2018 ANNUAL REPORT

FEDERAL 

DEPOSIT 

INSURANCE 

CORPORATION
THIS PAGE INTENTIONALLY LEFT BLANK
2018 ANNUAL REPORT

FEDERAL 

DEPOSIT 

INSURANCE 

CORPORATION
ANNUAL REPORT 

2

FEDERAL DEPOSIT INSURANCE CORPORATION

550 17th Street NW, Washington, DC 20429 OFFICE OF THE CHAIRMAN

February 14, 2019

Dear Sir/Madam,

The Federal Deposit Insurance Corporation (FDIC) is pleased to submit its 2018 Annual Report

(also referred to as the Performance and Accountability Report), which includes the audited financial 

statements of the Deposit Insurance Fund and the Federal Savings and Loan Insurance Corporation 

(FSLIC) Resolution Fund. This report is produced in accordance with:

♦ Section 17(a) of the Federal Deposit Insurance Act,

♦ the Chief Financial Officers Act of 1990, Public Law 101-576, 

♦ the Government Performance and Results Act of 1993 (as amended) and the GPRA Modernization 

Act of 2010,

♦ Section 5 (as amended) of the Inspector General Act of 1978, 

♦ the Reports Consolidation Act of 2000, and

♦ the Fraud Reduction and Data Analytics Act of 2015.

In accordance with the Reports Consolidation Act of 2000, the FDIC assessed the reliability of the 

performance data contained in this report. We found no material inadequacies, and the data are 

considered to be complete and reliable. 

Based on internal management evaluations, and in conjunction with the results of independent financial 

statement audits, we can provide reasonable assurance that the objectives of Section 2 (internal controls) 

and Section 4 (financial management systems) of the Federal Managers’ Financial Integrity Act of 1982 

have been achieved, and that the FDIC has no material weaknesses. We are committed to maintaining 

effective internal controls corporate-wide in 2019. 

Sincerely,

Jelena McWilliams

Chairman

The President of the United States

The President of the United States Senate

The Speaker of the United States House of Representatives
ANNUAL REPORT 2018

2018

3

TABLE OF CONTENTS

Mission, Vision, and Values...............................................................................................................................................4

Message from the Chairman.............................................................................................................................................5

Message from the Chief Financial Officer...........................................................................................................................9

FDIC Senior Leaders........................................................................................................................................................10

I. Management’s Discussion and Analysis.................................................................................................................11

The Year in Review................................................................................................................................................13

Overview............................................................................................................................................................... 13

Deposit Insurance.................................................................................................................................................. 13

Supervision ........................................................................................................................................................... 14

Supervision Policy.................................................................................................................................................. 20

Financial Technology ............................................................................................................................................ 26

Community Banking Initiatives............................................................................................................................. 28

Activities Related to Systemically Important Financial Institutions ........................................................................ 34

Depositor and Consumer Protection...................................................................................................................... 39

Receivership Management ..................................................................................................................................... 46

Enhancing the FDIC’s IT Security......................................................................................................................... 49

Minority and Women Inclusion............................................................................................................................. 51

International Outreach ......................................................................................................................................... 54

Effective Management of Strategic Resources......................................................................................................... 55

II. Performance Results Summary.............................................................................................................................59

Summary of 2018 Performance Results by Program............................................................................................... 61

Performance Results by Program and Strategic Goal .............................................................................................. 63

Prior Years’ Performance Results ............................................................................................................................ 69

III. Financial Highlights..............................................................................................................................................83

Deposit Insurance Fund Performance.................................................................................................................... 85

IV. Budget and Spending...........................................................................................................................................89

FDIC Operating Budget........................................................................................................................................ 91

2018 Budget and Expenditures by Program .......................................................................................................... 92

Investment Spending ............................................................................................................................................. 93

V. Financial Section ..................................................................................................................................................95

Deposit Insurance Fund......................................................................................................................................... 96

FSLIC Resolution Fund....................................................................................................................................... 112

Government Accountability Office Auditor’s Report............................................................................................ 119

Management’s Report on Internal Control Over Financial Reporting .................................................................. 124

Management’s Response to the Auditor’s Report.................................................................................................. 125

VI. Risk Management and Internal Controls..............................................................................................................127

Fraud Reduction and Data Analytics Act of 2015 ................................................................................................ 129

Management Report on Final Actions.................................................................................................................. 130

VII. Appendices ........................................................................................................................................................133

A. Key Statistics ................................................................................................................................................. 135

B. More About the FDIC .................................................................................................................................. 148

C. Office of Inspector General’s Assessment of the Management and Performance 

Challenges Facing the FDIC.......................................................................................................................... 157

D. Acronyms and Initialisms .............................................................................................................................. 189
MISSION, VISION, AND VALUES

MISSION

The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress 

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

♦ Insuring deposits,

♦ Examining and supervising financial institutions for safety and soundness and 

consumer protection,

♦ Making large and complex financial institutions resolvable, and

♦ Managing receiverships.

VISION

The FDIC is a recognized leader in promoting sound public policies; addressing risks in the nation’s 

financial system; and carrying out its insurance, supervisory, consumer protection, resolution planning, 

and receivership management responsibilities.

VALUES

The FDIC and its employees have a tradition of distinguished public service. Six core values guide us 

in accomplishing our mission:

Integrity We adhere to the highest ethical and professional standards.

Competence We are a highly skilled, dedicated, and diverse workforce that is empowered to 

achieve outstanding results.

Teamwork We communicate and collaborate effectively with one another and with other 

regulatory agencies.

Effectiveness We respond quickly and successfully to risks in insured depository institutions 

and the financial system.

Accountability We are accountable to each other and to our stakeholders to operate in a 

financially responsible and operationally effective manner.

Fairness We respect individual viewpoints and treat one another and our stakeholders 

with impartiality, dignity, and trust.

4
2018

5

Since my appointment as the 21st Chairman, I 

have been honored to serve alongside the dedicated 

and passionate men and women of the Federal 

Deposit Insurance Corporation. Our mission is 

vital to the economy of the United States, and our 

accomplishments serve as a bulwark to financial 

stability around the world. 

The United States banking industry continued its 

strong performance in 2018. The industry posted 

record profits, net interest margins increased, loan 

balances grew, and loan performance improved. 

There were no bank failures in 2018, and the number 

of banks on the FDIC’s problem bank list declined to 

the lowest level since third quarter 2007. The Deposit 

Insurance Fund increased to over $100 billion, and 

the reserve ratio increased to 1.36 percent in third 

quarter 2018, exceeding the statutorily required 

minimum reserve ratio of 1.35 percent two years 

ahead of the required date. 

FDIC supervision programs continued to protect 

our Nation’s financial institutions and consumers. 

Our examiners started all examinations within 

established statutory or FDIC requirements, and 

examination results indicate that the vast majority of 

FDIC-supervised institutions are operating in a safe 

and sound manner and effectively managing their 

consumer protection responsibilities. 

One of my top priorities as FDIC Chairman is 

to encourage more de novo formation, and we are 

hard at work to make this a reality. Among other 

initiatives, the FDIC has requested public comment 

on the deposit insurance application process to 

identify potential improvements. We are also working 

to streamline our evaluation of deposit insurance 

applications, and have launched a process to receive 

and review draft deposit insurance proposals. Through 

these initiatives, we seek to improve the quality of 

submissions and reduce the time necessary to review 

and process applications, particularly those involving 

complex proposals. De novo banks are a key source of 

new capital, talent, ideas, and ways to serve customers, 

and the FDIC will do its part to support this segment 

of the industry.

The FDIC also took robust steps this year to reduce 

the regulatory burden on community banks, without 

sacrificing safety and soundness or consumer 

protections. We eliminated over one-half of the more 

than 800 pieces of supervisory guidance outstanding. 

We also launched a pilot program to use technology to 

reduce the number of onsite days needed to conduct 

an examination, and took other steps to reduce the 

costs of examinations to our regulated institutions. 

As part of this effort, the FDIC has worked toward 

quickly implementing many provisions of the 

Economic Growth, Regulatory Relief, and Consumer 

Protection Act. This includes proposed rulemakings 

to establish a community bank leverage ratio for 

MESSAGE FROM THE CHAIRMAN

MESSAGE FROM THE CHAIRMAN
MESSAGE FROM THE CHAIRMAN

ANNUAL REPORT 

6

highly capitalized community banks, tailor the 

application of existing capital and liquidity rules 

for regional banks, modify the capital treatment 

of certain commercial real estate loans, modify 

the threshold for mortgage loans to be exempt 

from appraisal requirements, simplify reporting 

requirements for community banks with less than $5 

billion in assets, and exempt community banks from 

the Volcker Rule. The FDIC has also issued a final 

rule to extend the exam cycle to 18 months for banks 

with less than $3 billion in assets. 

The FDIC continued to evaluate firm-developed 

resolution plans, and to develop our own strategies 

and capabilities to facilitate, if necessary, the orderly 

resolution of large, complex financial institutions 

without taxpayer support or market breakdowns. 

To support this effort, the FDIC and Federal Reserve 

Board provided feedback regarding Title I resolution 

plans submitted by 23 foreign banking organizations 

and two domestic regional bank holding companies, 

and assessed plans submitted by another 16 domestic 

regional bank holding companies. The agencies 

also released for public comment revised guidance 

for the eight largest domestic firms. The FDIC also 

worked to enhance our preparedness to use backup 

Title II Orderly Liquidation Authority, including 

strengthening our working relationships with 

international authorities. 

Traditional resolution activity for insured depository 

institutions in 2018 included the monitoring of 

several institutions near failure, the execution of 

deposit insurance processing system improvements, 

the liquidation of more than $1 billion in legacy 

assets, the termination of 66 receiverships, and the 

processing of almost $3 billion in dividend payments 

to creditors. Substantial progress was made in the 

evaluation of the resolution plans of 41 large banks, 

and in the development of the FDIC’s capabilities 

around bridge bank governance, including executive 

search and onboarding, bridge bank exit strategies, 

human capital transitioning, crisis communication, 

claims administration, and large transaction 

accounting.

In October, I announced my first public initiative as 

Chairman, “Trust through Transparency,” an agencywide effort that unites the FDIC behind the goals 

of being accessible, understandable, responsive, and 

accountable. Transparency is pivotal to maintaining 

the public’s trust in the safety and soundness of the 

entire banking system and in our ability to accomplish 

our mission. The first step in this initiative was 

to launch a new section of our website (https://

www.fdic.gov/transparency/) where we publish 

FDIC performance metrics. These are quantifiable 

measurements of performance, such as turnaround 

times for examinations and applications, call center 

response rates, and guidelines and decisions related to 

appeals of material supervisory determinations and 

deposit insurance assessments. In the same place on 

our website, we posted other policies and procedures 

regarding how we conduct our work. 

Publishing this information provides transparency 

to the banking industry and the public on our 

performance. In its first two months, our new 

“Trust through Transparency” website received more 

than 34,000 page views. During the remainder of 

my chairmanship, we will continue to update this 

information, provide more data, and make it easier for 

the public to hold us accountable. We will provide 

information that anyone – not just technical experts – 

can understand. We will solicit and respond to public 

feedback, and continue to provide real, quantifiable 

performance measures. If you like what we are doing, 

or if you have concerns, we also established an email 

account to gather your feedback: Transparency@

FDIC.gov. 

Looking forward to 2019, we have set forth a robust 

agenda for the agency. 

We will continue to focus on reducing unnecessary 

regulatory burdens for community banks without 

sacrificing consumer protections or prudential 

requirements. My “Back to Basics” initiative is 

designed to tailor regulatory requirements to the risk 

presented by these smaller institutions, thus reducing 

their cost of compliance. When we make these 
MESSAGE FROM THE CHAIRMAN

2018

7

adjustments, we allow banks to focus on the business 

of banking, not on the unraveling of red tape. 

In addition, we are in the process of establishing an 

Office of Innovation that will partner with banks and 

non-banks to understand how technology is changing 

the business of banking. The Office will be tasked 

with addressing four fundamental questions: 

1. How can the FDIC provide a safe regulatory 

environment to promote the technological 

innovation that is already occurring?

2. How can the FDIC promote technological 

development at community banks that often have 

limited research and development funding to 

support independent efforts?

3. What changes in policy – particularly in the 

areas of identity management, data quality and 

integrity, and data usage or analysis – must occur 

to support innovation while promoting safe and 

secure financial services and institutions?

4. How can the FDIC transform – in terms of our 

technology, examination processes, and culture 

– to enhance the stability of the financial system, 

protect consumers, and reduce the compliance 

burden on our regulated institutions?

Through increased collaboration with FDIC-regulated 

institutions, consumers, and financial services 

innovators, we will help increase the velocity of 

innovation in our business.

As the banking industry evolves, so must the FDIC. 

That is why I have directed FDIC leadership to 

conduct a comprehensive review of our current 

supervisory processes, as well as the organization, 

workforce structure, and capabilities supporting our 

supervisory mission. Through focused adoption of 

new technologies and processes, we can improve 

the transparency, efficiency, and effectiveness of our 

consumer and prudential examinations. We look 

forward to working with experts in information 

technology and banking – from the private sector, 

academia, and government – for input on how the 

FDIC can improve our supervision efforts.

In 2019, we will also increase our focus on 

underserved or unbanked communities. We will 

expand our engagement with Minority Depository 

Institutions (MDIs), so that they are in a better 

position to serve their communities. At the same 

time, we will work with all FDIC-supervised 

institutions to promote the safe adoption of additional 

products and services that bring these underserved 

communities more fully into the banking fold. The 

FDIC has issued a request for information soliciting 

feedback on steps the agency can take to better enable 

FDIC-supervised banks to offer small dollar credit 

to consumers.

The current positive economic cycle will not last 

forever. The actions that the FDIC has taken in 2018 

and our planned agenda for 2019 will strengthen the 

stability of our institutions should a downturn occur 

sooner than expected.

I am genuinely honored to serve as your FDIC 

Chairman, and I look forward to working with all 

of you to ensure that our Nation’s banks remain 

strong and that the FDIC maintains its longstanding 

tradition of distinguished public service.

Sincerely,

Jelena McWilliams
THIS PAGE INTENTIONALLY LEFT BLANK
2018

9

I am pleased to present 

the FDIC’s 2018 Annual 

Report, which covers 

financial and program 

performance information 

and summarizes our 

successes for the year.

For 27 consecutive years, 

the U.S. Government 

Accountability Office has issued unmodified audit 

opinions for the two funds administered by the 

FDIC: the Deposit Insurance Fund (DIF) and the 

Federal Savings and Loan Insurance Corporation 

(FSLIC) Resolution Fund (FRF). We take pride 

in our responsibility and demonstrate discipline 

and accountability as stewards of these funds. We 

remain proactive in the execution of sound financial 

management and in providing reliable financial data.

2018 FINANCIAL AND 

PROGRAM RESULTS

The DIF balance (the net worth of the Fund) rose 

to a record $102.6 billion as of December 31, 2018, 

compared to the year-end 2017 balance of $92.7 

billion. The Fund balance increase was primarily 

due to assessment revenue. No insured financial 

institutions failed in 2018.

The DIF U.S. Treasury securities investment portfolio 

balance was $92.7 billion as of December 31, 2018, 

an increase of $9.4 billion over the year-end 2017 

portfolio balance of $83.3 billion. Interest revenue on 

DIF investments was $1.6 billion for 2018, compared 

to $1.1 billion for 2017.

In 2018, the FDIC continued to reduce operating 

costs and prudently manage the funds that it 

administers. The FDIC Operating Budget for 2018 

totaled approximately $2.09 billion, which represented 

a decrease of $66 million (3.0 percent) from 2017. 

Actual 2018 spending totaled approximately $1.90 

billion. On December 18, 2018, the FDIC Board of 

Directors approved a 2019 FDIC Operating Budget 

totaling $2.04 billion, down $49 million (2.3 percent) 

from the 2018 budget. Including 2019, the annual 

operating budget has declined for nine consecutive 

years, consistent with a steadily declining workload.

The FDIC continues to reduce staffing levels, as 

conditions in the banking industry improve and 

the FDIC requires fewer resources. The FDIC’s 

authorized full-time equivalent staffing dropped 

from 6,363 in 2017 to 6,083 in 2018, a 4.4 percent 

reduction. The FDIC Board of Directors recently 

approved an authorized staffing level of 5,901 fulltime equivalent positons for 2019, a 3.0 percent 

reduction from 2018.

The FDIC also took important steps in 2018 to 

enhance its enterprise risk management program 

by updating our enterprise risk management and 

internal control corporate directive, drafting a risk 

appetite statement, and updating our risk profile. 

We will continue to implement enhancements to the 

program during 2019 to ensure the FDIC identifies 

and addresses enterprise risks proactively. We will 

remain focused on implementing sound financial 

management techniques, effective internal controls, 

and appropriate risk responses.

Sincerely,

Steven O. App

M E S S A G E F R O M T H E 

CHIEF FINANCIAL OFFICER

MESSAGE FROM THE CHIEF FINANCIAL OFFICER
ANNUAL REPORT 

10

FDIC SENIOR LEADERS

Seated (left to right): Arleas Upton Kea, Barbara A. Ryan, Chairman Jelena McWilliams, Director Martin J. Gruenberg, and Doreen R. Eberley.

Standing 1st Row (left to right): Jay N. Lerner, Arthur J. Murton, Jason C. Cave, Diane Ellis, Mark E. Pearce, Saul Schwartz, and Andy Jiminez. 2nd Row 

(left to right): Craig R. Jarvill, Kymberly K. Copa, M. Anthony Lowe, Howard G. Whyte, Charles Yi, Bret D. Edwards, Russell G. Pittman, Ricardo Delfin, 

Zachary N. Brown, and David Barr.

Not pictured: Brandon Milhorn, Steven O. App, Chad Davis, Suzannah L. Susser, and Robert D. Harris.

FDIC SENIOR LEADERS
11

MANAGEMENT’S I. DISCUSSION AND ANALYSIS
THIS PAGE INTENTIONALLY LEFT BLANK
2018

MANAGEMENT ’S DISCUSSION AND ANALYSIS 13

THE YEAR IN REVIEW

OVERVIEW

During 2018, the FDIC continued to fulfill its 

mission-critical responsibilities. In addition, the 

agency adopted and issued proposed rules on key 

regulations under the Economic Growth, Regulatory 

Relief and Consumer Protection Act (EGRRCPA) 

and the Economic Growth and Regulatory Paperwork 

Reduction Act of 1996 (EGRPRA), and engaged 

in several community banking and community 

development initiatives. 

Cybersecurity remained a high priority for the 

FDIC in 2018; the agency worked to strengthen 

cybersecurity oversight, help financial institutions 

mitigate risk, and respond to cyber threats. 

The sections below highlight these and other 

accomplishments during the year. 

In May 2018, Jelena McWilliams was confirmed as 

the 21st Chairman of the FDIC, and has met with 

bankers from across the country in the intervening 

months to discuss the diverse needs of bank customers 

and how to meet those needs.

DEPOSIT INSURANCE

As insurer of bank and savings association deposits, 

the FDIC must continually evaluate and effectively 

manage how changes in the economy, financial 

markets, and banking system affect the adequacy and 

the viability of the Deposit Insurance Fund (DIF).

Long-Term Comprehensive Fund Management Plan 

In 2010 and 2011, the FDIC developed a 

comprehensive, long-term DIF management plan 

designed to reduce the effects of cyclicality and 

achieve moderate, steady assessment rates throughout 

economic and credit cycles, while also maintaining a 

positive fund balance, even during a banking crisis. 

That plan complements the DIF Restoration Plan, 

originally adopted in 2008 and subsequently revised, 

which was designed to ensure that the reserve 

ratio (the ratio of the fund balance to estimated 

insured deposits) would reach 1.35 percent by 

September 30, 2020, as required by the Dodd-Frank 

Wall Street Reform and Consumer Protection Act 

(Dodd-Frank Act).

Picture provided by the Kansas Bankers Association

Chairman Jelena McWilliams (center), with bankers from New Hampshire, Iowa, and Kansas.
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

14

Under the long-term DIF management plan, to 

increase the probability that the fund reserve ratio 

will reach a level sufficient to withstand a future crisis, 

the FDIC Board set the Designated Reserve Ratio 

(DRR) of the DIF at 2.0 percent. The FDIC views 

the 2.0 percent DRR as a long-term goal and the 

minimum level needed to withstand future crises of 

the magnitude of past crises. In December 2018, the 

Board voted to maintain the 2.0 percent ratio 

for 2019.

Additionally, as part of the long-term DIF 

management plan, the FDIC has suspended dividends 

indefinitely when the fund reserve ratio exceeds 

1.5 percent. In lieu of dividends, the plan prescribes 

progressively lower assessment rates that will become 

effective when the reserve ratio exceeds 2.0 percent 

and 2.5 percent. 

State of the Deposit Insurance Fund 

There were no bank failures in 2018. The fund 

balance continued to grow through 2018, as it has 

every quarter after the end of 2009. Assessment 

revenue was the primary contributor to the increase 

in the fund balance in 2018. The fund reserve ratio 

rose to 1.36 percent at September 30, 2018, from 

1.27 percent a year earlier. 

Minimum Reserve Ratio

Section 334 of the Dodd-Frank Act, which 

increased the minimum reserve ratio of the DIF 

from 1.15 percent to 1.35 percent, mandates that the 

reserve ratio reach that level by September 30, 2020. 

To achieve this ratio, the FDIC imposed surcharges 

on the quarterly assessments of insured depository 

institutions (IDIs) with total consolidated assets of 

$10 billion or more (large banks). The surcharge 

equaled an annual rate of 4.5 basis points applied to 

an institution’s regular quarterly deposit insurance 

assessment base after subtracting $10 billion, with 

additional adjustments for banks with affiliated IDIs. 

As of September 30, 2018, the reserve ratio exceeded 

the required minimum of 1.35 percent, and the 

surcharges were suspended.

Because the Dodd-Frank Act mandates that the FDIC 

offset the effect of the increase in the reserve ratio 

on small banks (i.e., banks with assets less than $10 

billion), these banks were exempt from the surcharges. 

Furthermore, assessment credits are provided to small 

banks for the portion of their regular assessments that 

contributed to growth in the reserve ratio between 

1.15 percent and 1.35 percent. The FDIC has 

calculated the aggregate amount of credits to be 

$765 million. Each quarter the reserve ratio is at 

least 1.38 percent, the FDIC will automatically apply 

a small bank’s credits to reduce its regular assessment 

up to the entire amount of the assessment. 

SUPERVISION 

Supervision and consumer protection are cornerstones 

of the FDIC’s efforts to ensure the stability of, and 

public confidence in, the nation’s financial system. 

The FDIC’s supervision program promotes the 

safety and soundness of FDIC-supervised financial 

institutions, protects consumers’ rights, and promotes 

community investment initiatives.

Examination Program 

The FDIC’s strong bank examination program is at 

the core of its supervisory program. As of December 

31, 2018, the FDIC was the primary federal regulator 

for 3,495 FDIC-insured, state-chartered institutions 

that were not members of the Federal Reserve 

System (generally referred to as “state nonmember” 

institutions). Through risk management (safety and 

soundness), consumer compliance, Community 

Reinvestment Act (CRA), and other specialty 

examinations, the FDIC assesses an institution’s 

operating condition, management practices and 

policies, and compliance with applicable laws 

and regulations. 

As of December 31, 2018, the FDIC conducted 1,492 

statutorily required risk management examinations, 

including reviews of Bank Secrecy Act (BSA) 

compliance, and all required follow-up examinations 

for FDIC-supervised problem institutions, within 

prescribed time frames. The FDIC also conducted 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

15

FDIC EXAMINATIONS 2016-2018

2018 2017 2016

Risk Management (Safety and Soundness): 

State Nonmember Banks 1,333 1,440 1,563

Savings Banks 159 171 164

State Member Banks 0 0 0

Savings Associations 0 0 0

National Banks 0 0 0

Subtotal–Risk Management Examinations 1,492 1,611 1,727

CRA/Consumer Compliance Examinations:

Consumer Compliance/Community Reinvestment Act 876 770 709

Consumer Compliance-only 337 393 594

CRA-only 2 5 8

Subtotal–CRA/Compliance Examinations 1,215 1,168 1,311

Specialty Examinations:

Trust Departments 308 347 351

Information Technology and Operations 1,503 1,627 1,742

Bank Secrecy Act 1,523 1,640 1,761

Subtotal–Specialty Examinations 3,334 3,614 3,854

TOTAL 6,041 6,393 6,892

1

 The CAMELS composite rating represents the adequacy of Capital, the quality of Assets, the capability of Management, the quality and level of Earnings, the adequacy 

of Liquidity, and the Sensitivity to market risk, and ranges from “1” (strongest) to “5” (weakest).

1,215 statutorily required CRA/consumer compliance 

examinations (876 joint CRA/consumer compliance 

examinations, 337 consumer compliance-only 

examinations, and two CRA-only examinations). 

In addition, the FDIC performed 3,334 specialty 

examinations (which include reviews for BSA 

compliance) within prescribed time frames.

The table below illustrates the number of 

examinations by type, conducted from 2016 

through 2018. 

Risk Management 

All risk management examinations have been 

conducted in accordance with statutorily-established 

time frames. As of September 30, 2018, 71 insured 

institutions with total assets of $53.3 billion were 

designated as problem institutions for safety and 

soundness purposes (defined as those institutions 

having a composite CAMELS1 rating of 4 or 5). By 

comparison, on September 30, 2017, there were 104 

problem institutions with total assets of $16.0 billion. 

This represents a 32 percent decline in the number 

of problem institutions and a 233 percent increase in 

problem institution assets. 

For the 12 months ended September 30, 2018, 45 

institutions with aggregate assets of $7.4 billion 

were removed from the list of problem financial 

institutions, while 12 institutions with aggregate assets 

of $45.6 billion were added to the list. The FDIC is 

the primary federal regulator for 52 of the 71 problem 

institutions, with total assets of $7.3 billion. 

In 2018, the FDIC’s Division of Risk Management 

Supervision (RMS) initiated 156 formal enforcement 

actions and 95 informal enforcement actions. 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

16

Enforcement actions against institutions included, 

but were not limited to 13 actions under Section 8(b) 

of the Federal Deposit Insurance Act (FDI Act), all 

of which were consent orders, and 94 memoranda 

of understanding (MOUs). Of these enforcement 

actions against institutions, eight consent orders 

and 20 MOUs were based, in whole or in part, 

on apparent violations of BSA and anti-money 

laundering (AML) laws and regulations. In addition, 

enforcement actions were also initiated against 

individuals. These actions included, but were not 

limited to, 52 removal and prohibition actions under 

Section 8(e) of the FDI Act (50 consent orders and 

two notices of intention to remove/prohibit), three 

actions under Section 8(b) of the FDI Act (two orders 

to pay restitution, and one notice of charges), and 11 

civil money penalty (CMPs) (10 orders to pay and one 

notice of assessment).

The FDIC continues its risk-focused, forward-looking 

supervision program by assessing risk management 

practices during the examination process to ensure 

that risks are mitigated before they lead to financial 

deterioration. 

Consumer Compliance 

As of December 31, 2018, 35 insured state 

nonmember institutions, about 1 percent of all 

supervised institutions, with total assets of $39 billion, 

were problem institutions for consumer compliance, 

CRA, or both. All of the problem institutions for 

consumer compliance were rated “4” for consumer 

compliance purposes, with none rated “5.” For CRA 

purposes, the majority were rated “Needs to Improve,” 

and only one was rated “Substantial Noncompliance.” 

As of December 31, 2018, all follow-up examinations 

for problem institutions were performed on schedule.

As of December 31, 2018, the FDIC conducted 

substantially all required consumer compliance 

and CRA examinations and, when violations 

were identified, completed follow-up visits and 

implemented appropriate enforcement actions in 

accordance with FDIC policy. In completing these 

activities, the FDIC substantially met its internallyestablished time standards for the issuance of final 

examination reports and enforcement actions. 

Overall, banks demonstrated strong consumer 

compliance programs. The most significant consumer 

protection issue that emerged from the 2018 consumer 

compliance examinations involved banks’ failure to 

adequately monitor third-party vendors. For example, 

the FDIC found violations involving unfair or 

deceptive acts or practices, such as failure to disclose 

material information about product features and 

limitations, deceptive marketing and sales practices, 

and misrepresentations about the costs of products. 

The FDIC issued orders requiring the payment of 

CMPs to address these violations. 

As of December 31, 2018, the FDIC’s Division of 

Depositor and Consumer Protection (DCP) initiated 

21 formal enforcement actions and 13 informal 

enforcement actions to address consumer compliance 

concerns. This included three restitution orders, four 

consent orders, 13 CMPs, one Notice of Assessment, 

and 13 MOUs. Restitution orders are formal actions 

that require institutions to pay restitution in the form 

of consumer refunds for violations of law. In 2018, 

these orders required the payment of approximately 

$21.3 million to harmed consumers. As of December 

31, 2018, the CMP orders totaled $3,556,766.

Large Bank Supervision Program 

The Large Bank Supervision Branch within RMS 

addresses the growing complexity of large banking 

organizations with assets exceeding $10 billion and 

not assigned to the Complex Financial Institution 

(CFI) Group. This branch is responsible for 

supervisory oversight, ongoing monitoring, and 

resolution planning, while supporting the insurance 

business line. For state nonmember banks with 

assets exceeding $10 billion, the FDIC generally 

applies a continuous examination program, whereby 

dedicated staff conducts ongoing on-site supervisory 

examinations and institution monitoring. The FDIC 

also has dedicated on-site examination staff at select 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

17

banks for which the FDIC is not the primary federal 

regulator. These examiners work closely with other 

financial institution regulatory authorities to identify 

emerging risks and assess the overall risk profile of 

large institutions. 

The Large Insured Depository Institution (LIDI) 

Program remains the primary instrument for offsite monitoring of IDIs with $10 billion or more 

in total assets not assigned to CFI Group. The 

LIDI Program provides a comprehensive process 

to standardize data capture and reporting for large 

and complex institutions nationwide, allowing for 

quantitative and qualitative risk analysis. In 2018, 

the LIDI Program covered 116 institutions with total 

assets of $6.2 trillion. The LIDI Program supports 

effective large bank supervision by using individual 

institution information to focus resources on higherrisk areas, determine the need for supervisory action, 

and support insurance assessments and resolution 

planning. 

The Shared National Credit (SNC) Program is an 

interagency initiative administered jointly by the 

FDIC, the Office of the Comptroller of the Currency 

(OCC), and the Federal Reserve Board (FRB) to 

ensure consistency in the regulatory review of large, 

syndicated credits, as well as to identify risk in this 

market, which comprises a large volume of domestic 

commercial lending. In 2018, outstanding credit 

commitments identified in the SNC Program totaled 

$4.4 trillion. The FDIC, OCC, and FRB report 

the results of their review in an annual, joint public 

statement. 

In the first quarter of 2018, the Large Bank 

Supervision Branch completed a horizontal creditrisk rating assessment at 16 large FDIC-supervised 

institutions to evaluate transparency and effectiveness 

of their internal credit risk rating systems. The 

findings of this horizontal assessment were 

summarized in a Supervisory Insights article published 

in September 2018.2

 

Operational Risk Supervision Program

Information Technology and Cybersecurity

The FDIC examines information technology (IT), 

including cybersecurity, at each bank it supervises as 

part of the risk management examination. Examiners 

assign an IT rating using the Federal Financial 

Institutions Examination Council’s (FFIEC) 

Uniform Rating System for Information Technology 

(URSIT), and the IT rating is incorporated into the 

management component of the CAMELS rating, 

in accordance with the FFIEC’s Uniform Financial 

Institutions Rating System (UFIRS). 

The FDIC continued to enhance its IT supervision in 

2018. Examiners used the Information Technology 

Risk Examination Program (InTREx), which 

includes cybersecurity components, to conduct 

IT examinations. Examiners provided results and 

recommended actions to institutions to address IT, 

cybersecurity, and other operational risks. During 

the year, the FDIC also analyzed the effectiveness and 

efficiency of this examination program by reviewing 

workpapers and reports of examination comments. 

Together with the Federal Reserve and the Conference 

of State Bank Supervisors, adjustments to InTREx 

are being considered and implemented. In addition, 

the FDIC held an IT Security Training Conference 

to provide continuing education to RMS IT subject 

matter experts and IT examiners on risks facing the 

industry, and examination policy.

In October 2018, the FDIC and other FFIEC 

members conducted a webinar and published a 

Cybersecurity Resource Guide for Financial Institutions 

to raise awareness about the importance of 

cybersecurity. The webinar provided an overview 

of the resource guide, and featured a guest speaker 

from the Department of Homeland Security National 

Cybersecurity and Technical Services (NCATS) team 

who provided information on the NCATS’ Cyber 

Hygiene program. This program’s goal is to secure 

internet-accessible systems by continuously scanning 

2

 Sandra Macias, “Credit Risk Grading Systems: Observations From a Horizontal Assessment,” Supervisory Insights 15 no. 1, Summer 2018, https://www.fdic.gov/regulations/examinations/supervisory/insights/sisum18/si-summer-2018-article02.pdf.
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

18

for known vulnerabilities and configuration errors at 

no cost to financial institutions. 

In October 2018, the FDIC also published new 

vignettes for Cyber Challenge: A Community Bank 

Cyber Exercise. Cyber Challenge is a series of video 

vignettes and discussion material that can help bank 

management and staff learn more about operational 

risk and mitigation techniques. 

The FDIC, OCC, and FRB also examine IT and 

other operational components of service providers 

that support financial institutions via the continued 

implementation of the Cybersecurity Examination 

Program.  During 2018, the agencies completed 

a horizontal interconnectivity review, as well as 

individual cybersecurity reviews at all significant 

service providers.

The FDIC continues to actively engage with both 

the public and private sectors to assess cybersecurity 

and other operational risk issues. This work includes 

regular meetings with the Financial and Banking 

Information Infrastructure Committee (FBIIC), the 

Financial Services Sector Coordinating Council for 

Critical Infrastructure Protection, the Department 

of Homeland Security, the Financial Services 

Information Sharing and Analysis Center, other 

regulatory agencies, and law enforcement to share 

information regarding emerging issues and coordinate 

responses. 

The FDIC played a significant role in organizing 

FBIIC incident management communication related 

to areas affected by hurricanes Florence and Michael. 

The FDIC also actively participated in FBIIC working 

groups to better understand the financial sector’s 

vulnerability to a cybersecurity incident, and consider 

ways to harmonize cybersecurity supervisory efforts.

Bank Secrecy Act/Anti-Money Laundering 

In 2018, the FDIC and the other federal banking 

agencies issued examination procedures for the 

customer due diligence and beneficial ownership 

rules, which were effective May 11. These procedures 

supersede similar examination instructions and 

procedures in the 2014 version of the FFIEC 

BSA/AML Examination Manual. 

The FDIC, other federal banking agencies, and 

Financial Crimes Enforcement Network (FinCEN) 

evaluated opportunities to increase the efficiency and 

effectiveness of the BSA/AML examination process. 

During the year, these agencies issued two statements. 

The first statement discussed how banks with a 

community focus, less-complex operations, and lower 

risk profiles may share BSA resources. The second 

statement expressed support for banks’ innovative efforts 

with respect to BSA/AML compliance. 

Cyber Fraud and Financial Crimes

The FDIC has undertaken a number of initiatives 

in 2018 to protect the banking industry from 

criminal financial activities. For example, the FDIC 

developed, sponsored, and presented a financial crimes 

conference that was attended by examiners, lawyers, 

other interested personnel from the FDIC, other 

banking agencies, and law enforcement agencies. 

The FDIC also helped financial institutions identify 

and shut down “phishing” websites that attempt 

to fraudulently obtain an individual’s confidential 

personal or financial information. Finally, the FDIC 

published an article titled “Beware of ATM, Debit 

and Credit Card ‘Skimming’ Schemes” in the Winter 

2018 edition of the Consumer News.

 3

Examiner Training and Development

Examiner training continued to receive high priority 

and attention in 2018 on multiple fronts. The FDIC 

strives to deliver effective and efficient on-the-job, 

classroom, and computer-based instruction. A cadre 

of highly trained and skilled instructors provides 

classroom learning to FDIC examination staff, as well 

as staff of regulatory partners from international and 

state agencies. Oversight of the training program 

is provided by senior and mid-level management 

to ensure that content and delivery are effective, 

3

 “Beware of ATM, Debit, and Credit Card ‘Skimming’ Schemes,” FDIC Consumer News, Winter 2018, https://www.fdic.gov/consumers/consumer/news/cnwin18/

cardskimming.html.
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

19

appropriate, and current. The FDIC works in 

collaboration with partners across the organization 

and with the FFIEC to ensure that emerging risks 

and topics are incorporated and conveyed timely. 

Examination staff at all levels benefit from targeted 

and tenure-appropriate content. The FDIC also 

recognizes the critical role peer-to-peer knowledge 

transfer plays in preserving institutional knowledge 

and experience, and encourages opportunities for 

employees to learn from each other. 

The FDIC has undertaken a multi-year project to 

expand and strengthen its examiner development 

programs for specializations, such as IT, BSA/AML, 

trust, capital markets, and accounting. As banks 

become more specialized, enhancing examiner 

skills in these areas is key to ensuring an effective 

examination program. The goal of this project is to 

standardize the skills needed to examine banks of 

varying levels of risk and complexity in each specialty 

area, and to develop on-the-job training (OJT) 

programs to provide opportunities for examiners 

to acquire higher level competencies in these 

specialty areas. 

In 2018, the FDIC drafted specialty OJT programs 

in accounting, capital markets, BSA/AML, and trust. 

These drafts are under management review and are 

targeted for implementation in 2019. The agency also 

implemented a new intermediate IT OJT program 

and updated its advanced IT OJT program.

In addition, a Current Expected Credit Losses (CECL) 

Examiner Training and Development Plan was 

launched in 2018 to begin a multi-year initiative to 

ensure examination staff understands the requirements 

of the new credit losses accounting standard and are 

consistent in conveying the FDIC’s expectations with 

respect to banks’ CECL implementation efforts.

Minority Depository Institution Activities 

The preservation of minority depository institutions 

(MDI) remains a high priority for the FDIC. In 

2018, the FDIC continued to promote and support 

MDI and Community Development Financial 

Institution (CDFI) industry-led strategies for success. 

These strategies include increasing collaboration 

between MDI and CDFI bankers and other financial 

institutions; partnering to share costs, raise capital, 

or pool loans; and making innovative use of available 

federal programs. The FDIC supports this effort 

by providing outreach, education and training, and 

technical assistance to MDI and CDFI banks. 

During 2018, the FDIC led discussions with MDI 

bankers and its Advisory Committee on Community 

Banking (CBAC) about the FDIC’s Resource 

Guide for Collaboration with Minority Depository 

Institutions. This guide, published in December 2017, 

encourages collaboration among MDIs and between 

MDIs and other institutions. The publication 

describes some of the ways that financial institutions, 

including community banks, can partner with MDIs 

to the benefit of all institutions involved, as well as 

the communities they serve. Both community banks 

and larger insured financial institutions have valuable 

incentives under the CRA to undertake ventures 

with MDIs, including capital investment and loan 

participations. In 2018, the FDIC began preparations 

to host roundtables and other events that would 

enable MDIs to engage with potential collaboration 

partners in 2019.

The FDIC added additional minority bankers to 

its CBAC to bring more diverse perspectives and 

input to these discussions. In addition, the agency 

began updating its 2014 study, “Minority Depository 

Institutions: Structure, Performance, and Social 

Impact,” for publication in 2019. In support of its 

statutory goal to preserve the minority character in 

mergers and acquisitions, the FDIC hosted outreach 

sessions with MDI bankers to provide an overview 

of the process for bidding on failed minority banks, 

and to offer technical assistance to banks desiring to 

place a bid on a failed MDI franchise. The FDIC also 

began planning for the 2019 Interagency Minority 

Depository Institution and CDFI Bank Conference, 

which the FDIC will host in collaboration with the 

OCC and FRB. 

The FDIC also continuously pursued efforts to 

improve communication and interaction with MDIs 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

20

and to respond to the concerns of minority bankers 

in 2018. The agency maintains active outreach with 

MDI trade groups and offers to arrange annual 

meetings between FDIC regional management and 

each MDI’s board of directors to discuss issues of 

interest. The FDIC routinely contacts MDIs to offer

return visits and technical assistance following the 

conclusion of FDIC safety and soundness, compliance, 

CRA, and specialty examinations to help bank 

management understand and implement examination 

recommendations. These return visits, normally 

conducted within 90 to 120 days after the examination, 

are intended to provide useful recommendations or 

feedback for improving operations, not to identify 

new issues.

The FDIC’s website invites inquiries and provides 

contact information for any MDI to request technical 

assistance at any time. 

In 2018, the FDIC provided 149 individual technical 

assistance sessions on nearly 50 risk management and 

compliance topics, including: 

♦ Accounting, 

♦ Bank Secrecy Act and Anti-Money Laundering, 

♦ Community Reinvestment Act, 

♦ Funding and liquidity, 

♦ Information technology risk management 

and cybersecurity, 

♦ Third-party oversight, and

♦ Troubled debt restructuring. 

The FDIC also held outreach, training, and 

educational programs for MDIs through conference 

calls and regional banker roundtables. In 2018, topics 

of discussion for these sessions included many of those 

listed above, as well as collaboration and partnerships, 

capital markets, cybersecurity, liquidity risk, and 

Ombudsman services. In addition, the FDIC assisted 

four MDIs in the early termination of Shared Loss 

Agreements related to the purchase of failed bank 

franchises during the crisis. 

Mutual Institution Activities

In July 2018, the FDIC and OCC co-hosted the 2018 

Joint Mutual Forum, which was open to all mutual 

banking institutions regardless of charter type. 

Mutually owned institutions represent about 9 percent 

of all FDIC-insured institutions and are among the 

oldest form of depository institution. Attended by 

approximately 135 participants, the forum provided 

an opportunity for mutual bankers to learn about 

current trends and engage in a dialogue on the 

strengths of and challenges facing mutual institutions. 

The forum opened with remarks by FDIC Chairman 

Jelena McWilliams and Comptroller of the Currency 

Joseph M. Otting and featured presentations and 

banker panels covering topics of interest relating to 

the mutual industry. Key sessions focused on: Being 

a Mutual in Today’s Financial Services Environment, 

Strategic Thinking: Liquidity and Interest Rate Risk 

Management, a regulatory Compliance Update, and 

an opportunity for each agency to hold an agencyspecific session to address other current matters and 

respond to banker inquiries.

SUPERVISION POLICY

The goal of supervision policy is to provide clear, 

consistent, meaningful, and timely information to 

financial institutions.

Risk-Focused Supervision Program

During 2018, RMS undertook initiatives to enhance 

its risk-focused supervision programs, including a 

study of post-crisis bank failures, and an in-depth 

evaluation of examination processes.

RMS studied post-crisis bank failures for lessons that 

could be used to enhance risk-focused supervision 

activities going forward. The study reinforced 

the importance of a comprehensive and vigilant 

approach to continuous risk-focused, forward-looking 

supervision. As a result, case study analyses were 

presented to supervisory staff, and training sessions 

were held to communicate lessons learned from the 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

21

study that would help examiners identify deficiencies 

or weaknesses and work with institutions to correct 

their root causes.

The FDIC also initiated an Examination Workstream 

project to review risk-focused examination practices. 

The Conference of State Bank Supervisors (CSBS) 

participated in the initiative, which also leveraged 

feedback from other sources, and developed numerous 

recommendations to enhance the risk-focused 

supervision program.

Current Expected Credit 

Losses Implementation

In June 2016, the Financial Accounting Standards 

Board (FASB) introduced the CECL methodology for 

estimating allowances for credit losses, replacing the 

current incurred-loss methodology. 

Since then, the FDIC has worked collaboratively 

with the other federal banking agencies, the FASB, 

the Securities and Exchange Commission (SEC), 

and the CSBS to answer questions regarding the 

implementation of CECL. 

♦ In February 2018, the FDIC and FRB, in 

conjunction with the FASB, SEC, and CSBS, 

jointly hosted two CECL webinars—one for 

examiners and another for bankers—entitled 

“Practical Examples of How Smaller, Less 

Complex Community Banks Can Implement the 

Current Expected Credit Losses Methodology.” 

The webinars addressed loan loss rate methods 

that such institutions can use to implement 

CECL, as well as related data considerations and 

controls. The banker webinar had more than 

8,000 participants. Materials have been archived 

for viewing, and a transcript of the banker 

webinar is available. 

♦ In May 2018, the FDIC, FRB, and OCC issued 

a notice of proposed rulemaking (the CECL 

NPR), that proposed a revision to the regulatory 

capital rules for the implementation of, and 

capital transition to, the CECL methodology.

♦ In July 2018, the three banking agencies, together 

with the FASB, SEC, and CSBS, conducted a 

Q&A webinar that addressed various CECL 

questions the agencies have received from 

community bankers. The July webinar had more 

than 3,300 participants. The webinar materials 

and a transcript of the presentation have also 

been archived for viewing. 

In September 2018, the FDIC, jointly with the 

other federal banking agencies, published a Federal 

Register notice requesting comment on proposed 

revisions to the Call Report and other regulatory 

reports to address, among other things, changes in 

the accounting for credit losses under the CECL 

methodology. The notice also proposed changes to 

the Call Report’s regulatory capital schedule and 

changes to another report to align these reports 

with the agencies’ May 14, 2018, CECL NPR. 

The agencies issued the CECL final rule in December 

2018. The final rule allows banks to transition the 

day one effects of the CECL accounting standard on 

regulatory capital over three years. The final rule also 

revises the agencies’ regulatory capital rule and other 

rules to take into consideration differences between the 

new accounting standard and existing U.S. generally 

accepted accounting principles.

Alternative Reference Rates

The FDIC, along with the other FFIEC members, 

launched an initiative to raise awareness and educate 

supervised financial institutions and examiners about 

reference rate alternatives to the London Inter-bank 

Offered Rate (LIBOR). The FFIEC members hosted 

an introductory webinar in December 2018, and plan 

to follow with additional outreach via webinars and 

other efforts as new information develops.

Credit Risk, Liquidity Risk, 

and Interest-Rate Risk

Loan volume continues to grow as the economy 

expands for the tenth consecutive year. A large 

majority of insured institutions grew their loan 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

22

portfolios over the past year, and some institutions 

have further increased existing concentrations. Loan 

growth accompanied by a reduction in holdings of 

liquid assets and increased reliance on funding sources 

other than traditionally stable deposits is particularly 

prevalent among institutions with rising or elevated 

concentration levels. These trends have the potential 

to give rise to heightened credit and liquidity risk. 

While interest rates are beginning to rise, asset 

maturities remain lengthened. A lengthy period 

of historically low interest rates and tightening 

net interest margins created incentives for insured 

depository institutions to reach for yield in their 

lending and investment portfolios by extending 

portfolio durations, potentially increasing their 

vulnerability to interest-rate risk. Banks must 

continue to be diligent in their efforts to identify, 

manage, and monitor credit risk, liquidity risk, and 

interest-rate risk.

Through regular on-site examinations and interim 

contacts with state nonmember institutions, FDIC 

staff regularly engages in dialogue with institution 

management to ensure that their policies to manage 

credit risk, liquidity risk, and interest-rate risk are 

effective. Where appropriate, FDIC staff works with 

institutions that have significant exposure to these 

risks and encourages them to take appropriate riskmitigating steps. The FDIC uses off-site monitoring 

to help identify institutions that may have heightened 

exposure to these risks, and follows up with them to 

better understand their risk profiles. 

Throughout 2018, the FDIC conducted outreach 

and offered technical assistance regarding these risk 

issues, including Supervisory Insights articles on credit 

risk grading systems and on the risk management 

practices of insured banks active in oil and gas 

lending. In addition, FDIC examiners now devote 

additional attention during the examination process 

to assessing how well banks are managing the risks 

associated with concentrations in credit exposures and 

funding sources. The findings of these assessments 

are shared with bank management in the Report 

of Examination.

