

entities, a term defined to include a director, officer, employee, or 

controlling shareholder of, or agent for, an institution, and an 

independent contractor (such as an attorney, appraiser, or 

accountant).155 The FDIC pursues enforcement actions for violations 

of laws, rules, or regulations, unsafe or unsound banking practices, 

breaches of fiduciary duty, and violations of final orders, conditions 

imposed in writing, or written agreements. The FDIC as supervisor 

has a number of remedies when wrongdoing is committed by parties 

affiliated with the failed IDI. These remedies include consent orders, 

assessments of civil money penalties, restitution orders, cease-anddesist orders, and barring of institution-affiliated parties from the 

banking industry. For example, the FDI Act authorizes the FDIC (or 

another federal banking regulator, if the FDIC is not the primary 

regulator) to issue cease-and-desist orders requiring institution-

 154 FDI Act § 11(k), 12 U.S.C. § 1821(k).

155 Offices of Inspectors General of the FDIC, Federal Reserve, CFPB, and the Department of the Treasury, 

“Enforcement Actions and Professional Liability Claims Against Institution-Affiliated Parties and Individuals 

Associated With Failed Institutions” at 9 (2014)[hereinafter Offices of Inspectors General], 

https://www.treasury.gov/about/organizationalstructure/ig/Audit%20Reports%20and%20Testimonies/OIGCA14012.pdf.
61

affiliated parties to make restitution of losses incurred by a bank

through their actions.156

Federal Reserve and OCC

The Federal Reserve and the OCC have similar supervisory authority 

under the FDI Act.157 The Federal Reserve is the appropriate federal 

banking agency responsible for supervising state-chartered banks that 

are members of the Federal Reserve and bank holding companies. The 

Federal Reserve’s authority to issue enforcement actions extends to 

those entities and to institution-affiliated parties.158

The OCC is the appropriate federal banking agency responsible for 

supervising national banks, federal branches and agencies of foreign 

institutions, and federally chartered savings associations and their 

subsidiaries. The OCC’s authority to issue enforcement actions 

extends to those entities and to institution-affiliated parties.159

FDIC OIG

The FDIC OIG is responsible, among other things, for investigating 

criminal conduct in relation to a failed IDI, including criminal acts of 

an institution’s former officers, directors, and agents. The FDIC OIG’s 

investigators routinely work with the Federal Bureau of 

Investigation, the Internal Revenue Service, the Department of 

Homeland Security, and state law enforcement.

Investigations are pursued under federal and state law. When an 

investigation leads to evidence of criminal wrongdoing, the FDIC OIG 

typically works with U.S. Attorneys in the Department of Justice to 

pursue a criminal case.

Essential Criterion 3 The deposit insurer, or other relevant authority, has policies 

and procedures in place to ensure that insiders, related parties, 

and professional service providers acting for the failed bank are 

appropriately investigated for wrongdoing and for possible 

culpability in a bank failure.

The FDIC has policies and procedures in place to ensure that insiders, 

related parties, and professional service providers that acted for the 

failed IDI are appropriately investigated for wrongdoing.

 156 FDI Act § 8(b)(6), 12 U.S.C. § 1818(b)(6).

157 FDI Act § 8, 12 U.S.C. § 1818.

158 Offices of Inspectors General, 6–7.

159 Offices of Inspectors General, 7.
62

FDIC in Its Capacity as Receiver for Failed IDIs

As discussed above, the FDIC in its receivership capacity investigates 

potential professional liability claims based on losses caused to 

failed IDIs. Claims are pursued if they are both meritorious and 

expected to be cost-effective. Written policies and procedures 

govern the investigation and pursuit of professional liability claims. 

The process followed by the Professional Liability Program is 

summarized in the OIGs’ Report.160

FDIC in Its Corporate Capacity

The FDIC in its corporate capacity is the deposit insurer for all 

banks and is the appropriate federal banking agency responsible 

for state-chartered banks that are not members of the Federal 

Reserve and for FDIC-insured branches of foreign banks. The 

FDIC’s supervisory authority extends to institution-affiliated 

parties of the foregoing entities, including a director, officer, 

employee, controlling shareholder, agent, or independent 

contractor (such as an attorney, appraiser, or accountant). The 

FDIC has secondary enforcement authority over banks that are 

supervised and regulated by the Federal Reserve and the OCC and 

over persons affiliated with those institutions.

The FDIC has a formal process for pursuing enforcement actions, 

beginning with identification of issues that may warrant 

enforcement action. Potential grounds for enforcement actions are 

identified with information volunteered by institution employees 

and customers, from contact with other supervisory agencies or law 

enforcement officials, and in routine oversight activities such as 

conducting examinations and reviewing suspicious activity reports. 

The process followed for FDIC enforcement actions related to 

institution-affiliated parties is summarized in the OIGs’ Report.161

The Federal Reserve and the OCC

Formal processes of the Federal Reserve and the OCC for pursuing 

enforcement actions related to institution-affiliated parties are 

summarized in the report by the Offices of Inspectors General.

 160 Offices of Inspectors General, Appendix 2: Regulators’ Processes for Pursuing EAs and PLCs, FDIC: Professional 

Liability Claims Process, 50.

161 Offices of Inspectors General, Appendix 2: Regulators’ Processes for Pursuing EAs and PLCs, FDIC: Enforcement 

Actions Process Pertaining to IAPs, 47.
63

PRINCIPLE 13 EARLY DETECTION AND TIMELY INTERVENTION

The deposit insurer should be part of a framework within the financial safety net that 

provides for the early detection of, and timely intervention in, troubled banks. The 

framework should provide for intervention before the bank becomes nonviable. Such 

actions should protect depositors and contribute to financial stability.

Essential Criterion 1 The deposit insurer is part of an effective framework within the 

financial safety net that provides for the early detection of, and 

timely intervention in, banks in financial difficulty before the 

bank becomes nonviable.

The FDIC is effectively integrated into the early detection and 

intervention functions of the financial safety-net framework. The 

safety-net’s early warning systems and intervention mechanisms for 

troubled banks are timely and effective.

Integration of the FDIC Into an Effective Safety-Net Framework

The FDIC is part of a framework within the financial safety-net that 

provides for the early detection of, and timely intervention in, troubled 

banks. Through review of examination reports, use of off-site 

monitoring tools, and participation in examinations conducted by other 

federal regulators (either through agreements with these regulators or, 

in limited circumstances, under the exercise of the FDIC’s authority to 

conduct special (backup) examination activities), the FDIC regularly 

monitors the potential risks at all insured institutions, including those 

for which it is not the primary federal supervisor.162 The division of 

responsibility for prudential supervision of U.S. banks is discussed 

further in CP-2, EC-2.

Coordination among the financial safety-net participants, including 

the FDIC, OCC, and Federal Reserve, is facilitated primarily by the 

FFIEC, of which each is a member.163 The FDIC Chairman is also a 

member of the FSOC, which identifies and responds to risks to the 

financial stability of the United States and promotes market 

discipline.164 For additional information regarding coordination and 

information sharing in bank supervision, refer to CP-4.

 162 12 U.S.C. § 1820(b)(3); 12 C.F.R. 327.4(f) and 12 U.S.C. § 1818(t).

163 For information about the FFIEC’s structure, purpose, and activities, see https://www.ffiec.gov/about.htm.

164 For information about the FSOC’s structure, purpose, and activities, see 

https://www.treasury.gov/initiatives/fsoc/about/Pages/default.aspx.
64

Early Detection of Troubled Banks

Federal banking agencies detect troubled banks early on with offsite 

surveillance, onsite examinations, and a forward-looking and riskfocused supervisory strategy.165 This approach enables the agencies 

to develop a thorough understanding of the operations of individual 

banks. The agencies evaluate and ensure bank safety, soundness, and 

compliance with laws and regulations, and monitor the stability of 

banks and the financial system.

Statutes require onsite examinations every 12 to 18 months, 

depending on the bank’s condition, supervisory history, and asset 

size.166 Full-scope examinations address these components, which

are scored in a system known as CAMELS:

 Capital adequacy

 Asset quality

 Management strength, including quality of oversight by the 

board of directors and the bank’s audit function, internal 

control structure, and compliance

 Earnings quality and sustainability

 Liquidity sources to support cash needs

 Sensitivity of earnings and capital position to market risk.

For the largest, most complex institutions, federal banking agencies 

maintain a full-time, on-site examination staff to monitor the 

banking organization’s condition and activities. The FDIC maintains 

a permanent on-site presence at the largest, most complex 

institutions as secondary supervisor.

Each of the federal banking agencies uses well-defined off-site 

surveillance procedures for measuring and monitoring the risk 

profiles of individual banks and bank holding companies.

Timely Intervention in Troubled Banks

If a federal banking agency notes supervisory concerns, the agency 

will undertake appropriate and timely follow-up to verify that the 

bank has implemented required corrective actions. Typically, 

 165 See for example Federal Reserve Supervision and Regulation (SR) Letter 97-24, “Risk-Focused Framework for 

Supervision of Large Complex Institutions,” and Federal Reserve SR Letter 97-25, “Risk-Focused Framework for the 

Supervision of Community Banks,” which describe examination procedures developed by the Federal Reserve and the 

FDIC. See also OCC, “Large Bank Supervision” and “Community Bank Supervision;” Federal Reserve, “Commercial 

Bank Examination Manual,” Section 1000.1; and FDIC, “Risk Management Manual of Examination Policies,” Section 1.1.

166 FDI Act § 10(d), 12 U.S.C. § 1820(d).
65

weaknesses and deficiencies are communicated to the management 

and directors of a bank during the examination process and in a 

written report. Management and directors are expected to address 

all problems and take measurable actions to ensure that the 

problems are corrected and will not recur. If a review identifies a 

material supervisory determination, the agency may address it with 

a variety of supervisory approaches, including informal and 

nonbinding commitments by bank management, and formal 

enforcement actions. Formal enforcement actions may be pursued 

with or without the cooperation of the bank or the IAP.167

Additionally, the Prompt Corrective Action (PCA) framework serves 

to promote early identification of problems and prompt 

intervention. See PCA discussion in EC-3 for detailed explanation.

If an institution or IAP fails to comply with a final formal enforcement 

action, the agency can terminate deposit insurance coverage or 

remove the IAP. When the FDIC terminates deposit insurance, the 

chartering authority will generally revoke the institution’s charter and 

place the bank into a resolution managed by the FDIC.168

Essential Criterion 2 Safety-net participants have the operational independence and 

power to perform their respective roles in the framework for 

early detection and timely intervention.

The legal authority, operational independence, and roles of safetynet participants are established in laws. Reliable systems ensure the 

collection of timely, accurate, and relevant information to evaluate 

individual banks and the banking sector, and the criteria used to 

identify problem banks are transparent. Discretionary and 

mandatory intervention powers are available for timely and effective 

intervention in troubled banks (see more information under EC-1 

above and EC-3 below). In certain circumstances, institutions have 

limited legal means to oppose supervisory actions, but use of these 

has not caused undue interference in addressing troubled banks.

 167 Additional information about formal actions and the process for imposing them is in the agencies’ 

handbooks and examination manuals. See OCC, “Large Bank Supervision,” and “Community Bank Supervision;”

Federal Reserve System, “Commercial Bank Examination Manual” (Section 5040); and FDIC, “Risk 

Management Manual of Examination Policies” (Section 15).

168 See FDI Act § 11(c)(2), 12 U.S.C. § 1821(c)(2). Cessation of deposit insurance coverage is an enumerated ground 

for appointing a conservator or receiver under the FDI Act. See FDI Act § 11(c)(5)(J), 12 U.S.C. § 1821(c)(5)(J).
66

Operational Independence of the Federal Banking Agencies

Federal statutes provide for the operational independence of each 

federal banking agency. Operational independence of safety-net

participants is ensured through statutory provisions for appointing 

and removing agency heads, the self-funding nature of the FDIC and 

the Federal Reserve, and the legal protections for staff acting within 

the scope of their employment. These laws minimize the opportunity 

for government or industry interference that could compromise an 

agency’s independence or impede an agency’s ability to obtain and 

deploy the resources to carry out its mandate. See CP-3 for more 

information regarding governance and CP-11 for more information 

regarding legal protection.

Authority of Federal Banking Agencies

to Exercise Supervisory Powers

Each federal banking agency operates under statutory authority and 

has clearly defined objectives and responsibilities.169 As discussed 

under CP-2, statutes and regulations provide the FDIC and other 

federal banking agencies with clear and broad authority to address 

compliance with laws and ensure the safety and soundness of 

institutions under their jurisdiction. The criteria used as the basis for 

intervention in troubled banks are established in statutes and 

regulations. These authorities provide supervisors with proactive 

and remedial measures to address matters of concern and the 

discretion to determine when to use them. As described under 

CP-13, EC-1, the agencies may take prompt remedial action and 

impose penalties through legally binding formal enforcement actions 

to address unsafe or unsound practices, violations of laws or 

regulations, or breaches of any written agreement signed between 

the agency and the bank.

Appropriate actions undertaken by the federal banking agencies 

have not been unduly delayed or overturned by courts. The statutes 

and regulations governing the ability of federal banking agencies to

intervene in a timely manner also contain due process protections 

for banks and IAPs. Those provisions for notice of a proposed 

enforcement action, the opportunity for an agency hearing, and 

subsequent judicial review are nonetheless structured to allow for 

 169 See for example National Bank Act, 12 U.S.C. § 1 and following (OCC); Federal Reserve Act, 12 U.S.C. § 221 and 

following (Federal Reserve); 12 U.S.C. § 5491 and following (CFPB); FDI Act, 12 U.S.C. § 1811 and following (FDIC).
67

prompt agency resolution of problems (and immediate agency 

intervention when necessary).170 Likewise, in the event of a 

recalcitrant bank or IAP, a federal banking agency may apply to court 

for the judicial enforcement of any effective and outstanding 

enforcement notice or order.

There are also legal avenues available to oppose the appointment of 

the FDIC as receiver or conservator when a bank fails. These legal 

options have been used infrequently and have not caused undue 

interference in the FDIC’s ability to carry out its receivership 

authorities. Refer to CP-14 for more information.

Systems for Collecting Timely, Accurate, and

Relevant Banking Information

The federal banking agencies maintain robust systems to ensure 

collection of timely, accurate, and relevant information to assess 

individual banks and the overall banking sector. These data are critical 

for early detection and timely intervention. Each quarter, every bank

must submit comprehensive financial data known as Consolidated 

Reports of Condition and Income (Call Reports). The data include 

financial, operational, prudential, and structural information and must 

adhere to uniform instructions that ensure consistency and reliability. 

During bank examinations, examiners review Call Report data to 

verify integrity and accuracy.