Industry Guidance

Interagency Statement on Accounting and 

Reporting Implications of the New Tax Law

In January 2018, the FDIC, jointly with the FRB and 

OCC, issued an interagency statement containing 

guidance on the accounting implications of the 

new tax law, which was enacted on December 22, 

2017, and related matters. The statement provided 

instructions on the application of FASB Accounting 

Standards Codification (ASC) Topic 740, “Income 

Taxes,” and did not represent new rules or regulations 

of the agencies. The changes enacted in the new 

tax law were relevant to financial statements and 

regulatory reports, such as the Call Report and the 

Consolidated Financial Statements for Holding 

Companies (FR Y-9C Report).

Interagency Statement Clarifying 

the Role of Supervisory Guidance

In September 2018, the FDIC, jointly with the 

FRB, OCC, National Credit Union Administration 

(NCUA), and Consumer Financial Protection Bureau 

(CFPB), issued an interagency statement explaining 

the role of supervisory guidance and describing the 

agencies’ approach to supervisory guidance. The 

statement reaffirmed the purpose of supervisory 

guidance to articulate the agencies’ general views 

regarding appropriate practices for a given subject 

area. Unlike a statute or regulation, supervisory 

guidance does not have the force and effect of 

law, and the agencies do not take enforcement 

actions based on supposed “violations” of 

supervisory guidance.

Regulatory Relief

During 2018, the FDIC issued 13 FILs to provide

guidance to financial institutions in areas affected by 

hurricanes, tornadoes, flooding, wildfires, and other 

severe storms, and to facilitate recovery. In these FILs, 

the FDIC encouraged banks to work constructively with 

borrowers experiencing financial difficulties as a result of 

natural disasters, and clarified that prudent extensions 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

23

or modifications of loan terms in such circumstances 

can contribute to the health of communities and serve 

the long-term interests of lending institutions. 

Rulemakings to Implement the 

Economic Growth, Regulatory Relief, 

and Consumer Protection Act 

In May 2018, the EGRRCPA was signed into law, 

and the FDIC immediately began efforts to 

implement various provisions of the new law.

Community Bank Leverage Ratio

In November 2018, the FDIC, OCC, and FRB 

issued a notice of proposed rulemaking to implement 

Section 201 of EGRRCPA to establish a leverage ratio 

for qualifying community banks. If a qualifying 

community bank exceeds this leverage ratio, it would 

be deemed to meet the generally applicable leverage 

and risk-based capital requirements and the wellcapitalized ratio requirements under the prompt 

corrective action framework. Comments will be 

accepted for 60 days following publication in the 

Federal Register. 

In December 2018, the FDIC published a notice of 

proposed rulemaking to amend the deposit insurance 

assessment system to address the application of the 

leverage ratio for qualifying community banks. 

Comments will be accepted for 60 days following 

publication in the Federal Register. 

Appraisal Threshold for Residential Real Estate Loans

In December 2018, the FDIC, OCC, and FRB 

published a proposed rule to amend the agencies’ 

regulations requiring appraisals for certain real 

estate-related transactions. The proposed rule would 

raise the threshold from $250,000 to $400,000 at 

which appraisals would be required for residential 

real estate-related transactions. The proposed rule 

would also make conforming changes to exempt 

certain transactions secured by residential property in 

rural areas from the agencies’ appraisal requirement 

pursuant to the EGRRCPA. Pursuant to the DoddFrank Act, the proposed rule would amend the 

agencies’ appraisal regulations and require institutions 

to review appraisals for federally related transactions 

for compliance with the Uniform Standards of 

Professional Appraisal Practice. The comment period 

closed on February 5, 2019.

Reciprocal Deposits

Section 202 of EGRRCPA amended Section 29 of the 

FDI Act with respect to reciprocal brokered deposits. 

On September 12, 2018, the FDIC approved an NPR 

on the treatment of reciprocal deposits to conform 

Section 337.6 of the FDIC Rules and Regulations 

to Section 202. The NPR was published in the 

Federal Register on September 26, 2018. The 30-day 

comment period closed on October 26, 2018. 

After reviewing the 13 comments received, the FDIC 

Board approved a final rule on December 18, 2018, 

for publication in the Federal Register. This final rule 

adopts the NPR as proposed.

The final rule incorporates the Section 202 statutory 

language into the regulation. In summary, the final 

rule provides an exception for a capped amount 

of reciprocal brokered deposits from treatment as 

brokered deposits for certain IDIs, and confirms 

that the current statutory and regulatory rate 

restrictions for less than well-capitalized institutions 

apply to reciprocal deposits that are excepted from 

treatment as brokered deposits. The final rule also 

includes conforming amendments to the insurance 

assessment regulations, Part 327 of the FDIC Rules 

and Regulations, to be consistent with the statutory 

definition of reciprocal deposits. 

Volcker Rule

In December 2018, the FDIC, OCC, FRB and 

SEC issued an NPR to implement Section 203 of 

EGRRCPA. Section 203 amends Section 13 of the 

Bank Holding Company Act to create an exclusion 

for certain banks and their holding companies from 

the prohibitions of the Volcker Rule. To qualify, 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

24

neither the IDI nor any controlling company may 

have more than $10 billion in total consolidated 

assets, or total trading assets and trading liabilities 

of more than 5 percent of total consolidated assets, 

as reported on the most recent regulatory filing. 

The NPR would also implement Section 204 of 

EGRRCPA to amend the restrictions applicable to 

the naming of a hedge fund or private equity fund 

to permit certain banking entities that are not banks 

or bank holding companies to share a name with the 

fund under certain circumstances. Comments will 

be accepted for 30 days following publication in the 

Federal Register.

Short Form Call Reports

In November 2018, the FDIC, together with the FRB 

and OCC, published in the Federal Register an NPR 

to implement Section 205 of EGRRCPA, that would 

increase the existing asset-size limit from less than 

$1 billion to less than $5 billion for eligibility to file 

the streamlined FFIEC 051 Call Report, provided 

other criteria are met, and establish reduced reporting 

for all IDIs that file this version of the Call Report. 

To further reduce reporting requirements in the 

FFIEC 051 Call Report, the agencies also proposed 

exempting approximately 37 percent of data items 

from being reported in the FFIEC 051 Call Report 

in the first and third quarters. The principal areas 

proposed for reduced reporting include data items 

related to categories of risk-weighting of various types 

of assets and other exposures under the agencies’ 

regulatory capital rules, fiduciary and related services 

assets and income, and troubled debt restructurings 

by loan category. As of June 30, 2018, almost 90 

percent of IDIs reported less than $1 billion in total 

assets and were already eligible to file the FFIEC 

051 Call Report based on asset size. By raising the 

threshold for filing the FFIEC 051 to less than $5 

billion in total assets, approximately 95 percent of 

all IDIs would be eligible to file this streamlined 

Call Report. The 60-day comment period closed on 

January 18, 2019.

Expanded Examination Cycle

In December 2018, the FDIC, FRB, and OCC jointly 

published final rules to expand the examination cycle 

for certain small IDIs and U.S. branches and agencies 

of foreign banks. The final rules did not differ from 

the interim rules that were published in the Federal 

Register on August 29, 2018. 

Section 210 of the EGRRCPA raised the asset-size 

threshold for the 18-month examination cycle from 

less than $1 billion in assets to less than $3 billion in 

assets for certain well-capitalized and well-managed 

IDIs with an “outstanding” composite condition, 

and gave the agencies discretion to similarly raise this 

threshold for certain IDIs with an “outstanding” or 

“good” composite condition. The agencies exercised 

this discretion and issued final rules that, in general, 

make qualifying IDIs with less than $3 billion in 

total assets eligible for an 18-month (rather than a 

12-month) examination cycle. 

To qualify, IDIs must have a CAMELS composite 

rating of “1” or “2,” and be well-capitalized, wellmanaged, not subject to a formal enforcement 

proceeding, and must not have undergone any change 

in control during the previous 12-month period. 

The rule also applies to qualifying U.S. branches or 

agencies of a foreign bank. 

Since BSA compliance programs are required to be 

reviewed during safety and soundness examinations, 

institutions with assets up to $3 billion that are 

now eligible for the 18-month safety-and-soundness 

examination cycle will also generally be subject to less 

frequent BSA reviews.

High Volatility Commercial Real Estate

The FDIC worked with the FRB and OCC to 

issue an NPR, published in the Federal Register on 

September 28, 2018, to incorporate the new definition 

of high-volatility commercial real estate acquisition, 

development or construction loan included in Section 

214 of EGRRCPA. The 60-day comment period ended 

on November 27, 2018.
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

25

Liquidity Coverage Ratio Rule: Treatment of Certain 

Municipal Obligations as High-Quality Liquid Assets

Section 403 of EGRRCPA amended Section 18 of 

the FDI Act, requiring the FDIC, OCC, and FRB 

(collectively, the agencies) to amend their liquidity 

coverage ratio (LCR) rules, and any other regulation 

that incorporates a definition of the term “highquality liquid asset” (HQLA), to treat a municipal 

obligation as HQLA that is a level 2B liquid asset if 

the obligation, as of the calculation date, is liquid and 

readily-marketable and investment grade. On August 

31, 2018, the agencies published an interim final rule 

in the Federal Register in compliance with Section 

403. The comment period for the interim final rule 

closed October 1, 2018. The agencies are reviewing 

the comments received.

Other Rulemakings

Removal of Credit Ratings from 

International Banking Regulations

In March 2018, the FDIC published a final rule 

amending its international banking regulations 

related to permissible investment activities and the 

pledging of assets. The final rule removes references 

to “external credit ratings” and replaces them with 

“appropriate standards of creditworthiness.” The 

changes in the FDIC Rules and Regulations Part 347, 

Subparts A and B, are consistent with Section 939A 

of the Dodd-Frank Act.

Securities Transaction Settlement Cycle

In June 2018, the FDIC and OCC published a final 

rule to amend the rules to generally require supervised 

institutions to settle securities transactions within the 

number of business days in the standard settlement 

cycle followed by registered broker dealers in the 

United States. The final rule, which became effective 

on October 1, 2018, responds to an industry-wide 

shift in the standard settlement cycle from three 

days after the trade date (“T+3”) to two days (“T+2”), 

as mandated by the SEC’s recent amendments to 

SEC Rule 15c6-1(a). By requiring FDIC-supervised 

institutions to settle securities transactions within 

the standard settlement cycle as provided in SEC 

Rule 15c6-1(a), the final rule effectively conforms the 

FDIC’s rules to the current T+2 and accommodates 

future shifts in the standard settlement cycle. 

Proposed Changes to Applicability Thresholds

 for Regulatory Capital Requirements and 

Liquidity Requirements

In December 2018, the FDIC, FRB, and OCC 

published an NPR that would establish a revised 

framework for applying the regulatory capital rule, 

liquidity coverage ratio rule, and proposed net stable 

funding ratio rule. Under the proposal, application 

of the rules would depend on the risk profile of each 

large U.S. banking organization and its subsidiary 

institutions. The proposal would establish four 

categories of standards for banking organizations with 

total assets of $100 billion or more, and would apply 

capital and liquidity requirements tailored for banking 

organizations subject to each category. The 30-day 

comment period ended on January 22, 2019.

Modifications to the Statement of Policy for Section 19

On July 19, 2018, after considering public comments, 

the FDIC Board of Directors approved modifications 

to the Statement of Policy for Section 19 of the Federal 

Deposit Insurance Act to revise the criteria that define 

de minimis offenses, clarify existing statements, and 

remove outdated references to the Office of Thrift 

Supervision.  The modifications are intended to reduce 

regulatory burden, promote public awareness of the 

law, and decrease the number of covered offenses that 

will require an application.  In addition, the FDIC 

revised the Section 19 application form and published 

an informational brochure: “Your Complete Guide 

to Section 19.”  The modifications to the statement of 

policy, revised application form, and informational 

brochure were announced in FIL-68-2018. 

Brokered Deposits

The FDIC continues to receive questions about the 

application of the brokered deposit regulation (Section 

337.6 of the FDIC Rules and Regulations). Except 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

26

for the December 2018 update for reciprocal deposits, 

FDIC last amended its brokered deposit regulation 

– specifically the interest rate restrictions– in 2009. 

Since that time, technology, law, business models, and 

product ranges have evolved. In order to determine 

what additional changes to Section 337.6 may be 

warranted, the FDIC approved an Advance NPR on 

December 18, 2018, to seek comment on the brokered 

deposit regulation more generally. The comment 

period will end 90 days after publication in the 

Federal Register.

FINANCIAL TECHNOLOGY 

The FDIC continuously monitors developments in 

technology to better understand how it may affect 

the financial industry. 

Center for Financial Research

The FDIC’s Center for Financial Research (CFR) 

encourages, supports, and conducts innovative 

research on topics that inform the FDIC’s key 

functions of deposit insurance, supervision, and the 

resolution of failed banks. CFR researchers produced 

a number of new and innovative working papers 

in 2018. Many of these were published in leading 

banking, finance, and economics journals, and 

presented in banking and finance seminars at major 

conferences, regulatory institutions, and universities. 

FDIC Chairman Jelena McWilliams delivers opening remarks at the 

18th Annual Bank Research Conference.

The CFR also developed and maintained many 

financial models used throughout the FDIC, 

including off-site models that inform the examination 

process. CFR economists also provided ongoing 

support to RMS through on-site examinations.

In September 2018, the CFR and the Journal of 

Financial Services Research jointly sponsored the 18th 

Annual Bank Research Conference. FDIC Chairman 

Jelena McWilliams kicked-off the conference by 

highlighting the importance of research in supporting 

the FDIC’s role in maintaining stability and public 

confidence in the nation’s financial system. The 

conference has become a premier forum in its field. 

Conference organizers received more than 450 

submissions for the 26 available presentation slots, and 

approximately 220 participants attended. Discussion 

sessions focused on tradeoffs in bank regulation, 

segmentation of the lending markets, FinTech, and 

depositor reactions to increased risk at banks, among 

other things.

In October 2018, the CFR published the Small 

Business Lending Survey, which presented findings 

from a nationally representative survey of U.S. banks 

about their small 

business lending 

practices. The 

report provided new 

information about 

the amount of loans 

that banks extend 

to small businesses; 

how banks engage 

with their small 

business customers, 

including start-ups; 

the competitive 

environment for 

small business loans; and how banks of different 

sizes compete in the small business lending market. 

Presentations of the findings were made to banking 

organizations and regulatory agencies, and the full 

report is available at https://www.fdic.gov/sbls.
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

27

FDIC Emerging Technology 

Steering Committee

The FDIC’s Emerging Technology Steering 

Committee, supported by two staff-level 

subcommittees, continues to monitor and assess 

the various dimensions of emerging technology 

developments. The committee is comprised of the 

Directors of RMS, DCP, Division of Insurance 

and Research (DIR), Division of Resolutions and 

Receiverships (DRR), and the Office of Complex 

Financial Institutions (OCFI), as well as the General 

Counsel, the Chief Risk Officer, and the Chief 

Information Officer.

In 2018, the Emerging Technology Steering 

Committee continued work on its established 

objectives: 

♦ Comprehend, assess, and monitor the current 

emerging technology activities, risks, and trends; 

♦ Evaluate the projected impact to the banking 

system, the deposit insurance system, effective 

regulatory oversight, economic inclusion, and 

consumer protection; 

♦ Oversee internal working groups monitoring 

particular aspects of emerging technology; 

♦ Recommend follow-up actions, as appropriate, 

and monitor implementation; and 

♦ Help formulate strategies to respond to 

opportunities and challenges presented by 

emerging technology, and to ensure developments 

align with regulatory goals. 

In May 2018, the FDIC hosted a forum on the Use of 

Technology in the Business of Banking. The forum 

brought together a range of stakeholders, including 

banks, technology firms, financial technology 

(fintech) firms, trade associations, consumer groups, 

and other regulators, to explore emerging technology 

issues, specifically as they relate to the business of 

banking. The goals of the forum were to better 

understand emerging technologies that banks are 

using or considering for future use; gain a deeper 

understanding of how banks are leveraging (or 

can leverage) those emerging technologies to seize 

opportunities for their business and their customers, 

as well as methods to mitigate risks; and facilitate 

candid discussion of emerging issues related to the 

use of financial technology in banking. Panelists 

represented banks of all sizes, from small community 

banks to large banks, as well as other firms and 

organizations involved with emerging technology. 

Together, they offered a range of perspectives on many 

new technologies and the associated opportunities and 

potential risks.

The FDIC also participates on several working groups 

related to financial technology:

♦ The Basel Committee on Banking Supervision’s 

Task Force on Financial Technology, which 

focuses on the impact of financial technology on 

banks’ business models, risk management and 

implications for bank supervision; 

♦ The Financial Stability Oversight Council 

(FSOC) Digital Assets Working Group, which is 

examining potential policy areas as they relate to 

digital assets and the application of distributed 

ledger technology; and 

♦ An interagency FinTech discussion forum, which 

focuses on issues related to consumer compliance.

FinTech Legal Group

In 2018, the General Counsel announced a Legal 

Division initiative and formed a FinTech Legal Group 

comprised of attorneys from across the Division. The 

initiative will support the Legal Division and the 

FDIC, including its internal agency working groups 

with respect to emerging and novel legal issues arising 

from new digital and other forms of technology. 

In particular, the FinTech Legal Group considers 

developments that may transform the traditional 

banking business model, operations, systems, 

and vendor and consumer relationships; impact 

application of current laws and regulations; affect the 

risk profiles of FDIC-insured and FDIC-supervised 

institutions; and introduce new considerations in 

resolving failed institutions. 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

28

COMMUNITY BANKING INITIATIVES

Community banks provide traditional, relationshipbased banking services in their local communities, 

and as the primary federal supervisor for the majority 

of community banks, the FDIC has a particular 

responsibility for the safety and soundness of this 

segment of the banking system. 

As defined for FDIC research purposes, community 

banks made up 92 percent of all FDIC-insured 

institutions at mid-year 2018. While these banks hold 

just 13 percent of banking industry assets, community 

banks are of critical importance to the U.S. economy 

and local communities across the nation. They hold 

42 percent of the industry’s small loans to farmers and 

businesses, making them the lifeline to entrepreneurs 

and small enterprises of all types, and they hold the 

majority of bank deposits in U.S. rural counties and 

micropolitan counties with populations up to 50,000. 

In fact, as of June 2018, community banks held more 

than 75 percent of deposits in more than 1,200 U.S. 

counties. In more than 600 of these counties, the 

only banking offices available to consumers were those 

operated by community banks.

In 2012, the FDIC launched a Community Banking 

Initiative to better understand and support these 

institutions. As part of the initiative, the FDIC 

publishes research on issues of importance to 

community banks, and provides them with resources 

to manage risk, enhance the expertise of their staff, 

and adapt to changes in the regulatory environment.

Community Banking Research 

The FDIC pursues an ambitious, ongoing agenda 

of research and outreach focused on community 

banking issues. Since the 2012 publication of the 

FDIC Community Banking Study, FDIC researchers 

have published more than a dozen additional studies 

on topics ranging from small business financing to the 

factors that have driven industry consolidation over 

the past 30 years. 

The FDIC Quarterly Banking Profile (QBP) includes 

a section focused specifically on community bank 

performance, providing a detailed statistical picture of 

the community banking sector that can be accessed 

by analysts, other regulators, and bankers themselves. 

The most recent report shows that net income at 

community banks continued to grow at a healthy 

annual rate in the first three quarters of 2018. 

The long-term trend of consolidation has done little to 

diminish the role of community banks in the banking 

industry. More than three-quarters of the community 

banks that merged in 2017 and early 2018 were 

acquired by other community banks. On a merger 

adjusted basis, loan growth at community banks 

exceeded growth at noncommunity banks in every 

year between 2012 and 2017. (See Chart 1 on Page 

29.) From June 2017 to June 2018, currently operating 

noncommunity banks closed far more offices than 

they acquired. In contrast, currently operating 

community banks acquired offices and opened still 

more offices, on net, during the year. 

(See Table 1 on page 29.) 

Community Bank Advisory Committee 

The FDIC’s Advisory Committee on Community 

Banking is an ongoing forum for discussing current 

issues and receiving valuable feedback from the 

industry. The committee, which met twice during 

2018, is composed of as many as 18 community bank 

CEOs from around the country. It is a valuable 

resource for information on a wide range of topics, 

including examination policies and procedures, capital 

and other supervisory issues, credit and lending 

practices, deposit insurance assessments and coverage, 

and regulatory compliance issues. 

At the July 2018 meeting, DIR discussed the current 

financial performance of community banks, and 

how selected risk indicators compare to those seen 

before the financial crisis. As compared to the precrisis years, community banks have higher capital 

ratios than noncommunity banks, and far fewer of 

community banks have extremely high concentrations 

in construction lending. The presenters also noted, 

however, that community banks are holding generally 

more loans, fewer liquid assets, and face potential 

pressures on deposit costs as interest rates increase. 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

29

Committee members indicated that deposit pricing 

pressures had been relatively modest, but that further 

interest rate increases could begin to pressure their 

deposit costs. 

De Novo Banks 

In 2018, the FDIC pursued multiple initiatives to 

fulfill its commitment to working with, and providing 

support to, any group with interest in starting a bank. 

In general, these initiatives focused on reviewing and, 

as appropriate, updating the processes, procedures, 

and management systems by which the FDIC 

receives, reviews, and acts on applications. 

Most significantly, in December 2018, the FDIC 

announced new measures to promote a more 

transparent, streamlined, and accountable process 

for all de novo applications submitted to the 

agency. Specifically, the FDIC issued a Request 

CHART 1: COMMUNITY BANK LOAN GROWTH HAS EXCEEDED GROWTH 

AT NONCOMMUNITY BANKS FOR SIX CONSECUTIVE YEARS

Merger Adjusted Annual Growth in Total Loans and Leases

2006-2017

Source: FDIC. All calculations are merger adjusted.

TABLE 1. COMMUNITY BANKS ADDED OFFICES WHILE NONCOMMUNITY BANKS 

CLOSED OFFICES FROM JUNE 2017 TO JUNE 2108

Offices of the 

June 2018 

Group of 

Institutions in 

June 2017

Offices of 

Banks 

Acquired

Number of 

Offices in 

June 2017 

Mergeradjusted

New 

Offices 

Opened

Offices 

Closed

Net Offices 

Purchased 

or Sold

Number of 

Offices in 

June 2018

Community Banks 29,832 619 30,451 585 500 15 30,551

Noncommunity banks 57,886 1,481 59,367 404 2,254 -15 57,502

TOTAL 87,718 2,100 89,818 989 2,754 0 88,053

Source: FDIC

-10

-5

0

5

10

15

-8.9%

2006 2016

11.2%

7.0%

9.5% 9.3%

-2.1%

-0.3%

-2.3%

2.1%

-0.9%

2.0%

3.4%2.9%

5.0%

2.1%

8.6%

4.7%

8.6%

6.0%

3.9%

7.7%

2007 2008 2009 2010 2011

Community Banks

Noncommunity Banks

2012 2013 2014 2015 2017

10%

0%

-5%

5%

15%

-10%

9.0% 8.3%

4.8%
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

30

for Information soliciting comments on the deposit 

insurance application process, including the 

transparency and efficiency of the process, and any 

unnecessary burdens that impede the process. 

The agency also established a process to receive and 

review draft deposit insurance proposals. This process 

will help organizers of new financial institutions by 

providing an early opportunity for both the FDIC 

and organizers to identify potential challenges with 

respect to the statutory criteria, areas that may require 

further detail or support, and potential issues or 

concerns. It will also promote a more transparent 

and efficient deposit insurance application process. 

The FDIC also established an Applications Mailbox 

as an additional means by which bankers and other 

applicants may pose questions regarding a specific 

application or the application process.

Other measures to support de novo formation, included:

♦ Re-publishing time frame guidelines for 

processing applications, notices, requests, and 

other filings submitted on behalf of proposed 

and existing institutions and other parties to help 

applicants in their planning. 

♦ Updating the Applying for Deposit Insurance – A 

Handbook for Organizers of De Novo Institutions. 

The handbook was designed to help organizers 

become familiar with the deposit insurance 

application process. 

♦ Updating the Deposit Insurance Applications 

Procedures Manual. The manual provides 

comprehensive instruction to staff regarding 

the review and processing of deposit insurance 

applications.

Technical Assistance Program 

As part of the Community Banking Initiative, 

the FDIC continued to provide a robust technical 

assistance program for bank directors, officers, and 

employees. The technical assistance program 

includes Directors’ College events held across the 

country, industry teleconferences and webinars, 

and a video program.

In 2018, the FDIC hosted Directors’ College 

events in five of its six regions. These events 

were typically conducted jointly with state trade 

associations and addressed issues such as corporate 

governance, regulatory capital, community banking, 

concentrations management, consumer protection, 

BSA, and interest-rate risk, among other topics. 

The FDIC also offers a series of banker events, in 

order to maintain open lines of communication and 

to keep bank management and staff up-to-date on 

important banking regulatory and emerging issues of 

interest to community bankers. In 2018, the FDIC 

offered 11 teleconferences or webinars focused on the 

following topics: 

♦ Understanding Reasonably Expected Market 

Area (REMA) and Community Reinvestment 

Act (CRA) Assessment area, 

♦ Liquidity and funding risk management, 

♦ Current Expected Credit Losses (CECL) 

accounting methodology, 

♦ The impact of rising interest rates on asset/

liability management,

♦ Money Smart for Small Businesses,

♦ Regulatory and accounting update,

♦ Common exam findings,

♦ Update on compliance and CRA, and

♦ Information sharing on standardized export of 

imaged loan documents.

In October 2018, the FDIC hosted a teleconference 

to provide information about EGRRCPA 

implementation, and to answer questions. The 

call was part of the FDIC’s consumer compliance 

teleconference and webinar series, which allows the 

FDIC to communicate important information to 

supervised institutions on a variety of topics and to 

respond to industry questions. 

In November 2018, the FDIC hosted another 

teleconference to discuss results of the 2017 National 

Survey of Unbanked and Underbanked Households. 

During this call, participants also discussed economic 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

31

inclusion resources pertinent to community banks, 

including the Money Smart for Adults financial 

education program, and CRA consideration for 

activities that benefit underserved communities.

Economic Growth and Regulatory 

Paperwork Reduction Act

The Economic Growth and Regulatory Paperwork 

Reduction Act (EGRPRA) directs the federal banking 

agencies and the FFIEC to conduct a joint review of 

regulations every 10 years to determine whether any 

of those regulations are outdated or unnecessary. 

In March 2017, the FFIEC submitted a report to 

Congress that described actions the agencies had 

already taken to address comments received during 

the EGRPRA process as well as actions the agencies 

planned to take in the future. During 2018, the 

FDIC along with the other FFIEC member agencies, 

continued to work together to reduce burden in the 

following areas raised during the EGRPRA review 

process. 

♦ Capital Simplification Proposal 

In 2017, the federal banking agencies issued 

an NPR to seek comment on simplifications to 

the capital framework as part of the agencies’ 

EGRPRA efforts. Parts of the proposed 

rulemaking was superseded by certain capital 

framework provisions of the Economic Growth, 

Regulatory Relief and Consumer Protection Act. 

As a result, the federal banking agencies issued 

in September 2018 an NPR to seek comment on 

implementation of the revised statutory definition 

of High Volatility Commercial Real Estate and 

issued in November 2018 an additional NPR to 

seek comment on the leverage ratio for qualifying 

community banks. FDIC staff, along with the 

staff of other federal banking agencies, continued 

to review comments received in response to the 

2017 NPR to simplify the capital rules for small 

banks not eligible for the community bank 

leverage ratio, including the regulatory capital 

treatment of mortgage servicing assets, deferred 

tax assets, investments in the capital instruments 

of other financial institutions, and minority 

interest. FDIC staff, along with the staff of 

other federal banking agencies, plan to put forth 

final rules on both of these capital simplification 

efforts in 2019 and explore other areas of 

regulatory capital rules that may be simplified 

or streamlined.  

♦ Commercial and Residential Real Estate 

Appraisal Thresholds 

On April 9, 2018, the FDIC, FRB, and 

OCC jointly published a final rule that raised 

the threshold for requiring an appraisal on 

commercial real estate transactions from 

$250,000 to $500,000. 

Similarly, on December 7, 2018, the FDIC, FRB, 

and OCC jointly published an NPR requesting 

comment on an increase in the threshold for 

requiring an appraisal on residential real estate 

transactions from $250,000 to $400,000.

♦ Frequently Asked Questions (FAQs) on the 

Appraisal Regulations and the Interagency 

Appraisal and Evaluation Guidelines

In October 2018, the FDIC, FRB, and OCC 

jointly issued FAQs on real estate appraisals 

and evaluations, in response to questions raised 

during the EGRPRA process about the agencies’ 

appraisal regulations and guidance. The FAQs 

do not introduce new policy or guidance, but 

instead assemble previously communicated policy 

and interpretations. The FAQs complement the 

agencies’ appraisal regulations, the real estate 

lending standards, the Interagency Appraisal and 

Evaluation Guidelines, the Interagency Advisory 

on the Use of Evaluations in Real Estate-Related 

Financial Transactions, and other regulations and 

advisories related to appraisals and evaluations. 

The FAQs rescinded and replaced FAQs that the 

agencies previously issued in March 2005.

♦ Advisory on the Availability of Appraisers 

The FDIC, FRB, OCC, and NCUA issued an 

advisory that discusses two existing methods 

that may address appraiser shortages, particularly 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

32

in rural areas: temporary practice permits and 

temporary waivers. The advisory addresses 

concerns raised pursuant to the EGRPRA 

review process. 

The first method, temporary practice permits, 

may be granted by state appraiser regulatory 

agencies to allow credentialed appraisers to 

provide their services in states experiencing 

a shortage of appraisers, subject to state law. 

Reciprocity is a widely used practice in which 

one state recognizes the appraiser certification 

and licensing of another state, permitting statecertified and -licensed appraisers to perform 

appraisals across state lines. The second method, 

temporary waivers, sets aside requirements 

relating to the certification or licensing of 

individuals to perform appraisals under Title 

XI of FIRREA in states or geographic political 

subdivisions while there is a scarcity of certified 

or licensed appraisers that has caused significant 

delays in performing appraisals. Authority to 

grant temporary waiver requests rests with the 

FFIEC's Appraisal Subcommittee, and is subject 

to FFIEC approval. To further communicate 

about the availability of the waiver process and 

get a deeper understanding of rural appraisal 

issues, the Conference of State Bank Supervisors 

organization arranged six roundtables between 

federal banking regulators, state commissioners 

and rural community bankers. Roundtables were 

held in Michigan, Tennessee, Wyoming, North 

Dakota, South Dakota, and Montana.

♦ Call Report Burden Reduction

Effective with the June 30, 2018, reporting 

date, burden-reducing revisions were made to 

all three versions of the Call Report (FFIEC 

051, FFIEC 041, and FFIEC 031 Call Reports). 

These changes were the result of multi-phase 

review of the data collected in all Call Report 

schedules, the re-evaluation of certain previously 

reviewed schedules, and consideration of industry 

comments and feedback. These changes were 

designed to ease reporting requirements and 

lessen the reporting burden for small and 

large institutions.

Additionally, during 2018 the FFIEC’s Task 

Force on Reports developed options for 

expanding eligibility to file the FFIEC 051 Call 

Report beyond the initial asset size eligibility 

threshold of $1 billion. This effort included 

analyzing Call Report data from institutions 

with domestic offices only and $1 billion or more 

in total assets. Section 205 of the EGRRCPA 

requires the banking agencies to issue regulations 

that allow for a reduced reporting requirement 

in the first and third quarter Call Reports for 

institutions that have less than $5 billion in 

total assets and satisfy other appropriate criteria 

established by the agencies. An NPR to expand 

eligibility for filing FFIEC 051 and to reduce 

the quarterly reporting frequency for some items 

to semiannual (i.e., June and December only) 

was published in November 2018. As of June 

30, 2018, approximately 90 percent of IDIs were 

eligible to file the FFIEC 051 Call Report. If 

the rule is finalized as proposed, approximately 

95 percent of IDIs would be eligible to file the 

FFIEC 051 Call Report. 

♦ Part 350 Disclosure of Financial and 

Other Information

In October 2018, the FDIC published an NPR 

to rescind and remove Part 350 of its regulations, 

which requires insured state nonmember banks 

and insured state-licensed branches of foreign 

banks to prepare an annual disclosure statement 

containing specified financial information and 

make it available to the public. The FDIC 

determined that widespread access to the internet 

allows interested persons to readily access more 

extensive and timely financial information about 

individual institutions than an annual disclosure 

statement, and that the burden of providing this 

annual disclosure statement is no longer justified. 

♦ Management Official Interlocks

In December 2018, the FDIC, OCC, and 

FRB approved a proposed rule that would 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

33

increase the major assets prohibition thresholds 

for management interlocks in the agencies’ 

rules implementing the Depository Institution 

Management Interlocks Act (DIMIA). The 

DIMIA major assets prohibition prohibits a 

management official of a depository organization 

with total assets exceeding $2.5 billion (or any 

affiliate of such an organization) from serving 

at the same time as a management official of an 

unaffiliated depository organization with total 

assets exceeding $1.5 billion (or any affiliate of 

such an organization). Raising the thresholds 

will account for changes in the U.S. banking 

market and inflation since the current thresholds 

were established in 1996, and relieve certain 

institutions (i.e., those below the adjusted 

threshold) from having to ask the agencies for 

an exemption from the major assets prohibition. 

The agencies proposed three alternative 

approaches to increasing the thresholds, and do 

not expect the proposal to materially increase 

anticompetitive risk.

♦ Retirement of Certain Financial 

Institution Letters 

Financial Institution Letters (FILs) serve as 

the primary tool for delivering information to 

financial institutions about new regulations, 

supervisory guidance, management tools, 

regulatory relief, and other subjects of interest. 

As part of a continuing effort to reduce 

regulatory burden, in December 2018, the FDIC 

retired 374 risk management supervision-related 

FILs and 119 FILs related to consumer protection 

that were issued between 1995 and 2017. The 

retired FILs were identified as being outdated or 

as conveying regulations or other information 

that is still in effect but available elsewhere on the 

FDIC’s website.

♦ Examination Modernization

Recognizing that regulatory burden does not 

emanate only from statutes and regulations, the 

FDIC, along with the FFIEC, continued the 

FFIEC Examination Modernization project in 

2018 as a follow-up to the review of regulations 

under EGRPRA. The project is focused on 

identifying ways to improve the efficiency of 

processes, procedures, and tools related to safetyand-soundness examinations and supervisory 

oversight, while maintaining the quality of the 

examination process. 

In March 2018, the FFIEC issued an update 

on the Examination Modernization project, 

which noted that, in response to feedback from 

both bankers and examiners, the FFIEC would 

initially focus on the following measures to 

reduce supervisory burden:

1. Highlight and reinforce regulator 

communication objectives before, during, and 

after examinations.

2. Continue to tailor examinations based on risk.

3. Leverage technology and shift, as appropriate, 

examination work from on-site to off-site. 

4. Improve electronic file transfer systems to 

facilitate the secure exchange of information 

between institutions and supervisory offices or 

examiners.

As a first step, and to address the first theme, 

the FDIC and other banking agencies issued 

a statement describing the principles of 

communication the agencies follow during the 

examination process, and committed to issue 

guidance to examination staff to reinforce 

and clarify the importance of being clear and 

transparent with community bankers during the 

examination process. 

In April 2018, the FDIC conducted an 

information sharing session to introduce 

a methodology for examiners to review 

standardized imaged loan files off-site. This 

technology is designed to reduce the amount of 

time examiners must spend onsite during a bank 

examination. A pilot program began in May, 

and several institutions have participated. 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

34

Also in 2018, the Examination Modernization 

project team reviewed and compared principles 

and processes for risk-focusing examinations of 

community banks. This review concluded that 

the agencies have developed and implemented 

similar programs and processes for risk-tailoring 

examinations. 

On November 27, 2018, the FFIEC issued a 

statement to update the industry on efforts 

to reduce supervisory burden by tailoring 

examinations based on risk. In this statement, 

the FDIC and other agencies committed to issue 

reinforcing and clarifying guidance to examiners 

on risk-focused examination principles.

♦ OTS Rule Integration

The FDIC also streamlined and clarified 

certain regulations through the Office of Thrift 

Supervision (OTS) rule integration process. 

Under Section 316(b) of the Dodd-Frank 

Act, former OTS rules remain in effect “until 

modified, terminated, set aside, or superseded 

in accordance with applicable law” by the 

relevant successor agency, a court of competent 

jurisdiction, or operation of law. When 

the FDIC republished the transferred OTS 

regulations as new FDIC regulations applicable 

to state savings associations, the FDIC stated in 

the Federal Register notice that its staff would 

evaluate the transferred OTS rules and might 

later recommend incorporating them into other 

FDIC rules, amending them, or rescinding 

them. This process began in 2013 and continues, 

involving publication in the Federal Register of a 

series of NPRs and final rules. 

In April 2018, two transferred OTS rules, 

Prompt Corrective Action and Capital, were 

removed as part of Basel III implementation. 

Additionally, in May 2018, the FDIC issued 

final rules to remove two transferred OTS rules, 

Minimum Security Procedures and Consumer 

Protection in Sales of Insurance, and to make 

technical amendments to related FDIC rules 

for applicability to FDIC-supervised state banks 

and savings associations. In November 2018, 

the FDIC issued a final rule to remove the 

transferred OTS rule regarding Fiduciary Powers 

of State Savings Associations, and to amend and 

revise rules regarding Consent Requirements 

for the Exercise of Trust Powers. The final rule 

makes all FDIC-supervised institutions subject 

to the same application procedures for obtaining 

consent to exercise trust powers. 

Finally, in December 2018, the FDIC approved 

an NPR seeking comment on the removal of a 

transferred rule regarding lending and investment 

that is duplicative of standards in existing FDIC 

regulations. The NPR also seeks to remove rules 

related to the registration of residential mortgage 

loan originators in light of Title X of the DoddFrank Act, which transferred this authority to 

the CFPB. Staff will continue to review the 

remaining nine transferred regulations.

ACTIVITIES RELATED TO SYSTEMICALLY 

IMPORTANT FINANCIAL INSTITUTIONS

The FDIC is committed to addressing the unique 

challenges associated with the supervision, insurance, 

and potential resolution of large and complex financial 

institutions. The agency’s ability to analyze and 

respond to risks in these institutions is particularly 

important, as they comprise a significant share of 

banking industry assets and deposits. We have 

developed a consistent approach to large bank 

supervision nationwide that allows us to identify, 

analyze, and quickly respond to industry-wide and 

institution-specific risks and emerging issues. The 

FDIC has segregated these activities in two groups to 

both ensure that supervisory attention is risk-focused 

and tailored to the risk presented by the nation’s 

largest banks, and to meet our responsibilities under 

the FDI Act and the Dodd-Frank Act.

Complex Financial Institutions Program 

The Dodd-Frank Act expanded the FDIC’s 

responsibilities pertaining to systematically important 

financial institutions (SIFIs) and nonbank financial 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

35

companies designated by FSOC. The FDIC’s CFI 

Group and Large Bank Supervision Branch, both 

within RMS, perform ongoing risk monitoring of 

Global Systemically Important Banks (G-SIBs), large 

Foreign Banking Organizations (FBOs), and FSOCdesignated nonbank financial companies, provide 

backup supervision of the firms’ related IDIs, and 

evaluate the firms’ required resolution plans. The CFI 

Group also performs certain analyses that support the 

FDIC’s role as an FSOC member.

Resolution Plans – Title I Living Wills 

Certain large banking organizations and nonbank 

financial companies designated by the FSOC for 

supervision by the FRB are periodically required to 

submit resolution plans to the FRB and the FDIC. 

Each resolution plan, commonly known as a “living 

will,” must describe the company’s strategy for rapid 

and orderly resolution under the U.S. Bankruptcy 

Code in the event of material financial distress or 

failure of the company.

Companies subject to Title I are divided into three 

groups: 1) companies with $250 billion or more in 

nonbank assets, 2) companies with nonbank assets 

between $100 billion and $250 billion, and 3) all 

other companies with total consolidated assets of $50 

billion or more.4

 Large bank holding companies with 

substantial nonbank assets file in July. Other large 

bank holding companies file in December. 

Large Bank Holding Companies 

with Substantial Nonbank Assets

July filers include Bank of America Corporation, 

Bank of New York Mellon Corporation, JPMorgan 

Chase & Co., State Street Corporation, Wells Fargo 

& Company, Goldman Sachs Group, Inc., Morgan 

Stanley, and Citigroup, Inc. (collectively referred to as 

the eight domestic G-SIBs); and Barclays PLC, Credit 

Suisse Group AG, Deutsche Bank AG, and UBS AG, 

(collectively referred to as the four large FBOs). 

The four FBOs submitted resolution plans on or 

before July 1, 2018. On December 18, 2018, the 

FDIC and FRB issued letters to the four firms 

providing their review findings and information 

about areas where additional work needs to be done 

to improve resolvability. The agencies also extended 

the next resolution plan filing deadline for FBOs 

from July 1, 2019, to July 1, 2020. The extensions 

will allow additional time for the agencies to provide 

feedback to the firms on their last submissions and for 

the firms to produce their next plans. 

On July 29, 2018, the agencies issued for public 

comment revised resolution plan guidance for the 

eight domestic banking organizations. The proposed 

guidance updates to the agencies’ expectations for how 

a firm’s resolution strategy should address derivatives 

and trading activities, and payment, clearing, and 

settlement activities. The comment period closed 

on September 14, 2018. The agencies issued final 

guidance on December 18, 2018.

Other Large Bank Holding Company Filers

In January 2018, the FDIC, jointly with the FRB, 

provided feedback to 19 foreign-based banking 

organizations with total consolidated assets of $50 

billion or more regarding resolution plans submitted 

in December 2015. In March 2018, the FDIC, and 

FRB, provided feedback to two regional bank holding 

companies which submitted their resolution plans 

in December 2016. In May 2018, the FDIC and 

FRB granted an extension to 14 regional bank 

holding companies, extending the due date for 

their next resolution plan from December 2018 to 

December 2019. 

Nonbank Firms 

Nonbank financial firms designated as systemically 

important by FSOC also are required to submit 

resolution plans for review by the FDIC and FRB. 

Prudential, Inc., the only remaining designated 

4

 In 2018, the EGRRCPA increased the threshold for resolution plan requirements under Section 165(d) of the Dodd-Frank Act. The FDIC and FRB have announced 

their intention to propose amendments to current regulations and tailor certain future plan submission requirements in 2019. 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

36

nonbank at the start of 2018, was required to submit 

its plan on December 31, 2018, pursuant to a previous 

extension. However, on October 16, 2018, FSOC 

rescinded Prudential’s designation as a SIFI. 

Insured Depository 

Institution Resolution Plans

Section 360.10 of the FDIC Rules and Regulations 

requires an IDI with total assets of $50 billion or 

more to periodically submit to the FDIC a plan for 

its resolution in the event of its failure (the “IDI 

rule”). The IDI rule requires covered IDIs to submit 

a resolution plan that would allow the FDIC, as 

receiver, to resolve the institution under Sections 11 

and 13 of the FDI Act in an orderly manner that 

enables prompt access to insured deposits, maximizes 

the return from the sale or disposition of the failed 

IDI’s assets, and minimizes losses realized by 

creditors. The resolution plan must also describe how 

a proposed strategy will be least costly to the Deposit 

Insurance Fund. 

Forty-one large insured banks covered by the IDI rule 

submitted their resolution plans by July 1, 2018. In 

the time period leading up to the submission deadline, 

the FDIC had undertaken measures to improve 

transparency and responsiveness. Specifically, the 

FDIC established a dedicated mailbox to receive 

questions and responded to more than 200 individual 

questions from banks, conducted three industry 

calls, met with one trade association, and conducted 

numerous meetings with individual covered IDIs. 

The resolution plans submitted by the IDIs have been 

reviewed and potential impediments to resolvability 

identified. Letters will be sent to the firms in 

early 2019.

The FDIC expects to issue an advance notice of 

proposed rulemaking relating to the IDI rule for 

public comment during the first quarter of 2019. 

Monitoring and Measuring Systemic Risks 

The FDIC monitors risks related to G-SIBs and 

large FBOs at the firm level and industry wide to 

inform supervisory planning and response, policy 

and guidance considerations, and resolution planning 

efforts. As part of this monitoring, the FDIC 

analyzes each company’s risk profile, governance 

and risk management capabilities, structure and 

interdependencies, business operation and activities, 

management information system capabilities, and 

recovery and resolution capabilities. 

The FDIC continues to work closely with the other 

federal banking agencies to analyze institution-specific 

and industry-wide conditions and trends, emerging 

risks and outliers, risk management, and the potential 

risk posed to financial stability by G-SIBs and 

large FBOs and non-bank financial companies. To 

support risk monitoring that informs supervisory and 

resolution planning efforts, the FDIC has developed 

systems and reports that make extensive use of 

structured and unstructured data. Monitoring reports 

are prepared on a routine and ad-hoc basis and cover 

a variety of aspects that include risk components, 

business lines and activity, market trends, and 

product analysis. 

Additionally, the FDIC has implemented and 

continues to expand upon various monitoring 

systems, including the Systemic Monitoring System 

(SMS). The SMS provides an individual risk profile 

and assessment for each G-SIB and large FBO by 

evaluating the level and change in metrics that serve 

as important indicators of overall risk. The SMS 

supports the identification of emerging and outsized 

risks within individual firms and the prioritization 

of supervisory and monitoring activities. The SMS 

also serves as an early warning system of financial 

vulnerability. Information from SMS and other 

FDIC-prepared reports are used to prioritize activities 

relating to SIFIs and to coordinate supervisory and 

resolution-related activities with the other banking 

agencies. 

The FDIC also conducts semi-annual “Day of Risk” 

meetings to present, discuss, and prioritize the review 

of emerging risks. In some cases, these discussions 

can lead to shifts in supervisory focus or priorities. 

In 2018, RMS CFI Group implemented a new SIFI 

Risk Report that identifies key vulnerabilities of 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

37

systemically important firms, gauges the proximity of 

these firms to a resolution event, and independently 

assesses the appropriateness of supervisory CAMELS 

ratings for the insured deposit institutions held by 

these firms. 

Back-up Supervision Activities for IDIs of 

Systemically Important Financial Institutions

Risk monitoring is enhanced by the FDIC’s back-up 

supervision activities. In its back-up supervisory role, 

as outlined in Sections 8 and 10 of the FDI Act, the 

FDIC has expanded resources and has developed and 

implemented policies and procedures to guide backup supervisory activities. These activities include 

performing analyses of industry conditions and 

trends, supporting insurance pricing, participating 

in supervisory activities with other regulatory 

agencies, and exercising examination and enforcement 

authorities when necessary. 

At institutions where the FDIC is not the primary 

federal regulator, FDIC staff works closely with other 

regulatory authorities to identify emerging risk and 

assess the overall risk profile of large and complex 

institutions. The FDIC has assigned dedicated staff 

to IDIs of G-SIBs and large FBOs and certain other 

large IDIs to enhance risk-identification capabilities 

and facilitate the communication of supervisory 

information. These individuals work with the staff 

of the FRB and OCC in monitoring risk at their 

assigned institutions. 

Through December 2018, FDIC staff participated 

in 112 targeted examination activities with the FRB 

or OCC in G-SIBS, large FBOs, and large regional 

banks. The reviews included, but were not limited 

to, engagement in evaluation of risk management, 

corporate governance, BSA/AML reviews, credit risk 

reviews, quantitative model reviews, and cybersecurity 

risk and operational risk reviews. FDIC staff also 

participated in various interagency horizontal review 

activities, including the FRB’s Comprehensive 

Capital Assessment and Review, reviews of model 

risk management, and independent pricing of 

fair-valued assets. 

Title II Orderly Liquidation Authority 

Under the Dodd-Frank Act, failed or failing financial 

companies are expected to file for reorganization or 

liquidation under the U.S. Bankruptcy Code, similar 

to what any failed or failing nonfinancial company 

would file. If resolution under the Bankruptcy 

Code would result in serious adverse effects to U.S. 

financial stability, Title II of the Dodd-Frank Act 

provides a backup authority for resolving a company 

for which the bankruptcy process is not viable. 

There are strict parameters on the use of the Title 

II Orderly Liquidation Authority, however, and it 

can only be invoked under a statutorily prescribed 

recommendation and determination process, coupled 

with an expedited judicial review process.

Resolution Strategy Development 

The FDIC has undertaken institution-specific 

strategic planning to carry out its orderly liquidation 

authorities with respect to the largest G-SIBs 

operating in the United States. The strategic plans 

and optionality being developed for these firms are 

informed by the Title I plan submissions. Further, 

the FDIC continues to build its systemic resolution 

framework, portions of which have been shared with 

other authorities, and is developing process documents 

to facilitate the implementation of the framework in 

a Title II resolution. In addition, preliminary work 

continues in the development of resolution strategies 

for financial market utilities, particularly central 

counterparties (CCPs). 

Cross-Border Efforts 

Advance planning and cross-border coordination 

for the resolution of Global Systemically Important 

Financial Institutions (G-SIFIs) is essential to 

minimizing disruptions to global financial markets. 

Recognizing that the resolution of a G-SIFI creates 

complex cross-border legal and operational concerns, 

the FDIC continues to work with foreign regulators 

to establish frameworks for effective cooperation, 

including information-sharing arrangements.
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

38

The FDIC continued to advance its working 

relationships with authorities from other jurisdictions 

that supervise G-SIFIs, and through international 

forums, such as the Financial Stability Board’s 

Resolution Steering Group and its various subgroups. 

In 2018, the FDIC continued its ongoing work with 

international authorities to enhance coordination on 

cross-border bank resolution. This work included 

participation by senior financial officials and staff 

from the United States and key foreign jurisdictions. 

FDIC staff continues to pursue follow-on work 

endorsed by senior officials from participating 

agencies.

The FDIC serves as a co-chair for all of the 

cross-border crisis management groups (CMGs) 

of supervisors and resolution authorities for U.S. 

G-SIFIs. In addition, the FDIC participates as a 

host authority in CMGs for foreign G-SIFIs. The 

FDIC and the European Commission (EC) continued 

their engagement through a joint working group, 

which is composed of senior executives at the FDIC 

and EC who meet to focus on both resolution and 

deposit insurance issues. In 2018, the working group 

discussed cross-border bank resolution and resolution 

of CCPs, among other topics. 

FDIC staff also participated in the joint U.S.-EU 

Financial Regulatory Forum meetings, one held in 

Washington, D.C., in January 2018, and another 

held in Brussels in June 2018, with representatives 

of the EC and other participating European 

Union authorities, and staffs of the Department of 

Treasury, FRB, SEC, Commodities Futures Trading 

Commission (CFTC), and other participating U.S. 

agencies. Discussions addressed the outlook for 

financial regulatory reforms and future priorities, 

including those involving standards relevant to banks 

and cooperation on cross-border issues relevant to 

capital markets such as those involving CCPs. 

In 2018, FDIC staff also participated in the inaugural 

meeting of the U.S.-UK Financial Regulatory 

Working Group in London, which was formed to 

support financial stability and related matters. This 

cooperation is especially important given transition in 

the UK’s regulatory relationships as it withdraws from 

the European Union. 

Systemic Resolution Advisory Committee 

The FDIC created the Systemic Resolution Advisory 

Committee (SRAC) in 2011 to receive advice and 

recommendations on a broad range of issues regarding 

the resolution of systemically important financial 

companies pursuant to the Dodd-Frank Act. Over 

the years, the SRAC has advised the FDIC on a 

variety of issues, including:

♦ The effects on financial stability and economic 

conditions resulting from the failure of a SIFI, 

♦ The ways in which specific resolution strategies 

would affect stakeholders and customers, 

♦ The tools available to the FDIC to wind down 

the operations of a failed organization, and 

♦ The tools needed to assist in cross-border 

relations with foreign regulators and governments 

when a SIFI has international operations. 

Members of the SRAC have a wide range of 

experience, including managing complex firms, 

administering bankruptcies, and working in the legal 

system, accounting field, and academia. The last 

meeting of the SRAC was held on December 6, 2018. 

Agenda topics included updates to the Title I Living 

Wills, Title II Orderly Liquidation Authority, and 

international developments. 

Financial Stability Oversight Council 

The FSOC was created by the Dodd-Frank Act in 

July 2010 to promote the financial stability of the 

United States. It is composed of 10 voting members, 

including the Chairperson of the FDIC, and five nonvoting members. 

The FSOC’s responsibilities include the following:

♦ Identifying risks to financial stability, responding 

to emerging threats in the financial system, and 

promoting market discipline; 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

39

♦ Identifying and assessing threats that institutions 

may pose to financial stability and, if appropriate, 

designating a nonbank financial company for 

supervision by the FRB subject to heightened 

prudential standards; 

♦ Designating financial market utilities and 

payment, clearing, or settlement activities 

that are, or are likely to become, systemically 

important; 

♦ Facilitating regulatory coordination and 

information sharing regarding policy 

development, rulemaking, supervisory 

information, and reporting requirements; 

♦ Monitoring domestic and international financial 

regulatory proposals and advising Congress 

and making recommendations to enhance the 

integrity, efficiency, competitiveness, and stability 

of U.S. financial markets; and 

♦ Producing annual reports describing, among 

other things, the Council’s activities and 

potential emerging threats to financial stability. 

In December 2018, the FSOC issued its 2018 annual 

report. Generally, at each of its meetings, the FSOC 

discusses various risk issues. In 2018, the FSOC 

meetings addressed, among other topics: the process 

for considering applications from bank holding 

companies or their successors under section 117 of 

the Dodd-Frank Act, the annual reevaluation of its 

designation of a nonbank financial company, financial 

market volatility, fluctuations in various asset classes 

(including cryptocurrency futures) and the impacts 

on financial institutions and markets, the progress of 

the United Kingdom’s efforts to leave the European 

Union (i.e., “Brexit”) and potential changes that could 

affect U.S. financial markets or institutions, and 

alternative reference rates, including the adoption of 

the Secured Overnight Financing Rate. Additionally, 

in early 2018, the Council established a working 

group to study a digital asset and distributed ledger 

technology. The working group brings together 

federal financial regulators whose jurisdictions are 

relevant to the oversight of digital assets and their 

underlying technologies.

DEPOSITOR AND 

CONSUMER PROTECTION

A major component of the FDIC’s mission is to 

ensure that financial institutions treat consumers 

and depositors fairly, and operate in compliance with 

federal consumer protection, anti-discrimination, 

and community reinvestment laws. The FDIC 

also promotes economic inclusion to build and 

strengthen positive connections between insured 

financial institutions and consumers, depositors, small 

businesses, and communities.

Rulemaking and Guidance

Home Mortgage Disclosure Act 

In March 2018, the FDIC and other FFIEC members 

revised A Guide to HMDA Reporting: Getting It Right! 

The guide was updated to reflect changes to the Home 

Mortgage Disclosure Act (HMDA) in October 2015, 

and further amendments made in 2017. The guide 

was designed to help financial institutions better 

understand the HMDA requirements, including data 

collection and reporting provisions.

In July 2018, the FDIC released a statement on the 

impact of the EGRRCPA on HMDA. EGRRCPA 

provides partial exemptions for some insured 

depository institutions and insured credit unions 

from certain HMDA requirements. The FDIC noted 

that the CFPB would be providing further guidance 

on the applicability of the EGRRCPA to HMDA 

data collected in 2018. The agencies retained their 

diagnostic examination approach regarding HMDA 

data collected in 2018 and reported in 2019.

Updated Examination Procedures

Updated examination procedures were communicated 

through revisions to the FDIC Compliance 

Examination Manual that is publicly available on 

the FDIC’s website. 

In February 2018:

♦ Truth in Lending Act (TILA) (V-1.1): Several 

TILA thresholds were updated. Specifically, the 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

40

escrow exemption and the appraisal exemption 

thresholds for higher priced mortgages were 

increased and dollar amounts for provisions in 

Regulation Z related to qualified mortgages and 

Home Ownership and Equity Protection Act 

loans were updated. The exemption threshold 

for consumer credit and lease transactions were 

also increased. The Credit Card Penalty Fee Safe 

Harbor remained the same as the prior year. 

♦ Home Mortgage Disclosure Act (HMDA) 

(V-9.1): The asset size exemption thresholds were 

updated. Additional information regarding 

implementation of the 2015 HMDA Final Rule 

and subsequent rulemakings was added.

♦ Consumer Leasing Act (V-10.1): The exemption 

threshold for consumer credit and lease 

transactions was updated. 

♦ Community Reinvestment Act (XI-1.1): 

Asset-based definitions for “small banks” and 

“intermediate small banks” were updated. 

In May 2018:

♦ Truth in Lending Act (TILA) (V-1.1): The 

interagency TILA examination procedures 

were updated to reflect the 2016 amendments 

to the Mortgage Servicing Rule originally issued 

in 2013.

♦ Real Estate Settlement Procedures Act (RESPA) 

(V-3.1): The interagency RESPA examination 

procedures were updated to reflect the 2016 

amendments to the Mortgage Servicing Rule 

originally issued in 2013. 

♦ Servicemembers Civil Relief Act (SCRA) (V11.1): The SCRA chapter was updated to reflect a 

statutory amendment extending the sunset date 

of certain expanded protections for members 

of uniformed services relating to mortgages 

and mortgage foreclosure available under the 

Servicemembers Civil Relief Act. 

In June 2018: 

♦ Retail Insurance Sales (IX-2.1): The Retail 

Insurance Sales chapter was updated to reflect 

changes to Part 343 to reflect the scope of the 

FDIC’s current supervisory responsibilities 

as the appropriate federal banking agency for 

state savings associations that were previously 

regulated by the Office of Thrift Supervision. 

In August 2018:

♦ Expedited Funds Availability Act (VI-1.1): The 

Expedited Funds Availability Act chapter was 

updated to reflect amendments to Regulation CC 

regarding check collections and return provisions. 

Promoting Economic Inclusion

The FDIC is strongly committed to promoting 

access to a broad array of responsible and sustainable 

banking products to meet consumer’s financial needs. 

In support of this goal, the FDIC: 

♦ Conducts research on the unbanked and 

underbanked populations, 

♦ Engages in research and development on models 

of products meeting the needs of lower-income 

consumers, 

♦ Supports partnerships to promote consumer 

access to and use of banking services, 

♦ Advances financial education and literacy, and 

♦ Facilitates partnerships to support community 

and small business development. 

Advisory Committee on Economic Inclusion 

The Advisory Committee on Economic Inclusion 

(ComE-IN) provides the FDIC with advice and 

recommendations on important initiatives to expand 

access to mainstream banking services to underserved 

populations. This includes reviewing basic retail 

financial services (e.g., low-cost, safe transaction 

accounts; affordable small-dollar loans; savings 

accounts; and other services), as well as demand-side 

factors such as consumers’ perceptions of mainstream 

financial institutions. 

In October 2018, the ComE-IN held a meeting that 

included a discussion of the results from the 2017 

FDIC National Survey of Unbanked and Underbanked 

Households. The committee also heard a presentation 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

41

on research from the United Kingdom’s Financial 

Conduct Authority into the effectiveness of mobile 

text notifications sent to help consumers avoid 

unwanted fees. In addition, the committee heard a 

presentation on opportunities to extend economic 

inclusion in the banking system through youth 

employment programs.

In December 2018, the FDIC renewed the ComE-IN 

charter pursuant to the requirements of the Federal 

Advisory Committee Act (5 U.S.C. App. 2).

FDIC National Survey of Unbanked and 

Underbanked Households and Related Research

As part of its ongoing commitment to expanding 

economic inclusion in the United States, the FDIC 

works to fill the research and data gap regarding 

household participation in mainstream banking and 

the use of nonbank financial services. In addition, 

Section 7 of the Federal Deposit Insurance Reform 

Conforming Amendments Act of 2005 mandates that 

the FDIC regularly report on underserved populations 

and bank efforts to bring individuals and families 

into the mainstream banking system. In response, 

the FDIC regularly conducts and reports on surveys 

of households and banks to inform the public and 

enhance the understanding of financial institutions, 

policymakers, regulators, researchers, academics, 

and others. 

In 2018, the FDIC published results from the 2017 

FDIC National Survey of Unbanked and Underbanked 

Households. In addition to updating key reference 

measurements on participation in the banking system, 

the report analyzed the methods through which 

households access their bank accounts, examined 

consumer use of various mobile banking functions, 

measured bank branch utilization, and examined 

household use of and demand for mainstream credit. 

This information provided a basis for identifying 

additional opportunities in the report to expand 

economic inclusion in the banking system. The 

FDIC made full results and respondent-level data 

available on https://economicinclusion.gov and 

also provided users with the ability to generate 

custom tabulations and to access a wide range of 

pre-formatted information, including new five-year 

estimates that provide additional granularity for state 

and local results. In addition, planning for the 2019 

FDIC National Survey of Unbanked and Underbanked 

Households is complete. A November 2018 notice 

in the Federal Register proposed the use of a 

revised questionnaire.

Community and Small Business Development 

and Affordable Mortgage Lending

In 2018, the FDIC provided technical assistance 

to banks and community organizations through 

more than 254 outreach events designed to increase 

shared knowledge and support collaboration between 

financial institutions and other community, housing, 

and small business development resources and to 

improve knowledge about CRA. 

The FDIC’s work emphasized sharing information to 

support bank efforts to prudently provide affordable 

mortgages, small business credit, and access to safe 

accounts and financial education. 

As part of this effort, the FDIC also launched the 

Affordable Mortgage Lending Center, a website 

that houses a number of resources, including the 

Affordable Mortgage Lending Guide, a three-part guide 

designed to help community banks identify affordable 

mortgage products. 

By year-end 2018, the Affordable Mortgage Lending 

Center had more than 15,000 subscribers. Materials 

from the center have been downloaded more than 

12,000 times, and the site has had more than 68,000 

page views since its inception. 

In addition, the FDIC sponsored sessions with 

interagency partners covering basic and advanced 

CRA training for banks. The agencies also offered 

CRA basics for community-based organizations, 

as well as seminars on establishing effective 

bank/community collaborations in more than 

27 communities. The FDIC also focused on 

encouraging community development initiatives in 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

42

rural communities. This work included workshops 

to highlight housing needs and programs, economic 

development programs, and community development 

financial institution collaborations, including those 

serving Native American communities.

Advancing Financial Education

Financial education helps consumers understand and 

use bank products effectively and sustain a banking 

relationship. In 2018, the FDIC continued to be 

a leader in developing high-quality, free financial 

education resources and pursuing collaborations to 

use those tools to educate the public. 

The Money Smart series of products is available 

to organizations and individuals who want to 

teach financial concepts to consumers of all ages; 

individuals can also use the products to learn the 

concepts on their own. In particular, the newly 

updated Money Smart for Adults can help adults 

build the fundamental financial knowledge, 

skills, and confidence they need to use banking 

services effectively. 

Youth Financial Education 

The FDIC’s Youth Banking Network provides 

opportunities for 66 banks to learn from one another 

and FDIC staff about promising strategies to teach 

financial education concepts to school-aged children 

using hands-on approaches. 

In 2018, Youth Banking Network members 

participated in periodic learning calls to discuss 

helpful strategies and resources. For example, the 

April 2018 call highlighted practical approaches in 

conducting reality fairs, a strategy to help young 

people understand the tradeoffs of money choices that 

they can expect to experience as they enter adulthood. 

The FDIC also engaged network participants to 

develop an operational toolkit of resources that 

can support the development of new youth savings 

collaborations. The FDIC drafted new resources for 

the network based on consultations with members 

that included:

♦ Answers to frequently asked questions about 

operating youth banking programs; 

♦ A tip sheet to help banks communicate with 

parents and caregivers about the financial 

education provided through schools;

♦ A tip sheet to help banks communicate with 

teachers and administrators to secure an 

agreement to educate students; 

♦ Strategies bankers can use to make financial 

education relevant when visiting classrooms to 

talk about money; 

♦ A guide to reality fairs; and 

♦ A guide to measuring outcomes of youth 

savings programs.

Many youth banking programs provide financial 

education training based on FDIC’s Money Smart 

for Young People curriculum. As part of the FDIC’s 

ongoing efforts to improve the curriculum, the FDIC 

obtained feedback from 26 educators who taught 

83 Money Smart for Young People sessions as part 

of a special project. The participating educators 

overwhelmingly reported that the materials were 

structured well, easy to use, and initiated critical 

thinking among students. They also provided 

valuable suggestions for improvement, such as 

including more activities, updating the content, and 

reorganizing content to make it more useful. 

The FDIC has begun to revise Money Smart for Young 

People based on this teacher feedback and other 

curriculum assessments with a goal of releasing a 

redesigned and strengthened curriculum tool in mid2019. As part of our collaboration with the CFPB 

to promote youth financial capability, the FDIC is 

exploring how to integrate the CFPB’s research-based 

Building Blocks for Youth Financial Capability activities 

into the updated materials. 

Financial Education Outreach 

Highlights of our outreach include collaboration 

with members of the Federal Financial Literacy and 

Education Commission (FLEC). During Financial 

Capability Month (April), the members shared and 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

43

promoted financial education resources using the 

#FinancialFuture2018 hashtag on social media. 

During a webinar hosted by FLEC, 200 participants 

learned about the FDIC’s financial education 

resources. 

The FDIC also collaborated with the U.S. 

Department of Education and other FLEC agencies 

on the “Financial Education in America’s Schools” 

convening on April 27, 2018. This event promoted 

the exchange of ideas among state and local leaders 

and highlighted federal resources that support 

promising ideas.

In addition, the FDIC engaged with youth 

employment programs to use the Money Smart

financial education materials to reach young workers. 

For example, FDIC staff visited a Job Corps site in 

Washington, D.C., to provide technical assistance, 

and later conducted a Money Smart train-the-trainer 

session for 10 staff members, and planned a banker 

roundtable. 

The FDIC also developed a brochure for workforce 

program organizations that included tips on how 

to engage financial institutions to provide financial 

education or deposit account opportunities for young 

people. The FDIC joined with NCUA to engage 

more than 15 cities to participate in the America Saves 

for Young Workers initiative and learn how to connect 

young workers with basic deposit accounts at insured 

financial institutions.

From left, Salvador Arbujo, Tina Queen, April Atkins, and Alberto Cornejo 

discuss an activity during a Money Smart Train-the-Trainer session for the 

Community Affairs Branch staff.

The FDIC collaborated with the CFPB to release a 

Spanish translation of Money Smart for Older Adults. 

This material had been updated in 2017 to include 

information and resources to help older adults and 

their caregivers avoid financial exploitation through 

fraud and scams. 

Finally, the format of the FDIC Consumer News 

has changed from a quarterly printed newsletter to 

an electronic monthly article release with printable 

versions. This allows for more frequent contact 

with consumers and consistent timely releases of 

information. It also provides an opportunity to 

attract new readers through the use of social media in 

an easy to read format for mobile devices. Through 

digitation the FDIC can measure and improve 

communication and outreach efforts. 

Money Smart for Adults 

In November 2018, the FDIC updated the Money 

Smart for Adults curriculum, building on insights 

gained from more than 17 years of experience with 

the Money Smart program. The revised curriculum, 

field-tested twice with community organizations and 

banks, features 14 modules that cover basic financial 

topics for use during group training or one-on-one 

work. Specifically, the updated curriculum features:

♦ Expanded content on topics such as mobile 

banking, reading a pay statement, renting an 

apartment, creative ways to save money, and 

updated information on standard topics such as 

credit reports and scores;

♦ Vibrant graphics and discrete sections so 

instructors can create effective training sessions 

by choosing topics of interest to training 

participants;

♦ “Try It” activities that provide engaging 

opportunities for participants to practice what 

they’re learning during training in many 

contexts, including realistic scenarios;

♦ “Apply It” activities to help participants apply 

what they have learned to their own lives, either 

during or after training; 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

44

♦ “Key Takeaways” that briefly summarize the 

main message of each section;

♦ A “Take Action” section in every module that 

encourages participants to identify at least one 

thing they plan to do because of what they 

learned during the training; 

♦ A new Guide to Presenting Money Smart for 

Adults that includes tools to help instructors 

present interactive, non-biased training using 

the updated curriculum, such as “roadmaps” to 

create customized training across modules, fun 

and engaging introductory activities to energize 

participants to learn, and detailed checklists to 

prepare for training; and

♦ An updated supplement with scenarios featuring 

individuals with disabilities thinking about a 

financial decision.

More than 1,500 organizations were trained on the 

updated materials before year-end, including during 

two national webinars, and plans are underway to 

provide training to many more organizations. 

In addition, the FDIC plans to release a self-paced 

online learning tool based on the updated curriculum 

in 2020. 

Money Smart for Small Business 

The FDIC convened forums and roundtables 

featuring safe small business products and services, 

and provided information and technical assistance 

to support initiatives geared to increase access to 

capital for small businesses. In 2018, the FDIC 

completed 74 events and activities primarily focused 

on small business.

The Small Business Administration (SBA) and its 

partner networks – including the Small Business 

Development Centers, Women’s Business Centers and 

SCORE Chapters – the Federal Trade Commission, 

CFPB, and other stakeholders collaborated with the 

FDIC to produce a revised version of the Money Smart 

for Small Business Credit and Banking Modules to 

address information needs in response to a lending 

marketplace where entrepreneurs may be unaware 

of safe and affordable financing options and may 

be engaging in financing with terms they do not 

fully understand.

Money Smart Alliance

The maximum potential of the curriculum is reached 

when banks collaborate with non-profits or other 

community-based organizations to bring Money Smart

training to local communities, and, when appropriate, 

connect the training to banking products and services 

that respond to the needs of participants. Through 

the Money Smart Alliance, the FDIC recognizes 

organizations that commit to using Money Smart and 

that want to receive regular updates and training tips 

to enhance their use of the curriculum. 

More than 450 organizations joined the Alliance 

during 2018, bringing the total members to 1,062. 

The Alliance experienced a 34 percent growth during 

2018 compared to year-end 2017. This growth is 

largely attributable to the Money Smart Advance Team 

effort that built engagement with organizations that 

have or will deliver Money Smart to adults. 

The FDIC engaged Alliance members through 

quarterly webinars and one-on-one calls. Alliance 

members also learned about the updated Money Smart 

for Adults curriculum (and had the opportunity for 

early review of the modules) starting in September 

2018, several weeks before the broader public release.

Partnerships for Access 

to Mainstream Banking

The FDIC supported community development and 

economic inclusion partnerships at the local level 

by providing technical assistance and information 

resources throughout the country, with a focus on 

unbanked and underbanked households and low- and 

moderate-income communities. Community Affairs 

staff support economic inclusion through work with 

the Alliances for Economic Inclusion (AEI), Bank On 

initiatives, and other coalitions originated by local and 

state governments, and in collaboration with federal 

partners and many local and national non-profit 

organizations. The FDIC also partners with other 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

45

financial regulatory agencies to provide information 

and technical assistance on community development 

to banks and community leaders across the country. 

In the 12 AEI communities and in other areas, 

the FDIC helped working groups of bankers and 

community leaders develop responses to the financial 

capability and services needs in their communities. 

To integrate financial capability into community 

services more effectively, the FDIC supported 

seminars and training sessions for community service 

providers and asset-building organizations, workshops 

for financial coaches and counselors, promotion of 

savings opportunities for low- and moderate-income 

people and communities, initiatives to expand access 

to savings accounts for all ages, outreach to bring 

larger numbers of people to expanded tax preparation 

assistance sites, and education for business owners to 

help them become bankable. 

The FDIC worked across the nation, including in 

16 targeted communities, to convene 12 forums 

and 19 roundtables that helped advance strategies 

to expand access to safe and affordable deposit 

accounts and engage unbanked and underbanked 

consumers. The FDIC provided technical assistance 

to bankers, coalition leaders, and others interested 

in understanding opportunities for banking services 

designed to meet the needs of the unbanked 

and underbanked. 

In total, the FDIC sponsored more than 55 events, 80 

outreach activities, and 13 speaking engagements and 

exhibitions during 2018 that provided opportunities 

for partners to collaborate on increasing access to 

bank accounts and credit services, opportunities 

to build savings and improve credit histories, and 

initiatives to significantly strengthen the financial 

capability of community service providers who 

directly serve consumers with low or moderate 

incomes and small businesses. 

Consumer Complaints and Inquiries

The FDIC helps consumers by receiving, 

investigating, and responding to consumer complaints 

about FDIC-supervised institutions and answering 

inquiries about banking laws and regulations, FDIC 

operations, and other related topics. In addition, the 

FDIC provides analytical reports and information 

on complaint data for internal and external use, and 

conducts outreach activities to educate consumers. 

The FDIC recognizes that consumer complaints and 

inquiries play an important role in the development 

of strong public and supervisory policy. Assessing 

and resolving these matters helps the agency identify 

trends or problems affecting consumer rights, 

understand the public perception of consumer 

protection issues, formulate policy that aids 

consumers, and foster confidence in the banking 

system by educating consumers about the protection 

they receive under certain consumer protection laws 

and regulations.

Consumer Complaints by Product and Issue 

The FDIC receives complaints and inquiries 

by telephone, fax, U.S. mail, email, and online 

through the FDIC’s website. In 2018, the FDIC 

handled 18,334 written and telephonic complaints 

and inquiries. Of the 12,016 involving written 

correspondence, 5,306 were referred to other agencies 

and 6,710 were handled by the FDIC. The FDIC 

responded to 97 percent of written complaints 

within time frames established by corporate policy, 

and acknowledged 100 percent of all consumer 

complaints and inquiries within 14 days. As part 

of the complaint and inquiry handling process, 

the FDIC works with the other federal financial 

regulatory agencies to ensure that complaints and 

inquiries are forwarded to the appropriate agencies for 

response. The FDIC carefully analyzes the topics and 

issues involved in complaints about FDIC-supervised 

institutions. The number of complaints received 

about a specific bank topic and issue can serve as a red 

flag to prompt further review of practices that may 

raise consumer protection or supervisory concerns. 

In 2018, the four most frequently identified topics 

in consumer complaints and inquiries about FDICsupervised institutions concerned checking accounts 

(19 percent), consumer line of credit/installment 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

46

loans (15 percent), credit cards consumer/business 

(14 percent), and residential real estate (10 percent). 

Issues most commonly cited in correspondence 

about checking accounts were concerns with account 

discrepancies or transaction errors, and fees and 

service charges. Consumer loan complaints and 

inquiries most frequently described issues with 

reporting erroneous account information and 

collection practices, while consumer correspondence 

about credit cards most often raised issues regarding 

reporting of erroneous account information and 

billing disputes/error resolution. Correspondence 

regarding residential real estate related to disclosures, 

inaccurate appraisal reports, and loan modifications.

The FDIC also investigated 63 Fair Lending 

complaints alleging discrimination during 2018. The 

number of discrimination complaints investigated 

has fluctuated over the past several years but averaged 

approximately 67 complaints per year between 

2013 and 2018. Over this period, 47 percent of 

the complaints investigated alleged discrimination 

based on the race, color, national origin, or ethnicity 

of the applicant or borrower; 14 percent related to 

discrimination allegations based on age; 13 percent 

involved the sex of the borrower or applicant; and 8 

percent concerned disability. 

Consumer refunds generally involve the financial 

institution offering a voluntary credit to the 

consumer’s account, often as a direct result of 

complaint investigations and identification of a 

banking error or violation of law. Through December 

2018, consumers received more than $448,500 in 

refunds from financial institutions as a result of 

the assistance provided by the FDIC’s Consumer 

Response Center.

Public Awareness of Deposit 

Insurance Coverage

An important part of the FDIC’s deposit insurance 

mission is to ensure that bankers and consumers 

have access to accurate information about the FDIC’s 

rules for deposit insurance coverage. The FDIC has 

an extensive deposit insurance education program 

consisting of seminars for bankers, electronic tools for 

estimating deposit insurance coverage, and written 

and electronic information targeted to both bankers 

and consumers. 

The FDIC continued its efforts to educate bankers 

and consumers about the rules and requirements for 

FDIC insurance coverage during 2018. For example, 

as of December 31, 2018, the FDIC conducted four 

telephone seminars for bankers on deposit insurance 

coverage, reaching an estimated 4,473 bankers 

participating at approximately 1,278 bank sites 

throughout the country. The FDIC also features 

deposit insurance training videos that are available on 

the FDIC’s website and YouTube channel. 

As of December 31, 2018, the FDIC Call 

Center received 96,703 telephone calls, of which 

approximately 38,681 were identified as deposit 

insurance-related inquiries. The FDIC Call Center 

handled approximately 20,102 inquiries and Deposit 

Insurance subject matter experts (SMEs) handled 

18,579 complex telephone calls identifying a total 

of 50,548 deposit insurance issues. In addition to 

telephone inquiries about deposit insurance coverage, 

the FDIC received 1,339 written inquiries from 

consumers and bankers identifying a total of 2,248 

deposit insurance issues. Of these inquiries, 100 

percent received responses within two weeks, as 

required by corporate policy.

RECEIVERSHIP MANAGEMENT

The FDIC has the unique mission of protecting 

depositors of insured banks and savings associations. 

No depositor has ever experienced a loss on the 

insured amount of his or her deposits in an FDICinsured institution due to a failure. When an 

institution closes, its chartering authority—the state 

for state-chartered institutions and the OCC for 

national banks and federal savings associations— 

typically appoints the FDIC as receiver, responsible 

for resolving the failed institution.

The FDIC employs a variety of strategies and business 

practices to resolve a failed institution. These 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

47

strategies and practices are typically associated with 

either the resolution process or the receivership 

process. Depending on the characteristics of 

the institution, the FDIC may utilize several of 

these methods to ensure the prompt and smooth 

payment of deposit insurance to insured depositors, 

to minimize the impact on the DIF, and to speed 

dividend payments to uninsured depositors and other 

creditors of the failed institution. 

The resolution process involves evaluating and 

marketing a failing institution, soliciting and 

accepting bids for the sale of the institution, 

determining which bid (if any) is least costly to the 

DIF, and working with the acquiring institution 

through the closing process. 

To minimize disruption to the local community, 

the resolution process must be performed as quickly 

and efficiently as possible. The FDIC uses two 

basic resolution methods: purchase and assumption 

transactions and deposit payoffs. 

The purchase and assumption (P&A) transaction 

is the most commonly used resolution method. 

Typically, in a P&A transaction, a healthy institution 

purchases certain assets and assumes certain liabilities 

of the failed institution. However, a variety of P&A 

transactions can be used. Because each failing bank 

situation is different, P&A transactions provide 

flexibility to structure deals that result in obtaining 

the highest value for the failed institution. For each 

possible P&A transaction, the acquirer may acquire 

either all of the failing institution’s deposits or only 

the insured portion of the deposits.

From 2008 through 2013, loss sharing was offered by 

the FDIC in connection with P&A transactions. In 

a loss-share transaction, the FDIC, as receiver, agrees 

to share losses on certain assets with the acquirer, 

absorbing a significant portion (typically 80 percent) 

of future losses on assets that have been designated as 

“shared-loss assets” for a specific period of time (e.g., 

five to 10 years). The economic rationale for these 

transactions is that keeping assets in the banking 

sector and resolving them over an extended period 

of time can produce a better net recovery than 

the FDIC’s immediate liquidation of these assets. 

However, in recent years as the markets improved 

and functioned more normally with both capital 

and liquidity returning to the banking industry, 

acquirers have become more comfortable with bidding 

on failing bank franchises without the loss-sharing 

protection. 

The FDIC continues to monitor compliance 

with shared-loss agreements by validating the 

appropriateness of loss-share claims; reviewing 

acquiring institutions’ efforts to maximize recoveries; 

ensuring consistent application of policies and 

procedures across both shared-loss and legacy 

portfolios; and confirming that the acquirers have 

sufficient internal controls, including adequate staff, 

reporting, and recordkeeping systems. At year-end 

2018, there were 81 receiverships with active sharedloss agreements and $9.6 billion in total shared-loss 

covered assets.

Financial Institution Failures

During 2018, there were no institution failures, 

compared to eight failures in 2017. 

There were no losses on insured deposits, and no 

appropriated funds were required to pay insured 

deposits.

The following chart provides a comparison of failure 

activity over the past three years.

FAILURE ACTIVITY 2016 – 2018

Dollars in Billions

2018 2017 2016

Total Institutions 0 8 5

Total Assets of Failed 

Institutions* $0.0 $5.1 $0.3

Total Deposits of Failed 

Institutions* $0.0 $4.7 $0.3

Estimated Loss to the DIF $0.0 $1.2 $0.04

*Total assets and total deposits data are based on the last quarterly report filed by 

the institution prior to failure.
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

48

Asset Management and Sales

As part of its resolution process, the FDIC tries to sell 

as many assets as possible to an assuming institution. 

Assets that are retained by the receivership are 

promptly valued and liquidated in order to maximize 

the return to the receivership estate. For 95 percent 

of failed institutions, at least 90 percent of the book 

value of marketable assets is marketed for sale within 

90 days of an institution’s failure for cash sales, and 

within 120 days for structured sales. 

Cash sales of assets for 2018 totaled $38.6 million in 

book value. 

As a result of the FDIC’s marketing and collection 

efforts, the book value of assets in inventory decreased 

by $1.1 billion (48 percent) in 2018. 

The following chart shows the beginning and ending 

balances of these assets by asset type.

ASSETS-IN-LIQUIDATION INVENTORY 

BY ASSET TYPE

Dollars in Millions

Asset Type 12/31/18 12/31/17 12/31/16

Securities $50 $160 $183

Consumer Loans 0 8 8

Commercial Loans 34 50 19

Real Estate Mortgages 67 139 85

Other Assets/Judgments 151 260 268

Owned Assets 3 47 40

Net Investments in 

Subsidiaries 19 157 100

Structured and 

Securitized Assets 854 1,449 2,614

TOTAL $1,178 $2,271 $3,317

Receivership Management Activities

The FDIC, as receiver, manages failed banks and their 

subsidiaries with the goal of expeditiously winding up 

their affairs. The oversight and prompt termination 

of receiverships help to preserve value for the 

uninsured depositors and other creditors by reducing 

overhead and other holding costs. Once the assets of 

a failed institution have been sold and its liabilities 

extinguished, the final distribution of any proceeds is 

made, and the FDIC terminates the receivership. In 

2018, the number of receiverships under management 

decreased by 66 (19.5 percent) to 272. 

The following chart shows overall receivership activity 

for the FDIC in 2018.

RECEIVERSHIP ACTIVITY

Active Receiverships as of 12/31/17 338

New Receiverships 0

Receiverships Terminated 66

Active Receiverships as of 12/31/18 272

Protecting Insured Depositors

The FDIC’s ability to attract healthy institutions 

to assume deposits and purchase assets of failed 

banks and savings associations at the time of failure 

minimizes the disruption to customers and allows 

assets to be returned to the private sector immediately. 

Assets remaining after resolution are liquidated by 

the FDIC in an orderly manner, and the proceeds are 

used to pay receivership creditors, including depositors 

whose accounts exceeded the insurance limit. During 

2018, receiverships paid dividends of $4.6 million to 

depositors whose accounts exceeded the insurance 

limit.

Professional Liability and 

Financial Crimes Recoveries

The FDIC investigates bank failures to identify 

potential claims against directors, officers, securities 

underwriters and issuers, fidelity bond insurance 

carriers, appraisers, attorneys, accountants, mortgage 

loan brokers, title insurance companies, and other 

professionals who may have caused losses to insured 

depository institutions and FDIC receiverships. The 

FDIC will pursue meritorious claims that are expected 

to be cost-effective. 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

49

During 2018, the FDIC recovered $116.2 million 

from professional liability claims and settlements. 

The FDIC did not authorize any professional liability 

lawsuits during 2018. As of December 31, 2018, 

the FDIC’s caseload included 62 open institutions 

(not including institutions open for collection only), 

21 professional liability lawsuits (down from 24 at 

year-end 2017), nine residential mortgage malpractice 

and fraud lawsuits (down from 21), and open 

investigations in 27 claim areas out of 18 institutions. 

The FDIC seeks to complete professional liability 

investigations and make decisions expeditiously on 

whether to pursue potential professional liability 

claims. The FDIC completed investigations and made 

decisions on 92 percent of the investigations related 

to failures that reached the 18-month point after the 

institution’s failure date in 2018, thereby exceeding its 

annual performance target. 

As part of the sentencing process, for those convicted 

of criminal wrongdoing against an insured institution 

that later failed, a court may order a defendant 

to pay restitution or to forfeit funds or property 

to the receivership. The FDIC, working with the 

U.S. Department of Justice, in connection with 

criminal restitution and forfeiture orders issued by 

federal courts and independently in connection 

with restitution orders issued by the state courts, 

collected $8.3 million in 2018. As of December 

31, 2018, there were 2,346 active restitution and 

forfeiture orders (decreased from 4,163 at year-end 

2017). This includes 101 orders held by the Federal 

Savings and Loan Insurance Corporation (FSLIC) 

Resolution Fund, (i.e., orders arising out of failed 

financial institutions that were in receivership or 

conservatorship by the FSLIC or the Resolution 

Trust Corporation).

ENHANCING THE FDIC’s IT SECURITY

Information technology (IT) is an essential 

component in virtually all FDIC business processes. 

This integration with the business provides 

opportunities for efficiencies but also requires an 

awareness of potential risks. In 2018, the Chief 

Information Officer Organization focused its efforts 

on addressing cybersecurity risk, strengthening 

infrastructure resiliency, and improving IT 

governance. 

Addressing FDIC Cybersecurity Risk

The FDIC’s Information Security Program is critical 

to the agency’s ability to carry out the mission of 

maintaining stability and public confidence in the 

nation’s financial system. The Information Security 

Program relies on effective and efficient cybersecurity 

practices that are designed to detect, identify, respond, 

and recover from cybersecurity incidents as rapidly 

as possible with minimal disruption to stakeholders, 

and to protect against future incidents. The FDIC 

continues to strengthen and expand its cybersecurity 

program and practices.

On May 11, 2017, the President issued an Executive 

Order 13800 entitled Strengthening the Cybersecurity 

of Federal Networks and Critical Infrastructure. 

The Executive Order builds on existing statutory 

requirements under the Federal Information Security 

Modernization Act of 2014, which establishes 

information security obligations for Federal agencies 

(including the FDIC). Subsequent to the issuance 

of the Executive Order, OMB issued Reporting 

Guidance for Executive Order on Strengthening 

the Cybersecurity of Federal Networks and Critical 

Infrastructure, M-17-25 (May 19, 2017) to provide 

agency heads with instructions for meeting the risk 

management reporting requirements in the Executive 

Order. To fulfill these requirements and strengthen 

cybersecurity, the FDIC:

♦ Reorganized the Information Security function 

by creating the Office of the Chief Information 

Security Officer which includes a new Deputy 

Chief Information Security Officer position 

and a new Privacy Section Chief position that 

report directly to the Chief Information 

Security Officer;

♦ Implemented the Cybersecurity Framework 

(CSF) according to OMB M-17-25 requirements;
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

50

♦ Conducted the CSF cybersecurity assessment to 

capture, assess, report, and monitor the current 

state of FDIC cybersecurity controls;

♦ Established an agency-wide Incident 

Response Plan;

♦ Updated the agency’s Breach Response Plan to 

address new Federal policy requirements; and

♦ Developed and submitted the Annual Risk and 

FISMA Reports for 2018.

Cybersecurity continues to be a top management 

priority at the FDIC. During 2018, the FDIC has 

taken a number of actions to enhance and improve 

our risk management practices. 

We developed and implemented an Information 

Security and Privacy Strategic Plan to guide our efforts 

through 2021. This plan aligns with the FDIC 

Information Technology Strategic Plan: 2017 – 2020, 

and defines the core strategies needed to sustain and 

improve the FDIC’s cybersecurity posture. 

To operationalize the strategy, the FDIC implemented 

a risk management function and assigned program, 

and executive-level officials to manage information 

risk.  Ensuring that leaders are accountable for the 

effective planning, implementation, and monitoring 

of risk management enables the FDIC to identify, 

prioritize, communicate, and sustain the information 

security and privacy controls required to mitigate 

cybersecurity risks across the agency. 

Strengthening Infrastructure Resiliency 

Infrastructure resilience requires that the FDIC be 

able to provide and maintain an acceptable level 

of service in the face of threats and challenges to 

normal computer and network operations. Threats 

and challenges for services can range from simple 

misconfigurations, unforeseen large scale natural 

disasters, to targeted attacks. The FDIC works to 

ensure that its infrastructure can anticipate, absorb, 

adapt to, and/or rapidly recover from a potentially 

disruptive event.

In 2018, the FDIC launched a comprehensive 

initiative to expand and enhance its existing disaster 

recovery and business continuity capabilities to ensure 

that designated IT systems and applications that 

support mission-essential functions can be recovered 

within targeted timeframes. As part of this multi-year 

project, the FDIC is migrating key IT systems and 

applications to a new and larger backup data center 

(BDC). This effort will help mitigate the current 

risk posed by the geographic proximity of the FDIC’s 

BDC to its primary data center. 

The new facility will enhance security capabilities that 

are not available at the current recovery site, including 

enterprise logging, vulnerability identification, 

file integrity monitoring, forensic analysis, threat 

management, and security operational risk 

management. These security enhancements will allow 

security operations and other key security functions 

to be carried out at the new site without interruption, 

in the event of a failure or other contingency at 

the primary data center. The new BDC will also 

provide flexibility and scalability for future growth 

and increased computing requirements. It will 

also accommodate potential future changes in the 

configuration of the network and provide connectivity 

to cloud providers. 

Additionally, the new BDC will provide for the rapid 

restoration (failover) of mission-critical business 

applications. Restoration processes will be automated 

to minimize manual intervention, and equipment will 

be maintained in a higher availability mode to enable 

faster restoration. As a result, the FDIC will be better 

positioned to preempt and rapidly recover from an 

outage or threat. 

Improving IT Governance

The purpose of IT governance at the FDIC is to 

ensure that IT resources are used effectively and 

efficiently to achieve the FDIC’s goals and mission. 

IT governance enables the alignment of the FDIC’s 

strategies and goals with IT services, infrastructure, 

and environment. 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

51

During 2018, the FDIC implemented changes to 

enhance, consolidate, and streamline IT governance 

processes. The Security and Enterprise Architecture 

Technical Advisory Board (SEATAB) was established, 

(replacing three other groups) and became the one 

governance body that was chartered to oversee and 

manage all architecture and technical decisions 

around FDIC’s technology infrastructure, platforms, 

systems, and applications. 

The implementation of the SEATAB was just one 

of the changes made in IT governance. The Chief 

Information Officer (CIO) Council charter was 

also revised to include increased business division 

membership. The CIO Council is the principal 

advisory body to the CIO, with members having 

the delegated authority to agree to and authorize IT 

decisions on behalf of the division or the office that 

the member represents. 

Additionally, an IT Operating Commitee SubCharter was established to reflect its strategic role 

in IT governance. The Operating Committee also 

assumed the responsibilities of the Intelligence 

and Critical Infrastructure Protection Committee 

(ICIPC). The Operating Committee, as the executive 

leadership of FDIC divisions and offices, is consulted 

and informed on corporate-wide IT matters. This 

ensures that there is consensus on those IT decisions 

that impact business priorities and corporate-wide 

operations and that these decisions are in the best 

interest of the FDIC. 

The changes made in IT governance, along with the 

use of the IT Decision Framework which serves as the 

foundation for IT architecture, development policies, 

and standards decisions ensure the integration and 

alignment of the FDIC information technology and 

security management processes with the agency’s 

strategic planning. 

Insider Threat and 

Counterintelligence Program

An insider threat is a concern or risk posed to the 

FDIC that involves an individual who misuses or 

betrays, wittingly or unwittingly, his or her authorized 

access to FDIC resources. This individual may 

have access to sensitive or personally identifiable 

information, as well as privileged access to critical 

infrastructure or business sensitive information 

(e.g., bank data). 

The FDIC established the Insider Threat and 

Counterintelligence Program (ITCIP) in September 

2016. ITCIP is a defensive program focused on 

preventing and mitigating internal and external 

threats and risks posed to FDIC personnel, facilities, 

assets, resources, and both national security 

and sensitive information by insider and foreign 

intelligence entities. These threats may involve 

inadvertent disclosures and intentional breaches 

of sensitive information by personnel who may be 

compromised by external sources, disgruntled, seeking 

personal gain, intending to damage the reputation of 

the FDIC, or acting for some other reason. ITCIP 

leverages both physical and logical safeguards to 

minimize the risk, likelihood, and impact of an 

executed insider threat. 

The National Insider Threat Task Force (NITTF) 

initiated its Federal Program Review in January 2017 

to ensure the FDIC’s implementation of the White 

House minimum standards. NITTF’s independent 

evaluation showed that FDIC’s ITCIP met all 

minimum standards and achieved full operating 

capability. NITTF also noted that FDIC’s ITCIP 

leads the federal government in several best practices 

that affect the entire workforce and serves as a model 

program for other independent regulators and nonTitle 50 departments and agencies. The FDIC is 

moving forward with several important new steps 

to further advance the agency’s ITCIP during 2019 

and beyond. 

MINORITY AND WOMEN INCLUSION

Consistent with the provisions of the Dodd-Frank 

Act, the FDIC continues to enhance its longstanding 

commitment to promote diversity and inclusion in 

employment opportunities and all business areas 

of the agency. The Office of Minority and Women 

Inclusion (OMWI) supports the FDIC’s mission 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

52

through outreach efforts to ensure the fair inclusion 

and utilization of minority- and women-owned 

businesses, law firms, and investors in contracting 

and investment opportunities. 

The FDIC relies on contractors to help meet its 

mission. The FDIC awarded 166 (29.4 percent) 

contracts to minority- and women-owned businesses 

(MWOBs) out of a total of 565 issued. The FDIC 

awarded contracts with a combined value of $499.5 

million in 2018, of which 24.5 percent ($122.5 

million) were awarded to MWOBs, compared to 

18.5 percent for all of 2017. The FDIC paid $98.0 

million of its total contract payments (22.8 percent) to 

MWOBs, under 299 MWOB contracts. 

The Legal Division’s legal contracting program 

endeavors to maximize the participation of both 

minority- and women-owned law firms (MWOLFs) 

and minority and women partners and associates 

employed at majority owned firms (Diverse Attorneys) 

in legal contracting. This approach is consistent 

with Section 342 of the Dodd-Frank Act that 

encourages diversity and inclusion at all levels. For 

both MWOLFs and Diverse Attorneys, FDIC legal 

matters provide important learning and professional 

client development opportunities that can be quite 

meaningful to career advancement. For the year 

2018, the Legal Division has an aggregate 26.4 

percent diversity and inclusion participation rate in 

legal contracting as set forth below.

The FDIC made 29 referrals to MWOLFs, which 

accounted for 28 percent of all legal referrals. Total 

payments to MWOLFs were $3.7 million in 2018, 

which is 7.7 percent of all payments to outside 

counsel, compared to 11 percent for all of 2017. In 

2018, Diverse Attorneys earned $8.9 million in legal 

fees, which is 18.6 percent of all payments to outside 

counsel. Taken together, FDIC paid $12.7 million to 

MWOLF firms and Diverse Attorneys out of a total of 

$48.0 million dollars spent on outside counsel services 

in 2018. This number represents 26.4 percent of total 

outside counsel fees. 

The keystone of the Legal Division diversity and 

inclusion outreach is the FDIC’s partnerships 

with minority bar associations and specialized 

stakeholder organizations. In 2018, the FDIC Legal 

Division participated in six minority bar association 

conferences and three stakeholder events in support 

of maximizing the participation of MWOLFs 

and Diverse Attorneys in FDIC legal contracting. 