The data are available to the public, and the federal banking agencies 

use the data for offsite monitoring of individual banks and the banking 

sector. Federal banking agencies have the authority to request and 

receive at any time any information from banks and bank holding 

companies if the agency believes it is material to the financial situation 

or the assessment of the risks of the bank or bank holding company.171

Essential Criterion 3 The framework includes a set of clearly defined qualitative 

and/or quantitative criteria that are used to trigger timely 

intervention or corrective action. The criteria:

(a) are clearly defined in law, regulation, or agreements;

(b) include safety and soundness indicators such as the 

institution’s capital, asset quality, management, earnings, 

liquidity, and sensitivity to market risk; and

 170 See for example FDI Act § 8(b)(1) (notice of violation and agency hearing), (c)(1)-(2) (temporary cease and desist 

orders and judicial review of those orders), (h) (agency hearings and orders), 12 U.S.C. § 1818(b)(1), (c)(1)-(2), (h).

171 For example, for national banks, see Revised Statutes § 5211, 12 U.S.C. § 161(a), (c).
68

(c) are reviewed periodically, and the procedure for this 

review is formalized.

The framework for corrective action includes qualitative and 

quantitative criteria defined in laws and regulations and used to 

trigger timely intervention or corrective action. The criteria are 

based on safety and soundness indicators. The effectiveness of the 

supervisory approach to troubled banks is formally and regularly 

reviewed, including how effectively the regulations were 

implemented. The appropriateness of the criteria is reviewed and 

updated as needed.172

Timely Intervention Resulting From Qualitative Determinations

As noted in EC-1, the federal banking agencies have the authority to 

take formal enforcement actions under many circumstances. 

Qualitative criteria are used to support formal enforcement actions 

when unsafe or unsound conditions exist. The term “unsafe or 

unsound practices or conditions” is not defined in statute or 

regulation because a single definition would not capture the broad 

spectrum of practices or conditions in the term. The FDIC’s “Risk 

Management Manual of Examination Policies” states that “generally, 

an unsafe or unsound practice encompasses any action, or lack of 

action, by an institution or an IAP which is contrary to generally 

accepted standards of prudent operation, the possible consequences 

of which, if continued, would result in abnormal risk of loss or 

damage to an institution, its shareholders, or the” DIF. Precedent 

may also be considered to determine whether unsafe or unsound 

conditions or practices exist, and the FDIC’s “Risk Management 

Manual of Examination Policies” lists practices and conditions 

determined in past proceedings of the FDIC Board to be unsafe or 

unsound. “Unsafe or unsound practices or conditions” may also be 

determined when an inadequately capitalized institution breaches 

quantitative thresholds in statutes, which are discussed below.

The federal banking agencies have established minimum operational 

and managerial standards (including internal controls and audit, 

loan documentation, credit underwriting, interest rate exposure, and 

asset growth); compensation standards; and standards relating to 

 172 Each of the federal banking agencies makes its examination guidance public through its handbooks and 

examination policy manuals. See OCC, “Large Bank Supervision” and “Community Bank Supervision;” Federal Reserve, 

“Commercial Bank Examination Manual;” and FDIC, “Risk Management Manual of Examination Policies.”
69

asset quality, earnings, stock valuation, and information security.173

If a federal banking agency determines that an institution fails to 

meet any of these established standards, the agency may require the 

institution, through formal enforcement actions, to submit to the 

agency an acceptable plan, known as a safety and soundness plan, to 

comply with the standard.

Timely Intervention Resulting From Quantitative Determinations

Every bank operating in the United States must maintain minimum 

levels of capital or be subject to restrictions, enforcement actions, or 

revocation of its banking charter and deposit insurance. While 

qualitative assessments of the adequacy of capital levels are made

throughout the supervisory process, the federal banking agencies 

have also established minimum capital thresholds which can trigger 

mandatory or discretionary supervisory interventions.

U.S. capital rules generally follow the framework adopted by the Basel 

Committee on Banking Supervision. In 2013, the federal banking 

agencies issued regulations for banks that align with the Basel III 

capital standards for all U.S. banks. For FDIC-supervised institutions, 

the capital rules are contained in Part 324 of the FDIC Rules and 

Regulations. Part 324 defines capital elements, establishes riskweighting guidelines for determining capital requirements under 

standardized and advanced approaches, and prescribes PCA for 

institutions not adequately capitalized.

Any bank which has less than its minimum leverage capital 

requirement may be deemed engaged in unsafe and unsound 

practice unless the institution has signed and complies with an 

agreement or has submitted and complies with an approved plan to 

increase its leverage capital ratio and take other necessary actions. 

Any bank with a Tier 1 capital to total assets ratio less than 2 percent 

may be deemed in unsafe and unsound condition. Institutions that 

fail to maintain minimum leverage capital requirements may be 

subject to a capital directive and other formal enforcement actions.

In addition, the federal banking agencies established the PCA 

framework to impose capital-preservation measures if thresholds 

are breached. Under the PCA framework, each bank’s capital ratios 

are used to place banks into one of five capital categories, ranging 

from “well-capitalized” to “critically undercapitalized.” Supervisory 

 173 12 C.F.R. § 364 (FDIC); 12 C.F.R. § 30 (OCC); 12 C.F.R. § 208 (FRB).
70

actions are permitted or prescribed, based on the bank’s PCA 

category. The PCA framework generally requires that a bank that is 

critically undercapitalized be recapitalized, sold, merged, liquidated, 

or placed into receivership or conservatorship within 90 days.174

The PCA framework ensures early intervention at banks that have 

problems, and the timely closure of failing institutions.

The Basel III capital standards incorporated into federal banking 

agency regulations include a capital conservation buffer rule designed 

to strengthen an institution’s financial resilience during economic 

cycles. Under the rule, banks must maintain a buffer of at least 

2.5 percent above each ratio corresponding to the “adequately 

capitalized” level in the PCA framework or the agency may restrict 

distributions and discretionary payments. Banks that exceed asset- or 

activity-based thresholds are also required to maintain an additional 

leverage buffer to avoid restrictions on capital distributions and 

discretionary bonus payments to executive officers.

Periodic Review of Criteria That Trigger

Intervention and Corrective Action

Federal banking agency laws and procedures require formal 

reviews of the effectiveness of the criteria that trigger corrective 

action. The FDI Act requires a formal review whenever a bank

failure results in a material loss to the DIF.175 The review and a 

Material Loss Review report are completed by the Inspector 

General of the federal banking agency that is the bank’s primary 

regulator.176 The report’s objective is to show why the material loss 

occurred and to recommend ways to prevent similar losses. The 

report includes an analysis of whether PCA actions were 

appropriately and effectively carried out. Federal banking agencies 

have also implemented other formal procedures that are not 

mandated by statute. The FDIC conducts internal audits of each of 

its regional offices every three years, including a review of a sample 

of downgraded institutions to assess the effectiveness of efforts to 

initiate corrective actions promptly.

The appropriateness of the criteria that trigger timely intervention 

or corrective action is subject to review and revision as needed. In 

 174 FDI Act § 38(h)(3), 12 U.S.C. § 1831o(h)(3).

175 FDI Act § 38(k), 12 U.S.C. § 1831o(k). “Material loss” is defined as a loss to the DIF that exceeds either $50 million or 

$75 million, depending on criteria in the statute.

176 Material Loss Reviews by the FDIC are publicly available at https://www.fdicoig.gov/reports-bank-failures.
71

2013, the FDIC made extensive changes to capital measurement 

methodologies and preservation tools to align with Basel III capital 

standards. In addition, the Economic Growth and Regulatory 

Paperwork Reduction Act (EGRPRA) mandates that federal banking 

agencies and the FFIEC review agency regulations and policies every 

ten years.177 In this review, criteria may be revised. The most recent 

review, in 2017, included several proposals to revise definitions 

used to calculate risk-weighted capital ratios. The federal banking 

agencies’ compliance with the Basel III capital standards and 

EGRPRA initiatives show commitment to review and revise criteria 

when appropriate.