Stakeholder event participation included service on 

several panels and committees, such as the National 

Association of Minority and Women Owned 

Law Firms (NAMWOLF) Advisory Council, the 

NAMWOLF Events Committee, the NAMWOLF 

Law Firm Admissions Committee, and the 

NAMWOLF Diversity and Inclusion Initiative.

In 2018, NAMWOLF formally recognized the FDIC 

as a principal member of, and major contributor to, 

its Inclusion Initiative, a collaborative program among 

law departments of major corporations designed to 

increase the participation of MWOLF firms in legal 

contracting. Members of the Inclusion Initiative have 

spent over $1 billion with MWOLF firms since its 

inception. The FDIC participates in the Inclusion 

Initiative along with major corporations.

The Legal Division recognizes the value of involving 

FDIC in-house counsel in its MWOLF outreach. 

In 2018, the Legal Division collaborated with a top 

rated New York MWOLF firm to present a full 

day continuing legal education seminar on cutting 

edge legal issues in the capital markets area to FDIC 

attorneys who are responsible for engaging outside 

counsel. The program was designed to showcase 

the MWOLF’s expertise while providing the firm 

with valuable opportunities to build meaningful 

relationships with FDIC oversight attorneys in the 

field offices and at the headquarters office. In its 

ongoing diversity and inclusion efforts, the Legal 

Division continues to seek more opportunities 

to highlight the expertise of MWOLF firms in 

accordance with the needs of the FDIC at any given 

point in time. Also in 2018, the Legal Division 

presented an MWOLF Utilization Workshop for the 

closed bank oversight attorneys at the Dallas Regional 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

53

Office. These attorneys are responsible for assigning 

work to MWOLFs. The program included a review of 

the prior year’s MWOLF statistics, planned projects, 

question and answers, and the solicitation of ideas 

from the attorneys for improving the selection and 

retention of outside counsel. 

Pursuant to Section 342 of the Dodd-Frank Act, 

which requires an assessment of legal contractors’ 

internal workforce diversity practices, the Legal 

Division conducted nine compliance reviews of the 

top-billing law firms (both non-minority-owned 

and MWOLFs). The reviews included discussions 

that focused on associate and partner recruitment, 

retention rates of minority and women associates 

and partners, and partnership offers to minority and 

women attorneys working on FDIC legal matters. 

The site visit discussions are instrumental in gathering 

diversity data for ongoing monitoring efforts as well as 

the exchange of ideas to enhance diversity initiatives.

In addition to the outreach efforts noted above, 

the Legal Division continues to provide technical 

assistance to other related government agencies on 

developing MWOLF outreach programs that mirror 

FDIC’s program. The Legal Division evaluated and 

approved six new MWOLF applications in 2018. 

Firms from various geographic areas were added to 

the FDIC List of Counsel Available in order to be 

eligible to receive legal contracting work.

In 2018, the FDIC participated in a total of 33 

business expos, one-on-one matchmaking sessions, 

and panel presentations. At these events, FDIC 

staff provided information and responded to 

inquiries regarding FDIC business opportunities 

for minorities and women. In addition to targeting 

MWOBs and MWOLFs, these efforts also targeted 

veteran-owned and small disadvantaged businesses. 

Vendors were provided with the FDIC’s general 

contracting procedures, prime contractors’ contact 

information, and forecasts of possible upcoming 

solicitations. Also, vendors were encouraged to 

register through the FDIC’s Contractor Resource 

List (the principal database for vendors interested 

in doing business with the FDIC). The Office of 

Minority and Women Inclusion (OMWI) Director 

and Chief of the Minority and Women Business and 

Diversity Inclusion Branch made panel presentations 

and attended a number of these events to enhance 

OMWI’s outreach efforts. 

The FDIC, in conjunction with the other OMWI 

agencies, partnered with the Minority Business 

Development Agency Business Center of San Antonio, 

University of Texas at San Antonio, and the Institute 

for Economic Development to host the Smart 

Contacts – Smart Contracts technical assistance event. 

The presenters shared information about tools for 

competing for government contracting opportunities 

and developing winning proposals. The OMWI 

Director, Chief of the Minority and Women Business 

Diversity Inclusion Branch, and leaders from other 

OMWI financial agencies made panel presentations 

to explain contracting opportunities. The OMWI 

agencies also hosted a panel on Doing Business with 

the OMWI Agencies. The final panel presentation 

consisted of representatives from various local 

minority/women trade organizations sharing their 

outreach mission and outreach services with the 199 

attendees. In addition, the sponsoring agencies and 

various procurement trade organizations exhibited at 

the event. 

Information regarding the Minority and Women 

Outreach Program can be found on the FDIC’s 

website at www.fdic.gov/mwop. 

In addition, FDIC worked closely with the OMWIs 

of the OCC, FRB, CFPB, NCUA, SEC, and the 

Department of Treasury to further implement 

Section 342(b)(2)(C) of the Dodd-Frank Act, which 

requires the agencies to develop standards to assess 

the diversity policies and practices of the entities 

they regulate. After publishing Joint Standards in 

2015, the FDIC developed an electronic diversity 

self-assessment instrument to assist FDIC-regulated 

financial institutions in systematically assessing their 

diversity programs.
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

54

The FDIC started collecting voluntary selfassessments from its regulated financial institutions 

in 2017. The FDIC received 95 of 805 (11.8 percent) 

self-assessments in 2017 for the 2016 reporting period. 

In 2018, the FDIC received 137 of 820 (16.7 percent) 

self-assessments from its regulated institutions for the 

2017 reporting period. OMWI analyzed the selfassessment responses for the 2016 reporting period 

and posted this analysis on its internal and external 

web sites.

While the FDIC is pleased with the increased 

participation of financial institutions in 2018, it 

will continue to take steps to increase voluntary 

participation by augmenting outreach at banking 

conferences, developing financial institution diversity 

marketing materials, and making improvements to 

the program website. 

On September 13, 2018, the FDIC along with the 

OMWI agencies hosted an outreach event entitled 

“Financial Regulatory Agencies Diversity Summit” 

in New York, New York. The 109 individuals that 

attended the event were from various financial 

institutions that are regulated by the financial 

agencies. The event focused on the value of 

conducting voluntary self-assessments, annually 

submitting assessment results to OMWI Directors, 

and making diversity information transparent to the 

public. The OMWI agencies also outlined how the 

self-assessments will be used to identify leading trends 

and establish benchmarks that will assist financial 

institutions in assessing and enhancing their diversity 

programs. The OMWI FDIC Director, along with 

Directors from other OMWI financial agencies, made 

a panel presentation concerning the analysis of selfassessments received for the 2016 and 2017 reporting 

periods and associated issues.

INTERNATIONAL OUTREACH 

The FDIC played a leading role during the year 

in supporting the global development of deposit 

insurance, bank supervision, and bank resolution 

systems. This included working closely with 

regulatory and supervisory authorities from around 

the world, as well as international standard-setting 

bodies and multilateral organizations, such as the 

International Association of Deposit Insurers (IADI), 

the Association of Supervisors of Banks of the 

Americas (ASBA), the Basel Committee on Banking 

Supervision (BCBS), the Financial Stability Board 

(FSB), the International Monetary Fund (IMF), and 

The World Bank. The FDIC engaged with foreign 

regulatory counterparts by hosting visiting officials, 

conducting training seminars, delivering technical 

assistance abroad, and fulfilling the commitments 

of FDIC membership in international organizations. 

The FDIC also advanced policy objectives with 

key jurisdictions by participating in high-level 

interagency dialogues.

International Association of Deposit Insurers 

FDIC officials and subject matter experts provided 

continuing support for IADI programs in 2018. This 

included chairing IADI’s Training and Conference 

Technical Committee, which provided support 

for developing and facilitating technical assistance 

workshops for the Middle Eastern, African, European, 

Eurasian, Asia-Pacific, Caribbean, North American, 

and Latin American regions of IADI. The FDIC 

also participated in reviews of IADI members’ selfassessments of compliance with the Core Principles

and assisted in the development of a Core Principles

workshop for officials and senior management of 

deposit insurance and other financial regulatory 

authorities in conjunction with the IADI Annual 

General Meeting. Led and supported by FDIC 

executives and senior staff, IADI technical assistance 

and training activities reached approximately 500 

participants during 2018. 

Association of Supervisors of Banks of the Americas 

Senior FDIC staff chaired the ASBA Training and 

Technical Committee in 2018, which designs and 

implements ASBA’s training strategy, promoting the 

adoption of sound banking supervision policies and 

practices among its members. The training program 

reached more than 500 member participants in 2018. 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

55

Basel Committee on Banking Supervision 

The FDIC supports and contributes to the 

development of international standards, guidelines, 

and sound practices for prudential regulation and 

supervision of banks through its longstanding 

membership in BCBS. The contribution includes 

actively participating in many of the committee 

groups, working groups, and task forces established 

by BCBS to carry out its work, which focused on 

policy development, supervision and implementation, 

macroprudential supervision, accounting, and 

consultation. 

International Capacity Building 

During the year, FDIC provided direct assistance to 

many foreign organizations through the provision 

of technical expertise. These engagements included 

providing staff experts to advise the European Union’s 

Single Resolution Board, the De Nederlandsche 

Bank, and the IMF. FDIC also hosted more than 

170 visiting regulators and other government officials 

from 20 countries during the year, including in-depth 

technical visits from the Indonesia Deposit Insurance 

Corporation and Bank of Ghana. Two sessions of 

FDIC 101: An Introduction to Deposit Insurance, Bank 

Supervision, and Resolutions, a structured learning 

program for senior foreign officials, were offered in 

2018 and attended by 65 participants from more 

than 45 organizations. FDIC’s Corporate University 

also makes supervisory courses available to foreign 

participants and trained 129 students this year. 

EFFECTIVE MANAGEMENT 

OF STRATEGIC RESOURCES

The FDIC recognizes that it must effectively manage 

its human, financial, and technological resources 

to successfully carry out its mission and meet the 

performance goals and targets set forth in its annual 

performance plan. The FDIC must align these 

strategic resources with its mission and goals and 

deploy them where they are most needed to enhance 

its operational effectiveness and minimize potential 

financial risks to the DIF. Following are the FDIC’s 

major accomplishments in improving operational 

efficiency and effectiveness during 2018.

Human Capital Management 

The FDIC’s human capital management programs 

are designed to attract, train, develop, reward, 

and retain a highly skilled, diverse, and resultsoriented workforce. In 2018, the FDIC workforce 

planning initiatives emphasized the need to plan for 

employees to fulfill current and future capability 

and leadership needs. This focus ensures that the 

FDIC has a workforce positioned to meet today’s core 

responsibilities and prepared to fulfill its mission in 

the years ahead. 

Strategic Workforce Planning and Readiness 

During 2018, the FDIC continued to develop 

and implement integrated workforce development 

strategies to address workforce challenges and 

opportunities. The effort is focused on four 

broad objectives: 

♦ Attract and develop talented employees across 

the agency; 

♦ Enhance the capabilities of employees through 

training and diverse work experiences; 

♦ Encourage employees to engage in active career 

development planning and seek leadership roles 

in the FDIC; and 

♦ Build on and strengthen the FDIC’s operations 

to support these efforts. 

In 2018, the FDIC continued to develop the programs 

and processes to help meet its long-term workforce 

and leadership needs. The FDIC is committed to 

building and growing its talent pipeline to ensure 

succession challenges are met. To that end, the 

agency expanded its succession planning efforts in 

2018 to include a survey of 4,000 non-supervisory 

employees occupying positions that could feed into 

the agency’s longer-term pipeline for management 
MANAGEMENT ’S DISCUSSION AND ANALYSIS

ANNUAL REPORT 

56

positions. The survey was designed to identify 

the population’s aspiration to higher-level and 

management roles, their perceptions of readiness for 

these opportunities, and actions they have taken to 

prepare themselves. 

Nearly two-thirds of mid-level non-supervisor 

respondents reported that they were interested in 

seeking higher-level positions at the FDIC. Of 

these, more than three-quarters believe they have the 

talents and skills for higher-level positions and plan 

to apply for promotions and details over the next 

five years, demonstrating their ongoing interest in 

career development. The FDIC also learned that less 

than half of respondents have discussed their career 

interests and plans with a manager. 

As a result of the survey findings, the FDIC plans 

to further develop the longer-term pipeline of the 

FDIC’s aspiring leadership pool. Plans include 

supervisory training in succession management 

techniques, developing resources to support career 

planning discussions between managers and staff, 

and promoting emerging manager coaching through 

FDIC’s Career Management Program. 

The FDIC’s strategic workforce planning initiatives 

require a long-term and sustained focus to identify 

future workforce and leadership needs, assess current 

capabilities, support aspiration to management and 

leadership roles, and develop and source the talent to 

meet emerging workforce needs. Through further 

development of its human capital strategies, the FDIC 

will work to ensure that the future FDIC workforce 

is as prepared, capable, and dedicated as the one it 

has today.

Corporate Employee Program 

The FDIC’s Corporate Employee Program (CEP) 

sponsors the development of newly hired Financial 

Institution Specialists (FIS) in entry-level positions. 

During the first-year rotation within the program, FIS 

gain experience and knowledge in the core business of 

the FDIC, including DCP, RMS, DRR, and DIR. At 

the conclusion of the rotation period, FIS are placed 

within RMS or DCP, where they continue their career 

path to become commissioned examiners. 

The CEP is an essential part of the FDIC’s ability to 

provide highly-trained staff for its core occupational 

series, and ultimately for its future senior technical 

and leadership positions. Nearly 500 individuals are 

active in this multi-discipline program. Since the 

CEP’s inception in 2005, more than 980 employees 

have become commissioned examiners after 

successfully completing the program’s requirements. 

The FDIC continues to sponsor the Financial 

Management Scholars Program (FMSP), an additional 

hiring source for the CEP. Participants in the FMSP 

complete an internship with the FDIC the summer 

following the conclusion of their junior year in 

college. The program serves as an additional avenue 

to recruit talent. 

Employee Learning and Development 

The FDIC is committed to training and developing 

its employees throughout their careers to enhance 

technical proficiency and leadership capacity, 

supporting career progression and succession 

management. The FDIC is focused on developing 

and implementing comprehensive curricula for its 

business lines to prepare employees to meet new 

challenges. Such training, which includes both 

classroom and online instruction for maximum 

flexibility, is a critical part of workforce and succession 

planning as more experienced employees become 

eligible for retirement.

The FDIC also offers a comprehensive leadership 

development program that combines core courses, 

electives, and other enrichment opportunities to 

develop employees at all levels. From new employees 

to new executives, the FDIC provides employees 

with targeted leadership development opportunities 

that align with key leadership competencies. In 

addition to a broad array of internally developed and 

administered courses, the FDIC also provides its 

employees with funds and/or time to participate in 

external training to support their career development.
MANAGEMENT ’S DISCUSSION AND ANALYSIS

2018

57

Employee Engagement

The FDIC continually evaluates its human capital 

programs and strategies to ensure that it remains an 

employer of choice, and that all of its employees are 

fully engaged and aligned with the mission. The 

FDIC uses the Federal Employee Viewpoint Survey 

mandated by Congress to solicit information from 

employees, and takes an agency-wide approach to 

address key issues identified in the survey. The FDIC 

continues to rank near the top in all categories of 

the Partnership for Public Service Best Places to Work 

in the Federal Government® list for mid-size federal 

agencies. Effective leadership is the primary factor 

driving employee satisfaction and commitment in 

the federal workplace, according to a report by the 

Partnership for Public Service. 

The FDIC engages employees through formal 

mechanisms such as the Workplace Excellence 

program, Chairman’s Diversity Advisory Councils, 

and Employee Resource Groups; and informally 

through working groups, team discussions, and 

daily employee-supervisor interactions. Employee 

engagement plays an important role in empowering 

employees and helps maintain, enhance, and 

institutionalize a positive workplace environment. 

Photo credit: Partnership for Public Service

Deputy to the Chairman and Chief Operating Officer and Director of the 

Division of Administration Arleas Upton Kea receives the award for Best 

Places to Work in the Federal Government for mid-sized federal agencies 

from Max Stier, President and CEO of Partnership for Public Service.

Employee Resource Groups bring people together.
THIS PAGE INTENTIONALLY LEFT BLANK
59 59

PERFORMANCE II. RESULTS SUMMARY
THIS PAGE INTENTIONALLY LEFT BLANK
2018

PERFORMANCE RESULTS SUMMARY 61

SUMMARY OF 2018 PERFORMANCE RESULTS BY PROGRAM

The FDIC successfully achieved 26 of the 37 annual 

performance targets established in its 2018 Annual 

Performance Plan. Seven of the targets were not 

applicable since there were no bank failures in 2018. 

Two targets were substantially achieved, which 

involved conducting consumer compliance and CRA 

examinations and implementing corrective programs 

within timeframes established by FDIC policy. Two 

targets were not met, which involved finalizing 

rulemaking in regard to regulatory capital standards. 

There were no instances in which 2018 performance 

had a material adverse effect on the successful 

achievement of the FDIC’s mission or its strategic 

goals and objectives regarding its major program 

responsibilities.

Additional key accomplishments are noted below.

PROGRAM AREA PERFORMANCE RESULTS

Insurance ♦ Updated the FDIC Board of Directors on loss, income, and reserve ratio 

projections for the Deposit Insurance Fund (DIF) at the March and 

December meetings. 

♦ Briefed the FDIC Board of Directors in March and December on 

progress in meeting the goals of the Restoration Plan. 

♦ Completed reviews of the recent accuracy of the contingent loss reserve. 

♦ Researched and analyzed emerging risks and trends in the banking 

sector, financial markets, and the overall economy to identify issues 

affecting the banking industry and the DIF. 

♦ Provided policy research and analysis to FDIC leadership in support of 

the implementation of financial industry regulation, as well as support 

for testimony and speeches. 

♦ Published economic and banking information and analyses through 

the FDIC Quarterly, FDIC Quarterly Banking Profile (QBP), FDIC 

State Profiles, Perspectives, and the Center for Financial Research 

Working Papers. 

♦ Operated the Electronic Deposit Insurance Estimator (EDIE), which 

had 777,655 user sessions in 2018. 
PERFORMANCE RESULTS SUMMARY

ANNUAL REPORT 

62

PROGRAM AREA PERFORMANCE RESULTS

Supervision ♦ A total of 398 institutions were assigned a composite CAMELS rating 

of 2 and had Matters Requiring Board Attention (MRBAs) identified in 

the examination reports. To ensure that MRBAs are being appropriately 

addressed at these institutions, the FDIC timely reviews progress reports 

and follows up with bank management as needed. More specifically, 

within six months of issuing the examination reports, the FDIC 

conducted appropriate follow up and review of these MRBAs at 383 (96 

percent) of these institutions. Follow up and review of the MRBAs at 

the remaining 15 institutions (4 percent) occurred more than six months 

after issuing the examination reports primarily due to delayed responses 

from some banks as well as the need for additional information in order 

to complete a full review. 

♦ Participated on the examinations of selected financial institutions, for 

which the FDIC is not the primary federal regulator, to assess risk to 

the DIF. 

♦ Implemented the strategy outlined in the work plan approved by the 

Advisory Committee on Economic Inclusion to support the expanded 

availability of Safe Accounts and the responsible use of technology, to 

expand banking services to the underbanked. 

Receivership Management ♦ Terminated at least 75 percent of new receiverships that are not subject 

to loss-share agreements, structured sales, or other legal impediments, 

within three years of the date of failure. 

♦ Continued to enhance the FDIC’s ability to administer deposit 

insurance claims at large insured deposit institutions. 

♦ Evaluated within 120 days all termination offers from Limited Liability 

Corporation (LLC) managing members to determine whether to pursue 

dissolution of those LLCs that are determined to be in the best overall 

economic interest of the participating receiverships.
PERFORMANCE RESULTS SUMMARY

2018

63

2018 INSURANCE PROGRAM RESULTS

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

1 Respond promptly to all 

insured financial institution 

closings and related 

emerging issues.

Number of business 

days after an institution 

failure that depositors 

have access to insured 

funds.

Insured depositor 

losses resulting from 

a financial institution 

failure.

Depositors have access to insured 

funds within one business day if the 

failure occurs on a Friday.

Depositors have access to insured 

funds within two business days if the 

failure occurs on any other day of the 

week.

Depositors do not incur any losses on 

insured deposits.

No appropriated funds are required to 

pay insured depositors.

N/A – NO FAILURES.

SEE PG. 47.

N/A – NO FAILURES. 

SEE PG. 47.

N/A – NO FAILURES. 

SEE PG. 47.

N/A – NO FAILURES. 

SEE PG. 47.

2 Disseminate data and 

analyses on issues and 

risks affecting the financial 

services industry to bankers, 

supervisors, the public, and 

other stakeholders on an 

ongoing basis.

Scope and timeliness 

of information 

dissemination on 

identified or potential 

issues and risks.

Disseminate results of research and 

analyses in a timely manner through 

regular publications, ad hoc reports, 

and other means.

Undertake industry outreach 

activities to inform bankers and other 

stakeholders about current trends, 

concerns, and other available FDIC 

resources.

ACHIEVED.

SEE PG. 61.

ACHIEVED.

SEE PG. 61.

3 Adjust assessment rates, 

as necessary, to achieve a 

DIF reserve ratio of at least 

1.35 percent of estimated 

insured deposits by 

September 30, 2020.

Updated fund balance 

projections and 

recommended changes 

to assessment rates.

Demonstrated progress 

in achieving the goals of 

the Restoration Plan.

Provide updated fund balance 

projections to the FDIC Board of 

Directors by June 30, 2018, and 

December 31, 2018.

Recommend changes to deposit 

insurance assessment rates to the 

FDIC Board of Directors as necessary.

Provide progress reports to the FDIC 

Board of Directors by June 30, 2018, 

and December 31, 2018.

ACHIEVED.

SEE PGS. 13,14,61.

ACHIEVED.

SEE PGS. 13,14,61.

ACHIEVED.

SEE PGS. 13,14,61.

PERFORMANCE RESULTS BY PROGRAM AND STRATEGIC GOAL
PERFORMANCE RESULTS SUMMARY

ANNUAL REPORT 

64

2018 INSURANCE PROGRAM RESULTS (continued)

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

4 Expand and strengthen the 

FDIC’s participation and 

leadership role in supporting 

robust and effective deposit 

insurance programs, 

resolution strategies, and 

banking systems worldwide. 

Activities to expand 

and strengthen 

engagement with 

strategically important 

foreign jurisdictions 

and key international 

organizations and 

associations, and to 

advance the FDIC’s 

global leadership 

and participation on 

deposit insurance, 

bank supervision, 

resolution practices and 

international financial 

safety net issues.

Provision of technical 

assistance and training 

to foreign counterparts.

Foster strong relationships with 

international banking regulators, 

deposit insurers, and other relevant 

authorities by engaging with 

strategically important jurisdictions 

and organizations on international 

financial safety net issues.

Provide leadership and expertise to 

key international organizations and 

associations that promote sound 

deposit insurance and effective bank 

supervision and resolution practices.

Promote international standards 

and expertise in financial regulatory 

practices and stability through the 

provision of technical assistance and 

training to global financial system 

authorities. 

ACHIEVED.

SEE PGS. 54-55.

ACHIEVED.

SEE PGS. 54-55.

ACHIEVED.

SEE PGS. 54-55.

5 Market failing institutions to 

all known qualified and 

interested potential bidders.

Scope of qualified 

and interested bidders 

solicited.

Contact all known qualified and 

interested bidders. 

N/A – NO FAILURES. 

SEE PG. 47.

6 Provide educational 

information to insured 

depository institutions and 

their customers to help 

them understand the rules 

for determining the amount 

of insurance coverage on 

deposit accounts.

Timeliness of responses 

to deposit insurance 

coverage inquiries.

Initiatives to increase 

public awareness of 

deposit insurance 

coverage changes.

Respond within two weeks to 

95 percent of written inquiries 

from consumers and bankers about 

FDIC deposit insurance coverage.

Conduct at least four telephone or 

in-person seminars for bankers on 

deposit insurance coverage.

ACHIEVED. 

SEE PGS. 45-46.

ACHIEVED.

SEE PG. 46.
PERFORMANCE RESULTS SUMMARY

2018

65

2018 SUPERVISION PROGRAM RESULTS

Strategic Goal: FDIC-insured institutions are safe and sound. 

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

1 Conduct on-site risk 

management examinations 

to assess the overall financial 

condition, management 

practices and policies, and 

compliance with applicable 

laws and regulations of 

FDIC-supervised depository 

institutions. When problems 

are identified, promptly 

implement appropriate 

corrective programs, and 

follow up to ensure that 

identified problems are 

corrected.

Percentage of required 

examinations conducted 

in accordance with 

statutory requirements 

and FDIC policy.

Follow-up actions on 

identified problems.

Conduct all required risk 

management examinations within the 

timeframes prescribed by statute and 

FDIC policy.

For at least 90 percent of institutions 

that are assigned a composite 

CAMELS rating of 2 and for which 

the examination report identifies 

“Matters Requiring Board Attention” 

(MRBAs), review progress reports and 

follow up with the institution within 

six months of the issuance of the 

examination report to ensure that all 

MRBAs are being addressed.

ACHIEVED.

SEE PGS. 14-15.

ACHIEVED.

SEE PGS. 14-15.

2 Assist in protecting the 

infrastructure of the U.S. 

banking system against 

terrorist financing, money 

laundering, and other 

financial crimes. 

Percentage of required 

examinations conducted 

in accordance with 

statutory requirements 

and FDIC policy. 

Conduct all BSA examinations within 

the timeframes prescribed by statute 

and FDIC policy.

ACHIEVED.

SEE PGS. 14-15.

3 Ensure that regulatory 

capital standards promote 

banks’ resilience under stress 

and the confidence of their 

counterparties. 

Simplification of 

capital standards for 

community banks.

U.S. implementation of 

internationally agreed 

regulatory standards.

Finalize a Notice of Proposed 

Rulemaking (NPR) for a simplified 

risk-based capital framework for 

community banks.

Finalize the Basel III Net Stable 

Funding Ratio (NSFR).

NOT ACHIEVED. 

SEE PG. 31.

NOT ACHIEVED. 

SEE PG. 25.

4 Implement strategies 

to promote enhanced 

cybersecurity and business 

continuity within the 

banking industry.

Enhance the 

cybersecurity awareness 

and preparedness of the 

banking industry.

Continue implementation of a 

horizontal review program that 

focuses on the information technology 

risks in large and complex supervised 

institutions and in technology service 

providers.

Continue implementation of the 

Cybersecurity Examination Program 

for the most significant service 

provider examinations. 

ACHIEVED. 

SEE PG. 18.

ACHIEVED.

SEE PG. 18.
PERFORMANCE RESULTS SUMMARY

ANNUAL REPORT 

66

2018 SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: Consumers’ rights are protected, and FDIC-supervised institutions invest in their communities.

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

1 Conduct on-site CRA 

and consumer compliance 

examinations to assess 

compliance with applicable 

laws and regulations by 

FDIC-supervised depository 

institutions. When 

violations are identified, 

promptly implement 

appropriate corrective 

programs and follow up 

to ensure that identified 

problems are corrected.

Percentage of 

examinations conducted 

in accordance with the 

timeframes prescribed 

by FDIC policy.

Implementation of 

corrective programs.

Conduct all required examinations 

within the timeframes established by 

FDIC policy.

Conduct visits and/or follow-up 

examinations in accordance with 

established FDIC policies to ensure 

that the requirements of any required 

corrective program have been 

implemented and are effectively 

addressing identified violations.

SUBSTANTIALLY 

ACHIEVED.

SEE PG. 16.

SUBSTANTIALLY

ACHIEVED.

SEE PG. 16.

2 Effectively investigate and 

respond to written consumer 

complaints and inquiries 

about FDIC-supervised 

financial institutions.

Timely responses to 

written consumer 

complaints and 

inquiries.

Respond to 95 percent of written 

consumer complaints and inquiries 

within timeframes established by 

policy, with all complaints and 

inquiries receiving at least an initial 

acknowledgement within two weeks.

ACHIEVED.

SEE PGS. 45-46.

3 Promote economic inclusion 

and access to responsible 

financial services through 

supervisory, research, policy, 

and consumer/community 

affairs initiatives.

Completion of planned 

initiatives.

Publish the results of the 2017 FDIC 

National Survey of Unbanked and 

Underbanked Households.

Complete planning for the 2019 

FDIC National Survey of Unbanked 

and Underbanked Households.

Continue to promote broader access 

to and use of low-cost transaction and 

savings accounts to build banking 

relationships that will meet the 

needs of unbanked and underbanked 

households by increasing the 

current level of engagement from 

10 communities to 15 communities. 

Launch the revised Money Smart for 

Adults curriculum. 

ACHIEVED.

SEE PG. 41.

ACHIEVED.

SEE PG. 41.

ACHIEVED.

SEE PGS. 41-42

ACHIEVED. 

SEE PGS. 43-44.
PERFORMANCE RESULTS SUMMARY

2018

67

2018 SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: Large and complex financial institutions are resolvable in an orderly manner under bankruptcy.

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

1 Identify and address risks 

in large, complex financial 

institutions, including those 

designated as systemically 

important.

Compliance with the 

statutory and regulatory 

requirements under 

Title I of the DoddFrank Act and Section 

360.10 of the FDIC 

Rules and Regulations.

Risk monitoring of 

large, complex financial 

institutions, bank 

holding companies, and 

designated nonbanking 

firms.

In collaboration with the FRB, 

continue to review all resolution 

plans subject to the requirements of 

Section 165(d) of Dodd-Frank to 

ensure their conformance to statutory 

and other regulatory requirements. 

Identify potential impediments 

in those plans to resolution 

under the Bankruptcy Code.

Continue to review all resolution 

plans subject to the requirements 

of Section 360.10 of the Insured 

Depository Institutions (IDI) Rule to 

ensure their conformance to statutory 

and other regulatory requirements. 

Identify potential impediments 

to resolvability under the Federal 

Deposit Insurance (FDI) Act.

Conduct ongoing risk analysis and 

monitoring of large, complex financial 

institutions to understand and assess 

their structure, business activities, risk 

profiles, and resolution and recovery 

plans.

ACHIEVED. 

SEE PGS. 34-36.

ACHIEVED. 

SEE PGS. 36-37.

ACHIEVED.

SEE PG. 37.
PERFORMANCE RESULTS SUMMARY

ANNUAL REPORT 

68

2018 RECEIVERSHIP MANAGEMENT PROGRAM RESULTS

Strategic Goal: Resolutions are orderly and receiverships are managed effectively.

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

1 Value, manage, and market 

assets of failed institutions 

and their subsidiaries in a 

timely manner to maximize 

net return.

Percentage of the assets 

marketed for each failed 

institution.

For at least 95 percent of insured 

institution failures, market at least 

90 percent of the book value of the 

institution’s marketable assets within 

90 days of the failure date (for cash 

sales) and within 120 days of the date 

that the pool of similar assets is of 

sufficient size to bring to market (for 

structured sales).

N/A – NO FAILURES. 

SEE PG. 47.

2 Manage the receivership 

estate and its subsidiaries 

toward an orderly 

termination. 

Timely termination of 

new receiverships.

Terminate at least 75 percent of new 

receiverships that are not subject to 

loss-share agreements, structured sales, 

or other legal impediments within 

three years of the date of failure.

N/A – NO FAILURES. 

SEE PG. 47.

3 Conduct investigations into 

all potential professional 

liability claim areas for all 

failed insured depository 

institutions, and decide 

as promptly as possible to 

close or pursue each claim, 

considering the size and 

complexity of the institution.

Percentage of 

investigated claim areas 

for which a decision has 

been made to close or 

pursue the claim.

For 80 percent of all claim areas, 

make a decision to close or pursue 

professional liability claims within 18 

months of the failure of an insured 

depository institution.

ACHIEVED.

SEE PG. 49.

4 Ensure the FDIC’s 

operational readiness to 

administer the resolution of 

large financial institutions, 

including those designated as 

systemically important.

Refinement of 

resolution plans and 

strategies.

Continued crossborder coordination 

and cooperation in 

resolution planning.

Continue to refine plans to ensure 

the FDIC’s operational readiness to 

administer the resolution of large 

financial institutions under Title II 

of the Dodd-Frank Act, including 

those nonbank financial companies 

designated as systemically important.

Continue to deepen and strengthen 

bilateral working relationships with 

key foreign jurisdictions. 

ACHIEVED. 

SEE PG. 37.

ACHIEVED.

SEE PGS. 37-38.
PERFORMANCE RESULTS SUMMARY

2018

69

INSURANCE PROGRAM RESULTS

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

ANNUAL PERFORMANCE GOALS AND TARGETS 2017 2016 2015 2014 2013

1. Respond promptly to all insured financial institution 

closings and related emerging issues.

♦ Depositors have access to insured funds within one 

business day if the failure occurs on a Friday. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Depositors have access to insured funds within two 

business days if the failure occurs on any other 

day of the week.

ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Depositors do not incur any losses on 

insured deposits. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.

♦ No appropriated funds are required to pay 

insured depositors. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.

2. Disseminate data and analyses on issues and risks 

affecting the financial services industry to bankers, 

supervisors, the public, and other stakeholders on an 

ongoing basis.

♦ Disseminate results of research and analyses in a 

timely manner through regular publications, ad hoc 

reports, and other means.

ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Undertake industry outreach activities to inform 

bankers and other stakeholders about current trends, 

concerns, and other available FDIC resources.

ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Industry outreach activities are undertaken to inform 

bankers and other stakeholders about current trends, 

concerns, and other available FDIC resources.

ACHIEVED.

3. Adjust assessment rates, as necessary, to achieve a DIF 

reserve ratio of at least 1.35 percent of estimated insured 

deposits by September 30, 2020.

♦ Provide updated fund balance projections to the 

FDIC Board of Directors by June 30, 2017, and 

December 31, 2017.

ACHIEVED

♦ Provide updated fund balance projections to the 

FDIC Board of Directors by June 30, 2016, and 

December 31, 2016.

ACHIEVED.

PRIOR YEARS’ PERFORMANCE RESULTS

Refer to the respective full Annual Report of prior 

years, located on the FDIC’s website for more 

information on performance results for those years. 

Shaded areas indicate no such target existed for that 

respective year.
PERFORMANCE RESULTS SUMMARY

ANNUAL REPORT 

70

INSURANCE PROGRAM RESULTS (continued)

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

Annual Performance Goals and Targets 2017 2016 2015 2014 2013

♦ Provide updated fund balance projections to the 

FDIC Board of Directors by June 30, 2015, and 

December 31, 2015.

ACHIEVED.

♦ Provide updated fund balance projections to the 

FDIC Board of Directors by June 30, 2014, and 

December 31, 2014.

ACHIEVED.

♦ Provide updated fund balance projections to the 

FDIC Board of Directors by June 30, 2013, and 

December 31, 2013.

ACHIEVED.

♦ Provide progress reports to the FDIC Board of 

Directors by June 30, 2017, and December 31, 2017. ACHIEVED.

♦ Provide progress reports to the FDIC Board of 

Directors by June 30, 2016, and December 31, 2016. ACHIEVED.

♦ Provide progress reports to the FDIC Board of 

Directors by June 30, 2015, and December 31, 2015. ACHIEVED.

♦ Provide progress reports to the FDIC Board of 

Directors by June 30, 2014, and December 31, 2014. ACHIEVED.

♦ Provide progress reports to the FDIC Board of 

Directors by June 30, 2013, and December 31, 2013. ACHIEVED.

♦ Recommend changes to deposit insurance assessment 

rates to the FDIC Board of Directors as necessary. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.

4. Expand and strengthen the FDIC’s participation and 

leadership role in supporting robust and effective deposit 

insurance programs, resolution strategies, and banking 

systems worldwide.

♦ Foster strong relationships with international banking 

regulators, deposit insurers, and other relevant 

authorities by engaging with strategically important 

jurisdictions and organizations on key international 

financial safety net issues. 

ACHIEVED. ACHIEVED.

♦ Provide leadership and expertise to key international 

organizations and associations that promote sound 

deposit insurance and effective bank supervision and 

resolution practices.

ACHIEVED.

♦ Promote international standards and expertise in 

financial regulatory practices and stability through the 

provision of technical assistance and training to global 

financial system authorities.

ACHIEVED.
PERFORMANCE RESULTS SUMMARY

2018

71

INSURANCE PROGRAM RESULTS (continued)

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

Annual Performance Goals and Targets 2017 2016 2015 2014 2013

♦ Continue to play leadership roles within key 

international organizations and associations and 

promote sound deposit insurance, bank supervision, 

and resolution practices. 

ACHIEVED.

♦ Promote continued enhancement of international 

standards and expertise in financial regulatory 

practices and stability through the provision of 

technical assistance and training to global financial 

system authorities. 

ACHIEVED.

♦ Develop and foster closer relationships with bank 

supervisors in the reviews through the provision of 

technical assistance and by leading governance efforts 

in the Association of Supervisors of Banks of the 

Americas (ASBA). 

ACHIEVED.

♦ Maintain open dialogue with counterparts in 

strategically important jurisdictions, international 

financial organizations and institutions, and partner 

U.S. agencies; and actively participate in bilateral 

interagency regulatory dialogues.

ACHIEVED.

♦ Maintain open dialogue with counterparts in 

strategically important jurisdictions, international 

financial organizations and institutions, and partner 

U.S. agencies.

ACHIEVED.

♦ Maintain open dialogue with counterparts 

in strategically important countries as well as 

international financial institutions and partner 

U.S. agencies.

ACHIEVED.

♦ Maintain a leadership position in the International 

Association of Deposit Insurers (IADI) by conducting 

workshops and performing assessments of deposit 

insurance systems based on the methodology for 

assessment of compliance with the IADI Core 

Principles for Effective Deposit Insurance Systems 

(Core Principles), developing and conducting training 

on priority topics identified by IADI members, and 

actively participating in IADI’s Executive Council 

and Standing Committees.

ACHIEVED. ACHIEVED.
PERFORMANCE RESULTS SUMMARY

ANNUAL REPORT 

72

INSURANCE PROGRAM RESULTS (continued)

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

Annual Performance Goals and Targets 2017 2016 2015 2014 2013

♦ Conduct workshops and assessments of deposit 

insurance systems based on the methodology for 

assessment of compliance with Basel Committee on 

Bank Supervisions (BCBS) and the International 

Association of Depositor Insurers (IADI) Core 

Principles for Effective Deposit Insurance Systems.

ACHIEVED.

♦ Maintain open dialogue with the Association of 

Supervisors of Banks of the Americas (ASBA) to 

develop and foster relationships with bank supervisors 

in the region by providing assistance when necessary. 

ACHIEVED.

♦ Engage with authorities responsible for resolutions 

and resolutions planning in priority foreign 

jurisdictions and contribute to the resolution-related 

agenda of the Financial Stability Board (FSB) through 

active participation in the FSB’s Resolution Steering 

Group (ReSG).

ACHIEVED.

♦ Engage with authorities responsible for resolutions 

and resolutions planning in priority foreign 

jurisdictions.

ACHIEVED.

♦ Contribute to the resolution-related agenda of the 

Financial Stability Board (FSB) through active 

participation in the FSB’s Resolution Steering Group 

and its working groups.

ACHIEVED.

♦ Actively participate in bilateral interagency regulatory 

dialogues. ACHIEVED.

♦ Support visits, study tours, secondments, and longerterm technical assistance and training programs for 

representatives for foreign jurisdictions to strengthen 

their deposit insurance organizations, central banks, 

bank supervisors, and resolution authorities.

ACHIEVED. ACHIEVED. ACHIEVED.

5. Market failing institutions to all known qualified and 

interested potential bidders.

♦ Contact all known qualified and interested bidders. ACHIEVED ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.
PERFORMANCE RESULTS SUMMARY

2018

73

INSURANCE PROGRAM RESULTS (continued)

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

Annual Performance Goals and Targets 2017 2016 2015 2014 2013

6. Provide educational information to insured depository

institutions and their customers to help them 

understand the rules for determining the amount of 

insurance coverage on deposit accounts.

♦ Respond within two weeks to 95 percent of written 

inquiries from consumers and bankers about FDIC 

deposit insurance coverage.

ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Conduct at least four telephone or in-person seminars 

for bankers on deposit insurance coverage. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Conduct at least 12 telephone or in-person seminars 

for bankers on deposit insurance coverage. ACHIEVED.

♦ Conduct at least 15 telephone or in-person seminars 

for bankers on deposit insurance coverage. ACHIEVED.

♦ Complete and post on the FDIC website videos 

for bankers and consumers on deposit insurance 

coverage.

ACHIEVED.
PERFORMANCE RESULTS SUMMARY

ANNUAL REPORT 

74

SUPERVISION PROGRAM RESULTS

Strategic Goal: FDIC-insured institutions are safe and sound.

ANNUAL PERFORMANCE GOALS AND TARGETS 2017 2016 2015 2014 2013

1. Conduct on-site risk management examinations to assess 

the overall financial condition, management practices 

and policies, and compliance with applicable laws and 

regulations of FDIC-supervised depository institutions. 

When problems are identified, promptly implement 

appropriate corrective programs, and follow up to ensure 

that identified problems are corrected. 

♦ Conduct all required risk management examinations 

within the time frames prescribed by statute and 

FDIC policy.

ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.

♦ For at least 90 percent of institutions that are assigned 

a composite CAMELS rating of 2 and for which the 

examination report identifies “Matters Requiring Board 

Attention” (MRBAs), review progress reports and 

follow up with the institution within six months of the 

issuance of the examination report to ensure that all 

MRBAs are being addressed.

ACHIEVED. ACHIEVED. ACHIEVED.

♦ Implement formal or informal enforcement actions 

within 60 days for at least 90 percent of all institutions 

that are newly downgraded to a composite Uniform 

Financial Institutions Rating of 3, 4, or 5.

SUBSTANTIALLY

ACHIEVED.

SUBSTANTIALLY

ACHIEVED.

2. Assist in protecting the infrastructure of the U.S. 

banking system against terrorist financing, money 

laundering, and other financial crimes.

♦ Conduct all Bank Secrecy Act examinations 

within the time frames prescribed by statute and 

FDIC policy.

ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.

3. More closely align regulatory capital standards with risk 

and ensure that capital is maintained at prudential levels. 

♦ Issue a Notice of Proposed Rulemaking (NPR) for a 

simplified capital framework for community banks. ACHIEVED.

♦ Issue a final rule implementing the Basel III Net 

Stable Funding Ratio.

NOT

ACHIEVED.

♦ Publish in 2016, a Notice of (proposed) Rulemaking 

on the Basel III Net Stable Funding Ratio. ACHIEVED.

♦ Publish by December 31, 2015, an interagency 

Notice of Proposed Rulemaking on implementation 

of the Basel III Net Stable Funding Ratio. 

NOT

ACHIEVED.
PERFORMANCE RESULTS SUMMARY

2018

75

SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: FDIC-insured institutions are safe and sound.

Annual Performance Goals and Targets 2017 2016 2015 2014 2013

♦ Finalize Basel III reporting instructions in time to 

ensure that institutions that are using the advanced 

approaches can implement Basel III in the first 

quarter of 2014 and that all IDIs can implement the 

standardized approach in the first quarter of 2015.

ACHIEVED.

♦ Publish a final Basel Liquidity Coverage Rule, 

in collaboration with other regulators by 

December 31, 2014.

ACHIEVED.

♦ Publish a final rule implementing the Basel III capital 

accord in collaboration with other regulators, by 

December 31, 2014.

ACHIEVED.

♦ Finalize, in collaboration with other regulators, an 

enhanced U.S. supplementary leverage ratio standard 

by December 31, 2014.

ACHIEVED.

♦ Complete by June 30, 2013, the review of comments 

and impact analysis of June 2012 proposed 

interagency changes to regulatory capital rules.

ACHIEVED.

♦ Issue by December 31, 2013, final regulatory 

capital rules. ACHIEVED.

4. Implement strategies to promote enhanced information 

security, cybersecurity, and business continuity within 

the banking industry.

♦ Continue implementation of a horizontal review 

program that focuses on the IT risks in large and 

complex supervised institutions and Technology 

Service Providers (TSPs).

ACHIEVED.

♦ Revise and implement by December 31, 2017, the 

Cybersecurity Examination Tool for TSPs. ACHIEVED.

♦ Establish a horizontal review program that focuses 

on the IT risks in large and complex supervised 

institutions and Technology Service providers (TSPs).

ACHIEVED.

♦ Complete by June 30, 2016, examiner training 

and implement by September 30, 2016, the new 

IT examination work program to enhance focus 

on information security, cybersecurity, and 

business continuity. 

ACHIEVED.

♦ Enhance the technical expertise of the IT 

supervisory workforce. ACHIEVED.

♦ Working with FFIEC counterparts, update 

and strengthen IT guidance to the industry on 

cybersecurity preparedness.

ACHIEVED.
PERFORMANCE RESULTS SUMMARY

ANNUAL REPORT 

76

SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: FDIC-insured institutions are safe and sound.

Annual Performance Goals and Targets 2017 2016 2015 2014 2013

♦ Working with the FFIEC counterparts, update 

and strengthen IT examination work programs 

for institutions and technology service providers 

(TSPs) to evaluate cybersecurity preparedness and 

cyber resiliency.

ACHIEVED.

♦ Improve information sharing on identified 

technology risks among the IT examination 

workforces of FFIEC member agencies.

ACHIEVED.

♦ In coordination with the FFIEC, implement 

recommendations to enhance the FDIC’s supervision 

of the IT risks at insured depository institutions and 

their technology service providers.

ACHIEVED.

5. Identify and address risks in financial institutions 

designated as systemically important.

♦ Conduct ongoing risk analysis and monitoring of 

SIFIs to understand their structure, business activities 

and risk profiles, and their resolution and recovery 

capabilities.

ACHIEVED.

♦ Complete, in collaboration with the Federal 

Reserve Board and in accordance with statutory and 

regulatory timeframes, all required actions associated 

with the review of resolution plans submitted by 

financial companies subject to the requirements of 

Section 165 (d) of the Dodd-Frank Act.

ACHIEVED.

♦ Complete, in collaboration with the FRB and in 

accordance with statutory and regulatory time frames, 

all required actions associated with the review of 

Section 165(d) resolution plans submitted under 

Title 1 of DFA.

ACHIEVED.

♦ Hold at least one meeting of the Systemic 

Resolution Advisory Committee to obtain feedback 

on resolving SIFIs.

ACHIEVED.

♦ Hold at least one meeting of the Systemic Resolution 

Advisory Committee to obtain feedback on resolving 

systemically important financial companies.

ACHIEVED.
PERFORMANCE RESULTS SUMMARY

2018

77

SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: Consumers’ rights are protected, and FDIC-supervised institutions invest in their communities.

ANNUAL PERFORMANCE GOALS AND TARGETS 2017 2016 2015 2014 2013

1. Conduct on-site CRA and consumer compliance 

examinations to assess compliance with applicable 

laws and regulations by FDIC-supervised depository 

institutions. When violations are identified, promptly 

implement appropriate corrective programs and follow 

up to ensure that identified problems are corrected. 

♦ Conduct all required examinations within the time 

frames established by FDIC policy. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Conduct visits and/or follow-up examinations in 

accordance with established FDIC policies to ensure 

that the requirements of any required corrective 

program have been implemented and are effectively 

addressing identified violations. 

ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Conduct 100 percent of required examinations 

within the time frames established by FDIC policy.

SUBSTANTIALLYACHIEVED.

ACHIEVED.

2. Effectively investigate and respond to written consumer 

complaints and inquiries about FDIC-supervised 

financial institutions.

♦ Respond to 95 percent of written consumer 

complaints and inquiries within time frames 

established by policy, with all complaints and 

inquiries receiving at least an initial acknowledgment 

within two weeks.

ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.

3. Promote economic inclusion and access to responsible 

financial services through supervisory, research, policy, 

and consumer/community affairs initiatives.

♦ Revise and administer the 2017 FDIC National 

Survey of Unbanked and Underbanked Households. ACHIEVED.