 177 12 U.S.C. § 3311; see for example FFIEC, Joint Report to Congress: Economic Growth and Regulatory Paperwork 

Reduction Act (2017), https://www.ffiec.gov/pdf/2017_FFIEC_EGRPRA_Joint-Report_to_Congress.pdf; FFIEC, 

Economic Growth and Regulatory Paperwork Reduction Act, https://egrpra.ffiec.gov/about/the-law.html.
72

PRINCIPLE 14 FAILURE RESOLUTION

An effective failure resolution regime should enable the deposit insurer to provide for 

protection of depositors and contribute to financial stability. The legal framework should 

include a special resolution regime.

Essential Criterion 1 The deposit insurer has the operational independence and 

sufficient resources to exercise its resolution powers consistent 

with its mandate.

The FDIC has a high degree of operational independence and access to 

sufficient resources to execute its resolution powers, as it is a selffunded independent agency with a strong internal governance system.

The FDIC operates under the FDI Act to maintain financial stability 

and public confidence in the nation’s financial system. Under the FDI 

Act, the FDIC is the resolution authority for all IDIs in the United 

States, including systemically important banks. Please see the 

responses under CP-3 regarding governance for a more detailed 

discussion of the FDIC’s operational independence and the responses 

under CP-9 regarding sources of funds for a more detailed discussion 

of the FDIC’s resources.

Essential Criterion 2 The resolution regime ensures that all banks are resolvable 

through a broad range of powers and options.

The FDIC’s resolution regime is flexible enough to resolve small, 

medium, and large banks. It is authorized to exercise a variety of 

resolution authorities that with its special powers ensure that the 

FDIC can promptly and effectively execute resolutions.

Once the FDIC has been appointed receiver of a failed IDI, it succeeds 

to all rights, titles, powers, and authorities of that institution, its 

shareholders, and its management.178 The FDIC as receiver has broad 

authority to manage the assets and operations of the failed bank in 

resolution to, among other things, restructure or wind down the failed 

institution, repudiate contracts, enforce contracts, transfer contracts, 

enter into contracts, and purchase and sell assets.179 The FDIC also is 

responsible for paying insured depositors, administering a claims 

process, and marshalling the assets of the institution to pay those 

creditors under the statutorily prescribed hierarchy.180

 178 FDI Act § 11(d), 12 U.S.C. § 1821(d).

179 FDI Act, 12 U.S.C. § 1821(d)(2)(B), (E) and (G); (e) and (n).

180 FDI Act § 11(d)(11), 12 U.S.C. § 1821(d)(11).
73

Resolution Strategies

The FDI Act provides the FDIC as receiver with the tools to resolve 

small, medium, and large banks. Absent a systemic risk 

determination under the FDI Act, the FDIC as receiver must resolve a 

failed IDI, regardless of its size, in a manner that is least costly to the 

DIF.181 In most cases—particularly where the FDIC has sufficient 

advance warning, as when the capital condition of an institution

deteriorates over a period of time—the FDIC will seek to market the 

assets and liabilities of the failed IDI to an assuming institution (AI) 

through one or more purchase and assumption (P&A) 

transactions.182 P&A is the method the FDIC has used most often to 

resolve a failing institution and it is the least disruptive to local 

communities. In a P&A transaction a healthy institution agrees to 

purchase some or all of the assets of the failing institution and 

assumes some or all of its liabilities, including all insured deposits.

The resolution transaction can vary based on factors such as the time 

available to arrange the transaction, the location and size of the 

financial institution, the nature of its deposits, and the assets 

available for sale.183 If there are no bids for a P&A transaction, or if 

the bids received would not yield the least-costly resolution, the

 181 FDI Act § 13(c)(4), 12 U.S.C. § 1823(c)(4).

182 FDIC, FDIC Resolution Handbook, https://www.fdic.gov/bank/historical/reshandbook/resolutions-handbook.pdf.

183 P&A transactions include:

Basic P&A—assets that pass to acquirers generally are limited to cash, cash equivalents, and marketable 

securities. The liabilities assumed by the acquirers will include the portion of the deposit liabilities 

covered by FDIC insurance and may also include all deposits, if that is the least-costly option.

Whole Bank P&A—this variation emerged as the result of an effort to persuade acquirers to purchase the 

maximum amount of a failed institution’s assets. This type of transaction minimizes FDIC’s one-time 

cash outlay by having the acquirer purchase all assets, eliminates the FDIC’s further financial obligation 

to the acquirer, and reduces the assets held by the FDIC for liquidation.

P&A With Shared Loss—the FDIC, as receiver, agrees to share losses on certain types of assets with the 

acquirer. Shared loss assets are typically distressed assets that might not appeal to potential acquirers 

without protection from losses. The shared loss option also reduces the FDIC’s immediate cash needs, 

is operationally simpler, and moves assets quickly to the private sector.

Bridge Bank P&A—used when a P&A transaction cannot be concluded before the failure. A new, 

temporary national bank is organized by the FDIC and chartered by the OCC, and the FDIC manages 

certain assets and operations of the failed insured depository institution. This new institution exists 

until the FDIC markets the institution to a third party. A bridge bank can be operated for two years, 

with three one-year extensions. Before establishing a bridge bank, a cost analysis must show that the 

failing institution has franchise value and that this alternative is least-costly for the DIF (subject to a 

systemic risk exception from this least-cost requirement).
74

FDIC can execute a deposit payout and must pay depositors of the 

failed institution their insured deposits.184

Special Powers

The FDI Act grants the FDIC special powers that allow the receiver to 

resolve failed IDIs without prior judicial approval. For example, the 

FDIC as receiver may disaffirm or repudiate any contract or lease to 

which the failed institution is a party if the receiver determines that 

performance of the contract or lease would be burdensome, and that 

repudiation would promote the orderly administration of the 

institution’s affairs.185 The FDIC as receiver may, under certain 

circumstances, enforce contracts and prevent other parties from 

terminating agreements if preserving the contract is in the best 

interest of the receivership.186

The FDIC also has special powers in litigation. When the FDIC as 

receiver is substituted as a party for litigation related to the failed 

institution, the FDIC may request that the court stay the litigation for 

up to 90 days, and the court cannot decline to issue the stay.187 The 

FDIC also has the right to remove that litigation from state court to 

federal court.188

The FDIC has the power to organize one or more bridge 

institutions, and has the power to enter into legally enforceable 

agreements by which the FDIC can transfer, and the bridge 

 184 The three most common versions of a deposit payout are:

Straight Deposit Payout—used when the liquidation, closing, or winding down of affairs is determined to 

be the least-costly resolution. The FDIC pays insured depositors, retains all assets and other liabilities, 

and the receivership bears the responsibility and cost of liquidating all of the assets.

Insured Deposit Transfer—the insured and secured deposits of a failed institution are transferred to an 

agent institution in the community. The agent institution pays customers of the failed institution, or the 

customer may request a new account in the agent institution.

Deposit Insurance National Bank (DINB)—a bank of limited life and powers that is organized by the FDIC 

and chartered by the OCC. The FDIC may create a DINB to ensure that depositors, particularly those in 

underserved areas, have continued access to their insured funds, and time to open accounts at other 

insured institutions, when no other bank has agreed to assume the insured deposits. The FDI Act enables 

the FDIC to operate a DINB for up to two years. However, the majority of recent DINBs operated for only 

30 days. All assets and non-deposit liabilities of the failed institution remain in receivership.

185 FDI Act § 11(e)(1), 12 U.S.C. § 1821(e)(1).

186 FDI Act § 11(e)(13), 12 U.S.C. § 1821(e)(13).

187 FDI Act § 11(d)(12)(A)-(B), 12 U.S.C. § 1821(d)(12)(A)-(B).

188 FDI Act § 11(d)(13), 12 U.S.C. § 1821(d)(13).
75

institution can receive, assets and liabilities of the failed firm as 

selected by the FDIC.189

The FDIC as receiver has the power to merge the failed institution 

with another institution and the power to transfer or sell any 

asset or liability of the failed institution to a third party (including 

an asset management vehicle or bridge institution) without 

providing prior notification or obtaining any approval, 

assignment, or consent with respect to such transfer.190

Essential Criterion 3 Where there are multiple safety-net participants responsible 

for resolution, the legal framework provides for a clear 

allocation of objectives, mandates, and powers of those 

participants, with no material gaps, overlaps or inconsistencies. 

Clear arrangements for coordination are in place.

The FDIC is the sole resolution authority for all banks in the United 

States, including systemically important banks. The legal framework 

in the United States provides for a clear allocation of objectives, 

mandates, and powers of all safety-net participants. The U.S. federal 

banking agencies have in place several formal and informal 

mechanisms for cooperation and information sharing in connection 

with resolution.

State banking authorities are responsible for the resolution of 

state-licensed uninsured branches of foreign banks. The OCC is 

responsible for the resolution of federally licensed uninsured 

branches of foreign banks. The FDIC would coordinate with federal 

and state banking regulators, as the case may be, in circumstances

in which the FDIC is appointed receiver with respect to a subsidiary 

of a foreign bank. A comprehensive discussion relevant to safetynet participants is provided under CP-4, EC-1.

Essential Criterion 4 Resolution and depositor protection procedures are not limited 

to depositor reimbursement. The resolution authorities have 

effective resolution tools designed to help preserve critical 

bank functions and to resolve banks. These include, but are not 

limited to, powers to replace and remove senior management, 

terminate contracts, transfer and sell assets and liabilities, 

write down or convert debt to equity and establish a temporary 

bridge institution.

 189 FDI Act, 12 U.S.C. § 1821(n)(1)(A) and FDI Act, 12 U.S.C. § 1821(n)(3)(A).

190 FDI Act, 12 U.S.C. § 1821(d)(2)(G) and (n)(1)(A) and (B).
76

The FDIC has successfully demonstrated the use of various 

resolution tools to help preserve critical bank functions and to 

resolve failed IDIs in an orderly manner. The FDIC has the ability and 

legal powers supported by policies, procedures, and standards to 

resolve failing institutions.

FDIC Has Many Tools and Legal Powers to Resolve Failed IDIs

The FDIC as receiver has been granted through statute many powers 

that can be used to resolve failed IDIs that extend beyond depositor 

payouts. Under the FDI Act, the FDIC as receiver succeeds to all 

rights, titles, powers, and privileges of the failed IDI and of any 

stockholder, member, officer, or director, and therefore can perform 

all functions of the bank, including the removal and replacement of 

senior management and directors.191 The FDIC also has the authority 

to repudiate contracts, transfer and sell assets and liabilities, manage 

the claims process, and establish a temporary bridge institution.192

The FDIC has successfully used its bridge bank power to help preserve 

critical bank functions and to resolve failed banks in an orderly 

manner. Using a bridge bank provides an effective resolution tool 

when there is franchise value in the failing institution. This tool 

enables the FDIC to establish a new temporary national bank 

(chartered by the OCC) to bridge the gap in time between the failure of 

the institution and the time it takes the FDIC to evaluate and market 

the institution to a third party. The FDIC as receiver can preserve 

critical bank functions because it succeeds to all rights, titles, powers, 

and privileges of the failed institution and therefore can perform all 

functions of the failed IDI. See CP-14, EC-2 for more discussion of 

resolution tools and strategies and the FDIC’s special powers.

FDIC Use of Its Powers Is Supported by Policies,

Procedures, and Guidance

The FDIC’s exercise of its statutorily granted resolution and 

receivership powers is supported by a variety of sources.193 The 

FDIC also publishes statements of policy that address receivership 

 191 FDI Act § 11(d)(2), 12 U.S.C. § 1821(d)(2).

192 FDI Act § 11(e), 12 U.S.C. § 1821(e); FDI Act § 11(d)(2)(G), 12 U.S.C. § 1821(d)(2)(G); FDI Act § 11(d)(3)-(10),

12 U.S.C. § 1821(d)(3)-(10); FDI Act § 11(n)(1)(A), 12 U.S.C. § 1821(n)(1)(A).

193 See for example 12 C.F.R. Part 360.
77

and resolution issues.194 In addition, the Resolutions Handbook

addresses resolution and receivership processes and practices.195

FDIC Assesses Whether Resolution Tools

Are Used Appropriately

The FDI Act requires the Inspector General of the appropriate 

federal banking agency to conduct a review and prepare a report 

when the DIF incurs a material loss related to a bank for which the 

FDIC is appointed receiver.196 These reviews consider whether the 

FDIC properly implemented the PCA provisions of the FDI Act and 

how the resolution of the failed institution was handled. The reviews 

inform the FDIC’s approach to future resolutions.

The FDIC is also subject to external review by the GAO, including an 

annual audit of the FDIC and the DIF.197 The GAO also conducts 

reviews of the FDIC’s resolution activities.

Essential Criterion 5 One or more of the available resolution methods allows the 

flexibility for resolution at a lesser cost than otherwise 

expected in liquidation net of expected recoveries.

Generally, the FDIC is required to pursue the resolution option that is 

least costly to the DIF.198 The FDIC has many methods it can use to 

resolve failed institutions. While the FDIC has used deposit payouts in 

many forms, the FDIC most commonly pursues a P&A transaction 

strategy to resolve a failed institution. There are different P&A 

transactions that the agency can pursue, ranging from transfer of 

some assets of the failed IDI to the AI all the way to whole bank P&A. 

(See the response to EC-2 for a more detailed discussion of P&A 

transactions.) There is an exception to the least-costly resolution 

requirement when a statutory determination is made by the FDIC, the 

Federal Reserve, and the Secretary of the Treasury that compliance 

with the least-cost test would have serious adverse effects on 

economic conditions or financial stability in the United States.199

 194 FDIC statements of policy are available at https://www.fdic.gov/regulations/laws/rules/5000-100.html.

195 FDIC, Resolutions Handbook, https://www.fdic.gov/bank/historical/reshandbook/resolutions-handbook.pdf.

196 FDI Act § 38(k)(1), 12 U.S.C. § 1831o(k)(1).

197 FDI Act § 17(d)(1), 12 U.S.C. § 1827(d)(1).

198 FDI Act § 13(c)(4), 12 U.S.C. § 1823(c)(4).

199 FDI Act § 13(c)(4)(G), 12 U.S.C. § 1823(c)(4)(G).
78

For a full discussion of FDIC resolution tools and powers, see 

responses to EC-2 and EC-4. For a discussion of how the FDIC 

determines which resolution strategy to use, see the response to EC-9.

Essential Criterion 6 Resolution procedures follow a defined creditor hierarchy in 

which insured deposits are protected from sharing losses and 

shareholders take first losses.