♦ Continue and expand efforts to promote broader 

awareness of the availability of low-cost transaction 

accounts consistent with the FDIC’s Model SAFE 

transaction account template.

ACHIEVED.

♦ Complete and pilot a revised, instructor-led Money 

Smart for Adults product. ACHIEVED.

♦ Publish the results of the 2015 FDIC National Survey 

of Unbanked and Underbanked Household. ACHIEVED.

♦ Complete and present to the Advisory Committee 

on Economic Inclusions (ComE-IN) a report on the 

pilot Youth Savings Program (YSP) conducted jointly 

with the CFPB.

ACHIEVED.
PERFORMANCE RESULTS SUMMARY

ANNUAL REPORT 

78

SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: FDIC-insured institutions are safe and sound.

Annual Performance Goals and Targets 2017 2016 2015 2014 2013

♦ Revise, test, and administer the 2015 FDIC National 

Survey of Unbanked and Underbanked Household. ACHIEVED.

♦ Publish the results of the 2013 FDIC National Survey 

of Unbanked and Underbanked Households (conducted 

jointly with the U.S. Census Bureau).

ACHIEVED.

♦ Conduct the third biennial FDIC National Survey of 

Unbanked and Underbanked Households (conducted 

jointly with the U.S. Census Bureau).

ACHIEVED.

♦ Initiate work on the Survey of Banks’ Efforts to Serve 

the Unbanked and Underbanked. DEFERRED.

♦ Promote broader awareness of the availability of lowcost transaction accounts consistent with the FDIC’s 

Model SAFE transaction account template. 

ACHIEVED.

♦ Support the Advisory Committee on Economic 

Inclusion in expanding the availability and awareness 

of low-cost transaction accounts, consistent with the 

FDIC’s SAFE account template.

ACHIEVED.

♦ Implement the strategy outlined in the work plan 

approved by the Advisory Committee on Economic 

Inclusion to support the expanded availability of 

SAFE accounts and the responsible use of technology, 

to expand banking services to the underbanked.

ACHIEVED. ACHIEVED.

♦ In partnership with the Consumer Financial 

Protection Bureau, enhance financial capability 

among school-age children through (1) development 

and delivery of tailored financial education materials; 

(2) resources and outreach targeted to youth, parents, 

and teachers; and (3) implementation of a pilot youth 

savings program.

ACHIEVED.

♦ Facilitate opportunities for banks and community 

stakeholders to address issues concerning access to 

financial services, community development, and 

financial education.

ACHIEVED.
PERFORMANCE RESULTS SUMMARY

2018

79

SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: Large and complex financial institutions are resolvable in an orderly manner under bankruptcy.

ANNUAL PERFORMANCE GOALS AND TARGETS 2017 2016 2015 2014 2013

1. Identify and address risks in large and complex financial 

institutions, including those designated as systemically 

important.

♦ In collaboration with the FRB continue to review 

all resolution plans subject to the requirements 

of Section 165(d) of the DFA to ensure their 

conformance to statutory and other regulatory 

requirements. Identify potential impediments in 

those plans to resolution under the Bankruptcy Code. 

ACHIEVED. ACHIEVED.

♦ Continue to review all resolution plans subject 

to the requirements of Section 360.10 of the IDI 

rule to ensure their conformance to statutory and 

other regulatory time frames. Identify potential 

impediments to resolvability under the Federal 

Deposit Insurance (FDI) Act. 

ACHIEVED. ACHIEVED.

♦ Conduct ongoing risk analysis and monitoring of 

large, complex financial institutions to understand 

and assess their structure, business activities, risk 

profiles, and resolution and recovery plans. 

ACHIEVED. ACHIEVED.

♦ Conduct ongoing risk analysis and monitoring of 

large, complex financial institutions to understand 

and assess their structure, business activities, risk 

profiles, and resolution and recovery plans.

ACHIEVED. 

♦ Complete, in collaboration with the FRB and in 

accordance with statutory and regulatory time frames, 

a review of resolution plans submitted by individual 

financial companies subject to the requirements of 

section 165 (d) of DFA and Part 360.10 of the FDIC 

Rules and Regulations.

ACHIEVED.
PERFORMANCE RESULTS SUMMARY

ANNUAL REPORT 

80

RECEIVERSHIP MANAGEMENT PROGRAM RESULTS

Strategic Goal: Resolutions are orderly and receiverships are managed effectively.

ANNUAL PERFORMANCE GOALS AND TARGETS 2017 2016 2015 2014 2013

1. Value, manage, and market assets of failed institutions 

and their subsidiaries in a timely manner to maximize 

net return.

♦ For at least 95 percent of insured institution failures, 

market at least 90 percent of the book value of the 

institution’s marketable assets within 90 days of the 

failure date (for cash sales) or 120 days of the failure 

date (for structured sales).

ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.

2. Manage the receivership estate and its subsidiaries 

toward an orderly termination.

♦ Terminate at least 75 percent of new receiverships 

that are not subject to loss-share agreements, 

structured sales, or other legal impediments, within 

three years of the date of failure. 

ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Terminate within three years of the date of failure, 

at least 75 percent of new receiverships that are not 

subject to loss-share agreements, structured sales, or 

other legal impediments.

ACHIEVED.

3. Conduct investigations into all potential professional 

liability claim areas for all failed insured depository 

institutions, and decide as promptly as possible, to 

close or pursue each claim, considering the size and 

complexity of the institution.

♦ For 80 percent of all claim areas, make a decision to 

close or pursue professional liability claims within 

18 months of the failure of an insured depository 

institution.

ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED. ACHIEVED.

4. Ensure the FDIC’s operational readiness to administer 

the resolution of large financial institutions, including 

those designated as systemically important.

♦ Continue to refine plans to ensure the FDIC’s 

operational readiness to administer the resolution 

of large financial institutions under Title II of the 

DFA, including those nonbank financial companies 

designated as systemically important.

ACHIEVED.
PERFORMANCE RESULTS SUMMARY

2018

81

RECEIVERSHIP MANAGEMENT PROGRAM RESULTS (continued)

Strategic Goal: Resolutions are orderly and receiverships are managed effectively.

Annual Performance Goals and Targets 2017 2016 2015 2014 2013

♦ Refine plans to ensure the FDIC’s operational 

readiness to administer the resolution of large 

financial institutions including those designated as 

systemically important.

ACHIEVED.

♦ Continue to deepen and strengthen bilateral working 

relationships with key foreign jurisdictions. ACHIEVED. ACHIEVED. 

♦ Hold a meeting of the Systemic Resolution Advisory 

Committee in early 2016 to obtain feedback on 

resolving SIFIs.

ACHIEVED.

5. Ensure the FDIC’s operational readiness to resolve a 

large, complex financial institution using the orderly 

liquidation authority in Title II of the DFA.

♦ Update and refine firm-specific resolutions plans and 

strategies and develop operational procedures for the 

administration of a Title II receivership.

ACHIEVED. 

♦ Prepare for an early 2016 meeting of the Systemic 

Resolution Advisory Committee to obtain feedback 

on resolving SIFIs.

ACHIEVED. 

♦ Continue to deepen and strengthen bilateral working 

relationships with key foreign jurisdictions. ACHIEVED ACHIEVED. 
THIS PAGE INTENTIONALLY LEFT BLANK
83 83

FINANCIAL III.HIGHLIGHTS
THIS PAGE INTENTIONALLY LEFT BLANK
2018

FINANCIAL HIGHLIGHTS 85

In its role as insurer of bank and savings association 

deposits, the FDIC promotes the safety and soundness 

of insured depository institutions. The following 

financial highlights address the performance of the 

Deposit Insurance Fund. 

DEPOSIT INSURANCE 

FUND PERFORMANCE

The DIF balance was $102.6 billion at December 31, 

2018, compared to $92.7 billion at year-end 2017. 

Assessment revenue, including assessment surcharges 

on large banks, drove the growth in the DIF. 

Comprehensive income totaled $9.9 billion for 2018, 

compared to comprehensive income of $9.6 billion 

during 2017, a $275 million year-over-year increase. 

Assessment revenue was $9.5 billion for 2018, 

compared to $10.6 billion for 2017. The $1.1 

billion year-over-year decrease was primarily due to 

the cessation of the surcharge assessment on large 

institutions effective October 1, 2018, as a result of 

the reserve ratio exceeding the required minimum of 

1.35 percent as of September 30, 2018.

The DIF’s interest revenue on U.S. Treasury securities 

for 2018 was $1.6 billion, compared to interest 

revenue of $1.1 billion in 2017. The $576 million 

year-over-year increase resulted from a combination of 

factors: (1) the Federal Reserve increased the federal 

funds target rate, resulting in an increase in the 

average overnight investment interest rate; (2) higher 

yields on new long-term investments purchased as 

older long-term investments matured; and (3) steady 

growth in the investment portfolio balance. 

The provision for insurance losses was a negative 

$563 million for 2018, compared to negative $183 

million for 2017. The negative provision for 2018 

primarily resulted from a $570 million decrease to the 

estimated losses for prior year failures, attributable to: 

(1) a decrease in receivership shared-loss liability cost 

estimates of $186 million primarily due to lower-thananticipated losses on covered assets, reductions in 

shared-loss cost estimates from the early termination 

of shared-loss agreements (SLAs) during the year, 

and unanticipated recoveries from SLAs where 

the commercial loss coverage has expired but the 

recovery period remains active; (2) $172 million of 

estimated recoveries from residual certificates retained 

by receiverships for structured transactions; and (3) 

$130 million of unanticipated recoveries received by 

receiverships from tax refunds, litigation settlements, 

and professional liability claims. 

During 2018, the DIF recognized an unrealized 

loss on U.S. Treasury securities of $136 million, 

down from a $500 million unrealized loss in 2017. 

The unrealized loss in 2018 was the result of yields 

rising dramatically across all maturity sectors of the 

Treasury yield curve, resulting in declines in the 

securities’ market values relative to their book values. 

The DIF’s cash, cash equivalents, and U.S. Treasury 

investment portfolio balances increased by $13.4 

billion during 2018 to $98.5 billion at year-end 2018, 

from $85.1 billion at year-end 2017. This increase 

was primarily due to assessment collections of $10.8 

billion, recoveries from resolutions of $3.3 billion, and 

interest received on U.S. Treasury securities of $1.8 

billion, less operating expenses paid of $1.7 billion.
FINANCIAL HIGHLIGHTS

ANNUAL REPORT 

86

ESTIMATED DIF INSURED DEPOSITS

SOURCE: Commercial Bank Call and Thrift Financial Reports

Note: Beginning in fourth quarter 2010 through fourth quarter 2012, estimated insured deposits include the entire balance of noninterest-bearing transaction 

accounts.

DEPOSIT INSURANCE FUND RESERVE RATIOS

Dollars in Billions

3-11 6-11 9-11 12-11 3-12 6-12 9-12 12-12 3-13 6-13 9-13 12-13 3-14 6-14 9-14 12-14 3-15 6-15 9-15 12-15 3-16 6-16 9-16 12-16 3-17 6-17 9-17 12-17 3-18 6-18 9-18

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Fund Balance as a Percent of Estimated Insured Deposits

0.4

0.6

0.8

1.2

1.4

1.0

0.2

0.0

-0.2

3-11 6-11 9-11 12-11 3-12 6-12 9-12 12-12 3-13 6-13 9-13 12-13 3-14 6-14 9-14 12-14 3-15 6-15 9-15 12-15 3-16 6-16 9-16 12-16 3-17 6-17 9-17 12-17 3-18 6-18 9-18
FINANCIAL HIGHLIGHTS

2018

87

DEPOSIT INSURANCE FUND SELECTED STATISTICS

Dollars in Millions

For the years ended December 31

2018 2017 2016

Financial Results

Revenue $11,171 $11,664 $10,674 

Operating Expenses 1,765 1,739 1,715

Insurance and Other Expenses (includes provision for losses) (560) (181) (1,564)

Net Income 9,966 10,105 10,524 

Comprehensive Income 9,861 9,586 10,561 

Insurance Fund Balance $102,609 $92,747 $83,162 

Fund as a Percentage of Insured Deposits (reserve ratio) 1.36%3 1.30% 1.20%

Selected Statistics

Total DIF-Member Institutions1 5,4773 5,670 5,913 

Problem Institutions 713 95 123 

Total Assets of Problem Institutions $53,2893 $13,939 $27,624 

Institution Failures 0 8 5 

Total Assets of Failed Institutions in Year2 $0 $5,082 $277 

Number of Active Failed Institution Receiverships 272 338 378

1

 Commercial banks and savings institutions. Does not include U.S. insured branches of foreign banks.

2

 Total Assets data are based upon the last Call Report filed by the institution prior to failure.

3 As of September 30, 2018.
THIS PAGE INTENTIONALLY LEFT BLANK
89 89

BUDGET IV. AND SPENDING
THIS PAGE INTENTIONALLY LEFT BLANK
2018

BUDGET AND SPENDING 91

FDIC OPERATING BUDGET

The FDIC segregates its corporate operating budget 

and expenses into three discrete components: ongoing 

operations, receivership funding, and the Office of 

Inspector General (OIG). The receivership funding 

component represents expenses resulting from 

financial institution failures and is, therefore, largely 

driven by external forces and is less controllable and 

estimable. FDIC operating expenditures totaled $1.9 

billion in 2018, including $1.7 billion in ongoing 

operations, $145 million in receivership funding, 

and $37 million for the OIG. This represented 

approximately 94 percent of the approved budget 

for ongoing operations, 64 percent of the approved 

budget for receivership funding, and 92 percent of the 

approved budget for the OIG for the year. 

The approved 2019 FDIC Operating Budget of 

approximately $2.0 billion consists of $1.8 billion 

for ongoing operations, $175 million for receivership 

funding, and $43 million for the OIG. The level 

of approved ongoing operations budget for 2019 is 

approximately $2 million (0.1 percent) lower than 

the 2018 ongoing operations budget, while the 

approved receivership funding budget is $50 million 

(22 percent) lower than the 2018 receivership funding 

budget. The 2019 OIG budget is $3 million (7 

percent) higher than the 2018 OIG budget. 

As in prior years, the 2019 budget was formulated 

primarily on the basis of an analysis of projected 

workload for each of the Corporation’s three major 

business lines and its program support functions. The 

most significant factor contributing to the decrease 

in the FDIC Operating Budget is the improving 

health of the industry and the resultant reduction 

in failure related workload. Although savings in 

this area are being realized, the 2019 receivership 

funding budget provides resources for contractor 

support should workload in these areas require an 

immediate response.

FDIC EXPENDITURES 2009–2018

Dollars in Millions

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$0
BUDGET AND SPENDING

ANNUAL REPORT 

92

The FDIC’s Strategic Plan and Annual Performance 

Plan provide the basis for annual planning and 

budgeting for needed resources. The 2018 aggregate 

budget (for ongoing operations, receivership 

funding, OIG, and investment spending) was 

$2.1 billion, while actual expenditures for the 

year were $1.9 billion, about $34 million less than 

2017 expenditures. 

Over the past decade the FDIC’s expenditures have 

varied in response to workload. During the last 

several years, expenditures have fallen, largely due to 

decreasing resolution and receivership activity. To a 

lesser extent decreased expenses have resulted from 

supervision-related costs associated with the oversight 

of fewer troubled institutions.

2018 BUDGET AND EXPENDITURES BY PROGRAM

(including Allocated Support)

Dollars in Millions

Receivership

Management

Program

Insurance

Program

Supervision

and Consumer

Protection 

Program

General and

Administrative

$1,200

Budget

$900

$600

$300

$0

Expenditures

2018 BUDGET AND 

EXPENDITURES BY PROGRAM 

(Excluding Investments)

The FDIC budget for 2018 totaled approximately $2.1 

billion. Budget amounts were allocated as follows: 

$1.07 billion or 51 percent, to the Supervision and 

Consumer Protection program; $451 million or 21 

percent, to the Receivership Management program; 

$309 million, or 15 percent, to the Insurance 

program; and $271 million, or 13 percent, to 

Corporate General and Administrative expenditures. 

Actual expenditures for the year totaled $1.9 

billion. Actual expenditures amounts were allocated 

as follows: $1.06 billion, or 56 percent, to the 

Supervision and Consumer Protection program; 

$327 million, or 17 percent, to the Receivership 

Management program; $300 million, or 16 percent, 

to the Insurance program; and $213 million, or 

11 percent, to Corporate General and Administrative 

expenditures.
BUDGET AND SPENDING

2018

93

INVESTMENT SPENDING

The FDIC instituted a separate Investment Budget in 

2003 to provide enhanced governance of major multiyear development efforts. It has a disciplined process 

for reviewing proposed new investment projects and 

managing the construction and implementation of 

approved projects. Proposed IT projects are carefully 

reviewed to ensure that they are consistent with the 

Corporation’s enterprise architecture. The project 

approval and monitoring processes also enable 

the FDIC to be aware of risks to the major capital 

investment projects and facilitate appropriate, timely 

intervention to address these risks throughout the 

development process. An investment portfolio 

performance review is provided to the FDIC’s Board 

of Directors on a quarterly basis. From 2009-2018, 

investment spending totaled $104 million and is 

estimated at $9 million for 2019.

INVESTMENT SPENDING 2009 - 2018

Dollars in Millions

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$25

$15

$5

$10

$20

$30

$0
THIS PAGE INTENTIONALLY LEFT BLANK
95 95

FINANCIAL V. SECTION
FINANCIAL SECTION

ANNUAL REPORT 

96

DEPOSIT INSURANCE FUND (DIF)

Federal Deposit Insurance Corporation

Deposit Insurance Fund Balance Sheet 

As of December 31

(Dollars in Thousands) 2018 2017

ASSETS

 Cash and cash equivalents $ 5,773,995 $ 1,829,198

 Investment in U.S. Treasury securities (Note 3) 92,708,356 83,302,963

 Assessments receivable (Note 9) 1,376,341 2,634,386

 Interest receivable on investments and other assets, net 549,791 505,766

 Receivables from resolutions, net (Note 4) 3,058,241 5,972,971

 Property and equipment, net (Note 5) 328,530 334,050

Total Assets $ 103,795,254 $ 94,579,334

LIABILITIES

 Accounts payable and other liabilities $ 198,072 $ 236,971

 Liabilities due to resolutions (Note 6) 604,776 1,203,260

 Postretirement benefit liability (Note 12) 235,935 259,316

 Contingent liabilities:

 Anticipated failure of insured institutions (Note 7) 113,936 97,777

 Guarantee payments and litigation losses (Notes 7 and 8) 33,611 34,515

Total Liabilities 1,186,330 1,831,839

 Commitments and off-balance-sheet exposure (Note 13)

FUND BALANCE

 Accumulated Net Income 103,238,013 93,272,447

ACCUMULATED OTHER COMPREHENSIVE INCOME

 Unrealized (loss) on U.S. Treasury securities, net (Note 3) (615,549) (479,362)

 Unrealized postretirement benefit (loss) (Note 12) (13,540) (45,590)

Total Accumulated Other Comprehensive (Loss) (629,089) (524,952)

Total Fund Balance 102,608,924 92,747,495

Total Liabilities and Fund Balance $ 103,795,254 $ 94,579,334

The accompanying notes are an integral part of these financial statements.
FINANCIAL SECTION

2018

97

DEPOSIT INSURANCE FUND (DIF)

Federal Deposit Insurance Corporation

Deposit Insurance Fund Statement of Income and Fund Balance 

For the Years Ended December 31

(Dollars in Thousands) 2018 2017

REVENUE

 Assessments (Note 9) $ 9,526,723 $ 10,594,838

 Interest on U.S. Treasury securities 1,632,863 1,056,989

 Other revenue 11,208 11,947

Total Revenue 11,170,794 11,663,774

EXPENSES AND LOSSES

 Operating expenses (Note 10) 1,764,748 1,739,395

 Provision for insurance losses (Note 11) (562,622) (183,149)

 Insurance and other expenses 3,102 2,072

Total Expenses and Losses 1,205,228 1,558,318

Net Income 9,965,566 10,105,456

OTHER COMPREHENSIVE INCOME

 Unrealized (loss) on U.S. Treasury securities, net (136,187) (499,633)

 Unrealized postretirement benefit gain (loss) (Note 12) 32,050 (19,843)

Total Other Comprehensive (Loss) (104,137) (519,476)

Comprehensive Income 9,861,429 9,585,980

Fund Balance - Beginning 92,747,495 83,161,515

Fund Balance - Ending $ 102,608,924 $ 92,747,495

The accompanying notes are an integral part of these financial statements.
FINANCIAL SECTION

ANNUAL REPORT 

98

DEPOSIT INSURANCE FUND (DIF)

Federal Deposit Insurance Corporation

Deposit Insurance Fund Statement of Cash Flows

For the Years Ended December 31

(Dollars in Thousands) 2018 2017

OPERATING ACTIVITIES

Provided by:

 Assessments $ 10,766,890 $ 10,609,959

 Interest on U.S. Treasury securities 1,837,400 1,622,583

 Recoveries from financial institution resolutions 3,254,230 3,952,375

 Miscellaneous receipts 18,290 16,853

Used by:

 Operating expenses (1,744,274) (1,838,673)

 Disbursements for financial institution resolutions (353,448) (3,010,042)

 Miscellaneous disbursements (3,694) (799)

Net Cash Provided by Operating Activities 13,775,394 11,352,256

INVESTING ACTIVITIES

Provided by:

 Maturity of U.S. Treasury securities 27,354,816 29,931,209

Used by:

 Purchase of U.S. Treasury securities (37,140,141) (40,756,734)

 Purchase of property and equipment (45,272) (30,499)

Net Cash (Used) by Investing Activities (9,830,597) (10,856,024)

Net Increase in Cash and Cash Equivalents 3,944,797 496,232

Cash and Cash Equivalents - Beginning 1,829,198 1,332,966

Cash and Cash Equivalents - Ending $ 5,773,995 $ 1,829,198

The accompanying notes are an integral part of these financial statements.
FINANCIAL SECTION

2018

99

DEPOSIT INSURANCE FUND

NOTES TO THE FINANCIAL STATEMENTS

December 31, 2018 and 2017 

1

1. Operations of the Deposit Insurance Fund

OVERVIEW

The Federal Deposit Insurance Corporation (FDIC) is the 

independent deposit insurance agency created by Congress 

in 1933 to maintain stability and public confidence in the 

nation’s banking system. Provisions that govern the FDIC’s 

operations are generally found in the Federal Deposit 

Insurance (FDI) Act, as amended (12 U.S.C. 1811, et seq). In 

accordance with the FDI Act, the FDIC, as administrator of 

the Deposit Insurance Fund (DIF), insures the deposits of 

banks and savings associations (insured depository 

institutions). In cooperation with other federal and state 

agencies, the FDIC promotes the safety and soundness of 

insured depository institutions (IDIs) by identifying, 

monitoring, and addressing risks to the DIF. Commercial 

banks, savings banks and savings associations (known as 

“thrifts”) are supervised by either the FDIC, the Office of the 

Comptroller of the Currency, or the Federal Reserve Board. 

In addition to being the administrator of the DIF, the FDIC is 

the administrator of the FSLIC Resolution Fund (FRF). The 

FRF is a resolution fund responsible for the sale of the 

remaining assets and the satisfaction of the liabilities 

associated with the former Federal Savings and Loan 

Insurance Corporation (FSLIC) and the former Resolution 

Trust Corporation. The FDIC maintains the DIF and the FRF 

separately to support their respective functions.

Pursuant to the Dodd-Frank Wall Street Reform and 

Consumer Protection Act of 2010 (Dodd-Frank Act), the FDIC 

also manages the Orderly Liquidation Fund (OLF). 

Established as a separate fund in the U.S. Treasury (Treasury), 

the OLF is inactive and unfunded until the FDIC is appointed 

as receiver for a covered financial company. A covered 

financial company is a failing financial company (for 

example, a bank holding company or nonbank financial 

company) for which a systemic risk determination has been 

made as set forth in section 203 of the Dodd-Frank Act. 

The Dodd-Frank Act (Public Law 111-203) granted the FDIC 

authority to establish a widely available program to 

guarantee obligations of solvent IDIs or solvent depository 

institution holding companies (including affiliates) upon the 

systemic risk determination of a liquidity event during times 

of severe economic distress. The program would not be 

funded by the DIF but rather by fees and assessments paid 

by all participants in the program. If fees are insufficient to 

cover losses or expenses, the FDIC must impose a special 

assessment on participants as necessary to cover the

shortfall. Any excess funds at the end of the liquidity event 

program would be deposited in the General Fund of the 

Treasury. 

The Dodd-Frank Act also created the Financial Stability 

Oversight Council (FSOC) of which the Chairman of the FDIC 

is a member and expanded the FDIC’s responsibilities to 

include supervisory review of resolution plans (known as 

living wills) and backup examination authority for 

systemically important bank holding companies and 

nonbank financial companies supervised by the Federal 

Reserve Board. The living wills provide for an entity’s rapid 

and orderly resolution in the event of material financial 

distress or failure.

OPERATIONS OF THE DIF

The primary purposes of the DIF are to (1) insure the 

deposits and protect the depositors of IDIs and (2) resolve 

failed IDIs upon appointment of the FDIC as receiver in a 

manner that will result in the least possible cost to the DIF.

The DIF is primarily funded from deposit insurance 

assessments. Other available funding sources, if necessary, 

are borrowings from the Treasury, the Federal Financing 

Bank (FFB), Federal Home Loan Banks, and IDIs. The FDIC 

has borrowing authority of $100 billion from the Treasury 

and a Note Purchase Agreement with the FFB, not to exceed 

$100 billion, to enhance the DIF’s ability to fund deposit 

insurance. 

A statutory formula, known as the Maximum Obligation 

Limitation (MOL), limits the amount of obligations the DIF 

can incur to 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. The MOL for the DIF was 

$201.8 billion and $191.5 billion as of December 31, 2018 

and 2017, respectively. 

OPERATIONS OF RESOLUTION ENTITIES

The FDIC, as receiver, is responsible for managing and 

disposing of the assets of failed institutions in an orderly and 

efficient manner. The assets held by receiverships,

conservatorships, and bridge institutions (collectively, 

resolution entities), and the claims against them, are 

accounted for separately from the DIF assets and liabilities to 

ensure that proceeds from these entities are distributed 

according to applicable laws and regulations. Therefore, 

income and expenses attributable to resolution entities are 
FINANCIAL SECTION

ANNUAL REPORT 

100

DEPOSIT INSURANCE FUND

2

accounted for as transactions of those entities. The FDIC, as 

administrator of the DIF, bills resolution entities for services 

provided on their behalf.

2. Summary of Significant Accounting Policies

GENERAL

The financial statements include the financial position, 

results of operations, and cash flows of the DIF and are 

presented in accordance with U.S. generally accepted 

accounting principles (GAAP). These statements do not 

include reporting for assets and liabilities of resolution 

entities because these entities are legally separate and 

distinct, and the DIF does not have any ownership or 

beneficial interests in them. Periodic and final accounting 

reports of resolution entities are furnished to courts, 

supervisory authorities, and others upon request.

USE OF ESTIMATES

The preparation of the financial statements in conformity 

with GAAP requires management to make estimates and 

assumptions that affect the reported amounts of assets and 

liabilities, revenue and expenses, and disclosure of 

contingent liabilities. Actual results could differ from these 

estimates. Where it is reasonably possible that changes in 

estimates will cause a material change in the financial 

statements in the near term, the nature and extent of such 

potential changes in estimates have been disclosed. The 

more significant estimates include the assessments

receivable and associated revenue; the allowance for loss on

receivables from resolutions (which considers the impact of 

shared-loss agreements); the guarantee obligations for 

structured transactions; the postretirement benefit 

obligation; and the estimated losses for anticipated failures. 

CASH EQUIVALENTS

Cash equivalents are short-term, highly liquid investments 

consisting primarily of U.S. Treasury Overnight Certificates.

INVESTMENT IN U.S. TREASURY SECURITIES

The FDI Act requires that the DIF funds be invested in 

obligations of the United States or in obligations guaranteed 

as to principal and interest by the United States. 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.

The DIF’s investments in U.S. Treasury securities are classified 

as available-for-sale (AFS). Securities designated as AFS are 

shown at fair value. Unrealized gains and losses are

reported as other comprehensive income. Any realized 

gains and losses are included in the Statement of Income 

and Fund Balance as components of net income. Income on 

securities is calculated and recorded daily using the effective 

interest or straight-line method depending on the maturity 

of the security (see Note 3). 

REVENUE RECOGNITION FOR ASSESSMENTS

Assessment revenue is recognized for the quarterly period of 

insurance coverage based on an estimate. The estimate is 

derived from an institution’s regular risk-based assessment 

rate and assessment base for the prior quarter adjusted for 

certain changes in supervisory examination ratings for larger 

institutions as well as modest assessment base growth and 

average assessment rate adjustment factors. Effective third 

quarter 2016 through third quarter 2018, the estimate 

included a surcharge for institutions with $10 billion or more

in total consolidated assets (see Note 9). At the subsequent 

quarter-end, the estimated revenue amounts are adjusted 

when actual assessments for the covered period are 

determined for each institution. 

CAPITAL ASSETS AND DEPRECIATION

The FDIC buildings are depreciated on a straight-line basis 

over a 35- to 50-year estimated life. Building improvements 

are capitalized and depreciated over the estimated useful life 

of the improvements. Leasehold improvements are 

capitalized and depreciated over the lesser of the remaining 

life of the lease or the estimated useful life of the 

improvements, if determined to be material. Capital assets 

depreciated on a straight-line basis over a five-year 

estimated useful life include mainframe equipment; 

furniture, fixtures, and general equipment; and internal-use 

software. Computer equipment is depreciated on a straightline basis over a three-year estimated useful life (see Note 5).

PROVISION FOR INSURANCE LOSSES

The provision for insurance losses primarily represents 

changes in the allowance for losses on receivables from

closed banks and the contingent liability for anticipated 

failure of insured institutions (see Note 11).

REPORTING ON VARIABLE INTEREST ENTITIES

The receiverships engaged in structured transactions, some 

of which resulted in the issuance of note obligations that 

were guaranteed by the FDIC, in its corporate capacity. As 

the guarantor of note obligations for several structured 

transactions, the FDIC, in its corporate capacity, holds an 

interest in many variable interest entities (VIEs). The FDIC 

conducts a qualitative assessment of its relationship with 

each VIE as required by the Financial Accounting Standards 

Board (FASB) Accounting Standards Codification (ASC) Topic 

810, Consolidation. These assessments are conducted to 
FINANCIAL SECTION

2018

101

 

NOTES TO THE FINANCIAL STATEMENTS

3

determine if the FDIC, in its corporate capacity, has (1) power 

to direct the activities that most significantly affect the 

economic performance of the VIE and (2) an obligation to 

absorb losses of the VIE or the right to receive benefits from 

the VIE that could potentially be significant to the VIE. When 

a variable interest holder has met both of these 

characteristics, the enterprise is considered the primary 

beneficiary and must consolidate the VIE. In accordance 

with the provisions of FASB ASC Topic 810, an assessment of 

the terms of the legal agreement for each VIE was 

conducted to determine whether any of the terms had been 

activated or modified in a manner that would cause the 

FDIC, in its corporate capacity, to be characterized as a 

primary beneficiary. In making that determination, 

consideration was given to which, if any, activities were 

significant to each VIE. Often, the right to service collateral, 

to liquidate collateral, or to unilaterally dissolve the VIE was 

determined to be the most significant activity. In other 

cases, it was determined that the structured transactions did 

not include such significant activities and that the design of 

the entity was the best indicator of which party was the 

primary beneficiary. 

The conclusion of these analyses was that the FDIC, in its 

corporate capacity, has not engaged in any activity that 

would cause the FDIC to be characterized as a primary 

beneficiary to any VIE with which it was involved as of 

December 31, 2018 and 2017. Therefore, consolidation is 

not required for the December 31, 2018 and 2017 DIF 

financial statements. In the future, the FDIC, in its corporate 

capacity, may become the primary beneficiary upon the 

activation of provisional contract rights that extend to the 

FDIC if payments are made on guarantee claims. Ongoing 

analyses will be required to monitor consolidation 

implications under FASB ASC Topic 810.

The FDIC’s involvement with VIEs is fully described in Note 8

under FDIC Guaranteed Debt of Structured Transactions.

RELATED PARTIES

The nature of related parties and a description of related 

party transactions are discussed in Note 1 and disclosed 

throughout the financial statements and footnotes. 

APPLICATION OF RECENT ACCOUNTING STANDARDS

In June 2016, the FASB issued ASU 2016-13, Financial 

Instruments—Credit Losses (Topic 326): Measurement of 

Credit Losses on Financial Instruments. The ASU will replace 

the incurred loss impairment model with a new expected 

credit loss model for financial assets measured at amortized 

cost and for off-balance-sheet credit exposures. The 

guidance also amends the AFS debt securities impairment 

model by requiring the use of an allowance to record 

estimated credit losses (and subsequent recoveries) related 

to AFS debt securities. In November 2018, the FASB issued 

ASU 2018-19, Codification Improvements to Topic 326, 

Financial Instruments—Credit Losses, that changed the 

effective date of ASU 2016-13 for the DIF to January 1, 

2022. ASU 2016-13 requires the cumulative effect of the 

change on the DIF’s beginning fund balance when it is 

adopted. The FDIC continues to assess the effect ASU 2016-

13 will have on the DIF’s financial position and results of 

operations.

Other recent accounting pronouncements have been 

deemed not applicable or material to the financial 

statements as presented.

3. Investment in U.S. Treasury Securities

The “Investment in U.S. Treasury securities” line item on the 

Balance Sheet consisted of the following components by 

maturity (dollars in millions).

December 31, 2018 Net Unrealized Unrealized

Yield at Face Carrying Holding Holding Fair

Maturity Purchase Value Amount Gains Losses Value

Within 1 year 1.90% $ 28,950 $ 28,997 $ 0 $ (104) $ 28,893

After 1 year 

through 5 years 2.08% 64,650 64,327 137 (649) 63,815

Total $ 93,600 $ 93,324 $ 137 $ (753) a $ 92,708

U.S. Treasury notes and bonds

(a) These unrealized losses occurred as a result of temporary changes in market interest 

rates. The FDIC does not intend to sell the securities and is not likely to be required to sell 

them before their maturity date, thus, the FDIC does not consider these securities to be 

other than temporarily impaired at December 31, 2018. As of December 31, 2018, 

securities with a continuous unrealized loss position of less than 12 months had an 

aggregate related fair value and unrealized loss of $21.6 billion and $77 million, 

respectively. For those with a continuous unrealized loss position of 12 months or longer, 

their aggregate related fair value and unrealized losses were $53.1 billion and $676 million, 

respectively.
FINANCIAL SECTION

ANNUAL REPORT 

102

DEPOSIT INSURANCE FUND

4

December 31, 2017 Net Unrealized Unrealized

Yield at Face Carrying Holding Holding Fair

Maturity Purchasea Value Amount Gains Losses Value

Within 1 year 1.25% $ 26,525 b $ 26,661 $ 0 $ (53) $ 26,608

After 1 year 

through 5 years 1.67% 56,500 56,694 3 (428) 56,269

Subtotal $ 83,025 $ 83,355 $ 3 $ (481) $ 82,877

Within 1 year -0.14% $ 400 $ 427 $ 0 $ (1) $ 426

Subtotal $ 400 $ 427 $ 0 $ (1) $ 426

Total $ 83,425 $ 83,782 $ 3 $ (482) c $ 83,303

U.S. Treasury notes and bonds

U.S. Treasury Inflation-Protected Securities

(a) The Treasury Inflation-Protected Securities (TIPS) are indexed to increases or decreases 

in the Consumer Price Index for All Urban Consumers (CPI-U). For TIPS, the yields in the 

above table are stated at their real yields at purchase, not their effective yields. Effective 

yields on TIPS include a long-term annual inflation assumption as measured by the CPI-U. 

The long-term CPI-U consensus forecast is 2.0 percent, based on figures issued by the 

Congressional Budget Office and Blue Chip Economic Indicators in early 2017.

(b) Includes two Treasury notes totaling $2.1 billion which matured on Sunday, December 

31, 2017. Settlements occurred the next business day, January 2, 2018. 

(c) These unrealized losses occurred over a period of less than a year as a result of 

temporary changes in market interest rates. The FDIC does not intend to sell the securities 

and is not likely to be required to sell them before their maturity date, thus, the FDIC does 

not consider these securities to be other than temporarily impaired at December 31, 2017. 

The aggregate related fair value of securities with unrealized losses was $75.5 billion as of 

December 31, 2017.

4. Receivables from Resolutions, Net

The receivables from resolutions result from DIF payments to 

cover obligations to insured depositors (subrogated claims), 

advances to resolution entities for working capital, and 

administrative expenses paid on behalf of resolution entities. 

Any related allowance for loss represents the difference 

between the funds advanced and/or obligations incurred 

and the expected repayment. Estimated future payments on 

losses incurred on assets sold to an acquiring institution 

under a shared-loss agreement (SLA) are factored into the 

computation of the expected repayment. Assets held by 

resolution entities (including structured transaction-related 

assets; see Note 8) are the main source of repayment of the 

DIF’s receivables from resolutions. The “Receivables from 

resolutions, net” line item on the Balance Sheet consisted of 

the following components (dollars in thousands). 

December 31 December 31

2018 2017

Receivables from closed banks $ 68,267,737 $ 76,725,761

Allowance for losses (65,209,496) (70,752,790)

Total $ 3,058,241 $ 5,972,971

As of December 31, 2018, the FDIC, as receiver, managed 

272 active receiverships; no new receiverships were

established in 2018. The resolution entities held assets with 

a book value of $5.1 billion as of December 31, 2018, and 

$8.8 billion as of December 31, 2017 (including $4.0 billion 

and $6.5 billion, respectively, of cash, investments, 

receivables due from the DIF, and other receivables).

Estimated cash recoveries from the management and 

disposition of assets that are used to determine the 

allowance for losses are based on asset recovery rates from 

several sources, including actual or pending institutionspecific asset disposition data, failed institution-specific asset 

valuation data, aggregate asset valuation data on several 

recently failed or troubled institutions, sampled asset 

valuation data, and empirical asset recovery data based on 

failures since 2007. Methodologies for determining the 

asset recovery rates incorporate estimating future cash 

recoveries, net of applicable liquidation cost estimates, and 

discounting based on market-based risk factors applicable to 

a given asset’s type and quality. The resulting estimated 

cash recoveries are then used to derive the allowance for 

loss on the receivables from these resolutions.

For failed institutions resolved using a whole bank purchase 

and assumption transaction with an accompanying SLA, the 

projected future shared-loss payments on the covered 

residential and commercial loan assets sold to the acquiring 

institution under the agreement are considered in 

determining the allowance for loss on the receivables from 

these resolutions. The shared-loss cost projections are 

based on the covered assets’ intrinsic value, which is 

determined using financial models that consider the quality, 

condition and type of covered assets, current and future 

market conditions, risk factors, and estimated asset holding 

periods. 

For year-end 2018, the shared-loss cost estimates were 

updated for all 81 receiverships with active SLAs. The 

updated shared-loss cost projections for 13 residential SLAs, 

which represent the majority ($5.0 billion or 52 percent) of 

shared-loss covered assets of $9.6 billion, were primarily 

based on third-party valuations estimating the cumulative 

loss of covered assets. The updated cost projections on the 

remaining residential shared-loss covered assets ($4.6 billion 

or 48 percent) were based on pending sales activity and the 

FDIC’s historical loss experience that also factors in the time 

period based on the life of the agreement. This is a change 

from 2017, when the valuation methodology on such assets 

were either based on third-party valuations or a stratified 

random sample of institutions selected for third-party loss 

estimations and valuation results from the sampled 

institutions were aggregated and extrapolated to the nonsampled institutions by asset type and performance status.

This change was made to address the seasoned nature of 

this portfolio (loss coverage will expire on 75 percent of the 
FINANCIAL SECTION

2018

103

 

NOTES TO THE FINANCIAL STATEMENTS

5

remaining covered assets within one year of December

2018). The effect of this change was a $138 million decrease

to the shared-loss liability. As of December 31, 2018, all 

commercial asset shared-loss coverage has expired. For the 

year ending December 31, 2017, shared-loss cost projections

for commercial covered assets were based on the FDIC’s 

historical loss experience that also factored in the time 

period based on the life of the agreement. 

Also reflected in the allowance for loss calculation are endof-agreement SLA “true-up” recoveries. True-up recoveries 

are projected to be received at expiration in accordance with 

the terms of the SLA, if actual losses at expiration are lower 

than originally estimated. 

Note that estimated asset recoveries are regularly evaluated

during the year, but remain subject to uncertainties because 

of potential changes in economic and market conditions, 

which may cause the DIF’s actual recoveries to vary 

significantly from current estimates. 

WHOLE BANK PURCHASE AND ASSUMPTION 

TRANSACTIONS WITH SHARED-LOSS AGREEMENTS

Since the beginning of 2008 through 2013, the FDIC resolved 

304 failures using whole bank purchase and assumption 

resolution transactions with accompanying SLAs on total 

assets of $215.7 billion purchased by the financial institution 

acquirers. The acquirer typically assumed all of the deposits 

and purchased essentially all of the assets of a failed 

institution. The majority of the commercial and residential 

loan assets were purchased under an SLA, where the FDIC 

agreed to share in future losses and recoveries experienced 

by the acquirer on those assets covered under the 

agreement.

Losses on the covered assets of failed institutions are shared 

between the acquirer and the FDIC, in its receivership 

capacity, when losses occur through the sale, foreclosure, 

loan modification, or charge-off of loans under the terms of 

the SLA. The majority of the agreements cover commercial 

and single-family loans over a five- to ten-year shared-loss 

period, respectively, with the receiver covering 80 percent of 

the losses incurred by the acquirer and the acquiring 

institution covering 20 percent. Prior to March 26, 2010, 

most SLAs included a threshold amount, above which the 

receiver covered 95 percent of the losses incurred by the 

acquirer. Recoveries by the acquirer on covered commercial 

and single-family SLA losses are also shared over an eightto ten-year period, respectively. Note that future recoveries 

on SLA losses are not factored into the DIF allowance for loss 

calculation because the amount and timing of such receipts 

are not determinable. 

The estimated shared-loss liability is accounted for by the 

receiver and is included in the calculation of the DIF’s 

allowance for loss against the corporate receivable from the 

resolution. As shared-loss claims are asserted and proven, 

receiverships satisfy these shared-loss payments using 

available liquidation funds and/or by drawing on amounts 

due from the DIF for funding the deposits assumed by the 

acquirer (see Note 6). 

Receivership shared-loss transactions are summarized as 

follows (dollars in thousands).

December 31 December 31

2018 2017

Shared-loss payments made to date, net of recoveries $ 29,088,461 $ 29,014,957

Projected shared-loss payments, net of "true-up" recoveries $ 175,207 $ 428,971

Total remaining shared-loss covered assets $ 9,602,069 $ 13,896,921

The $4.3 billion reduction in the remaining shared-loss 

covered assets from 2017 to 2018 is primarily due to the 

liquidation of covered assets from active SLAs, expiration of 

loss coverage for two commercial loan SLAs, and early 

termination of SLAs impacting 20 receiverships during 2018.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the DIF to 

concentrations of credit risk are receivables from resolutions. 

The repayment of these receivables is primarily influenced by 

recoveries on assets held by receiverships and payments on 

the covered assets under SLAs. The majority of the 

remaining assets in liquidation ($1.2 billion) and current 

shared-loss covered assets ($9.6 billion), which together total 

$10.8 billion, are concentrated in commercial loans ($34

million), residential loans ($9.7 billion), and structured 

transaction-related assets ($853 million) as described in Note 

8. Most of the assets originated from failed institutions 

located in California ($7.3 billion), Puerto Rico ($1.1 billion), 

and Florida ($898 million).

5. Property and Equipment, Net

Depreciation expense was $51 million and $54 million for

2018 and 2017, respectively. The “Property and equipment, 

net” line item on the Balance Sheet consisted of the 

following components (dollars in thousands).
FINANCIAL SECTION

ANNUAL REPORT 

104

DEPOSIT INSURANCE FUND

6

December 31 December 31

2018 2017

Land $ 37,352 $ 37,352

Buildings (including building and leasehold improvements) 328,787 325,322

Application software (includes work-in-process) 103,543 112,727

Furniture, fixtures, and equipment 66,889 72,384

Accumulated depreciation (208,041) (213,735)

Total $ 328,530 $ 334,050

6. Liabilities Due to Resolutions

As of December 31, 2018 and 2017, the DIF recorded 

liabilities totaling $601 million and $1.2 billion, respectively,

to resolution entities representing the agreed-upon value of 

assets transferred from the receiverships, at the time of 

failure, to the acquirers/bridge institutions for use in funding 

the deposits assumed by the acquirers/bridge institutions. 

Ninety-seven percent of these liabilities are due to failures 

resolved under whole-bank purchase and assumption 

transactions, most with an accompanying SLA. The DIF 

satisfies these liabilities either by sending cash directly to a 

receivership to fund shared-loss and other expenses or by 

offsetting receivables from resolutions when a receivership 

declares a dividend. 

In addition, there were $4 million and $9 million in unpaid 

deposit claims related to multiple receiverships as of 

December 31, 2018 and 2017, respectively. The DIF pays 

these liabilities when the claims are approved.

7. Contingent Liabilities

ANTICIPATED FAILURE OF INSURED INSTITUTIONS

The DIF records a contingent liability and a loss provision for 

DIF-insured institutions that are likely to fail when the 

liability is probable and reasonably estimable, absent some 

favorable event such as obtaining additional capital or 

merging. The contingent liability is derived by applying 

expected failure rates and loss rates to the institutions based 

on supervisory ratings, balance sheet characteristics, and 

projected capital levels.

The banking industry’s financial condition and performance

were generally positive in 2018. According to the most 

recent quarterly financial data submitted by DIF-insured 

institutions, the industry’s capital levels continued to 

improve, and the percentage of total loans that were 

noncurrent at September 30 fell to its lowest level since 

second quarter 2007. The industry reported total net 

income of $178.1 billion for the first nine months of 2018, an 

increase of 27.4 percent over the comparable period one 

year ago.

Consistent with the positive performance of the banking 

industry, the contingent liability remained relatively stable as 

of December 31, 2018 compared to December 31, 2017. The 

DIF recorded contingent liabilities totaling $114 million and 

$98 million as of December 31, 2018 and 2017, respectively.

In addition to the recorded contingent liabilities, the FDIC 

has identified risks in the financial services industry that 

could result in additional losses to the DIF, should potentially 

vulnerable insured institutions ultimately fail. As a result of 

these risks, the FDIC believes that it is reasonably possible 

that the DIF could incur additional estimated losses of 

approximately $227 million as of December 31, 2018,

compared to $373 million as of year-end 2017. The actual 

losses, if any, will largely depend on future economic and 

market conditions and could differ materially from this 

estimate.

During 2018, no institutions failed. The improvement in 

financial performance and condition of the banking industry

of the past year should continue if market conditions remain 

favorable. However, the operating environment poses 

several key challenges. Interest rates have been 

exceptionally low for an extended period, and there are signs 

of growing credit and liquidity risk. Recently, revenue 

growth and net interest margins have benefited from 

interest rate hikes; however, margins may be squeezed as 

deposit rates begin to increase. Economic conditions that 

challenge the banking sector include the potential effect of 

increases in interest rates on liquidity and economic activity; 

the impact of trade tariffs on economic growth and exports;

the impact of continued weak commodity prices on local 

markets; and the risk of market volatility from geopolitical 

developments. The FDIC continues to evaluate ongoing risks 

to affected institutions in light of existing economic and 

financial conditions, and the extent to which such risks may 

put stress on the resources of the insurance fund.