The FDI Act provides a statutory hierarchy of claims that protects 

insured deposits and subjects shareholders to the first losses 

when a bank fails. Under the FDI Act, amounts realized from the 

liquidation or other resolution of any bank by the receiver shall be 

distributed to pay claims (other than secured claims) in this order:

(i) administrative expenses of the receiver

(ii) any deposit liability of the institution

(iii) any other general or senior liability of the institution [which is 

not described in clause (iv) or (v)]

(iv) any obligation subordinated to depositors or general 

creditors [which is not described in clause (v)]

(v) any obligation to shareholders or members arising because of 

their status as shareholders or members [including any 

depository institution holding company or any shareholder or 

creditor of such company].200

Essential Criterion 7 The resolution regime does not discriminate against depositors 

on the basis of their nationality or residence.

The U.S. resolution regime does not discriminate against depositors 

on the basis of their nationality or residence.201

Essential Criterion 8 The resolution regime is insulated against legal action that aims 

at the reversal of decisions related to resolving non-viable 

banks. No court can reverse such decisions. The legal remedy 

for successful challenges is limited to monetary compensation.

The FDI Act sets forth the limited scope of judicial review of FDIC’s 

operations as receiver of failed IDIs. The FDI Act provides that courts 

may not restrain or affect the exercise of powers or functions of the 

receiver or issue any attachment or execution upon assets in the 

possession of the FDIC as receiver.202

 200 FDI Act § 11(d)(11)(A), 12 U.S.C. § 1821(d)(11)(A).

201 12 C.F.R. § 330.3; FDI Act § 1, 12 U.S.C. § 1811.

202 FDI Act § 11(d)(13)(C)-(D), (j), 12 U.S.C. § 1821(d)(13)(C)-(D), (j).
79

There are legal means available to challenge the appointment of a 

receiver for a bank under both federal law (for a bank closed by a 

federal agency) and state law (for a state-chartered bank closed by 

its state regulator). Challenge procedures under state law vary from 

state to state, and are usually brought in state court against the state 

regulator. When the appointment is under federal law, a bank placed 

into a receivership or conservatorship may, within 30 days, apply in 

federal court for the FDIC to be removed as receiver or 

conservator.203 Regardless of the state or federal forum or the 

applicable law, the regulators have typically been able to present 

overwhelming factual evidence about a bank’s troubled condition 

and the need to close it, making any challenge unsuccessful.

The resolution process generally would not be interrupted by the 

challenge being considered by the court. In most cases, the 

resolution process would involve the rapid transfer of deposits to 

another institution or direct payments to depositors and sale of a 

substantial amount of the institution’s assets. Once these actions 

have been taken, there is generally no feasible means of reversing 

them to restore the institution intact to its owners. As a result, even 

if the court found against the appointment of the FDIC as receiver or 

conservator, the relief available to aggrieved parties will generally 

not include reversal of actions taken in receivership; rather it would 

be limited to monetary damages. Most failing banks are resolved 

without legal opposition.

Essential Criterion 9 The resolution regime keeps the period between depositors 

losing access to their funds and implementation of the 

selected resolution option (e.g. depositor reimbursement) as 

short as possible.

The FDI Act requires the FDIC to make payments of insured deposits 

as soon as possible upon the failure of a bank. The FDIC may make 

payments of insured deposits either by cash or by providing to each 

depositor a transferred deposit in another bank in the same 

community.204 Other than “as soon as possible,” Congress has not 

imposed any time limit for paying deposit insurance.

In practice, the FDIC has provided customers access to insured

deposits within one business day of the institution’s failure or 

within two business days if the failure occurs on a day other than 

 203 FDI Act § 11(c)(7), 12 U.S.C. § 1821(c)(7).

204 FDI Act § 11(f)(1), 12 U.S.C. § 1821(f)(1).
80

Friday. This is facilitated by pre-resolution planning and standard 

policies and procedures that the FDIC follows in making deposit 

insurance payments.

The majority of bank failures result in a P&A transaction in which 

the failed IDI’s deposits are transferred to another bank after the 

FDIC is appointed receiver. This approach results in a relatively 

seamless process that minimizes disruption for depositors, as 

proven during the recent financial crisis. From 2008 to 2013, the 

FDIC resolved 489 banks. Of these resolutions, 463 were P&A 

transactions; only 26 involved deposit payouts or the creation of a 

deposit insurance national bank (DINB). Of the P&A transactions, 

80 were whole bank P&A transactions in which both insured and 

uninsured deposits were transferred to the AI and no deposit 

insurance determination was necessary. Another 304 P&A 

transactions involved loss share agreements, which are similar to 

whole bank P&A transactions, except that the FDIC as receiver 

shares losses on certain types of assets.205

 205 “Crisis and Response,” 200.
81

PRINCIPLE 15 REIMBURSING DEPOSITORS

The deposit insurance system should reimburse depositors’ insured funds promptly, in 

order to contribute to financial stability. There should be a clear and unequivocal trigger for 

insured depositor reimbursement.

Essential Criterion 1 The deposit insurer is able to reimburse most insured 

depositors within seven working days. If the deposit insurer 

cannot currently meet this target, the deposit insurer has a 

credible plan in place to do so.

The FDI Act requires the FDIC to make payments of insured deposits 

as soon as possible upon the failure of an insured institution either 

by cash or by providing to each depositor a transferred deposit in a 

new bank equal to the insured deposit.206 While every bank failure is 

unique, there are standard policies and procedures that the FDIC 

follows in making deposit insurance payments as soon as possible. In 

practice, the FDIC is able to provide customers access to insured

deposits on the business day following an institution’s failure.

In certain cases, depositors may be required to provide 

supplemental documentation about their deposits, such as for 

accounts linked to a formal written trust agreement, funds placed by 

a fiduciary on behalf of an owner such as a deposit broker, or 

deposits placed by an administrator of an employee benefit plan. The 

deposit insurance determination may take longer in such cases. The 

timing for completing the deposit insurance determination is based 

solely on the depositor providing the required documentation 

needed by the FDIC to determine insurance coverage.

Essential Criterion 2 To be credible, the reimbursement plan:

a) has a clear time frame for implementation (e.g. within

two years);

b) is supported by relevant laws, regulations, systems, and 

processes (e.g. intervention and resolution manuals); and

c) has clear and measurable deliverables.

The FDI Act requires the FDIC to make payments of insured deposits as 

soon as possible after the failure of an insured institution. In practice 

the FDIC does so.

 206 FDI Act § 11(f)(1), 12 U.S.C. § 1821(f)(1).
82

Essential Criterion 3 In situations where reimbursement is triggered and there may 

be extended delays in reimbursements, the deposit insurer may 

make advance, interim, or emergency partial payments.

The legal framework in the United States allows the FDIC to 

reimburse insured deposits without extended delays. The FDIC has 

broad powers to manage the capacity and practical ability to pay 

claims for insured deposits as soon as possible by drawing upon the 

failed institution’s assets, and, if necessary, the DIF. Advance 

dividends for uninsured deposits may also be approved by the FDIC 

Board of Directors.

Essential Criterion 4 In order to provide depositors with prompt access to their 

funds, the deposit insurer:

(a) has access to depositors’ records at all times, which 

includes the authority to require banks to maintain 

depositor information in a format prescribed by the 

deposit insurer in order to expedite insured depositor 

reimbursement;

(b) has the authority to undertake advance or preparatory 

examinations (e.g. on-site and independently or in 

conjunction with the supervisory authority) on the 

reliability of depositor records, and has tested member 

institution’s IT systems and data to ensure the capability 

to produce such records; and

(c) has a range of reimbursement options.