LITIGATION LOSSES

The DIF records an estimated loss for unresolved legal cases 

to the extent that those losses are considered probable and 

reasonably estimable. The FDIC recorded probable litigation 

losses of $200 thousand for the DIF as of December 31, 2018 

and 2017. In addition, the FDIC has identified no reasonably 

possible losses from unresolved cases as of December 31, 

2018 and $1 million as of December 31, 2017.
FINANCIAL SECTION

2018

105

 

NOTES TO THE FINANCIAL STATEMENTS

7

8. Other Contingencies

INDYMAC FEDERAL BANK REPRESENTATION AND 

INDEMNIFICATION CONTINGENT LIABILITY

On March 19, 2009, the FDIC, as receiver, for IndyMac 

Federal Bank (IMFB) and certain subsidiaries (collectively, 

Sellers) sold substantially all of the assets, which included 

mortgage loans and servicing rights, to OneWest Bank (now

known as CIT Bank) and its affiliates (collectively, Acquirers). 

Under the sale agreements, the Acquirers have 

indemnification rights to recover losses incurred as a result 

of third-party claims and breaches of the Sellers’ 

representations. The FDIC, in its corporate capacity, 

guaranteed the Sellers’ indemnification obligations under 

the sale agreements. Until all indemnification claims are 

asserted, quantified and paid, losses could continue to be 

incurred by the receivership and indirectly by the DIF. 

The unpaid principal balances of loans in the servicing 

portfolios sold subject to the Sellers’ indemnification 

obligations totaled $171.6 billion at the time of sale. The 

IndyMac receivership has paid cumulative claims totaling

$110 million through December 31, 2018 and 2017. There 

were no claims accrued as of December 31, 2018 and 2017.

The Acquirers’ rights to submit breach notices as well as 

their right to submit claims for reimbursement with respect 

to certain third-party claims have passed. However, the 

Acquirers retain the right to assert indemnification claims for 

losses over the life of those loans for which breach notices or 

third-party claim notices were timely submitted. While many 

loans are subject to notices of alleged breaches, not all 

breach allegations or third-party claims will result in an 

indemnifiable loss. In addition, the Acquirers retain the right 

to seek reimbursement for losses incurred as a result of 

claims alleging breaches of loan seller representations 

asserted by Ginnie Mae on or before March 19, 2019 for its

reverse mortgage servicing portfolios. At the time of the 

sale to CIT the reverse loans serviced for Ginnie Mae 

constituted approximately 2 percent of the reverse servicing 

portfolio. Quantifying the contingent liability is subject to a 

number of uncertainties, including market conditions, the 

occurrence of borrower defaults and resulting foreclosures 

and losses, and the possible allocation of certain losses to 

the Acquirers. Therefore, because of these uncertainties the 

FDIC has determined that, while additional losses are 

probable, the amount is not currently estimable.

PURCHASE AND ASSUMPTION INDEMNIFICATION

In connection with purchase and assumption agreements for 

resolutions, the FDIC, in its receivership capacity, generally 

indemnifies the purchaser of a failed institution’s assets and

liabilities in the event a third party asserts a claim against the 

purchaser unrelated to the explicit assets purchased or 

liabilities assumed at the time of failure. The FDIC, in its 

corporate capacity, is a secondary guarantor if a receivership

is unable to pay. These indemnifications generally extend 

for a term of six years after the date of institution failure. 

The FDIC is unable to estimate the maximum potential 

liability for these types of guarantees as the agreements do 

not specify a maximum amount and any payments are 

dependent upon the outcome of future contingent events, 

the nature and likelihood of which cannot be determined at 

this time. During 2018 and 2017, the FDIC, in its corporate 

capacity, made no indemnification payments under such 

agreements, and no amount has been accrued in the 

accompanying financial statements with respect to these 

indemnification guarantees.

FDIC GUARANTEED DEBT OF STRUCTURED 

TRANSACTIONS

The FDIC, as receiver, used structured transactions

(securitizations and structured sales of guaranteed notes 

(SSGNs) or collectively, “trusts”) to dispose of residential 

mortgage loans, commercial loans, and mortgage-backed 

securities held by the receiverships. 

For these transactions, certain loans or securities from failed 

institutions were pooled and transferred into a trust 

structure. The trusts issued senior and/or subordinated debt 

instruments and owner trust or residual certificates 

collateralized by the underlying mortgage-backed securities 

or loans.

From March 2010 through March 2013, the receiverships 

transferred a portfolio of loans with an unpaid principal

balance of $2.4 billion and mortgage-backed securities with 

a book value of $6.4 billion to the trusts. Private investors 

purchased the senior notes issued by the trusts for $6.2

billion in cash and the receiverships held the subordinated 

debt instruments and owner trust or residual certificates. In

exchange for a fee, the FDIC, in its corporate capacity,

guarantees the timely payment of principal and interest due 

on the senior notes, with the last guarantee expected to 

terminate in 2022. If the FDIC is required to perform under 

its guarantees, it acquires an interest in the cash flows of the 

trust equal to the amount of guarantee payments made plus 

accrued interest. The subordinated note holders and owner 

trust or residual certificate holders receive cash flows from 

the trust only after all expenses have been paid, the 

guaranteed notes have been satisfied, and the FDIC has 

been reimbursed for any guarantee payments. 

The following table provides the maximum loss exposure to 

the FDIC, as guarantor, total guarantee fees collected, 

guarantee fees receivable, and other information related to 

the FDIC guaranteed debt for the trusts as of December 31, 

2018 and 2017 (dollars in millions).
FINANCIAL SECTION

ANNUAL REPORT 

106

DEPOSIT INSURANCE FUND

8

December 31 December 31

2018 2017

Number of trusts

Initial 11 11

Current 8 11

Trust collateral balances

Initial $ 8,780 $ 8,780

Current $ 1,643 $ 2,169

Guaranteed note balances

Initial $ 6,196 $ 6,196

Current (maximum loss exposure) $ 404 $ 672

Guarantee fees collected to date $ 163 $ 159

Amounts recognized in Interest 

receivable on investments and other 

assets, net

Receivable for guarantee fees $ 4 $ 8

Receivable for guarantee payments, 

net $ 28 $ 20

Amounts recognized in Contingent 

liabilities: Guarantee payments and 

litigation losses

Contingent liability for guarantee 

payments $ 33 $ 34

Amounts recognized in Accounts 

payable and other liabilities

Deferred revenue for guarantee feesa $ 4 $ 8

(a) All guarantee fees are recorded as deferred revenue and recognized as revenue 

primarily on a straight-line basis over the term of the notes. 

Except as presented above, the DIF records no other 

structured transaction-related assets or liabilities on its 

balance sheet.

ESTIMATED LOSS FROM GUARANTEE PAYMENTS

Any estimated loss to the DIF from the guarantees is based 

on an analysis of the expected guarantee payments by the 

FDIC, net of reimbursements to the FDIC for such guarantee 

payments. The DIF recorded a contingent liability of $33

million as of December 31, 2018, for estimated payments 

under the guarantee for one SSGN transaction, down from 

$34 million at December 31, 2017. As guarantor, the FDIC, in 

its corporate capacity, is entitled to reimbursement from the 

trust for any guarantee payments; therefore a corresponding

receivable has been recorded. The related allowance for loss 

on this receivable is $5 million as of December 31, 2018, 

reflecting the expected shortfall of proceeds available for 

reimbursement after liquidation of the SSGN’s underlying 

collateral at note maturity, as compared to the $14 million 

allowance recorded at year-end 2017. Guarantee payments 

are expected to be made at note maturity in December 

2020.

For all of the remaining transactions, the estimated cash 

flows from the trust assets provide sufficient coverage to 

fully pay the debts. To date, the FDIC, in its corporate 

capacity, has not provided, and does not intend to provide, 

any form of financial or other type of support for structured 

transactions that it was not previously contractually required 

to provide.

9. Assessments

The FDIC deposit insurance assessment system is mandated 

by section 7 of the FDI Act and governed by part 327 of title 

12 of the Code of Federal Regulations (12 CFR Part 327). 

The risk-based system requires the payment of quarterly

assessments by all IDIs.

In response to the Dodd-Frank Act, the FDIC implemented 

several changes to the assessment system, amended its 

Restoration Plan (which is required when the ratio of the DIF 

balance to estimated insured deposits, or reserve ratio, is 

below the statutorily mandated minimum), and developed a 

comprehensive, long-term fund management plan. The plan 

is designed to restore and maintain a positive fund balance 

for the DIF even during a banking crisis and achieve 

moderate, steady assessment rates throughout any 

economic cycle. Summarized below are actions taken to 

implement requirements of the Dodd-Frank Act and 

provisions of the comprehensive, long-term fund 

management plan.

• The FDIC amended the Restoration Plan, which was 

intended to ensure that the reserve ratio reaches 1.35 

percent by September 30, 2020, as required by the 

Dodd-Frank Act, in lieu of the previous statutory 

minimum of 1.15 percent by the end of 2016. While 

under the restoration plan, the FDIC updates, at least 

semiannually, its loss and income projections for the 

fund and, if needed, increases or decreases

assessment rates, following notice-and-comment 

rulemaking, if required.

• The FDIC Board of Directors designates a reserve ratio 

for the DIF and publishes the designated reserve ratio 

(DRR) before the beginning of each calendar year, as 

required by the FDI Act. Accordingly, in December 

2018, the FDIC published a notice maintaining the 
FINANCIAL SECTION

2018

107

 

NOTES TO THE FINANCIAL STATEMENTS

9

DRR at 2 percent for 2019. The DRR is an integral 

part of the FDIC’s comprehensive, long-term 

management plan for the DIF and is viewed as a longrange, minimum target for the reserve ratio.

• The FDIC adopted a final rule that suspends dividends 

indefinitely, and, in lieu of dividends, adopts lower 

assessment rate schedules when the reserve ratio 

reaches 1.15 percent, 2 percent, and 2.5 percent.

The Dodd-Frank Act requires that the FDIC offset the effect 

of increasing the minimum reserve ratio from 1.15 percent to 

1.35 percent on small banks. To implement this

requirement, the FDIC imposed a surcharge to the regular 

quarterly assessments of IDIs with $10 billion or more in 

total consolidated assets (larger institutions), beginning with 

the quarter ending September 30, 2016. Pursuant to a final 

rule published in March 2016:

• The surcharge generally equals an annual rate of 4.5 

basis points applied to a larger institution’s regular 

quarterly assessment base (with certain adjustments). 

• The FDIC will provide assessment credits, as described 

in 12 CFR 327.11(c)(4), to institutions with less than 

$10 billion in total assets (small banks) for the portion 

of their assessments that contributed to the growth in 

the reserve ratio between 1.15 percent and 1.35 

percent to ensure that the effect of reaching 1.35 

percent is fully borne by the larger institutions. 

As of September 30, 2018, the reserve ratio of the DIF 

exceeded the required minimum of 1.35 percent by reaching 

1.36 percent. As a result, the requirements of the amended 

Restoration Plan were achieved and the surcharge 

assessment on large banks ended effective October 1, 2018. 

The total amount of small bank assessment credits is $765

million. In each quarter that the reserve ratio is at or above 

1.38 percent, the FDIC will automatically apply a small bank’s 

credits to reduce its regular assessment up to the entire 

amount of the assessment, until credits are exhausted. 

The reserve ratio as of December 31, 2018, is not yet known, 

and it is uncertain whether the fourth quarter reserve ratio 

will be at least 1.38 percent. The year-end 2018 assessment 

receivable and related assessment revenue have not been 

reduced for the potential use of small bank assessment 

credits since it is only reasonably possible the small bank 

credits will be applied against fourth quarter assessments. 

The reserve ratio for December 31, 2018, will be determined 

before the fourth quarter assessments are billed and 

collected at the end of the first quarter of 2019. If the 

reserve ratio is at least 1.38 percent, then the FDIC expects 

that approximately $305 million in assessment credits will be 

applied against the first quarter collection in 2019, with an 

equal reduction to revenue at that time.

If the reserve ratio falls below 1.35 percent in the future, the 

FDIC would again establish and implement a restoration 

plan; however, under the FDI Act, the FDIC would have 8 

years to restore the reserve ratio to the 1.35 percent 

minimum, and possibly longer if the Board finds that 

extraordinary circumstances warrant a longer time period [12 

U.S.C. 1817(b)(3)(E)]. The FDIC must also establish and 

implement a restoration plan if the FDIC determines the 

DIF’s reserve ratio will, within 6 months of such 

determination, fall below 1.35 percent [12 U.S.C. 

1817(b)(3)(E)(i)].

ASSESSMENT REVENUE

Annual assessment rates averaged approximately 7.2 cents 

per $100 of the assessment base through September 30, 

2018. Annual assessment rates averaged approximately 3.5

cents per $100 for the fourth quarter of 2018, reflecting the 

end of surcharges on larger institutions beginning October 

1, 2018. Annual assessment rates averaged approximately 

7.2 cents per $100 of the assessment base during 2017. The 

assessment base is generally defined as average 

consolidated total assets minus average tangible equity 

(measured as Tier 1 capital) of an IDI during the assessment 

period.

The “Assessments receivable” line item on the Balance Sheet 

of $1.4 billion and $2.6 billion represents the estimated 

premiums due from IDIs for the fourth quarter of 2018 and 

2017, respectively. The actual deposit insurance assessments 

for the fourth quarter of 2018 will be billed and collected at 

the end of the first quarter of 2019. During 2018 and 2017, 

$9.5 billion and $10.6 billion, respectively, were recognized 

as assessment revenue from institutions, including $3.8

billion and $4.9 billion in surcharges from large IDIs in 2018

and 2017, respectively. In total, surcharges of $11.2 billion 

were collected over nine quarters.

PENDING LITIGATION FOR UNDERPAID ASSESSMENTS

On January 9, 2017, the FDIC filed suit in the United States 

District Court for the District of Columbia (and amended this 

complaint on April 7, 2017), alleging that Bank of America, 

N.A. (BoA) underpaid its insurance assessments for multiple 

quarters based on the underreporting of counterparty 

exposures. In total, the FDIC alleges that BoA underpaid 

insurance assessments by $1.12 billion, including interest for 

the quarters ending March 2012 through December 2014. 

The FDIC invoiced BoA for $542 million and $583 million 

representing claims in the initial suit and the amended 

complaint, respectively. BoA has failed to pay these past due 

amounts. Pending resolution of this matter, BoA has fully 

pledged security with a third-party custodian pursuant to a 
FINANCIAL SECTION

ANNUAL REPORT 

108

DEPOSIT INSURANCE FUND

10

security agreement with the FDIC. As of December 31, 2018, 

the total amount of unpaid assessments (including accrued 

interest) was $1.16 billion. For the years ending December 

31, 2018 and 2017, the impact of this litigation is not 

reflected in the financial statements of the DIF.

RESERVE RATIO

As of September 30, 2018 and December 31, 2017, the DIF 

reserve ratio was 1.36 percent and 1.30 percent, respectively.

ASSESSMENTS RELATED TO FICO

Assessments are levied on institutions for payments of the 

interest on bond obligations issued by the Financing 

Corporation (FICO). The final FICO assessment is estimated 

to be collected in March 2019 pursuant to a final rule issued 

in December 2018 by the Federal Housing Finance Agency, 

the agency authorized by Congress to prescribe regulations 

relating to the FICO. The FICO was established as a mixedownership government corporation to function solely as a 

financing vehicle for the former FSLIC. The FICO assessment 

has no financial impact on the DIF and is separate from 

deposit insurance assessments. The FDIC, as administrator 

of the DIF, acts solely as a collection agent for the FICO. 

Interest obligations collected and remitted to the FICO as of 

December 31, 2018 and 2017, were $460 million and $760

million, respectively.

10. Operating Expenses

The “Operating expenses” line item on the Statement of 

Income and Fund Balance consisted of the following 

components (dollars in thousands).

December 31 December 31

2018 2017

Salaries and benefits $ 1,221,138 $ 1,222,793

Outside services 268,693 265,514

Travel 89,443 88,786

Buildings and leased space 86,795 88,465

Software/Hardware maintenance 83,276 77,911

Depreciation of property and equipment 51,316 53,639

Other 26,666 26,362

Subtotal 1,827,327 1,823,470

Less: Expenses billed to resolution entities and others (62,579) (84,075)

Total $ 1,764,748 $ 1,739,395

11. Provision for Insurance Losses

The provision for insurance losses was a negative $563

million for 2018, compared to negative $183 million for

2017. The negative provision for 2018 primarily resulted 

from a $570 million decrease to the estimated losses for 

prior year failures.

As described in Note 4, the estimated recoveries from assets 

held by receiverships and estimated payments related to 

assets sold by receiverships to acquiring institutions under 

shared-loss agreements (SLAs) are used to derive the loss 

allowance on the receivables from resolutions. Summarized 

below are the three primary components that comprise the 

majority of the decrease in estimated losses for prior year 

failures.

• Receivership shared-loss liability cost estimates

decreased $186 million primarily due to lowerthan-anticipated losses on covered assets, 

reductions in shared-loss cost estimates from the 

early termination of SLAs during the year, and 

unanticipated recoveries from SLAs where the 

commercial loss coverage has expired but the 

recovery period remains active.

• Estimated recoveries from residual certificates 

retained by receiverships for structured transactions 

of $172 million were recognized in 2018 as 

uncertainties regarding collection have diminished. 

The likelihood of collection has increased given that 

the majority of the senior notes are at least 92

percent amortized as of year-end 2018 and all are 

projected to be fully paid within one to three years. 

The residual certificates will receive cash from the 

trust once the senior notes have been fully satisfied.

• Receiverships received $130 million of 

unanticipated recoveries from tax refunds, litigation 

settlements, and professional liability claims. These 

recoveries are typically not recognized in the 

allowance for loss estimate until the cash is 

received by receiverships, or collectability is 

assured, since significant uncertainties surround 

their recovery. 
FINANCIAL SECTION

2018

109

 

NOTES TO THE FINANCIAL STATEMENTS

11

12. Employee Benefits

PENSION BENEFITS AND SAVINGS PLANS

Eligible FDIC employees (permanent and term employees 

with appointments exceeding one year) are covered by the 

federal government retirement plans, either the Civil Service 

Retirement System (CSRS) or the Federal Employees 

Retirement System (FERS). Although the DIF contributes a 

portion of pension benefits for eligible employees, it does 

not account for the assets of either retirement system. The 

DIF also does not have actuarial data for accumulated plan 

benefits or the unfunded liability relative to eligible 

employees. These amounts are reported on and accounted 

for by the U.S. Office of Personnel Management (OPM).

Under the Federal Thrift Savings Plan (TSP), the FDIC 

provides FERS employees with an automatic contribution of 

1 percent of pay and an additional matching contribution up 

to 4 percent of pay. CSRS employees also can contribute to 

the TSP, but they do not receive agency matching 

contributions. Eligible FDIC employees may also participate 

in an FDIC-sponsored tax-deferred 401(k) savings plan with

an automatic contribution of 1 percent of pay and an 

additional matching contribution up to 4 percent of pay. 

The expenses for these plans are presented in the table 

below (dollars in thousands).

December 31 December 31

2018 2017

Civil Service Retirement System $ 2,089 $ 2,644

Federal Employees Retirement System (Basic Benefit) 111,926 111,228

Federal Thrift Savings Plan 35,564 35,180

FDIC Savings Plan 39,466 39,004

Total $ 189,045 $ 188,056

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The DIF has no postretirement health insurance liability since 

all eligible retirees are covered by the Federal Employees 

Health Benefits (FEHB) program. The FEHB is administered 

and accounted for by the OPM. In addition, OPM pays the 

employer share of the retiree’s health insurance premiums.

The FDIC provides certain life and dental insurance coverage 

for its eligible retirees, the retirees’ beneficiaries, and 

covered dependents. Retirees eligible for life and dental 

insurance coverage are those who have qualified due to (1) 

immediate enrollment upon appointment or five years of 

participation in the plan and (2) eligibility for an immediate 

annuity. The life insurance program provides basic coverage 

at no cost to retirees and allows converting optional 

coverage to direct-pay plans. For the dental coverage, 

retirees are responsible for a portion of the premium.

The FDIC has elected not to fund the postretirement life and 

dental benefit liabilities. As a result, the DIF recognized the 

underfunded status (the difference between the 

accumulated postretirement benefit obligation and the plan 

assets at fair value) as a liability. Since there are no plan 

assets, the plan’s benefit liability is equal to the accumulated 

postretirement benefit obligation. 

Postretirement benefit obligation, gain and loss, and 

expense information included in the Balance Sheet and 

Statement of Income and Fund Balance are summarized as 

follows (dollars in thousands).

December 31 December 31

2018 2017

Accumulated postretirement benefit obligation 

recognized in Postretirement benefit liability $ 235,935 $ 259,316

Amounts recognized in accumulated other 

comprehensive income: Unrealized postretirement 

benefit (loss)

Cumulative net actuarial loss $ (13,155) $ (44,630)

Prior service cost (385) (960)

 Total $ (13,540) $ (45,590)

Amounts recognized in other comprehensive income: 

Unrealized postretirement benefit gain (loss)

Actuarial gain (loss) $ 31,475 $ (20,418)

Prior service credit 575 575

 Total $ 32,050 $ (19,843)

Net periodic benefit costs recognized in Operating 

expenses

 Service cost $ 4,625 $ 4,098

 Interest cost 9,334 9,241

 Net amortization out of other comprehensive

 income 2,064 654

 Total $ 16,023 $ 13,993

Expected amortization of accumulated other comprehensive 

income into net periodic benefit cost over the next year is 

shown in the table below (dollars in thousands). 

December 31, 2019

Prior service costs $ 385

Net actuarial loss 0

Total $ 385
FINANCIAL SECTION

ANNUAL REPORT 

110

DEPOSIT INSURANCE FUND

12

The annual postretirement contributions and benefits paid 

are included in the table below (dollars in thousands).

December 31 December 31

2018 2017

Employer contributions $ 7,354 $ 6,720

Plan participants' contributions $ 846 $ 788

Benefits paid $ (8,200) $ (7,508)

The expected contributions for the year ending December 

31, 2019, are $9 million. Expected future benefit payments 

for each of the next 10 years are presented in the following 

table (dollars in thousands).

2019 2020 2021 2022 2023 2024-2028

$7,885 $8,448 $9,004 $9,575 $10,164 $59,735

Assumptions used to determine the amount of the 

accumulated postretirement benefit obligation and the net 

periodic benefit costs are summarized as follows.

December 31 December 31

2018 2017

Discount rate for future benefits (benefit obligation) 4.81% 4.03%

Rate of compensation increase 3.49% 3.44%

Discount rate (benefit cost) 4.03% 4.67%

Dental health care cost-trend rate

 Assumed for next year 3.80% 4.00%

 Ultimate 3.80% 4.00%

 Year rate will reach ultimate 2019 2018

13. Commitments and Off-Balance-Sheet Exposure

COMMITMENTS:

Leased Space

The DIF leased space expense totaled $44 million for 2018

and 2017. The FDIC’s lease commitments total $127 million 

for future years. The lease agreements contain escalation 

clauses resulting in adjustments, usually on an annual basis. 

Future minimum lease commitments are as follows (dollars 

in thousands).

2019 2020 2021 2022 2023 2024/Thereafter

$42,835 $29,795 $21,580 $11,816 $10,115 $10,432

OFF-BALANCE-SHEET EXPOSURE:

Deposit Insurance

Estimates of insured deposits are derived primarily from 

quarterly financial data submitted by IDIs to the FDIC and 

represent the accounting loss that would be realized if all 

IDIs were to fail and the acquired assets provided no 

recoveries. As of September 30, 2018 and December 31, 

2017, estimated insured deposits for the DIF were $7.4

trillion and $7.2 trillion, respectively.

14. Fair Value of Financial Instruments

Financial assets recognized and measured at fair value on a 

recurring basis at each reporting date include cash 

equivalents (see Note 2) and the investment in U.S. Treasury 

securities (see Note 3). Other financial assets and liabilities,

measured at amortized cost, are the receivables from 

resolutions, assessments receivable, interest receivable on 

investments, other short-term receivables, and accounts 

payable and other liabilities. The DIF’s financial assets 

measured at fair value consisted of the following 

components (dollars in millions).

December 31, 2018 Quoted Prices in

Active Markets for Significant Other Significant

Identical Assets Observable Inputs Unobservable Inputs Total Assets

(Level 1) (Level 2) (Level 3) at Fair Value

Assets

 Cash equivalents1 $ 5,739 $ 5,739

Available-for-Sale Debt Securities

 Investment in U.S. Treasury securities2 92,708 92,708

Total Assets $ 98,447 $ 0 $ 0 $ 98,447

(1) Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued 

at prevailing interest rates established by the Treasury’s Bureau of the Fiscal Service.

(2) The investment in U.S. Treasury securities is measured based on prevailing market yields 

for federal government entities.

December 31, 2017 Quoted Prices in

Active Markets for Significant Other Significant

Identical Assets Observable Inputs Unobservable Inputs Total Assets

(Level 1) (Level 2) (Level 3) at Fair Value

Assets

 Cash equivalents1 $ 1,820 $ 1,820

Available-for-Sale Debt Securities

 Investment in U.S. Treasury securities2 83,303 83,303

Total Assets $ 85,123 $ 0 $ 0 $ 85,123

(1) Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued 

at prevailing interest rates established by the Treasury’s Bureau of the Fiscal Service.

(2) The investment in U.S. Treasury securities is measured based on prevailing market yields 

for federal government entities.
FINANCIAL SECTION

2018

111

 

NOTES TO THE FINANCIAL STATEMENTS

13

15. Information Relating to the Statement of Cash Flows

The following table presents a reconciliation of net income 

to net cash from operating activities (dollars in thousands).

December 31 December 31

2018 2017

Operating Activities

Net Income: $ 9,965,566 $ 10,105,456

Adjustments to reconcile net income to net cash provided

 by operating activities:

Amortization of U.S. Treasury securities 246,725 543,445

Treasury Inflation-Protected Securities inflation adjustment (2,980) (8,564)

Depreciation on property and equipment 51,316 53,639

(Gain) loss on retirement of property and equipment (524) 386

Provision for insurance losses (562,622) (183,149)

Unrealized gain (loss) on postretirement benefits 32,050 (19,843)

Change in Assets and Liabilities:

 Decrease in assessments receivable 1,258,045 31,881

 (Increase) Decrease in interest receivable and other assets (43,889) 21,171

 Decrease in receivables from resolutions 3,493,375 1,620,258

 (Decrease) in accounts payable and other liabilities (38,899) (1,352)

 (Decrease) Increase in postretirement benefit liability (23,381) 27,116

 (Decrease) Increase in contingent liabilities - 

guarantee payments and litigation losses (904) 31,927

 (Decrease) in liabilities due to resolutions (598,484) (870,115)

Net Cash Provided by Operating Activities $ 13,775,394 $ 11,352,256

16. Subsequent Events

Subsequent events have been evaluated through February 7, 

2019, the date the financial statements are available to be 

issued. Based on management’s evaluation, there were no 

subsequent events requiring disclosure.
FINANCIAL SECTION

ANNUAL REPORT 

112

FSLIC RESOLUTION FUND (FRF)

Federal Deposit Insurance Corporation

FSLIC Resolution Fund Balance Sheet 

As of December 31

(Dollars in Thousands) 2018 2017

ASSETS

 Cash and cash equivalents $ 901,562 $ 885,380

 Other assets, net 746 497

Total Assets $ 902,308 $ 885,877

LIABILITIES

 Accounts payable and other liabilities $ 9 $ 92

Total Liabilities 9 92

RESOLUTION EQUITY (NOTE 5)

 Contributed capital 125,489,317 125,489,317

 Accumulated deficit (124,587,018) (124,603,532)

Total Resolution Equity 902,299 885,785

Total Liabilities and Resolution Equity $ 902,308 $ 885,877

The accompanying notes are an integral part of these financial statements.
FINANCIAL SECTION

2018

113

FSLIC RESOLUTION FUND (FRF)

Federal Deposit Insurance Corporation

FSLIC Resolution Fund Statement of Income and Accumulated Deficit

For the Years Ended December 31

(Dollars in Thousands) 2018 2017

REVENUE

 Interest on U.S. Treasury securities $ 15,818 $ 7,065

 Other revenue 808 764

Total Revenue 16,626 7,829

EXPENSES AND LOSSES

 Operating expenses 425 562

 Losses related to thrift resolutions (Note 6) (313) 21

Total Expenses and Losses 112 583

Net Income 16,514 7,246

Accumulated Deficit - Beginning (124,603,532) (124,610,778)

Accumulated Deficit - Ending $ (124,587,018) $ (124,603,532)

 

The accompanying notes are an integral part of these financial statements.
FINANCIAL SECTION

ANNUAL REPORT 

114

FSLIC RESOLUTION FUND (FRF)

Federal Deposit Insurance Corporation

FSLIC Resolution Fund Statement of Cash Flows

For the Years Ended December 31

(Dollars in Thousands) 2018 2017

OPERATING ACTIVITIES

Provided by:

Interest on U.S. Treasury securities $ 15,818 $ 7,065

Recovery of tax benefits 0 3,750

Recoveries from thrift resolutions 832 1,001

Miscellaneous receipts 3 4

Used by:

Operating expenses (452) (555)

Miscellaneous disbursements (19) (59)

Net Cash Provided by Operating Activities 16,182 11,206

Net Increase in Cash and Cash Equivalents 16,182 11,206

Cash and Cash Equivalents - Beginning 885,380 874,174

Cash and Cash Equivalents - Ending $ 901,562 $ 885,380

The accompanying notes are an integral part of these financial statements.
FINANCIAL SECTION

2018

115

FSLIC RESOLUTION FUND

NOTES TO THE FINANCIAL STATEMENTS

December 31, 2018 and 2017

1

1. Operations/Dissolution of the FSLIC Resolution Fund

OVERVIEW

The Federal Deposit Insurance Corporation (FDIC) is the 

independent deposit insurance agency created by Congress 

in 1933 to maintain stability and public confidence in the 

nation’s banking system. Provisions that govern the FDIC’s 

operations are generally found in the Federal Deposit 

Insurance (FDI) Act, as amended (12 U.S.C. 1811, et seq). In 

accordance with the FDI Act, the FDIC, as administrator of 

the Deposit Insurance Fund (DIF), insures the deposits of 

banks and savings associations (insured depository 

institutions). In cooperation with other federal and state 

agencies, the FDIC promotes the safety and soundness of 

insured depository institutions (IDIs) by identifying, 

monitoring, and addressing risks to the DIF.

In addition to being the administrator of the DIF, the FDIC is 

the administrator of the FSLIC Resolution Fund (FRF). As 

such, the FDIC is responsible for the sale of remaining assets 

and satisfaction of liabilities associated with the former 

Federal Savings and Loan Insurance Corporation (FSLIC) and 

the former Resolution Trust Corporation (RTC). The FDIC 

maintains the DIF and the FRF separately to support their 

respective functions.

The FSLIC was created through the enactment of the 

National Housing Act of 1934. The Financial Institutions 

Reform, Recovery, and Enforcement Act of 1989 (FIRREA) 

abolished the insolvent FSLIC and created the FRF. At that 

time, the assets and liabilities of the FSLIC were transferred 

to the FRF – except those assets and liabilities transferred to 

the newly created RTC – effective on August 9, 1989. 

Further, the FIRREA established the Resolution Funding 

Corporation (REFCORP) to provide part of the initial funds 

used by the RTC for thrift resolutions by authorizing 

REFCORP to issue debt obligations. The REFCORP issued 

debt obligations in the form of long-term bonds ranging in 

maturity from 2019 to 2030.

The RTC Completion Act of 1993 terminated the RTC as of 

December 31, 1995. All remaining assets and liabilities of 

the RTC were transferred to the FRF on January 1, 1996. 

Today, the FRF consists of two distinct pools of assets and 

liabilities: one composed of the assets and liabilities of the 

FSLIC transferred to the FRF upon the dissolution of the 

FSLIC (FRF-FSLIC), and the other composed of the RTC assets 

and liabilities (FRF-RTC). The assets of one pool are not 

available to satisfy obligations of the other.

OPERATIONS/DISSOLUTION OF THE FRF

The FRF will continue operations until all of its assets are 

sold or otherwise liquidated and all of its liabilities are 

satisfied. Any funds remaining in the FRF-FSLIC will be paid 

to the U.S. Treasury. Any remaining funds of the FRF-RTC 

will be distributed to the REFCORP to pay interest on the 

REFCORP bonds. In addition, the FRF-FSLIC has available 

until expended $602 million in appropriations to facilitate, if 

required, efforts to wind up the resolution activity of the 

FRF-FSLIC. 

The FDIC has extensively reviewed and cataloged the FRF's 

remaining assets and liabilities. Some of the unresolved 

issues are:

• criminal restitution orders (generally have from 1 to 

21 years remaining to enforce);

• collections of judgments obtained against officers 

and directors and other professionals responsible 

for causing or contributing to thrift losses 

(generally have up to 10 years remaining to 

enforce, unless the judgments are renewed or are 

covered by the Federal Debt Collections Procedures 

Act, which will result in significantly longer periods 

for collection of some judgments);

• liquidation/disposition of residual assets purchased 

by the FRF from terminated receiverships;

• one remaining issue related to assistance 

agreements entered into by the former FSLIC (FRF 

could continue to receive or refund overpayments 

of tax benefits sharing in future years);

• a potential tax liability associated with a fully 

adjudicated goodwill litigation case (see Note 3);

and

• Affordable Housing Disposition Program 

monitoring (the last agreement expires no later 

than 2045; see Note 4). 

The FRF could realize recoveries from tax benefits sharing, 

criminal restitution orders, and professional liability claims. 

However, any potential recoveries are not reflected in the 

FRF’s financial statements, given the significant uncertainties 

surrounding the ultimate outcome.
FINANCIAL SECTION

ANNUAL REPORT 

116

FSLIC RESOLUTION FUND

2

On April 1, 2014, the FDIC concluded its role as receiver, on 

behalf of the FRF, when the last active receivership was 

terminated. In total, 850 receiverships were liquidated by 

the FRF and the RTC. To facilitate receivership terminations, 

the FRF, in its corporate capacity, acquired the remaining 

receivership assets that could not be liquidated during the 

life of the receiverships due to restrictive clauses and other 

impediments. These assets are included in the “Other assets, 

net” line item on the Balance Sheet.

During the years of receivership activity, the assets held by 

receivership entities, and the claims against them, were 

accounted for separately from the FRF’s assets and liabilities 

to ensure that receivership proceeds were distributed in 

accordance with applicable laws and regulations. Also, the 

income and expenses attributable to receiverships were 

accounted for as transactions of those receiverships. The 

FDIC, as administrator of the FRF, billed receiverships for 

services provided on their behalf.

2. Summary of Significant Accounting Policies

GENERAL

The financial statements include the financial position, 

results of operations, and cash flows of the FRF and are 

presented in accordance with U.S. generally accepted 

accounting principles (GAAP). During the years of 

receivership activity, these statements did not include 

reporting for assets and liabilities of receivership entities 

because these entities were legally separate and distinct, and 

the FRF did not have any ownership or beneficial interest in 

them.

The FRF is a limited-life entity, however, it does not meet the 

requirements for presenting financial statements using the 

liquidation basis of accounting. According to Accounting 

Standards Codification Topic 205, Presentation of Financial 

Statements, a limited-life entity should apply the liquidation 

basis of accounting only if a change in the entity’s governing 

plan has occurred since its inception. By statute, the FRF is a 

limited-life entity whose dissolution will occur upon the 

satisfaction of all liabilities and the disposition of all 

assets. No changes to this statutory plan have occurred 

since inception of the FRF.

USE OF ESTIMATES

The preparation of the financial statements in conformity 

with GAAP requires management to make estimates and 

assumptions that affect the reported amounts of assets and 

liabilities, revenue and expenses, and disclosure of 

contingent liabilities. Actual results could differ from these 

estimates. Where it is reasonably possible that changes in 

estimates will cause a material change in the financial 

statements in the near term, the nature and extent of such 

potential changes in estimates have been disclosed. The 

estimates for other assets, goodwill litigation, and 

guarantees are considered significant.

CASH EQUIVALENTS

Cash equivalents are short-term, highly liquid investments 

consisting primarily of U.S. Treasury Overnight Certificates.

RELATED PARTIES

The nature of related parties and a description of related 

party transactions are discussed in Note 1 and disclosed 

throughout the financial statements and footnotes.

APPLICATION OF RECENT ACCOUNTING STANDARDS

Recent accounting pronouncements have been deemed not 

applicable or material to the financial statements as 

presented.

3. Goodwill Litigation

In United States v. Winstar Corp., 518 U.S. 839 (1996), the 

Supreme Court held that when it became impossible 

following the enactment of FIRREA in 1989 for the federal 

government to perform certain agreements to count 

goodwill toward regulatory capital, the plaintiffs were 

entitled to recover damages from the United States. The

contingent liability associated with the nonperformance of 

these agreements was transferred to the FRF on August 9, 

1989, upon the dissolution of the FSLIC.

The FRF can draw from an appropriation provided by Section 

110 of the Department of Justice Appropriations Act, 2000 

(Public Law 106-113, Appendix A, Title I, 113 Stat. 1501A-3, 

1501A-20), such sums as may be necessary for the payment 

of judgments and compromise settlements in the goodwill 

litigation. This appropriation is to remain available until 

expended. Because an appropriation is available to pay such 

judgments and settlements, any estimated liability for 

goodwill litigation will have a corresponding receivable from 

the U.S. Treasury and therefore have no net impact on the 

financial condition of the FRF. 

The last remaining goodwill case was resolved in 2015.

However, for another case fully adjudicated in 2012, an 

estimated loss of $5 million as of December 31, 2018, 

compared to $8 million as of year-end 2017, for the courtordered reimbursement of potential tax liabilities to the 

plaintiff is reasonably possible.
FINANCIAL SECTION

2018

117

 

 

NOTES TO THE FINANCIAL STATEMENTS

3

The FRF-FSLIC paid goodwill litigation expenses incurred by 

the Department of Justice (DOJ), the entity that defended 

these lawsuits against the United States, based on a 

Memorandum of Understanding (MOU) dated October 2, 

1998, between the FDIC and the DOJ. These expenses were 

paid in advance by the FRF-FSLIC and any unused funds 

were carried over by the DOJ and applied toward the next 

fiscal year charges. The DOJ has returned all unused funds 

except for $250 thousand retained to cover future 

administrative expenses. 

4. Guarantees

FANNIE MAE GUARANTEE

On May 21, 2012, the FDIC, in its capacity as administrator of 

the FRF, entered into an agreement with Fannie Mae for the 

release of $13 million of credit enhancement reserves to the 

FRF in exchange for indemnifying Fannie Mae from all future 

losses incurred on 76 multi-family mortgage loans. The 

former RTC had previously supplied Fannie Mae with the 

credit enhancement reserves to cover future losses on these 

mortgage loans through 2020. Based on the most current 

data available, as of September 30, 2018, the maximum 

exposure on this indemnification is the current unpaid 

principal balance of the remaining 9 multi-family loans 

totaling $288 thousand. Based on a contingent liability 

assessment of this portfolio as of September 30, 2018, the 

majority of the loans are at least 94 percent amortized, and

all are scheduled to mature within one to two years. Since 

all of the loans are performing and no losses have occurred 

since 2001, future payments on this indemnification are not 

expected. No contingent liability for this indemnification has 

been recorded as of December 31, 2018 and 2017.

AFFORDABLE HOUSING DISPOSITION PROGRAM

Required by FIRREA under section 501, the Affordable 

Housing Disposition Program (AHDP) was established in 

1989 to ensure the preservation of affordable housing for 

low-income households. The FDIC, in its capacity as 

administrator of the FRF-RTC, assumed responsibility for 

monitoring property owner compliance with land use 

restriction agreements (LURAs). To enforce the property 

owners’ LURA obligation, the RTC, prior to its dissolution, 

entered into Memoranda of Understanding with 34

monitoring agencies to oversee these LURAs. As of 

December 31, 2018, 24 monitoring agencies oversee these 

LURAs. The FDIC, through the FRF, has agreed to indemnify 

the monitoring agencies for all losses related to LURA legal 

enforcement proceedings. 

Since 2006, the FDIC entered into two litigations against 

property owners and paid $23 thousand in legal expenses, 

which was fully reimbursed due to successful litigation. The 

maximum potential exposure to the FRF cannot be 

estimated as it is contingent upon future legal proceedings. 

However, loss mitigation factors include: (1) the 

indemnification may become void if the FDIC is not 

immediately informed upon receiving notice of any legal 

proceedings and (2) the FDIC is entitled to reimbursement of 

any legal expenses incurred for successful litigation against a 

property owner. AHDP guarantees will continue until the 

termination of the last LURA, or 2045 (whichever occurs first). 

As of December 31, 2018 and 2017, no contingent liability 

for this indemnification has been recorded. 

5. Resolution Equity

As stated in the Overview section of Note 1, the FRF is 

composed of two distinct pools: the FRF-FSLIC and the FRFRTC. The FRF-FSLIC consists of the assets and liabilities of 

the former FSLIC. The FRF-RTC consists of the assets and 

liabilities of the former RTC. Pursuant to legal restrictions, 

the two pools are maintained separately and the assets of 

one pool are not available to satisfy obligations of the other.

Contributed capital, accumulated deficit, and resolution 

equity consisted of the following components by each pool 

(dollars in thousands).

December 31, 2018

FRF-FSLIC FRF-RTC

FRF 

Consolidated

Contributed capital - 

beginning $ 43,864,980 $ 81,624,337 $ 125,489,317

Contributed capital - 

ending 43,864,980 81,624,337 125,489,317

Accumulated deficit (43,006,464) (81,580,554) (124,587,018)

Total Resolution 

Equity $ 858,516 $ 43,783 $ 902,299

December 31, 2017

FRF-FSLIC FRF-RTC

FRF 

Consolidated

Contributed capital - 

beginning $ 43,864,980 $ 81,624,337 $ 125,489,317

Contributed capital - 

ending 43,864,980 81,624,337 125,489,317

Accumulated deficit (43,022,301) (81,581,231) (124,603,532)

Total Resolution 

Equity $ 842,679 $ 43,106 $ 885,785
FINANCIAL SECTION

ANNUAL REPORT 

118

FSLIC RESOLUTION FUND

4

CONTRIBUTED CAPITAL

The FRF-FSLIC and the former RTC received $43.5 billion and 

$60.1 billion from the U.S. Treasury, respectively, to fund 

losses from thrift resolutions prior to July 1, 1995. 

Additionally, the FRF-FSLIC issued $670 million in capital 

certificates to the Financing Corporation (a mixed-ownership 

government corporation established to function solely as a 

financing vehicle for the FSLIC) and the RTC issued $31.3 

billion of these instruments to the REFCORP. FIRREA 

prohibited the payment of dividends on any of these capital 

certificates. Through December 31, 2018, the FRF-FSLIC

received a total of $2.3 billion in goodwill appropriations, the 

effect of which increased contributed capital.

 

Through December 31, 2018, the FRF-RTC had returned $4.6

billion to the U.S. Treasury and made payments of $5.1

billion to the REFCORP. The most recent payment to the 

REFCORP was in July of 2013 for $125 million. In addition, 

the FDIC returned $2.6 billion to the U.S. Treasury on behalf 

of the FRF-FSLIC in 2013. These actions reduced contributed 

capital.

ACCUMULATED DEFICIT

The accumulated deficit represents the cumulative excess of 

expenses and losses over revenue for activity related to the 

FRF-FSLIC and the FRF-RTC. Approximately $29.8 billion and 

$87.9 billion were brought forward from the former FSLIC 

and the former RTC on August 9, 1989, and January 1, 1996, 

respectively. Since the dissolution dates, the FRF-FSLIC 

accumulated deficit increased by $13.2 billion, whereas the 

FRF-RTC accumulated deficit decreased by $6.3 billion.

6. Losses Related to Thrift Resolutions

Losses related to thrift resolutions represent changes in the 

estimated losses on assets acquired from terminated 

receiverships, as well as expenses for the disposition and 

administration of these assets. These losses were negative 

$313 thousand for 2018, compared to a positive $21 

thousand for 2017.

7. Fair Value of Financial Instruments

At December 31, 2018 and 2017, the FRF’s financial assets 

measured at fair value on a recurring basis are cash 

equivalents (see Note 2) of $857 million and $842 million, 

respectively. Cash equivalents are Special U.S. Treasury 

Certificates with overnight maturities valued at prevailing 

interest rates established by the U.S. Treasury’s Bureau of the 

Fiscal Service. The valuation is considered a Level 1 

measurement in the fair value hierarchy, representing 

quoted prices in active markets for identical assets.

8. Information Relating to the Statement of Cash Flows

The following table presents a reconciliation of net income

to net cash from operating activities (dollars in thousands).

December 31 December 31

2018 2017

Operating Activities

Net Income: $ 16,514 $ 7,246

Change in Assets and 

Liabilities:

(Increase) Decrease in 

other assets (249) 3,894

(Decrease) Increase in 

accounts payable and 

other liabilities (83) 66

Net Cash Provided by 

Operating Activities $ 16,182 $ 11,206

9. Subsequent Events

Subsequent events have been evaluated through February 7, 

2019, the date the financial statements are available to be 

issued. Based on management’s evaluation, there were no 

subsequent events requiring disclosure. 
FINANCIAL SECTION

2018

119

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT

441 G St. N.W. 

Washington, DC 20548 

Independent Auditor’s Report 

To the Board of Directors 

The Federal Deposit Insurance Corporation 

In our audits of the 2018 and 2017 financial statements of the Deposit Insurance Fund (DIF) and 

of the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund (FRF), both of 

which are administered by the Federal Deposit Insurance Corporation (FDIC),1

 we found 

• the financial statements of the DIF and of the FRF as of and for the years ended 

December 31, 2018, and 2017, are presented fairly, in all material respects, in accordance 

with U.S. generally accepted accounting principles; 

• FDIC maintained, in all material respects, effective internal control over financial reporting 

relevant to the DIF and to the FRF as of December 31, 2018; and 

• with respect to the DIF and to the FRF, no reportable noncompliance for 2018 with 

provisions of applicable laws, regulations, contracts, and grant agreements we tested. 

The following sections discuss in more detail (1) our report on the financial statements and on 

internal control over financial reporting and other information included with the financial 

statements;2

 (2) our report on compliance with laws, regulations, contracts, and grant 

agreements; and (3) agency comments. 

Report on the Financial Statements and on Internal Control over Financial Reporting 

In accordance with Section 17 of the Federal Deposit Insurance Act, as amended,3

 and the 

Government Corporation Control Act,4

 we have audited the financial statements of the DIF and 

of the FRF, both of which are administered by FDIC. The financial statements for the DIF 

comprise the balance sheets as of December 31, 2018, and 2017; the related statements of 

income and fund balance and of cash flows for the years then ended; and the related notes to 

the financial statements. The financial statements for the FRF comprise the balance sheets as 

of December 31, 2018, and 2017; the related statements of income and accumulated deficit and 

of cash flows for the years then ended; and the related notes to the financial statements. We 

also have audited FDIC’s internal control over financial reporting relevant to the DIF and to the 

FRF as of December 31, 2018, based on criteria established under 31 U.S.C. § 3512(c), (d), 

commonly known as the Federal Managers’ Financial Integrity Act (FMFIA). 

 

1

A third fund managed by FDIC, the Orderly Liquidation Fund, established by Section 210(n) of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376, 1506 (July 21, 2010), is unfunded 

and did not have any transactions from its inception in 2010 through 2018. 

2

Other information consists of information included with the financial statements, other than the auditor’s report. 

3

Act of September 21, 1950, Pub. L. No. 797, § 2[17], 64 Stat. 873, 890, classified as amended at 12 U.S.C. § 1827. 

4

31 U.S.C. §§ 9101-9110. 
FINANCIAL SECTION

ANNUAL REPORT 

120

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued)

We conducted our audits in accordance with U.S. generally accepted government auditing 

standards. We believe that the audit evidence we obtained is sufficient and appropriate to 

provide a basis for our audit opinions. 