The FDIC:

(a) can directly access the bank’s deposit records and it has the 

authority to require banks to maintain depositor information 

in a format prescribed by the FDIC to expedite insured 

depositor reimbursement.207 FDIC regulations include 

recordkeeping requirements that vary depending on the size of 

the institution.208 The FDIC’s examination authority allows for 

the review of deposit records to ensure they are maintained in 

a manner that would facilitate depositor reimbursement.209

(b) maintains the Claims Administration System, which has the 

 207 12 C.F.R. Part 370.1, 12 C.F.R. § 370.3.

208 See for example 12 C.F.R. § 360.9 (requirements for banks that have at least $2 billion in deposits and at least either 

250,000 deposit accounts or $20 billion in total assets); 12 C.F.R. Part 370 (requirements for banks that have 2 million 

or more deposit accounts).

209 FDI Act § 10(b), 12 U.S.C. § 1820(b).
83

ability to interface with an institution’s information technology 

system to quickly calculate deposit insurance coverage. The 

largest banks are required to implement and maintain the 

information technology capability to process their own deposit 

account records and calculate the deposit insurance coverage 

available for each depositor if a failure occurs.

210 The FDIC has 

implemented regulations and provided guidance regarding the 

file formats for depositor records.211 The FDIC has special 

examination authority for any bank.212 Accordingly, the FDIC 

has the authority to undertake advance or preparatory 

examinations on the reliability of depositor records, and it has 

the authority to test an institution’s IT systems and data to 

ensure the capability to produce records and deposit insurance 

determinations where those banks are required to maintain 

those capabilities.213 As part of standard bank examinations, 

FDIC examiners conduct IT examinations to determine the 

validity and reliability of the records produced by an 

institution’s system.214 During pre-failure preparations, FDIC 

examination and resolution staff gather information about the 

institution’s deposits, IT systems, and other aspects relevant to 

resolution planning.215 The FDIC uses the Claims 

Administration System prior to an institution’s failure to 

estimate the amount of insured and uninsured deposits held by 

an institution.216

(c) pays claims for insured deposits as soon as possible either in 

cash or by providing to each depositor a transferred deposit in 

another bank.217 In most cases, the FDIC satisfies its obligation 

to pay insured deposits by transferring them to an AI through a 

P&A transaction. As noted in EC-2, the payout can also be made 

in cash or facilitated through several means, including the 

establishment of a DINB or by using a paying agent.218

 210 12 C.F.R. § 370.3.

211 See for example 12 C.F.R. Part 360, Appendices A–H (detailing file format requirements for insured institutions 

subject to 12 C.F.R. § 360.9); 12 C.F.R. Part 370, Appendices A and B; and FDIC, 12 CFR Part 370 Recordkeeping 

Information Technology Functional Guide, https://www.fdic.gov/regulations/resources/recordkeeping/index.html.

212 FDI Act § 10(b)(3), 12 U.S.C. § 1820(b)(3).

213 12 C.F.R. § 360.9(h); 12 C.F.R. § 370.10(b).

214 FDIC, Risk Management Manual of Examination Policies, https://www.fdic.gov/regulations/safety/manual/.

215 Resolutions Handbook, 9-11.

216 FDIC, Freedom of Information Act Service Center—Major Information Systems, 

https://www.fdic.gov/about/freedom/systems.html.

217 FDI Act § 11(f)(1), 12 U.S.C. § 1821(f)(1).

218 FDI Act § 11(m), 12 U.S.C. § 1821(m); and Resolutions Handbook, 19-20.
84

Essential Criterion 5 The deposit insurer has the capacity and capability to promptly 

carry out the reimbursement process, including:

a) adequate resources and trained personnel (in-house or 

contractors) dedicated to the reimbursement function and 

supported with reimbursement documentation or manuals;

b) information systems to process depositor information in a 

systematic and accurate manner;

c) pre- and post-closing activities specified in closing 

documentation or manuals; and

d) scenario planning and simulations, including 

simulations on bank closings with supervisory and 

resolution authorities.

The FDIC:

(a) has adequate in-house personnel and access to contractor 

personnel to carry out its reimbursement functions effectively. 

The FDI Act requires the FDIC to have a division of asset 

disposition to handle liquidation of banks, which the FDIC has 

satisfied through its Division of Resolutions and Receiverships.

This division is responsible for resolving failed IDIs and 

managing the resulting receiverships. The FDIC has established 

claims determination and payments processes supported by 

reimbursement documentation and manuals.219

(b) has information systems to process depositor information in a 

systematic and accurate manner through the Claims 

Administration System, a centralized, automated repository for 

depositor information used when an IDI fails. It interfaces with 

an institution’s information technology system to quickly 

calculate deposit insurance coverage. FDIC regulations also 

require large banks to implement and maintain the capabilities 

to perform deposit insurance determinations using their own 

IT systems.220

(c) has developed policies, procedures, standards, and manuals for 

pre- and post-closing activities, including a claims manual, the 

Resolutions Handbook, and others.221

(d) is the sole resolution authority for all IDIs in the United States. 

The FDIC works with other supervisory authorities to plan for 

future resolutions, including regular meetings with federal 

banking supervisory authorities to discuss troubled institutions.

 219 Resolutions Handbook.

220 12 C.F.R. § 370 (recordkeeping and IT capability requirements for banks that have 2 million or more deposit 

accounts).

221 Resolutions Handbook.
85

Essential Criterion 6 A review (e.g. post mortem) following a bank failure is 

performed to determine and analyze elements of the 

reimbursement process (including the resolution procedures 

where applicable) which were successful or unsuccessful.

The FDIC regularly conducts informal reviews of actions taken during 

the course of the resolution of a failed IDI. In addition, the FDI Act 

requires the Inspector General of the appropriate federal banking 

agency to conduct a review and prepare a report when the DIF incurs 

a material loss related to a bank for which the FDIC is appointed 

receiver.222 These reviews consider how the resolution of the failed 

institution was handled and they inform the FDIC’s approach to future 

bank failures. The FDIC also conducts regional audits on a three-year 

cycle to review the effectiveness of resolutions.

Essential Criterion 7 An independent party conducts a periodic audit of the 

reimbursement process to confirm that appropriate internal 

controls are in place.

The FDIC is accountable through a transparent framework for the 

review of its discharge of its statutory responsibilities, including its 

management of the reimbursement process. The FDIC is required 

to maintain full accounting of receiverships undertaken under the 

FDI Act and make an annual accounting available to the Secretary

of the Treasury and the Comptroller General of the United States, 

among others.223

The FDIC is also subject to external review by the GAO, including an 

annual audit of the FDIC and the DIF.224 Finally, the FDI Act requires 

the Inspector General of the appropriate federal banking agency to 

conduct a review and prepare a report when the DIF incurs a material 

loss related to a bank for which the FDIC is appointed receiver.225

Essential Criterion 8 If set-off of insured deposits against past-due claims (e.g. debt 

service and arrears) or matured loans is applied, such 

application is timely and does not delay prompt reimbursement 

of insured depositors’ claims or undermine financial stability.

 222 FDI Act § 38(k)(1), 12 U.S.C. § 1831o(k)(1). The FDI Act defines a material loss as any estimated loss to the DIF in 

excess of $50 million if the loss occurs on or after January 1, 2014.

223 FDI Act § 11(d)(15), 12 U.S.C. § 1821(d)(15).

224 FDI Act § 17(d)(1), 12 U.S.C. § 1827(d)(1).

225 FDI Act § 38(k)(1), 12 U.S.C. § 1831o(k)(1). The FDI Act defines a material loss as any estimated loss to the DIF in 

excess of $50 million on or after January 1, 2014.
86

The FDIC may withhold payment of a portion of an insured deposit 

to a depositor to provide for the payment of a liability of the 

depositor which is due and owing to the failed institution or its 

receiver.226 The FDIC has established procedures for the timely 

application of any offset transactions to ensure prompt 

reimbursement of insured depositors’ claims.227

Essential Criterion 9 Working arrangements and/or agreements are in place with 

relevant clearing and settlement system agencies and 

liquidators, to ensure that transit items are dealt with in an 

appropriate, consistent and timely manner.

The FDIC receivership management process has addressed the 

treatment of items in transit when a bank fails. While the ultimate 

treatment of these items will depend on the strategy used to resolve 

the failed institution, the FDIC’s goal is to cause the least amount of 

disruption possible under the circumstances. For example, in a 

resolution handled through a P&A transaction, the institution 

accepting the transferred deposits will also likely clear items in 

transit. With an insured deposit transfer, the agent bank handling 

the deposit payout will clear items in transit. If a DINB is established 

following the failure, then items in transit will clear when they are 

presented to the DINB while it remains active.

Essential Criterion 10 In cases where the deposit insurer does not have the authority 

to act as a liquidator, the liquidator is obliged by law or 

regulation to cooperate with the deposit insurer to facilitate the 

reimbursement process.

The FDIC has sole responsibility for liquidating failed IDIs.228

 226 FDI Act § 12(d), 12 U.S.C. §1822(d).

227 The FDIC’s primary goal as the receiver is to protect the depositors. The FDIC has established procedures to allow 

depositors to offset the uninsured portion of a deposit against loan amounts owed to a failed bank. In the case of a 

depositor with large deposit balances and loans at the bank, the deposit amounts greater than the insurance limit 

could be used to pay off any loans owed by the depositor to a failed bank.

228 FDI Act § 11(c)(13)(B), 12 U.S.C. § 1821(c)(13)(B).
87

PRINCIPLE 16 RECOVERIES

The deposit insurer should have, by law, the right to recover its claims in accordance with 

the statutory creditor hierarchy.

Essential Criterion 1 The deposit insurer’s role in the recovery process is clearly 

defined in law. The deposit insurer is clearly recognized as a 

creditor of the failed bank by subrogation.

Under the FDI Act, the FDIC, upon the payment of claims for insured 

deposits, becomes subrogated to all rights of the depositor against the

bank to the extent of the payment or assumption.229

Essential Criterion 2 The deposit insurer has at least the same creditor rights or 

status as a depositor in the treatment in law of the estate of the 

failed bank.

Once the FDIC pays claims for insured deposits, the FDIC is then 

subrogated to all rights of such insured depositors against the estate 

of the failed institution.230 The FDIC’s subrogated claim is classified 

as a deposit liability and has the same rights and status as an 

uninsured depositor.

Essential Criterion 3 The deposit insurer, in its capacity as creditor, has the right of 

access to information from the liquidator, so that it can monitor 

the liquidation process.

The FDIC, acting as receiver, has primary responsibility for 

liquidating failed IDIs.

231 The FDIC as receiver has access to 

information regarding the failed institution, including 

information necessary to administer the claims process. The FDI 

Act does not restrict the FDIC in its receivership capacity from 

sharing relevant information with the FDIC in its deposit insurer

(creditor) capacity.

Essential Criterion 4 The management and disposition of the assets of a failed bank 

in its asset management and recovery approaches is guided by 

commercial and economic considerations.

 229 FDI Act §§ 11(f)-(g), 13(c)-(d), 12 U.S.C. §§ 1821(f)-(g), 1823(c)-(d).

230 FDI Act §§ 11(f)-(g), 13(c)-(d), 12 U.S.C. §§ 1821(f)-(g), 1823(c)-(d).

231 FDI Act § 11(d)(2), 12 U.S.C. § 1821(d)(2).
88

The FDI Act grants the FDIC broad powers to conduct the liquidation, 

management, and disposition of assets of a failed IDI.232 Upon 

appointment as receiver, the FDIC succeeds to all rights, titles, 

powers, and privileges of the institution. The FDIC may take over the 

institution’s assets and operate the entity with all of the powers of 

the members or shareholders, directors, and officers, and conduct all 

business of the entity.233

In carrying out its responsibilities in the management and 

disposition of assets of a failed IDI, the FDIC as receiver may utilize 

services of outside parties, including real estate and loan portfolio 

asset management, property management, auction marketing, legal, 

and brokerage services. If the FDIC as receiver utilizes the services of 

outside parties, it does so only when it determines that the 

utilization of the services is the most practicable, efficient, and costeffective option.234

In exercising any right, power, privilege, or authority in connection 

with any sale or disposition of assets of a failed IDI, the FDIC as 

receiver is required to act in a manner which:

 maximizes the net present value return from the sale or 

disposition of assets

 minimizes any loss realized in resolving cases

 ensures adequate competition and fair and consistent 

treatment of offerors

 prohibits discrimination based on race, sex, or ethnic group in 

the solicitation and consideration of offers

 maximizes the preservation of the availability and 

affordability of residential real property for low- and 

moderate-income individuals.235

In addition, the FDI Act requires the FDIC as receiver to consider the 

adverse economic impact its resolution and liquidation actions 

would have on local communities.236 After the FDIC is appointed 

receiver for a failed IDI, and before taking any action in the 

resolution of an institution, the FDIC evaluates the likely impact that 

the means of resolution and any action which the FDIC may take in 

 232 FDI Act § 11(d)(2), 12 U.S.C. § 1821(d)(2).

233 FDI Act § 11(d)(2), 12 U.S.C. § 1821(d)(2).

234 FDI Act § 11(d)(2)(K), 12 U.S.C. § 1821(d)(2)(K).

235 FDI Act § 11(d)(13)(E), 12 U.S.C. § 1821(d)(13)(E).

236 FDI Act § 11(h), 12 U.S.C. § 1821(h).
89

resolution may have on the viability of other banks in the same 

community. The FDIC considers the evaluation in determining the 

means, terms, and conditions for resolving the institution.237

Essential Criterion 5 Those working on behalf of the deposit insurer, other financial 

safety-net participants, and third-party professional service 

providers providing resolution services are not allowed to 

purchase assets from the liquidator.

FDIC employees, their spouses, and their minor children may not 

directly or indirectly purchase or acquire property held or managed 

by the FDIC as receiver or liquidator of the assets of a failed IDI.238 A 

contractor or its affiliated business entity that has performed 

services within the previous three years related to the assets that the 

prospective purchaser might buy is also not eligible to purchase 

those assets.239

An FDIC employee must disqualify himself or herself in writing from 

participating in the disposition of assets held by the FDIC as receiver 

or liquidator of an institution upon learning that the employee has a 

“covered relationship” with a prospective buyer.240

 237 FDI Act § 11(h), 12 U.S.C. § 1821(h).

238 5 C.F.R. § 3201.104.

239 The FDIC has established guidelines and certification procedures to identify prospective purchasers who are not 

eligible to purchase assets of the failed financial institutions from the FDIC under the laws, regulations, and policies 

governing such sales. Prospective buyers must complete a Purchaser Eligibility Certification in order to purchase a 

failed bank’s assets from the FDIC (https://www.fdic.gov/buying/owned/documents/pec-7300-06-ore.pdf).

240 5 C.F.R. § 3201.104(b); 5 C.F.R. § 2635.502(b)(1)(explanation of “covered relationships”).