Management’s Responsibility 

FDIC management is responsible for (1) the preparation and fair presentation of these financial 

statements in accordance with U.S. generally accepted accounting principles; (2) preparing and 

presenting other information included in documents containing the audited financial statements 

and auditor’s report, and ensuring the consistency of that information with the audited financial 

statements; (3) maintaining effective internal control over financial reporting, including the 

design, implementation, and maintenance of internal control relevant to the preparation and fair 

presentation of financial statements that are free from material misstatement, whether due to 

fraud or error; (4) evaluating the effectiveness of internal control over financial reporting based 

on the criteria established under FMFIA; and (5) its assessment about the effectiveness of 

internal control over financial reporting as of December 31, 2018, included in the accompanying 

Management’s Report on Internal Control over Financial Reporting in appendix I. 

Auditor’s Responsibility 

Our responsibility is to express opinions on these financial statements and opinions on FDIC’s 

internal control over financial reporting relevant to the DIF and to the FRF based on our audits. 

U.S. generally accepted government auditing standards require that we plan and perform the 

audits to obtain reasonable assurance about whether the financial statements are free from 

material misstatement, and whether effective internal control over financial reporting was 

maintained in all material respects. We are also responsible for applying certain limited 

procedures to other information included with the financial statements. 

An audit of financial statements involves performing procedures to obtain audit evidence about 

the amounts and disclosures in the financial statements. The procedures selected depend on 

the auditor’s judgment, including the auditor’s assessment of the risks of material misstatement 

of the financial statements, whether due to fraud or error. In making those risk assessments, the 

auditor considers internal control relevant to the entity’s preparation and fair presentation of the 

financial statements in order to design audit procedures that are appropriate in the 

circumstances. An audit of financial statements also involves evaluating the appropriateness of 

the accounting policies used and the reasonableness of significant accounting estimates made 

by management, as well as evaluating the overall presentation of the financial statements. 

An audit of internal control over financial reporting involves performing procedures to obtain 

evidence about whether a material weakness exists.5

 The procedures selected depend on the 

auditor’s judgment, including the assessment of the risk that a material weakness exists. An 

audit of internal control over financial reporting also includes obtaining an understanding of 

internal control over financial reporting, and evaluating and testing the design and operating 

effectiveness of internal control over financial reporting based on the assessed risk. Our audit of 

internal control also considered FDIC’s process for evaluating and reporting on internal control 

 

5

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such 

that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be 

prevented, or detected and corrected, on a timely basis. A deficiency in internal control exists when the design or 

operation of a control does not allow management or employees, in the normal course of performing their assigned 

functions, to prevent, or detect and correct, misstatements on a timely basis. 
FINANCIAL SECTION

2018

121

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued)

over financial reporting based on criteria established under FMFIA. Our audits also included 

performing such other procedures as we considered necessary in the circumstances. 

We did not evaluate all internal controls relevant to operating objectives as broadly established 

under FMFIA, such as those controls relevant to preparing performance information and 

ensuring efficient operations. We limited our internal control testing to testing controls over 

financial reporting. Our internal control testing was for the purpose of expressing an opinion on 

whether effective internal control over financial reporting was maintained, in all material 

respects. Consequently, our audit may not identify all deficiencies in internal control over 

financial reporting that are less severe than a material weakness. 

Definition and Inherent Limitations of Internal Control over Financial Reporting 

An entity’s internal control over financial reporting is a process effected by those charged with 

governance, management, and other personnel, the objectives of which are to provide 

reasonable assurance that (1) transactions are properly recorded, processed, and summarized 

to permit the preparation of financial statements in accordance with U.S. generally accepted 

accounting principles, and assets are safeguarded against loss from unauthorized acquisition, 

use, or disposition, and (2) transactions are executed in accordance with provisions of 

applicable laws, regulations, contracts, and grant agreements, noncompliance with which could 

have a material effect on the financial statements. 

Because of its inherent limitations, internal control over financial reporting may not prevent, or 

detect and correct, misstatements due to fraud or error. We also caution that projecting any 

evaluation of effectiveness to future periods is subject to the risk that controls may become 

inadequate because of changes in conditions, or that the degree of compliance with the policies 

or procedures may deteriorate. 

Opinions on Financial Statements 

In our opinion, 

• the DIF’s financial statements present fairly, in all material respects, the DIF’s financial 

position as of December 31, 2018, and 2017, and the results of its operations and its cash 

flows for the years then ended, in accordance with U.S. generally accepted accounting 

principles, and 

• the FRF’s financial statements present fairly, in all material respects, the FRF’s financial 

position as of December 31, 2018, and 2017, and the results of its operations and its cash 

flows for the years then ended, in accordance with U.S. generally accepted accounting 

principles. 

Opinions on Internal Control over Financial Reporting 

In our opinion, 

• FDIC maintained, in all material respects, effective internal control over financial reporting 

relevant to the DIF as of December 31, 2018, based on criteria established under FMFIA, 

and 

• FDIC maintained, in all material respects, effective internal control over financial reporting 

relevant to the FRF as of December 31, 2018, based on criteria established under FMFIA. 
FINANCIAL SECTION

ANNUAL REPORT 

122

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued)

During our 2018 audit, we identified deficiencies in FDIC’s internal control over financial 

reporting that we do not consider to be material weaknesses or significant deficiencies.6

Nonetheless, these deficiencies warrant FDIC management’s attention. We have communicated 

these matters to FDIC management and, where appropriate, will report on them separately. 

Other Matters 

Other Information 

FDIC’s other information contains a wide range of information, some of which is not directly 

related to the financial statements. This information is presented for purposes of additional 

analysis and is not a required part of the financial statements. We read the other information 

included with the financial statements in order to identify material inconsistencies, if any, with 

the audited financial statements. Our audit was conducted for the purpose of forming opinions 

on the DIF and the FRF financial statements. We did not audit and do not express an opinion or 

provide any assurance on the other information. 

Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements 

In connection with our audits of the financial statements of the DIF and of the FRF, both of 

which are administered by FDIC, we tested compliance with selected provisions of applicable 

laws, regulations, contracts, and grant agreements consistent with our auditor’s responsibility 

discussed below. We caution that noncompliance may occur and not be detected by these 

tests. We performed our tests of compliance in accordance with U.S. generally accepted 

government auditing standards. 

Management’s Responsibility

FDIC management is responsible for complying with applicable laws, regulations, contracts, and 

grant agreements. 

Auditor’s Responsibility 

Our responsibility is to test compliance with selected provisions of applicable laws, regulations, 

contracts, and grant agreements that have a direct effect on the determination of material 

amounts and disclosures in the financial statements of the DIF and of the FRF, and to perform 

certain other limited procedures. Accordingly, we did not test FDIC’s compliance with all 

applicable laws, regulations, contracts, and grant agreements. 

Results of Our Tests for Compliance with Laws, Regulations, Contracts, and Grant Agreements 

Our tests for compliance with selected provisions of applicable laws, regulations, contracts, and 

grant agreements disclosed no instances of noncompliance for 2018 that would be reportable, 

with respect to the DIF and to the FRF, under U.S. generally accepted government auditing 

standards. However, the objective of our tests was not to provide an opinion on compliance with 

applicable laws, regulations, contracts, and grant agreements. Accordingly, we do not express 

such an opinion. 

 

6

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting 

that is less severe than a material weakness, yet important enough to merit attention by those charged with 

governance. 
FINANCIAL SECTION

2018

123

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued)

Intended Purpose of Report on Compliance with Laws, Regulations, Contracts, and Grant 

Agreements 

The purpose of this report is solely to describe the scope of our testing of compliance with 

selected provisions of applicable laws, regulations, contracts, and grant agreements, and the 

results of that testing, and not to provide an opinion on compliance. This report is an integral 

part of an audit performed in accordance with U.S. generally accepted government auditing 

standards in considering compliance. Accordingly, this report on compliance with laws, 

regulations, contracts, and grant agreements is not suitable for any other purpose. 

Agency Comments 

In commenting on a draft of this report, FDIC stated that it was pleased to receive unmodified 

opinions on the DIF’s and the FRF’s financial statements, and noted that we reported that FDIC 

had effective internal control over financial reporting and that there was no reportable 

noncompliance with tested provisions of applicable laws, regulations, contracts, and grant 

agreements. FDIC also stated that it recognizes the important role a strong internal control 

program plays in an agency achieving its mission and that it remains committed to ensuring 

sound financial management remains a top priority. The complete text of FDIC’s response is 

reprinted in appendix II. 

James R. Dalkin 

Director 

Financial Management and Assurance 

February 7, 2019 
FINANCIAL SECTION

ANNUAL REPORT 

124

MANAGEMENT’S REPORT ON INTERNAL CONTROL 

OVER FINANCIAL REPORTING

Appendix I
FINANCIAL SECTION

2018

125

MANAGEMENT’S RESPONSE TO THE AUDITOR’S REPORT

Appendix II
THIS PAGE INTENTIONALLY LEFT BLANK
127 127

RISK MANAGEMENT VI. AND INTERNAL CONTROLS
THIS PAGE INTENTIONALLY LEFT BLANK
2018

RISK MANAGEMENT AND INTERNAL CONTROLS 129

The FDIC uses several means to maintain 

comprehensive internal controls, ensure the overall 

effectiveness and efficiency of operations, and 

otherwise comply as necessary with the following 

federal standards, among others: 

♦ Chief Financial Officers’ Act (CFO Act) 

♦ Federal Managers’ Financial Integrity Act 

(FMFIA) 

♦ Federal Financial Management Improvement Act 

(FFMIA) 

♦ Government Performance and Results Act 

(GPRA) 

♦ Federal Information Security Modernization Act 

of 2014 (FISMA) 

♦ OMB Circular A-123 

♦ GAO’s Standards for Internal Control in the 

Federal Government 

As a foundation for these efforts, the Division of 

Finance, Risk Management and Internal Controls 

Branch (RMIC) oversees a corporate-wide program 

of relevant activities by establishing policies and 

working with management in each division and 

office in the FDIC. The FDIC has made a concerted 

effort to ensure that financial, reputational, and 

operational risks have been identified and that 

corresponding control needs are being incorporated 

into day-to-day operations. The program also requires 

that comprehensive procedures be documented, 

employees be thoroughly trained, and supervisors 

be held accountable for performance and results. 

Compliance monitoring is carried out through 

periodic management reviews and by the distribution 

of various activity reports to all levels of management. 

Conscientious attention is also paid to the 

implementation of audit recommendations made by 

the FDIC Office of Inspector General, the GAO, and 

other providers of external/audit scrutiny. The FDIC 

has received unmodified opinions on its financial 

statement audits for 27 consecutive years, and these 

and other positive results reflect the effectiveness of 

the overall management control program.

In 2018, efforts were focused on enhancing FDIC’s 

Risk Management program (updating the enterprise 

risk management and internal control directive, 

drafting the risk appetite statement, updating the 

risk profile), improving data mining capabilities, 

identifying performance metrics, mapping key 

operational areas, exploring opportunities for process 

improvement, monitoring FDIC’s internal controls 

over outsourced service providers, continuing efforts 

with stakeholders on failed bank data, and system 

security. Considerable energy was devoted to ensuring 

that the FDIC’s processes and systems of control have 

kept pace with the workload, and that the foundation 

of controls throughout the FDIC remained strong. 

During 2019, RMIC will focus on the Corporate 

Enterprise Risk Management Program, Model Risk 

Management validation, enhancing the internal 

control program, exploring opportunities for process 

improvement, monitoring FDIC’s internal controls 

over outsourced service providers, and system security. 

Also, continued emphasis and management scrutiny 

will be applied to the accuracy and integrity of 

transactions and oversight of systems development 

efforts in general.

FRAUD REDUCTION AND 

DATA ANALYTICS ACT OF 2015

The Fraud Reduction and Data Analytics Act of 

2015 was signed into law on June 30, 2016. The law 

is intended to improve federal agency financial and 

administrative controls and procedures to assess and 

mitigate fraud risks, and to improve federal agencies’ 

development and use of data analytics for the purpose 

of identifying, preventing, and responding to fraud, 

including improper payments.

The FDIC’s enterprise risk management and internal 

control program considers the potential for fraud and 

incorporates elements of Principle 8 – Assess Fraud 

Risk, of the GAO Standards of Internal Control in 

the Federal Government. The FDIC implemented 

a Fraud Risk Assessment Framework as a basis 

for identifying potential financial fraud risks and 
RISK MANAGEMENT AND INTERNAL CONTROLS

ANNUAL REPORT 

130

TABLE 2: 

MANAGEMENT REPORT ON FINAL ACTION ON AUDITS WITH RECOMMENDATIONS 

TO PUT FUNDS TO BETTER USE FOR FISCAL YEAR 2018

Dollars in Thousands

(There were no audit reports in this category.)

TABLE 1: 

MANAGEMENT REPORT ON FINAL ACTION ON AUDITS 

WITH DISALLOWED COSTS FOR FISCAL YEAR 2018

Dollars in Thousands

(There were no audit reports in this category.)

schemes, ensuring that preventive and detective 

controls are present and working as intended. 

Examples of fraud risks are contractor payments, 

wire transfers, travel card purchases, and theft of 

cash receipts.

As part of the Framework, potential fraud areas are 

identified and key controls are evaluated/implemented 

as proactive measures to fraud prevention. Although 

no system of internal control provides absolute 

assurance, the FDIC’s system of internal control 

can provide reasonable assurance that key controls 

are adequate and working as intended. Monitoring 

activities include supervisory approvals, management 

reports, and exception reporting.

FDIC management performs due diligence in areas of 

suspected or alleged fraud. At the conclusion of due 

diligence, the matter is either closed or referred 

to the Office of Inspector General for investigation.

During 2018, there was no systemic fraud identified 

within the FDIC.

MANAGEMENT REPORT 

ON FINAL ACTIONS

As required under the provisions of Section 5 (as 

amended) of the Inspector General Act of 1978, the 

FDIC must report information on final action taken 

by management on certain audit reports. The tables 

on the following pages provide information on final 

action taken by management on audit reports for the 

federal fiscal year period October 1, 2017, through 

September 30, 2018.
RISK MANAGEMENT AND INTERNAL CONTROLS

2018

131

TABLE 3: 

AUDIT REPORTS WITHOUT FINAL ACTIONS BUT WITH MANAGEMENT DECISIONS 

OVER ONE YEAR OLD FOR FISCAL YEAR 2018

Report No. and 

Issue Date OIG Audit Finding Management Action Disallowed Costs

AUD-16-001

10/28/2015

The Acting CIO should assess the 

Information Security Manager (ISM) 

Outsourced Information Service 

Provider Assessment Methodology 

processes supporting information service 

provider assessments to determine and 

implement any needed improvements to 

ensure timely completion of assessments.

The FDIC needs additional time to 

bring the 22 remaining contracts into 

compliance consistent with recently 

developed transition and action plans.

Due Date: 4/30/2019

$0

EVAL-17-004

2/14/2017

The Director, RMS should continue to 

communicate to Financial Institutions 

(FIs) the importance of: fully 

considering and assessing the risks that 

Technology Service Providers (TSPs) 

could have on the FI’s ability to manage 

its own business continuity and incident 

response planning efforts; ensuring that 

contracts with TSPs include specific 

provisions that address FI-identified 

risks, protect FI interests, and provide 

details necessary to allow FIs to manage 

their own business continuity planning 

and incident response and reporting 

efforts through TSP operations; and 

clearly defining key contract terms that 

would be important in understanding 

FI and TSP rights and responsibilities 

in the event of a business disruption or 

computer security incident particularly 

for those contracts that FIs identify as 

critical or that have access to sensitive or 

personally identifiable information.

Due to the significant coordination 

required with many agencies, the review 

and editing of the draft Federal Financial 

Institutions Examination Council’s 

(FFIEC) Business Continuity Planning 

Booklet and FFIEC Outsourcing Booklet 

have experienced significant delays. The 

agencies are attempting to make the 

booklets more user-friendly. 

Due Date: 12/31/2019

$0
ANNUAL REPORT 

132

TABLE 3: 

AUDIT REPORTS WITHOUT FINAL ACTIONS BUT WITH MANAGEMENT DECISIONS 

OVER ONE YEAR OLD FOR FISCAL YEAR 2018 (continued)

Report No. and 

Issue Date OIG Audit Finding Management Action Disallowed Costs

EVAL-17-007

9/18/2017

The Director, DOA, should incorporate 

a risk assessment of individual separating 

employees into the FDIC’s pre-exit 

clearance process.

The Director, DOA, should work with 

the FDIC’s Chief Information Officer 

to establish appropriate policy for using 

Data Loss Prevention (DLP) to support 

the FDIC’s pre-exit clearance process.

The Director, DOA, should work with 

the FDIC’s Chief Information Officer to 

develop an expanded and better defined 

use of the Data Loss Prevention (DLP) 

tool for separating contractors.

Additional time is needed for DOA to 

assess currently-available operational 

and analytical tools to determine what 

tools can be used in supporting the 

Insider Threat and Counterintelligence 

Program (ITCIP). DOA will continue 

to analyze existing internal analytic 

capabilities and work with the CIOO to 

establish cybersecurity monitoring and 

mitigation capabilities (e.g., forensics, 

incident management systems, and data 

loss prevention methodologies) while 

protecting individual legal and privacy 

rights. The procedures and protocols will 

be drafted for appropriate review once the 

tools are identified and put into place. 

Due Date: 3/29/2019

More time is needed to complete the 

revisions to the Directive and to allow for 

sufficient time for the Directive Review 

Process.

Due Date: 3/29/2019

As the process for notification for 

contractor personnel is different than 

the process for employees, more time is 

needed to effectuate this change so that 

the Computer Security Incident 

Response Team (CSIRT) is notified 

in a timely fashion.

Due Date: 2/18/2019

$0

RISK MANAGEMENT AND INTERNAL CONTROLS
133

VII. APPENDICES
THIS PAGE INTENTIONALLY LEFT BLANK
2018

APPENDICES 135

A. KEY STATISTICS

FDIC ACTIONS ON FINANCIAL INSTITUTIONS APPLICATIONS 

2016–2018

2018 2017 2016

Deposit Insurance 17 12 7

Approved1 17 12 7

Denied 0 0 0

New Branches 533 500 507

Approved 533 500 507

Denied 0 0 0

Mergers 224 218 245

Approved 224 218 245

Denied 0 0 0

Requests for Consent to Serve2 120 104 167

Approved 120 104 164

Section 19 7 1 9

Section 32 113 103 155

Denied 0 0 3

Section 19 0 0 0

Section 32 0 0 3

Notices of Change in Control 21 17 14

Letters of Intent Not to Disapprove 21 17 14

Disapproved 0 0 0

Brokered Deposit Waivers 5 12 14

Approved 5 11 13

Denied 0 1 1

Savings Association Activities3 0 1 0

Approved 0 1 0

Denied 0 0 0

State Bank Activities/Investments4 9 2 5

Approved 9 2 5

Denied 0 0 0

Conversion of Mutual Institutions 2 5 5

Non-Objection 2 5 5

Objection 0 0 0

1

 Includes deposit insurance application filed on behalf of (1) newly organized institutions, (2) existing uninsured financial services companies seeking establishment as 

an insured institution, and (3) interim institutions established to facilitate merger or conversion transactions, and applications to facilitate the establishment of thrift 

holding companies.

2

 Under Section 19 of the Federal Deposit Insurance (FDI) Act, an insured institution must receive FDIC approval before employing a person convicted of dishonesty 

or breach of trust. Under Section 32, the FDIC must approve any change of directors or senior executive officers at a state nonmember bank that is not in compliance 

with capital requirements or is otherwise in troubled condition. 

3

 Section 28 of the FDI Act, in general, prohibits a federally-insured state savings association from engaging in an activity not permissible for a federal savings association 

and requires notices or applications to be filed with the FDIC.

4

 Section 24 of the FDI Act, in general, prohibits a federally-insured state bank from engaging in an activity not permissible for a national bank and requires notices or 

applications to be filed with the FDIC.
APPENDICES

ANNUAL REPORT 

136

COMBINED RISK AND CONSUMER ENFORCEMENT ACTIONS 

2016–2018

2018 2017 2016

Total Number of Actions Initiated by the FDIC 177 231 259

Termination of Insurance 8 9 5

Involuntary Termination 0 0 0

Sec. 8a For Violations, Unsafe/Unsound Practices or Conditions 0 0 0

Voluntary Termination 8 9 5

Sec. 8a By Order Upon Request 0 0 0

Sec. 8p No Deposits 7 8 5

Sec. 8q Deposits Assumed 1 1 0

Sec. 8b Cease-and-Desist Actions 23 26 30

Notices of Charges Issued 1 0 2

Orders to Pay Restitution 5 4 0

Consent Orders 17 14 26

Personal Cease and Desist Orders 0 8 2

Sec. 8e Removal/Prohibition of Director or Officer 52 65 97

Notices of Intention to Remove/Prohibit 2 7 8

Consent Orders 50 58 89

Sec. 8g Suspension/Removal When Charged With Crime 0 0 0

Civil Money Penalties Issued 25 47 37

Sec. 7a Call Report Penalties 0 0 0

Sec. 8i Civil Money Penalties 23 42 34

Sec. 8i Civil Money Penalty Notices of Assessment 2 5 3

Sec. 10c Orders of Investigation 6 9 10

Sec. 19 Waiver Orders 59 71 72

Approved Section 19 Waiver Orders 59 71 72

Denied Section 19 Waiver Orders 0 0 0

Sec. 32 Notices Disapproving Officer/Director’s Request for Review 0 0 1

Truth-in-Lending Act Reimbursement Actions 91 135 83

Denials of Requests for Relief 0 0 0

Grants of Relief 0 0 0

Banks Making Reimbursement* 91 135 83

Suspicious Activity Reports (Open and closed institutions)* 193,585 182,647 222,836

Other Actions Not Listed 4 4 7

* These actions do not constitute the initiation of a formal enforcement action and, therefore, are not included in the total number of actions initiated.
APPENDICES

2018

137

ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND, 

DECEMBER 31, 1934, THROUGH SEPTEMBER 30, 20181

Dollars in Millions (except Insurance Coverage)

Deposits in Insured 

Institutions2

Insurance Fund as 

a Percentage of

Year

Insurance 

Coverage2

Total Domestic 

Deposits

Est. Insured

Deposits

Percentage 

of Domestic 

Deposits

Deposit 

Insurance

Fund

Total 

Domestic 

Deposits

Est. Insured

Deposits

2018 $250,000 $12,368,002 $7,376,566 59.6 $100,204.0 0.81 1.36 

2017 250,000 12,129,503 7,159,748 59.0 92,747.5 0.76 1.30 

2016 250,000 11,693,371 6,917,928 59.2 83,161.5 0.71 1.20 

2015 250,000 10,952,922 6,519,449 59.5 72,600.2 0.66 1.11 

2014 250,000 10,410,687 6,195,554 59.5 62,780.2 0.60 1.01 

2013 250,000 9,825,479 5,998,238 61.0 47,190.8 0.48 0.79 

2012 250,000 9,474,720 7,402,053 78.1 32,957.8 0.35 0.45 

2011 250,000 8,782,291 6,973,483 79.4 11,826.5 0.13 0.17 

2010 250,000 7,887,858 6,301,542 79.9 (7,352.2) (0.09) (0.12)

2009 250,000 7,705,354 5,407,773 70.2 (20,861.8) (0.27) (0.39)

2008 100,000 7,505,408 4,750,783 63.3 17,276.3 0.23 0.36 

2007 100,000 6,921,678 4,292,211 62.0 52,413.0 0.76 1.22 

2006 100,000 6,640,097 4,153,808 62.6 50,165.3 0.76 1.21 

2005 100,000 6,229,753 3,890,930 62.5 48,596.6 0.78 1.25 

2004 100,000 5,724,621 3,622,059 63.3 47,506.8 0.83 1.31 

2003 100,000 5,223,922 3,452,497 66.1 46,022.3 0.88 1.33 

2002 100,000 4,916,078 3,383,598 68.8 43,797.0 0.89 1.29 

2001 100,000 4,564,064 3,215,581 70.5 41,373.8 0.91 1.29 

2000 100,000 4,211,895 3,055,108 72.5 41,733.8 0.99 1.37 

1999 100,000 3,885,826 2,869,208 73.8 39,694.9 1.02 1.38 

1998 100,000 3,817,150 2,850,452 74.7 39,452.1 1.03 1.38 

1997 100,000 3,602,189 2,746,477 76.2 37,660.8 1.05 1.37 

1996 100,000 3,454,556 2,690,439 77.9 35,742.8 1.03 1.33 

1995 100,000 3,318,595 2,663,873 80.3 28,811.5 0.87 1.08 

1994 100,000 3,184,410 2,588,619 81.3 23,784.5 0.75 0.92 

1993 100,000 3,220,302 2,602,781 80.8 14,277.3 0.44 0.55 

1992 100,000 3,275,530 2,677,709 81.7 178.4 0.01 0.01 

1991 100,000 3,331,312 2,733,387 82.1 (6,934.0) (0.21) (0.25)

1990 100,000 3,415,464 2,784,838 81.5 4,062.7 0.12 0.15 

1989 100,000 3,412,503 2,755,471 80.7 13,209.5 0.39 0.48 

1988 100,000 2,337,080 1,756,771 75.2 14,061.1 0.60 0.80 

1987 100,000 2,198,648 1,657,291 75.4 18,301.8 0.83 1.10 

1986 100,000 2,162,687 1,636,915 75.7 18,253.3 0.84 1.12 
APPENDICES

ANNUAL REPORT 

138

ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND, 

DECEMBER 31, 1934, THROUGH SEPTEMBER 30, 20181

 (continued)

Dollars in Millions (except Insurance Coverage) 

Deposits in Insured 

Institutions2

Insurance Fund as 

a Percentage of

Year

Insurance 

Coverage2

Total Domestic 

Deposits

Est. Insured

Deposits

Percentage 

of Domestic 

Deposits

Deposit 

Insurance

Fund

Total

Domestic 

Deposits

Est. Insured

Deposits

1985 100,000 1,975,030 1,510,496 76.5 17,956.9 0.91 1.19 

1984 100,000 1,805,334 1,393,421 77.2 16,529.4 0.92 1.19 

1983 100,000 1,690,576 1,268,332 75.0 15,429.1 0.91 1.22 

1982 100,000 1,544,697 1,134,221 73.4 13,770.9 0.89 1.21 

1981 100,000 1,409,322 988,898 70.2 12,246.1 0.87 1.24 

1980 100,000 1,324,463 948,717 71.6 11,019.5 0.83 1.16 

1979 40,000 1,226,943 808,555 65.9 9,792.7 0.80 1.21 

1978 40,000 1,145,835 760,706 66.4 8,796.0 0.77 1.16 

1977 40,000 1,050,435 692,533 65.9 7,992.8 0.76 1.15 

1976 40,000 941,923 628,263 66.7 7,268.8 0.77 1.16 

1975 40,000 875,985 569,101 65.0 6,716.0 0.77 1.18 

1974 40,000 833,277 520,309 62.4 6,124.2 0.73 1.18 

1973 20,000 766,509 465,600 60.7 5,615.3 0.73 1.21 

1972 20,000 697,480 419,756 60.2 5,158.7 0.74 1.23 

1971 20,000 610,685 374,568 61.3 4,739.9 0.78 1.27 

1970 20,000 545,198 349,581 64.1 4,379.6 0.80 1.25 

1969 20,000 495,858 313,085 63.1 4,051.1 0.82 1.29 

1968 15,000 491,513 296,701 60.4 3,749.2 0.76 1.26 

1967 15,000 448,709 261,149 58.2 3,485.5 0.78 1.33 

1966 15,000 401,096 234,150 58.4 3,252.0 0.81 1.39 

1965 10,000 377,400 209,690 55.6 3,036.3 0.80 1.45 

1964 10,000 348,981 191,787 55.0 2,844.7 0.82 1.48 

1963 10,000 313,304 177,381 56.6 2,667.9 0.85 1.50 

1962 10,000 297,548 170,210 57.2 2,502.0 0.84 1.47 

1961 10,000 281,304 160,309 57.0 2,353.8 0.84 1.47 

1960 10,000 260,495 149,684 57.5 2,222.2 0.85 1.48 

1959 10,000 247,589 142,131 57.4 2,089.8 0.84 1.47 

1958 10,000 242,445 137,698 56.8 1,965.4 0.81 1.43 

1957 10,000 225,507 127,055 56.3 1,850.5 0.82 1.46 

1956 10,000 219,393 121,008 55.2 1,742.1 0.79 1.44 

1955 10,000 212,226 116,380 54.8 1,639.6 0.77 1.41 

1954 10,000 203,195 110,973 54.6 1,542.7 0.76 1.39 

1953 10,000 193,466 105,610 54.6 1,450.7 0.75 1.37 
APPENDICES

2018

139

ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND, 

DECEMBER 31, 1934, THROUGH SEPTEMBER 30, 20181

 (continued)

Dollars in Millions (except Insurance Coverage) 

Deposits in Insured 

Institutions2

Insurance Fund as 

a Percentage of

Year

Insurance 

Coverage2

Total Domestic 

Deposits

Est. Insured

Deposits

Percentage 

of Domestic 

Deposits

Deposit 

Insurance

Fund

Total

Domestic 

Deposits

Est. Insured

Deposits

1952 10,000 188,142 101,841 54.1 1,363.5 0.72 1.34 

1951 10,000 178,540 96,713 54.2 1,282.2 0.72 1.33 

1950 10,000 167,818 91,359 54.4 1,243.9 0.74 1.36 

1949 5,000 156,786 76,589 48.8 1,203.9 0.77 1.57 

1948 5,000 153,454 75,320 49.1 1,065.9 0.69 1.42 

1947 5,000 154,096 76,254 49.5 1,006.1 0.65 1.32 

1946 5,000 148,458 73,759 49.7 1,058.5 0.71 1.44 

1945 5,000 157,174 67,021 42.6 929.2 0.59 1.39 

1944 5,000 134,662 56,398 41.9 804.3 0.60 1.43 

1943 5,000 111,650 48,440 43.4 703.1 0.63 1.45 

1942 5,000 89,869 32,837 36.5 616.9 0.69 1.88 

1941 5,000 71,209 28,249 39.7 553.5 0.78 1.96 

1940 5,000 65,288 26,638 40.8 496.0 0.76 1.86 

1939 5,000 57,485 24,650 42.9 452.7 0.79 1.84 

1938 5,000 50,791 23,121 45.5 420.5 0.83 1.82 

1937 5,000 48,228 22,557 46.8 383.1 0.79 1.70 

1936 5,000 50,281 22,330 44.4 343.4 0.68 1.54 

1935 5,000 45,125 20,158 44.7 306.0 0.68 1.52 

1934 5,000 40,060 18,075 45.1 291.7 0.73 1.61 

1

For 2018, figures are as of September 30; all other prior years are as of December 31. Prior to 1989, figures are for the Bank Insurance Fund (BIF) only and exclude 

insured branches of foreign banks. For 1989 to 2005, figures represent the sum of the BIF and Savings Association Insurance Fund (SAIF) amounts; for 2006 to 2018, 

figures are for DIF. Amounts for 1989-2018 include insured branches of foreign banks. Prior to year-end 1991, insured deposits were estimated using percentages 

determined from June Call and Thrift Financial Reports. 

2

 The year-end 2008 coverage limit and estimated insured deposits do not reflect the temporary increase to $250,000 then in effect under the Emergency Economic 

Stabilization Act of 2008. The Dodd-Frank Wall Street Reform and Consumer Protection (Dodd-Frank) Act made this coverage limit permanent. The year-end 2009 

coverage limit and estimated insured deposits reflect the $250,000 coverage limit. The Dodd-Frank Act also temporarily provided unlimited coverage for non-interest 

bearing transaction accounts for two years beginning December 31, 2010. Coverage for certain retirement accounts increased to $250,000 in 2006. Initial coverage 

limit was $2,500 from January 1 to June 30, 1934.
APPENDICES

ANNUAL REPORT 

140

INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS, 

SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2018 

Dollars in Millions

Income Expenses and Losses

Year Total

Assessment 

Income

Assessment 

Credits

Investment 

and Other

Effective

Assessment 

Rate1 Total

Provision 

for 

Ins. Losses

Admin.

and 

Operating 

Expenses2

Interest

& Other Ins. 

Expenses

Funding 

Transfer

from the 

FSLIC 

Resolution FundNet Income/

(Loss)

TOTAL $253,463.9 $185,121.7 $11,392.9 $79,735.1 $150,511.3 $107,728.6 $33,313.7 $9,469.1 $139.5 $103,092.1

2018 11,170.8 9,526.7 0.0 1,644.1 0.0627% 1,205.2 (562.6) 1,764.7 3.1 0 9,965.6

2017 11,663.7 10,594.8 0.0 1,068.9 0.0716% 1,558.2 (183.1) 1,739.4 2.0 0 10,105.5 

2016 10,674.1 9,986.6 0.0 687.5 0.0699% 150.6 (1,567.9) 1,715.0 3.5 0 10,523.5 

2015 9,303.5 8,846.8 0.0 456.7 0.0647% (553.2) (2,251.3) 1,687.2 10.9 0 9,856.7 

2014 8,965.1 8,656.1 0.0 309.0 0.0663% (6,634.7) (8,305.5) 1,664.3 6.5 0 15,599.8 

2013 10,458.9 9,734.2 0.0 724.7 0.0775% (4,045.9) (5,659.4) 1,608.7 4.8 0 14,504.8 

2012 18,522.3 12,397.2 0.2 6,125.3 0.1012% (2,599.0) (4,222.6) 1,777.5 (153.9) 0 21,121.3 

2011 16,342.0 13,499.5 0.9 2,843.4 0.1115% (2,915.4) (4,413.6) 1,625.4 (127.2) 0 19,257.4 

2010 13,379.9 13,611.2 0.8 (230.5) 0.1772% 75.0 (847.8) 1,592.6 (669.8) 0 13,304.9 

2009 24,706.4 17,865.4 148.0 6,989.0 0.2330% 60,709.0 57,711.8 1,271.1 1,726.1 0 (36,002.6)

2008 7,306.3 4,410.4 1,445.9 4,341.8 0.0418% 44,339.5 41,838.8 1,033.5 1,467.2 0 (37,033.2)

2007 3,196.2 3,730.9 3,088.0 2,553.3 0.0093% 1,090.9 95.0 992.6 3.3 0 2,105.3 

2006 2,643.5 31.9 0.0 2,611.6 0.0005% 904.3 (52.1) 950.6 5.8 0 1,739.2 

2005 2,420.5 60.9 0.0 2,359.6 0.0010% 809.3 (160.2) 965.7 3.8 0 1,611.2 

2004 2,240.3 104.2 0.0 2,136.1 0.0019% 607.6 (353.4) 941.3 19.7 0 1,632.7 

2003 2,173.6 94.8 0.0 2,078.8 0.0019% (67.7) (1,010.5) 935.5 7.3 0 2,241.3 

2002 2,384.7 107.8 0.0 2,276.9 0.0023% 719.6 (243.0) 945.1 17.5 0 1,665.1 

2001 2,730.1 83.2 0.0 2,646.9 0.0019% 3,123.4 2,199.3 887.9 36.2 0 (393.3)

2000 2,570.1 64.3 0.0 2,505.8 0.0016% 945.2 28.0 883.9 33.3 0 1,624.9 

1999 2,416.7 48.4 0.0 2,368.3 0.0013% 2,047.0 1,199.7 823.4 23.9 0 369.7 

1998 2,584.6 37.0 0.0 2,547.6 0.0010% 817.5 (5.7) 782.6 40.6 0 1,767.1 

1997 2,165.5 38.6 0.0 2,126.9 0.0011% 247.3 (505.7) 677.2 75.8 0 1,918.2 

1996 7,156.8 5,294.2 0.0 1,862.6 0.1622% 353.6 (417.2) 568.3 202.5 0 6,803.2 

1995 5,229.2 3,877.0 0.0 1,352.2 0.1238% 202.2 (354.2) 510.6 45.8 0 5,027.0 

1994 7,682.1 6,722.7 0.0 959.4 0.2192% (1,825.1) (2,459.4) 443.2 191.1 0 9,507.2 

1993 7,354.5 6,682.0 0.0 672.5 0.2157% (6,744.4) (7,660.4) 418.5 497.5 0 14,098.9 

1992 6,479.3 5,758.6 0.0 720.7 0.1815% (596.8) (2,274.7) 614.83 1,063.1 35.4 7,111.5 

1991 5,886.5 5,254.0 0.0 632.5 0.1613% 16,925.3 15,496.2 326.1 1,103.0 42.4 (10,996.4)

1990 3,855.3 2,872.3 0.0 983.0 0.0868% 13,059.3 12,133.1 275.6 650.6 56.1 (9,147.9)

1989 3,494.8 1,885.0 0.0 1,609.8 0.0816% 4,352.2 3,811.3 219.9 321.0 5.6 (851.8)

1988 3,347.7 1,773.0 0.0 1,574.7 0.0825% 7,588.4 6,298.3 223.9 1,066.2 0 (4,240.7)

1987 3,319.4 1,696.0 0.0 1,623.4 0.0833% 3,270.9 2,996.9 204.9 69.1 0 48.5 

1986 3,260.1 1,516.9 0.0 1,743.2 0.0787% 2,963.7 2,827.7 180.3 (44.3) 0 296.4 

1985 3,385.5 1,433.5 0.0 1,952.0 0.0815% 1,957.9 1,569.0 179.2 209.7 0 1,427.6 

1984 3,099.5 1,321.5 0.0 1,778.0 0.0800% 1,999.2 1,633.4 151.2 214.6 0 1,100.3 

1983 2,628.1 1,214.9 164.0 1,577.2 0.0714% 969.9 675.1 135.7 159.1 0 1,658.2 

1982 2,524.6 1,108.9 96.2 1,511.9 0.0769% 999.8 126.4 129.9 743.5 0 1,524.8 
APPENDICES

2018

141

INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS, 

SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2018 (continued)

Dollars in Millions

Income Expenses and Losses

Year Total

Assessment 

Income

Assessment 

Credits

Investment 

and Other

Effective

Assessment 

Rate1 Total

Provision 

for 

Ins. Losses

Admin.

and 

Operating 

Expenses2

Interest

& Other Ins. 

Expenses

Funding 

Transfer

from the 

FSLIC 

Resolution FundNet Income/

(Loss)

1981 2,074.7 1,039.0 117.1 1,152.8 0.0714% 848.1 320.4 127.2 400.5 0 1,226.6 

1980 1,310.4 951.9 521.1 879.6 0.0370% 83.6 (38.1) 118.2 3.5 0 1,226.8 

1979 1,090.4 881.0 524.6 734.0 0.0333% 93.7 (17.2) 106.8 4.1 0 996.7 

1978 952.1 810.1 443.1 585.1 0.0385% 148.9 36.5 103.3 9.1 0 803.2 

1977 837.8 731.3 411.9 518.4 0.0370% 113.6 20.8 89.3 3.5 0 724.2 

1976 764.9 676.1 379.6 468.4 0.0370% 212.3 28.0 180.44 3.9 0 552.6 

1975 689.3 641.3 362.4 410.4 0.0357% 97.5 27.6 67.7 2.2 0 591.8 

1974 668.1 587.4 285.4 366.1 0.0435% 159.2 97.9 59.2 2.1 0 508.9 

1973 561.0 529.4 283.4 315.0 0.0385% 108.2 52.5 54.4 1.3 0 452.8 

1972 467.0 468.8 280.3 278.5 0.0333% 65.7 10.1 49.6 6.0 5 0 401.3 

1971 415.3 417.2 241.4 239.5 0.0345% 60.3 13.4 46.9 0.0 0 355.0 

1970 382.7 369.3 210.0 223.4 0.0357% 46.0 3.8 42.2 0.0 0 336.7 

1969 335.8 364.2 220.2 191.8 0.0333% 34.5 1.0 33.5 0.0 0 301.3 

1968 295.0 334.5 202.1 162.6 0.0333% 29.1 0.1 29.0 0.0 0 265.9 

1967 263.0 303.1 182.4 142.3 0.0333% 27.3 2.9 24.4 0.0 0 235.7 

1966 241.0 284.3 172.6 129.3 0.0323% 19.9 0.1 19.8 0.0 0 221.1 

1965 214.6 260.5 158.3 112.4 0.0323% 22.9 5.2 17.7 0.0 0 191.7 

1964 197.1 238.2 145.2 104.1 0.0323% 18.4 2.9 15.5 0.0 0 178.7 

1963 181.9 220.6 136.4 97.7 0.0313% 15.1 0.7 14.4 0.0 0 166.8 

1962 161.1 203.4 126.9 84.6 0.0313% 13.8 0.1 13.7 0.0 0 147.3 

1961 147.3 188.9 115.5 73.9 0.0323% 14.8 1.6 13.2 0.0 0 132.5 

1960 144.6 180.4 100.8 65.0 0.0370% 12.5 0.1 12.4 0.0 0 132.1 

1959 136.5 178.2 99.6 57.9 0.0370% 12.1 0.2 11.9 0.0 0 124.4 

1958 126.8 166.8 93.0 53.0 0.0370% 11.6 0.0 11.6 0.0 0 115.2 

1957 117.3 159.3 90.2 48.2 0.0357% 9.7 0.1 9.6 0.0 0 107.6 

1956 111.9 155.5 87.3 43.7 0.0370% 9.4 0.3 9.1 0.0 0 102.5 

1955 105.8 151.5 85.4 39.7 0.0370% 9.0 0.3 8.7 0.0 0 96.8 

1954 99.7 144.2 81.8 37.3 0.0357% 7.8 0.1 7.7 0.0 0 91.9 

1953 94.2 138.7 78.5 34.0 0.0357% 7.3 0.1 7.2 0.0 0 86.9 

1952 88.6 131.0 73.7 31.3 0.0370% 7.8 0.8 7.0 0.0 0 80.8 

1951 83.5 124.3 70.0 29.2 0.0370% 6.6 0.0 6.6 0.0 0 76.9 

1950 84.8 122.9 68.7 30.6 0.0370% 7.8 1.4 6.4 0.0 0 77.0 

1949 151.1 122.7 0.0 28.4 0.0833% 6.4 0.3 6.1 0.0 0 144.7 

1948 145.6 119.3 0.0 26.3 0.0833% 7.0 0.7 6.36 0.0 0 138.6 

1947 157.5 114.4 0.0 43.1 0.0833% 9.9 0.1 9.8 0.0 0 147.6 

1946 130.7 107.0 0.0 23.7 0.0833% 10.0 0.1 9.9 0.0 0 120.7 

1945 121.0 93.7 0.0 27.3 0.0833% 9.4 0.1 9.3 0.0 0 111.6 

1944 99.3 80.9 0.0 18.4 0.0833% 9.3 0.1 9.2 0.0 0 90.0 
APPENDICES

ANNUAL REPORT 

142

INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS, 

SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2018 (continued)

Dollars in Millions

Income Expenses and Losses

Year Total

Assessment 

Income

Assessment 

Credits

Investment 

and Other

Effective

Assessment 

Rate1 Total

Provision 

for 

Ins. Losses

Admin.

and 

Operating 

Expenses2

Interest

& Other Ins. 

Expenses

Funding 

Transfer

from the 

FSLIC 

Resolution FundNet Income/

(Loss)

1943 86.6 70.0 0.0 16.6 0.0833% 9.8 0.2 9.6 0.0 0 76.8 

1942 69.1 56.5 0.0 12.6 0.0833% 10.1 0.5 9.6 0.0 0 59.0 

1941 62.0 51.4 0.0 10.6 0.0833% 10.1 0.6 9.5 0.0 0 51.9 

1940 55.9 46.2 0.0 9.7 0.0833% 12.9 3.5 9.4 0.0 0 43.0 

1939 51.2 40.7 0.0 10.5 0.0833% 16.4 7.2 9.2 0.0 0 34.8 

1938 47.7 38.3 0.0 9.4 0.0833% 11.3 2.5 8.8 0.0 0 36.4 

1937 48.2 38.8 0.0 9.4 0.0833% 12.2 3.7 8.5 0.0 0 36.0 

1936 43.8 35.6 0.0 8.2 0.0833% 10.9 2.6 8.3 0.0 0 32.9 

1935 20.8 11.5 0.0 9.3 0.0833% 11.3 2.8 8.5 0.0 0 9.5 

1933-34 7.0 0.0 0.0 7.0 N/A 10.0 0.2 9.8 0.0 0 (3.0)

1 The effective assessment rate is calculated from annual assessment income (net of assessment credits), excluding transfers to the Financing Corporation (FICO), 

Resolution Funding Corporation (REFCORP) and FSLIC Resolution Fund, divided by the average assessment base. Figures represent only BIF-insured institutions 

prior to 1990, and BIF- and SAIF-insured institutions from 1990 through 2005. After 1995, all thrift closings became the responsibility of the FDIC and amounts are 

reflected in the SAIF. Beginning in 2006, figures are for the DIF.

The annualized assessment rate for 2018 is based on full year assessment income divided by a four quarter average of 2018 quarterly assessment base amounts. The 

assessment base for fourth quarter 2018 was estimated using the third quarter 2018 assessment base and an assumed quarterly growth rate of one percent.

Historical Assessment Rates:

1934 – 1949 The statutory assessment rate was 0.0833 percent.

1950 – 1984 The effective assessment rates varied from the statutory rate 

of 0.0833 percent due to assessment credits provided in those 

years.

1985 – 1989 The statutory assessment rate was 0.0833 percent (no credits 

were given).

1990 The statutory rate increased to 0.12 percent.

1991 – 1992 The statutory rate increased to a minimum of 0.15 percent. 

The effective rates in 1991 and 1992 varied because the FDIC 

exercised new authority to increase assessments above the 

statutory minimum rate when needed.

1993 – 2006 Beginning in 1993, the effective rate was based on a risk-related 

premium system under which institutions paid assessments 

in the range of 0.23 percent to 0.31 percent. In May 1995, 

the BIF reached the mandatory recapitalization level of 1.25 

percent. As a result, BIF assessment rates were reduced to a 

range of 0.04 percent to 0.31 percent of assessable deposits, 

effective June 1995, and assessments totaling $1.5 billion were 

refunded in September 1995. Assessment rates for the BIF 

were lowered again to a range of 0 to 0.27 percent of assessable 

deposits, effective the start of 1996. In 1996, the SAIF collected 

a one-time special assessment of $4.5 billion. Subsequently, 

assessment rates for the SAIF were lowered to the same range as 

the BIF, effective October 1996. This range of rates remained 

unchanged for both funds through 2006.

2007 – 2008 As part of the implementation of the Federal Deposit Insurance 

Reform Act of 2005, assessment rates were increased to a range 

of 0.05 percent to 0.43 percent of assessable deposits effective 

at the start of 2007, but many institutions received a one-time 

assessment credit ($4.7 billion in total) to offset the new 

assessments.

2009 – 2011 For the first quarter of 2009, assessment rates were increased to 

a range of 0.12 percent to 0.50 percent of assessable deposits. 

On June 30, 2009, a special assessment was imposed on all 

insured banks and thrifts, which amounted in aggregate to 

approximately $5.4 billion. For 8,106 institutions, with $9.3 

trillion in assets, the special assessment was 5 basis points of 

each insured institution’s assets minus tier one capital; 89 

other institutions, with assets of $4.0 trillion, had their special 

assessment capped at 10 basis points of their second quarter 

assessment base. From the second quarter of 2009 through the 

first quarter of 2011, initial assessment rates ranged between 

0.12 percent and 0.45 percent of assessable deposits. Initial 

rates are subject to further adjustments.
APPENDICES

2018

143

2011 – 2016 Beginning in the second quarter of 2011, the assessment 

base changed to average total consolidated assets less average 

tangible equity (with certain adjustments for banker’s banks 

and custodial banks), as required by the Dodd-Frank Act. The 

FDIC implemented a new assessment rate schedule at the 

same time to conform to the larger assessment base. Initial 

assessment rates were lowered to a range of 0.05 percent to 

0.35 percent of the new base. The annualized assessment 

rates averaged approximately 17.6 cents per $100 of assessable 

deposits for the first quarter of 2011 and 11.1 cents per $100 of 

the new base for the last three quarters of 2011 (which is shown 

in the table).

2016 Beginning July 1, 2016, initial assessment rates were lowered 

from a range of 5 basis points to 35 basis points to a range of 3 

basis points to 30 basis points, and an additional surcharge was 

imposed on large banks (generally institutions with $10 billion 

or more in assets) of 4.5 basis points of their assessment base 

(after making adjustments).

2018 The 4.5 basis point surcharge imposed on large banks ended 

effective October 1, 2018. The annualized assessment rates 

averaged approximately 7.2 cents per $100 of the assessable base 

for the first three quarters of 2018 and 3.5 cents per $100 of 

the assessment base for the last quarter of 2018. The full year 

annualized assessment rate averaged 6.3 cent per $100 (which 

is shown in the table).

2 These expenses, which are presented as operating expenses in the Statement of Income and Fund Balance, pertain to the FDIC in its corporate capacity only and do not 

include costs that are charged to the failed bank receiverships that are managed by the FDIC. The receivership expenses are presented as part of the “Receivables from 

Resolutions, net” line on the Balance Sheet. The narrative and graph presented on page 91 of this report shows the aggregate (corporate and receivership) expenditures 

of the FDIC.

3 Includes $210 million for the cumulative effect of an accounting change for certain postretirement benefits (1992).

4 Includes a $106 million net loss on government securities (1976).

5 This amount represents interest and other insurance expenses from 1933 to 1972.

6 Includes the aggregate amount of $81 million of interest paid on capital stock between 1933 and 1948.
APPENDICES

ANNUAL REPORT 

144

RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS 

FOR THE PROTECTION OF DEPOSITORS, 1934 - 2018

Dollars in Thousands

Bank and Thrift Failures1

Year2

Number 

of Banks/

Thrifts

Total 

Assets3

Total 

Deposits3 Funding4 Recoveries5

Estimated 

Additional 

Recoveries

Final and 

Estimated 

Losses6

2,623 $946,643,412 $712,938,506 $586,979,457 $416,409,979 $63,951,764 $106,617,718 

2018 0 - - - - - -

2017 8 5,081,737 4,683,360 4,589,179 1,712,445 1,724,535 1,152,198 

2016 5 277,182 268,516 262,017 12,907 204,981 44,129 

2015 8 6,706,038 4,574,170 4,564,024 848,530 2,858,451 857,043 

2014 18 2,913,503 2,691,485 2,682,954 475,347 1,815,118 392,489 

2013 24 6,044,051 5,132,246 5,022,388 323,205 3,470,020 1,229,163 

2012 51 11,617,348 11,009,630 11,041,622 1,782,176 6,822,310 2,437,136 

2011 92 34,922,997 31,071,862 30,714,170 3,267,259 20,988,008 6,458,902 

20107 157 92,084,988 78,290,185 82,305,089 55,641,718 10,456,842 16,206,529 

20097 140 169,709,160 137,835,121 136,081,390 95,397,606 14,071,401 26,612,383 

20087 25 371,945,480 234,321,715 205,833,992 184,490,213 3,204,012 18,139,767

2007 3 2,614,928 2,424,187 1,920,159 1,474,822 285,662 159,676 

2006 0 0 0 0 0 0 0 

2005 0 0 0 0 0 0 0 

2004 4 170,099 156,733 139,244 134,978 349 3,917 

2003 3 947,317 901,978 883,772 812,933 8,192 62,647 

2002 11 2,872,720 2,512,834 1,567,805 1,711,173 (557,357) 413,989 

2001 4 1,821,760 1,661,214 21,131 1,138,677 (1,410,011) 292,465 

2000 7 410,160 342,584 297,313 265,175 0 32,138 

1999 8 1,592,189 1,320,573 1,308,316 718,057 4,233 586,027 

1998 3 290,238 260,675 293,117 69,575 1,937 221,606 

1997 1 27,923 27,511 25,546 20,520 0 5,026 

1996 6 232,634 230,390 201,533 140,918 0 60,615 

1995 6 802,124 776,387 609,043 524,571 0 84,472 

1994 13 1,463,874 1,397,018 1,224,769 1,045,718 0 179,051 

1993 41 3,828,939 3,509,341 3,841,658 3,209,012 0 632,646 

1992 120 45,357,237 39,921,310 14,541,476 10,866,760 567 3,674,149 

1991 124 64,556,512 52,972,034 21,501,749 15,496,730 2,512 6,002,507 

1990 168 16,923,462 15,124,454 10,812,484 8,040,995 0 2,771,489 

1989 206 28,930,572 24,152,468 11,443,281 5,247,995 0 6,195,286 

1988 200 38,402,475 26,524,014 10,432,655 5,055,158 0 5,377,497 

1987 184 6,928,889 6,599,180 4,876,994 3,014,502 0 1,862,492 

1986 138 7,356,544 6,638,903 4,632,121 2,949,583 0 1,682,538 

1985 116 3,090,897 2,889,801 2,154,955 1,506,776 0 648,179 

1984 78 2,962,179 2,665,797 2,165,036 1,641,157 0 523,879 

1983 44 3,580,132 2,832,184 3,042,392 1,973,037 0 1,069,355 

1982 32 1,213,316 1,056,483 545,612 419,825 0 125,787 

1981 7 108,749 100,154 114,944 105,956 0 8,988 

1980 10 239,316 219,890 152,355 121,675 0 30,680 

1934 - 1979 558 8,615,743 5,842,119 5,133,173 4,752,295 0 380,878
APPENDICES

2018

145

RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS 

FOR THE PROTECTION OF DEPOSITORS, 1934 - 2018 (continued)

Dollars in Thousands

Assistance Transactions1

Year2

Number 

of Banks/

Thrifts

Total 

Assets3

Total 

Deposits3 Funding4 Recoveries5

Estimated 

Additional 

Recoveries

Final and 

Estimated Losses6

154 $3,317,099,253 $1,442,173,417 $11,630,356 $6,199,875 $0 $5,430,481 

2018 0 0 0 0 0 0 0

2017 0 0 0 0 0 0 0 

2016 0 0 0 0 0 0 0 

2015 0 0 0 0 0 0 0 

2014 0 0 0 0 0 0 0 

2013 0 0 0 0 0 0 0 

2012 0 0 0 0 0 0 0 

2011 0 0 0 0 0 0 0 

2010 0 0 0 0 0 0 0 

20098 8 1,917,482,183 1,090,318,282 0 0 0 0 

20088 5 1,306,041,994 280,806,966 0 0 0 0 

2007 0 0 0 0 0 0 0 

2006 0 0 0 0 0 0 0 

2005 0 0 0 0 0 0 0 

2004 0 0 0 0 0 0 0 

2003 0 0 0 0 0 0 0 

2002 0 0 0 0 0 0 0 

2001 0 0 0 0 0 0 0 

2000 0 0 0 0 0 0 0 

1999 0 0 0 0 0 0 0 

1998 0 0 0 0 0 0 0 

1997 0 0 0 0 0 0 0 

1996 0 0 0 0 0 0 0 

1995 0 0 0 0 0 0 0 

1994 0 0 0 0 0 0 0 

1993 0 0 0 0 0 0 0 

1992 2 33,831 33,117 1,486 1,236 0 250 

1991 3 78,524 75,720 6,117 3,093 0 3,024 

1990 1 14,206 14,628 4,935 2,597 0 2,338 

1989 1 4,438 6,396 2,548 252 0 2,296 

1988 80 15,493,939 11,793,702 1,730,351 189,709 0 1,540,642 
APPENDICES

ANNUAL REPORT 

146

RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS 

FOR THE PROTECTION OF DEPOSITORS, 1934 - 2018 (continued)

Dollars in Thousands

Assistance Transactions1 (continued)

Year2

Number 

of Banks/

Thrifts

Total 

Assets3

Total 

Deposits3 Funding4 Recoveries5

Estimated 

Additional 

Recoveries

Final and 

Estimated Losses6

1987 19 2,478,124 2,275,642 160,877 713 0 160,164 

1986 7 712,558 585,248 158,848 65,669 0 93,179 

1985 4 5,886,381 5,580,359 765,732 406,676 0 359,056 

1984 2 40,470,332 29,088,247 5,531,179 4,414,904 0 1,116,275 

1983 4 3,611,549 3,011,406 764,690 427,007 0 337,683 

1982 10 10,509,286 9,118,382 1,729,538 686,754 0 1,042,784 

1981 3 4,838,612 3,914,268 774,055 1,265 0 772,790 

1980 1 7,953,042 5,001,755 0 0 0 0 

1934-1979 4 1,490,254 549,299 0 0 0 0

1 Institutions for which the FDIC is appointed receiver, including deposit payoff, insured deposit transfer, and deposit assumption cases.

2 For 1990 through 2005, amounts represent the sum of BIF and SAIF failures (excluding those handled by the RTC); prior to 1990, figures are only for the BIF. After 

1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. For 2006 to 2018, figures are for the DIF. 

3 Assets and deposit data are based on the last Call Report or TFR filed before failure.

4 Funding represents the amounts provided by the DIF to receiverships for subrogated claims, advances for working capital, and administrative expenses paid on their 

behalf. Beginning in 2008, the DIF resolves failures using whole-bank purchase and assumption transactions, most with an accompanying shared-loss agreement 

(SLA). The DIF satisfies any resulting liabilities by offsetting receivables from resolutions when receiverships declare a dividend and/or sending cash directly to 

receiverships to fund an SLA and other expenses.

5 Recoveries represent cash received and dividends (cash and non-cash) declared by receiverships.

6 Final losses represent actual losses for unreimbursed subrogated claims of inactivated receiverships. Estimated losses generally represent the difference between the 

amount paid by the DIF to cover obligations to insured depositors and the estimated recoveries from the liquidation of receivership assets.

7 Includes amounts related to transaction account coverage under the Transaction Account Guarantee Program (TAG). The estimated losses as of December 31, 2018, 

for TAG accounts in 2010, 2009, and 2008 are $372 million, $1.1 billion, and $12 million, respectively.

8 Includes institutions where assistance was provided under a systemic risk determination.
APPENDICES

2018

147

NUMBER, ASSETS, DEPOSITS, LOSSES, AND LOSS TO FUNDS OF INSURED 

THRIFTS TAKEN OVER OR CLOSED BECAUSE OF FINANCIAL DIFFICULTIES, 

1989 THROUGH 19951

Dollars in Thousands

Year Number of Institutions Assets Deposits

Final 

Receivership 

Loss2

Loss to 

Fund3

Total 748 $393,986,574 $318,328,770 $75,977,846 $81,580,554

1995 2 423,819 414,692 28,192 27,750 

1994 2 136,815 127,508 11,472 14,599 

1993 10 6,147,962 5,708,253 267,595 65,212 

1992 59 44,196,946 34,773,224 3,286,908 3,832,145 

1991 144 78,898,904 65,173,122 9,235,967 9,734,263 

1990 213 129,662,498 98,963,962 16,062,685 19,257,578 

19894 318 134,519,630 113,168,009 47,085,027 48,649,007

1

 Beginning in 1989 through July 1, 1995, all thrift closings were the responsibility of the Resolution Trust Corporation (RTC). Since the RTC was terminated on 

December 31, 1995, and all assets and liabilities transferred to the FSLIC Resolution Fund (FRF), all the results of the thrift closing activity from 1989 through 1995 

are now reflected on the FRF’s books. Year is the year of failure, not the year of resolution.

2

 The Final Receivership Loss represents the loss at the fund level from receiverships for unreimbursed subrogated claims of the FRF-RTC and unpaid advances to 

receiverships from the FRF-RTC.

3

 The Loss to Fund represents the total resolution cost of the failed thrifts in the FRF-RTC fund. In addition to the receivership losses, this includes corporate revenue 

and expense items such as interest expense on Federal Financing Bank debt, interest expense on escrowed funds, administrative expenses, and interest revenue on 

advances to receiverships.

4

 Total for 1989 excludes nine failures of the former FSLIC.
APPENDICES

ANNUAL REPORT 

148

Jelena McWilliams

Jelena 

McWilliams 

is the 21st 

Chairman of 

the FDIC. She 

was nominated 

by President 

Donald J. 

Trump on 

November 

30, 2017, and 

confirmed by 

the Senate 

on May 24, 

2018, to serve a six-year term on the FDIC Board of 

Directors, and designated as Chairman for a term of 

five years. 

Ms. McWilliams was Executive Vice President, Chief 

Legal Officer, and Corporate Secretary for Fifth 

Third Bank in Cincinnati, Ohio. Prior to joining 

Fifth Third Bank, Ms. McWilliams worked in the 

United States Senate for six years, most recently as 

Chief Counsel and Deputy Staff Director with the 

Senate Committee on Banking, Housing and Urban 

Affairs, and previously as Assistant Chief Counsel 

with the Senate Small Business and Entrepreneurship 

Committee. From 2007 to 2010, Ms. McWilliams 

served as an attorney at the Federal Reserve Board 

of Governors. Before entering public service, she 

practiced corporate and securities law at Morrison 

& Foerster LLP in Palo Alto, California, and Hogan 

& Hartson LLP (now Hogan Lovells LLP) in 

Washington, D.C. 

Ms. McWilliams graduated with highest honors from 

the University of California at Berkeley with a B.S. in 

political science, and earned her law degree from U.C. 

Berkeley School of Law.

Martin J. Gruenberg 

Martin J. Gruenberg 

is the 20th Chairman 

of the FDIC, receiving 

Senate confirmation on 

November 15, 2012, for 

a five-year term. Mr. 

Gruenberg served as 

Vice Chairman and 

Member of the FDIC 

Board of Directors 

from August 22, 2005, 

until his confirmation 

as Chairman. He served as Acting Chairman from 

July 9, 2011, to November 15, 2012, and also from 

November 16, 2005, to June 26, 2006.

Mr. Gruenberg joined the FDIC Board after broad 

congressional experience in the financial services and 

regulatory areas. He served as Senior Counsel to 

Senator Paul S. Sarbanes (D-MD) on the staff of the 

Senate Committee on Banking, Housing, and Urban 

Affairs from 1993 to 2005. Mr. Gruenberg advised 

the Senator on issues of domestic and international 

financial regulation, monetary policy, and trade. 

He also served as Staff Director of the Banking 

Committee’s Subcommittee on International Finance 

and Monetary Policy from 1987 to 1992. Major 

legislation in which Mr. Gruenberg played an active 

role during his service on the Committee includes 

the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989 (FIRREA); the Federal 

Deposit Insurance Corporation Improvement Act of 

1991 (FDICIA); the Gramm-Leach-Bliley Act; and 

the Sarbanes-Oxley Act of 2002.

Mr. Gruenberg served as Chairman of the Executive 

Council and President of the International Association 

of Deposit Insurers (IADI) from November 2007 to 

November 2012.

B. MORE ABOUT THE FDIC

FDIC Board of Directors
APPENDICES

2018

149

Mr. Gruenberg holds a J.D. from Case Western 

Reserve Law School and an A.B. from Princeton 

University, Woodrow Wilson School of Public and 

International Affairs. 

Kathleen L. Kraninger 

Kathy Kraninger 

became Director of the 

Consumer Financial 

Protection Bureau 

(CFPB) in December, 

2018. From her 

early days as a Peace 

Corps volunteer, to 

her role establishing 

the Department of 

Homeland Security 

(DHS), to her policy 

work at the Office of Management and Budget 

(OMB) to the CFPB, Director Kraninger has 

dedicated her career to public service.

Director Kraninger came to the CFPB from OMB, 

where as a Policy Associate Director she oversaw 

the budgets for executive branch agencies including 

the Departments of Commerce, Justice, DHS, 

Housing and Urban Development, Department 

of Transportation (DOT), and the Department 

of Treasury, in addition to 30 other government 

agencies.

Previously she worked in the U.S. Senate, where 

she was the Clerk for the Senate Appropriations 

Subcommittee on Homeland Security, which 

provides DHS with its $40 billion discretionary 

budget. On Capitol Hill, she also worked for the 

House Appropriations Subcommittee on Homeland 

Security as well as the Senate Homeland Security and 

Governmental Affairs Committee.

Ms. Kraninger also served in executive branch 

posts with DOT. There, after the terrorist attacks 

on September 11, 2001, she volunteered to join the 

leadership team that set up the newly created DHS.

Her work at DHS led to awards including the 

Secretary of Homeland Security’s Award of 

Exceptional Service, the International Police and 

Public Safety 9/11 Medal, and the Meritorious Public 

Service Award from the United States Coast Guard.

Ms. Kraninger graduated magna cum laude from 

Marquette University and earned a law degree from 

Georgetown University Law Center. She served as a 

U.S. Peace Corps Volunteer in Ukraine.

Joseph M. Otting

Joseph M. Otting was sworn 

in as the 31st Comptroller of 

the Currency on November 

27, 2017.

The Comptroller of the 

Currency is the administrator 

of the federal banking system 

and chief officer of the 

Office of the Comptroller 

of the Currency (OCC). 

The OCC supervises nearly 

1,400 national banks, federal savings associations, 

and federal branches and agencies of foreign banks 

operating in the United States. The mission of the 

OCC is to ensure that national banks and federal 

savings associations operate in a safe and sound 

manner, provide fair access to financial services, treat 

customers fairly, and comply with applicable laws and 

regulations.

The Comptroller also serves as a director of the 

Federal Deposit Insurance Corporation and member 

of the Financial Stability Oversight Council and the 

Federal Financial Institutions Examination Council.

Prior to becoming Comptroller of the Currency, Mr. 

Otting was an executive in the banking industry. He 

served as President of CIT Bank and Co-President of 

CIT Group.

Mr. Otting previously was President, Chief Executive 

Officer, and a member of the Board of Directors 

of OneWest Bank, N.A. Prior to joining OneWest 
APPENDICES

ANNUAL REPORT 

150

Bank, he served as Vice Chairman of U.S. Bancorp, 

where he managed the Commercial Banking Group 

and served on the Bancorp’s executive management 

committee. He also served as a member of U.S. 

Bank’s main subsidiary banks’ Board of Directors.

From 1986 to 2001, Mr. Otting was with Union Bank 

of California, where he was Executive Vice President 

and Group Head of Commercial Banking. Before 

joining Union Bank, he was with Bank of America 

and held positions in branch management, preferred 

banking, and commercial lending.

Mr. Otting has played significant roles in charitable 

and community development organizations. He has 

served as a board member for the California Chamber 

of Commerce, the Killebrew-Thompson Memorial 

foundation, the Associated Oregon Industries, the 

Oregon Business Council, the Portland Business 

Alliance, the Minnesota Chamber of Commerce, 

and Blue Cross Blue Shield of Oregon. He was also a 

member of the Financial Services Roundtable, the Los 

Angeles Chamber of Commerce, and the Board and 

Executive Committee of the Los Angeles Economic 

Development Corporation.

Mr. Otting holds a bachelor of arts in management 

from the University of Northern Iowa and is a 

graduate of the School of Credit and Financial 

Management, which was held at Dartmouth College 

in Hanover, New Hampshire.

Mick Mulvaney

Mick Mulvaney, former 

Acting Director of the 

Consumer Financial 

Protection Bureau, 

resigned from the FDIC 

Board of Directors as 

of December 11, 2018. 

Mr. Mulvaney had been 

a Board member since 

November 25, 2017.

Thomas M. Hoenig

Thomas M. Hoenig, 

former Vice Chairman, 

resigned on April 30, 

2018. Mr. Hoenig 

served a six-year term as 

FDIC Vice Chairman 

and member of the 

Board of Directors. 
APPENDICES

2018

151

DIVISION OF 

INFORMATION TECHNOLOGY

Russell G. Pittman

Director

DIVISION OF 

FINANCE

Zachary Brown

CISO

OFFICE OF 

CHIEF INFORMATION 

SECURITY OFFICER

DEPUTY TO THE CHAIRMAN 

AND CHIEF OPERATING OFFICER

AND

DIVISION OF ADMINISTRATION

CHIEF INFORMATION 

OFFICER AND 

CHIEF PRIVACY OFFICER

Howard Whyte

DEPUTY TO THE 

CHAIRMAN AND 

CHIEF FINANCIAL OFFICER

Steven O. App

OFFICE OF INSPECTOR GENERAL

Jay N. Lerner

Inspector General

OFFICE OF FINANCIAL 

INSTITUTION ADJUDICATION **

DIVISION OF RESOLUTIONS 

AND RECEIVERSHIPS

Bret D. Edwards

Director

LEGAL DIVISION

Charles Yi

General Counsel

* OMWI Director reports directly to the Chairman** ALJs are supported administratively within the Legal Division

DIVISION OF INSURANCE 

AND RESEARCH

Diane Ellis

Director

DIVISION OF 

DEPOSITOR AND 

CONSUMER PROTECTION

Mark E. Pearce

Director

OFFICE OF COMPLEX 

FINANCIAL INSTITUTIONS

Ricardo (Rick) Deln

Director

Arleas Upton Kea

DEPUTY TO THE CHAIRMAN 

FOR EXTERNAL AFFAIRS

Chad Davis

DEPUTY TO THE CHAIRMAN 

FOR POLICY

Arthur Murton

GENERAL COUNSEL

Charles Yi

Craig R. Jarvill

Director

CORPORATE

 UNIVERSITY

OFFICE OF 

COMMUNICATIONS

Suzannah L. Susser

Chief Learning Ocer 

David Barr

Assitant Director

OFFICE OF 

LEGISLATIVE AFFAIRS

Andy Jiminez

Director

OFFICE OF 

THE OMBUDSMAN

M. Anthony Lowe

Director

OFFICE OF MINORITY AND 

WOMEN INCLUSION *

Saul Schwartz

Director 

C. Richard Miserendino

 Administrative Law Judge

CHIEF OF STAFF

Brandon Milhorn

SENIOR ADVISOR

Travis Hill

BOARD OF DIRECTORS

Jelena McWilliams

FDIC

Chairman

Martin J. Gruenberg

FDIC

Board Member

Vacant

FDIC

Vice Chairman

Joseph Otting

OCC

Board Member

Kathleen L. Kraninger

CFPB

Board Member

DIVISION OF

RISK MANAGEMENT 

SUPERVISION

Doreen R. Eberley

Director

FDIC ORGANIZATION CHART/OFFICIALS
APPENDICES

ANNUAL REPORT 

152

Notes: 2009-2018 staffing totals reflect year-end full time equivalent staff. 

CORPORATE STAFFING 

STAFFING TRENDS 2009-2018

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

9,000

6,000

3,000

0

6,557 8,150 7,973 7,476

FDIC Year–End On-Board Stang

7,254 6,631 6,385 6,096 5,880 5,693
APPENDICES

2018

153

NUMBER OF EMPLOYEES BY DIVISION/OFFICE 2017 AND 2018 (YEAR-END)1

Total Washington Regional/

Division or Office: 2018 2017 2018 2017 2018 2017

Division of Risk Management Supervision 2,499 2,558 207 197 2,293 2,361

Division of Depositor and Consumer Protection 816 831 122 120 694 711

Division of Resolutions and Receiverships 387 457 119 134 268 323

Legal Division 474 506 314 326 160 180

Division of Administration 353 358 246 246 108 112

Division of Information Technology 280 276 216 219 64 57

Corporate University 204 217 197 211 7 6

Division of Insurance and Research 204 194 168 157 36 37

Division of Finance 164 166 160 162 4 4

Office of the Chief Information Security Officer2 37 36 37 36 0 0

Office of Inspector General 126 126 80 78 46 48

Office of Complex Financial Institutions 62 62 49 48 13 14

Executive Offices3 20 26 20 26 0 0

Executive Support Offices4 67 68 60 60 7 8

TOTAL 5,693 5,880 1,994 2,019 3,699 3,861

1 The FDIC reports staffing totals using a full-time equivalent methodology, which is based on an employee’s scheduled work hours. Division/Office staffing has been 

rounded to the nearest whole FTE. Totals may not foot due to rounding.

2

 Formerly known as the Information Security and Privacy Staff.

3

 Includes the Offices of the Chairman, Vice Chairman, Director (Appointive), Chief Operating Officer, Chief Financial Officer, Chief Policy Officer, External Affairs, 

and Chief lnformation Officer.

4 Includes the Offices of Legislative Affairs, Communications, Ombudsman, Financial Adjudication, and Minority and Women Inclusion.
APPENDICES

ANNUAL REPORT 

154

SOURCES OF INFORMATION

FDIC Website

www.fdic.gov

A wide range of banking, consumer, and financial 

information is available on the FDIC’s website. This 

includes the FDIC’s Electronic Deposit Insurance 

Estimator (EDIE), which estimates an individual’s 

deposit insurance coverage; the Institution Directory, 

which contains financial profiles of FDIC-insured 

institutions; Community Reinvestment Act 

evaluations and ratings for institutions supervised by 

the FDIC; Call Reports, which are bank reports of 

condition and income; and Money Smart, a training 

program to help individuals outside the financial 

mainstream enhance their money management skills 

and create positive banking relationships. Readers 

also can access a variety of consumer pamphlets, 

FDIC press releases, speeches, and other updates on 

the agency’s activities, as well as corporate databases 

and customized reports of FDIC and banking 

industry information. 

FDIC Call Center

Phone: 877-275-3342 (877-ASK-FDIC) 

703-562-2222 

Hearing Impaired: 800-925-4618 

703-562-2289

The FDIC Call Center in Washington, DC, is 

the primary telephone point of contact for general 

questions from the banking community, the public, 

and FDIC employees. The Call Center directly, or 

with other FDIC subject-matter experts, responds to 

questions about deposit insurance and other consumer 

issues and concerns, as well as questions about FDIC 

programs and activities. The Call Center also refers 

callers to other federal and state agencies as needed. 

Hours of operation are 8:00 a.m. to 8:00 p.m., 

Eastern Time, Monday – Friday, and 9:00 a.m. to 

5:00 p.m., Saturday – Sunday. Recorded information 

about deposit insurance and other topics is available 

24 hours a day at the same telephone number.

As a customer service, the FDIC Call Center has 

many bilingual Spanish agents on staff and has access 

to a translation service, which is able to assist with 

over 40 different languages.

Public Information Center 

3501 Fairfax Drive

Room E-1021

Arlington, VA 22226

Phone: 877-275-3342 (877-ASK-FDIC),

703-562-2200

Fax: 703-562-2296

FDIC Online Catalog: https://catalog.fdic.gov

E-mail: publicinfo@fdic.gov

Publications such as FDIC Quarterly and Consumer 

News and a variety of deposit insurance and 

consumer pamphlets are available at www.fdic.gov 

or may be ordered in hard copy through the FDIC 

online catalog. Other information, press releases, 

speeches and congressional testimony, directives to 

financial institutions, policy manuals, and FDIC 

documents are available on request through the Public 

Information Center. Hours of operation are 9:00 a.m. 

to 4:00 p.m., Eastern Time, Monday – Friday.

Office of the Ombudsman

3501 Fairfax Drive

Room E-2022

Arlington, VA 22226

Phone: 877-275-3342 (877-ASK-FDIC) 

Fax: 703-562-6057

E-mail: ombudsman@fdic.gov

The Office of the Ombudsman (OO) is an 

independent, neutral, and confidential resource and 

liaison for the banking industry and the general 

public. The OO responds to inquiries about the 

FDIC in a fair, impartial, and timely manner. It 

researches questions and fields complaints from 

bankers and bank customers. OO representatives 

are present at all bank closings to provide accurate 

information to bank customers, the media, bank 

employees, and the general public. The OO also 

recommends ways to improve FDIC operations, 

regulations, and customer service.
APPENDICES

2018

155

REGIONAL AND AREA OFFICES

Atlanta Regional Office Chicago Regional Office

Michael J. Dean, Regional Director John P. Conneely, Regional Director

10 Tenth Street, NE 300 South Riverside Plaza

Suite 800 Suite 1700

Atlanta, Georgia 30309 Chicago, Illinois 60606

(678) 916-2200 (312) 382-6000

Alabama Illinois

Florida Indiana

Georgia Kentucky

North Carolina Michigan

South Carolina Ohio

Virginia Wisconsin

West Virginia

Dallas Regional Office Memphis Area Office

Kristie K. Elmquist, Regional Director Kristie K. Elmquist, Director

1601 Bryan Street 6060 Primacy Parkway

Dallas, Texas 75201 Suite 300

(214) 754-0098 Memphis, Tennessee 38119

(901) 685-1603

Colorado Arkansas

New Mexico Louisiana

Oklahoma Mississippi

Texas Tennessee

Kansas City Regional Office New York Regional Office

James D. LaPierre, Regional Director John F. Vogel, Regional Director

1100 Walnut Street 350 Fifth Avenue

Suite 2100 Suite 1200

Kansas City, Missouri 64106 New York, New York 10118

(816) 234-8000 (917) 320-2500

Iowa Delaware

Kansas District of Columbia

Minnesota Maryland

Missouri New Jersey

Nebraska New York

North Dakota Pennsylvania

South Dakota Puerto Rico

Virgin Islands
APPENDICES

ANNUAL REPORT 

156

Boston Area Office San Francisco Regional Office

John F. Vogel, Director Kathy L. Moe, Regional Director

15 Braintree Hill Office Park 25 Jessie Street at Ecker Square

Suite 100 Suite 2300

Braintree, Massachusetts 02184 San Francisco, California 94105

(781) 794-5500 (415) 546-0160

Connecticut Alaska

Maine American Samoa

Massachusetts Arizona

New Hampshire California

Rhode Island Federated States of Micronesia

Vermont Guam

Hawaii

Idaho

Montana

Nevada

Oregon

Utah

Washington

Wyoming
APPENDICES

2018

157

C. OFFICE OF INSPECTOR GENERAL’S ASSESSMENT OF THE MANAGEMENT 

AND PERFORMANCE CHALLENGES FACING THE FDIC

Top Management and Performance Challenges 

Facing the Federal Deposit Insurance Corporation 

February 2019



Federal Deposit Insurance Corporation 

Office of Inspector General
APPENDICES

ANNUAL REPORT 

158

INTRODUCTION 

Each year, Federal Inspectors General are required to identify and report on the top challenges 

facing their respective agencies, pursuant to the Reports Consolidation Act of 2000. The Office 

of Inspector General (OIG) is therefore issuing this report, which identifies the Top Management 

and Performance Challenges (TMPC) facing the Federal Deposit Insurance Corporation (FDIC). 

This TMPC report is based upon the OIG’s experience and observations from our oversight 

work, reports by other oversight bodies, review of academic and other relevant literature, 

perspectives from Government agencies and officials, and information from private-sector 

entities. We considered this body of information in light of the current operating environment 

and circumstances and our independent judgment. 

The FDIC faces Challenges in several critical areas, a number of which remain from previous 

years: 

 Enhancing Oversight of Banks’ Cybersecurity Risk; 

 Adapting to Financial Technology Innovation; 

 Strengthening FDIC Information Security Management; 

 Preparing for Crises; 

 Maturing Enterprise Risk Management; 

 Sharing Threat Information with Banks and Examiners; 

 Managing Human Capital; 

 Administering the Acquisitions Process; and 

 Improving Measurement of Regulatory Costs and Benefits. 

We believe that the FDIC should focus its attention on these Challenges, and we hope that this 

document informs policymakers, including the FDIC and Congressional oversight bodies, and 

the American public about the programs and operations at the FDIC and the Challenges it 

faces.

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT
APPENDICES

2018

159

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

3 

1 | ENHANCING OVERSIGHT OF BANKS’ CYBERSECURITY RISK 

According to the Group of 7 industrialized countries, “cybersecurity risks to the global financial 

system are of critical concern,” and attacks in cyberspace are “increasing in sophistication, 

frequency, and persistence, cyber risks are growing more dangerous and diverse, threatening to 

disrupt our interconnected global financial systems and the institutions that operate and support 

those systems.”1

 The Office of the Comptroller of the Currency (OCC) echoed this sentiment in 

its Semiannual Risk Perspective (Fall 2018), finding that cybersecurity threats “target 

operational vulnerabilities that could expose large quantities of personally identifiable 

information and proprietary intellectual property, facilitate misappropriation of funds and data at 

the retail and wholesale levels, corrupt information, and disrupt business activities.”2

 The 

Financial Stability Oversight Council (FSOC) similarly recognized in its 2018 Annual Report that 

as financial institutions increase their reliance on technology, there is an increased risk that a 

cybersecurity event could have “severe negative consequences, potentially entailing systemic 

implications for the financial sector and the U.S. economy.”3

In February 2018, the White House Council of Economic Advisors estimated that the United 

States economy loses between $57 and $109 billion per year to malicious cyber activity. 

Cyberattacks—such as distributed denial of service and ransomware—may be global in nature 

and have disrupted financial services in several countries around the world.4

 Verizon 

Communications conducted its annual review of global data breaches across multiple sectors, 

including the financial sector, and reported that there were more than 53,000 security incidents 

and 2,200 data breaches across 65 countries between April 2017 and April 2018.5

 This review 

also found that these cyberattacks happen very quickly, and often surreptitiously; nearly 

 

1

 Group of 7, Fundamental Elements of Cybersecurity for the Financial Sector, (October 2016). The Group of 7—

Canada, France, Germany, Italy, Japan, The United Kingdom, and the United States— meet annually to discuss 

issues of global economic governance. 

2

 OCC Semiannual Risk Perspective, (Fall 2018), 16. 3

 The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 established the FSOC, which has 

responsibility for identifying risks and responding to emerging threats to financial stability. The FSOC brings together 

the expertise of Federal financial regulators (including the FDIC), an independent insurance expert, and state 

regulators. 

4

 World Bank Group, Financial Sector’s Cybersecurity: Regulations and Supervision (2018), 1. 5

 Verizon Communications Inc., 2018 Verizon Communications Data Breach Investigations Report, 11th Edition 

(April 2018). 

Cybersecurity continues to be a critical risk facing the financial sector. Cyber risks can affect 

the safety and soundness of institutions and lead to the failure of banks, thus causing losses 

to the FDIC’s Deposit Insurance Fund. For example, a cybersecurity incident could disrupt 

services at a bank, resulting in the exploitation of personal information in fraudulent or other 

illicit schemes, and an incident could start a contagion that spreads through established 

interconnected banking relationships. Despite increased spending on cybersecurity, banks 

are encountering difficulties in getting ahead of the increased frequency and sophistication 

of cyberattacks. The FDIC’s information technology (IT) examinations should ensure strong 

management practices within financial institutions and at their service providers. 
APPENDICES

ANNUAL REPORT 

160

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

4 

90 percent of the reported breaches occurred within seconds, and about 70 percent went 

undiscovered for months. 

The American Bankers Association also noted that “as businesses ramp up their cybersecurity 

efforts, threat vectors such as ransomware have become more frequent and potent, affecting 

companies in nearly every sector and posing significant risk to financial institutions.”6

 One study 

by the U.S. Chamber of Commerce and FICO (Fair Isaac Corporation) evaluated the cyber risk 

at 2,574 U.S. firms across ten sectors, including the financial sector. This study provided 

cybersecurity ranking scores from 300 (high risk) to 850 (low risk) for each sector as well as a 

national average. The cyber risks faced by the finance and banking sector exceeded eight 

other sectors and the national average, as shown in Figure 1. 

IT Examination Programs and Resources 

The FDIC Rules and Regulations, Part 364, Appendix B contains Interagency Guidelines 

Establishing Information Security Standards for bank regulators that state that an insured 

financial institution must “implement a comprehensive written information security program that 

includes administrative, technical, and physical safeguards appropriate to the size and 

complexity of the institution and the nature and scope of its activities.”7

 The FDIC and other 

regulators conduct IT examinations using the Uniform Rating System for Information 

 

6

 American Bankers Association Journal, Top Bank Risks in 2018 (December 11, 2017). 7

 12 C.F.R. Part 364, Appendix B. The FDIC, OCC, and Board of Governors of the Federal Reserve issued the 

Interagency Guidelines Establishing Information Security Standards. 

Source: U.S. Chamber of Commerce and FICO, Assessment of Business Cybersecurity (Q4 2018). 

Figure 1: Cyber Risk Scores Across Ten Sectors
APPENDICES

2018

161

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

5 

Technology created by the Federal Financial Institutions Examination Council (FFIEC).8

 The 

primary purpose of the rating system is to assess risks introduced by information technology at 

institutions and service providers, and to identify those institutions requiring supervisory 

attention.9

 When examinations identify risks and weak management practices at institutions, 

regulators may use enforcement procedures to address such risks.10 

The FDIC uses the Information Technology Risk Examinations (InTREx) work program to 

conduct IT examinations at financial institutions. The FDIC introduced InTREx in 2016 to 

enhance IT supervision by providing examiners with more efficient and risk-focused examination 

procedures.11 From January 2016 through October 2018, FDIC examiners conducted more 

than 3,000 InTREx examinations by reviewing bank documentation, interviewing key personnel, 

testing controls, and observing. According to the Division of Risk Management Supervision 

(RMS) officials, FDIC personnel and other regulators are considering InTREx enhancements to 

increase the effectiveness of the work program. One example would be using data to review 

and understand cybersecurity risks across all institutions. 

InTREx examinations required more hours than the prior examination methodology and 

impacted the FDIC’s ongoing challenge to ensure that it has an appropriate number of IT 

examiners. For example, the New York Regional Office stated that the InTREx examination 

process increased an average of 67 percent over the prior IT examinations, thus adding an 

extra 80 hours to the examination. In its operating budget for 2019, the FDIC added 

23 positions to its IT examination workforce in recognition of growing cybersecurity risks, 

including those posed by TSPs. 

Another challenge is keeping examiner skills current and up-to-date. The FDIC aims to match 

examiner skills with the complexity and sophistication of IT environments at banks. Changes in 

technology can affect the risk profile of an individual bank. For example, in the planning phase 

of an IT examination, the FDIC may find that the risk profile of a bank has increased and is 

greater than previous FDIC projections. Therefore, the FDIC may be required to shift 

examination staffing resources on short notice. We have work underway to review IT 

examination staffing and the effectiveness of IT examinations. 

Third-Party Service Providers 

In addition, banks frequently hire third-party Technology Service Providers (TSP) to perform 

operational functions on behalf of the bank—such as IT operations and business product lines. 

 

8

 The FFIEC was established on March 10, 1979, pursuant to title X of the Financial Institutions Regulatory and 

Interest Rate Control Act of 1978, Public Law 95-630. The Council is an interagency body empowered to prescribe 

uniform principles, standards, and report forms for the federal examination of financial institutions by the Board of 

Governors of the Federal Reserve System, the FDIC, the National Credit Union Administration, the OCC, and the 

Bureau of Consumer Financial Protection and to make recommendations to promote uniformity in the supervision of 

financial institutions. 

9

 FFIEC, Uniform Rating System for Information Technology, 64 Fed. Reg. 3109 (January 20, 1999). 10 FDIC, Risk Management Manual of Examination Policies, Part I 1.1 Basic Examination Concepts and Guidelines 

and Part IV Administrative Enforcement Actions. 

11 Financial Institution Letter-43-2016, Information Technology Risk Examination (InTREx) Program (June 30, 2016). 
APPENDICES

ANNUAL REPORT 

162

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

6 

TSPs may further sub-contract services to other vendors. According to the OCC, banks are 

increasingly reliant upon TSPs and sub-contractors, and such dependence creates a high level 

of risk for the banking industry.12 The OCC indicates that TSPs are increasingly targets for 

cybercrimes and espionage and may provide avenues for bad actors to exploit a bank’s 

systems and operations. For example, on December 20, 2018, two Chinese nationals were 

charged with computer intrusion offenses related to more than 45 service providers whose 

clients included the banking and finance industry and the U.S. Government. The 

hackers targeted service providers in order to gain unauthorized access to the computer 

networks of their clients and steal intellectual property and confidential business information.13 

A financial institution must manage the interconnections, system interfaces, and systems 

access of TSPs and sub-contractors and must implement appropriate controls.14 Significant 

consolidation among TSPs caused large numbers of banks—especially community banks 

supervised by the FDIC—to rely on a few large service providers for core systems and 

operations support.15 As a result, a cybersecurity incident at one TSP has the potential to affect 

multiple financial institutions.16 

FDIC examiners assess financial institutions’ management of TSP risk through InTREx IT 

examinations.17 The Interagency Guidelines Establishing Information Security Standards 

require that financial institutions: 

 Exercise appropriate due diligence in selecting TSPs; 

 Require TSPs to implement appropriate measures to meet the Interagency 

Guidelines objectives related to protecting against unauthorized access to, or use of, 

sensitive customer information; and 

 Monitor contract compliance by the TSPs, including service provider audits, test 

results summaries, or other evaluations.18 

A financial institution’s Board of Directors and senior managers are responsible for the oversight 

of activities conducted by a TSP on their behalf to the same extent as if the activity were 

handled within the institution.19

 

12 The FFIEC described the term TSP to include “independent third parties, joint venture/limited liability corporations, 

and bank and credit union service corporations that provide processing services to financial institutions.” Supervision 

of Technology Service Providers, FFIEC IT Examination Handbook InfoBase. 13 Department of Justice Press Release, Two Chinese Hackers Associated With the Ministry of State Security 

Charged with Global Computer Intrusion Campaigns Targeting Intellectual Property and Confidential Business 

Information (December 20, 2018). 14 OCC Semiannual Risk Perspective (Spring 2018), 18. 15 OCC Semiannual Risk Perspective (Spring 2018), 18. 16 OCC Semiannual Risk Perspective (Spring 2018), 18. 17 TSPs are also subject to interagency examination by Federal regulators, including the FDIC. See Federal 

Regulatory Agencies’ Administrative Guidelines, Implementation of Interagency Programs for the Supervision of 

Technology Service Providers (October 2012). 

18 These Interagency Guidelines can be found in the FDIC Rules and Regulations, Part 364, Appendix B. 

19 Financial Institution Letter 44-2008, Guidance for Managing Third-Party Risk (June 6, 2008). 
APPENDICES

2018

163

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

7 

In our prior OIG report entitled Technology Service Provider Contracts with FDIC-Supervised 

Institutions (2017), we did not see evidence, in the form of risk assessments or contract due 

diligence, that sampled financial institutions fully considered and assessed the potential impact 

and risk of TSPs. We made two recommendations to the FDIC. Although both remain 

unimplemented at the time of completion of this Top Challenges report, the FDIC has been 

working to address the recommendations.20 We plan to conduct additional work in this area to 

assess whether FDIC programs ensure that institutions are properly managing risks associated 

with third-party relationships. 

The FDIC plays an important role in addressing financial institutions’ cybersecurity risk which, if 

left unchecked, could threaten the safety and soundness of institutions as well as the stability of 

the financial system. The FDIC must ensure that IT examinations assess how financial 

institutions manage cybersecurity risks, including risks associated with TSPs, and address such 

risks through effective supervisory strategies. 

2 | ADAPTING TO FINANCIAL TECHNOLOGY INNOVATION 

The Group of Twenty’s Financial Stability Board (FSB) defined financial technology as 

“innovation that could result in new business models, applications, processes, or products with 

an associated material effect on financial markets and institutions and the provision of financial 

services.”21 Financial technology innovation includes, for example, mobile wallets, digital 

currencies, and digital financial advice.22 The rapid pace of financial technology is being driven 

 

20 The FDIC's OIG's Report on Unimplemented Recommendations contains information about recommendations from 

our audits and evaluations that the OIG has not closed because our Office has not determined that the FDIC has fully 

implemented recommended corrective actions. The status of each recommendation is subject to change due to the 

FDIC’s ongoing efforts to implement them, and the OIG’s independent review of information about those efforts. The 

Unimplemented Recommendations listing is updated monthly. 21 Financial Stability Implications from FinTech, Supervisory and Regulatory Issues That Merit Authorities’ Attention, 

(June 27, 2017), 7. The FSB was chartered by the Group of Twenty (G20) on September 25, 2009. The G20 

Members include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, 

Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and 

the European Union (plus Hong Kong, Singapore, Spain and Switzerland). The FSB charter aims to promote global 

financial stability by coordinating the development of regulatory, supervisory, and other financial sector policies and 

conducts outreach to non-member countries. The G20 members represent about two-thirds of the world’s population, 

85 percent of global gross domestic product, and over 75 percent of global trade. 22 Basel Committee on Banking, Sound Practices – Implications of Fintech Developments for Banks and Bank 

Supervisors (February 2018). 

FDIC policymakers and examiners must keep pace with the adoption of new financial 

technology to assess its impact on the safety and soundness of institutions and the stability 

of the banking system. The pace of change and breadth of innovation requires that the 

FDIC create agile and nimble regulatory processes, so that it can respond to, and adjust 

policies, examination processes, supervisory strategies, preparedness and readiness, and 

resolution approaches, as needed. 
APPENDICES

ANNUAL REPORT 

164

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

8 

by capital investment, demand for speed and convenience, and digitization.23 According to the 

Department of the Treasury (Treasury Department), from 2010 to 2017, more than 3,330 new 

technology companies were formed to serve the financial industry.24 The Treasury Department 

also estimated that one-third of online U.S. consumers use at least two financial technology 

services—including financial planning, savings and investment, online borrowing, or some form 

of money transfer and payment.25 Further, KPMG estimated that global investment in financial 

technology was $57.9 billion in just the first 6 months of 2018.26 

Regulators Need Nimble Approach to Financial Innovation 

The Treasury Department encouraged “an agile approach to regulation that can evolve with 

innovation” and stated that regulators, including the FDIC, must be nimble to adapt regulatory 

approaches to banks’ adoption and use of emerging technology, without creating barriers to 

innovation.27 According to the Basel Committee on Banking Supervision, financial technology 

innovation poses three main risks to the banking sector and consumers.28

Cybersecurity Risk – Financial technology companies are interconnected with IT 

systems at banks, yet these technology companies may not be subjected to regulatory 

requirements for safety and soundness and may not be examined by financial 

regulators. Certain banks reported that between 20 and 40 percent of online banking 

logins are attributable to financial technology companies, and many banks represented 

that they cannot distinguish among computer logins, as to whether they originate from 

consumers, data aggregators, or even malicious actors.29 IT system interconnections 

may provide a pathway for a cybersecurity incident at a financial technology company to 

infect the banking system. 

Operational Risk – When institutions have multiple technology services and 

relationships, they face ambiguity and uncertainty as to the applicability of certain 

privacy rules, the Bank Secrecy Act (BSA) provisions and regulations, and Anti-Money 

Laundering (AML) standards. Banks may be unsure as to whether they or the service 

provider implement rules, regulations, and requirements. Moreover, financial institutions 

face challenges to have sufficient skilled staff and capabilities to monitor these risks and 

 

23 Department of the Treasury, A Financial System That Creates Economic Opportunities: Nonbank Financials, 

Fintech, and Innovation July 2018); Basel Committee on Banking, Sound Practices – Implications of Fintech 

Developments for Bank and Bank Supervisors (February 2018). 24 A Financial System That Creates Economic Opportunities: Nonbank Financials, Fintech, and Innovation (July 

2018). 

25 A Financial System That Creates Economic Opportunities: Nonbank Financials, Fintech, and Innovation (July 

2018). 

26 KPMG, The Pulse of Fintech 2018: Biannual Global Analysis of Investment in Fintech (July 2018). KPMG is a 

professional services company. 

27 A Financial System That Creates Economic Opportunities: Nonbank Financials, Fintech, and Innovation, 9 and 13; 

and Sound Practices – Implications of Fintech Developments for Banks and Bank Supervisors (February 2018), 24. 28 Basel Committee on Banking, Sound Practices – Implications of Fintech Developments for Banks and Bank 

Supervisors (February 2018). 29 Lael Brainard, Member, Board of Governors of the Federal Reserve System, Where Do Banks Fit in the Fintech 

Stack? Remarks delivered at the Northwestern Kellogg Public-Private Interface Conference on “New Developments 

in Consumer Finance: Research & Practice” (April 29, 2017). 
APPENDICES

2018

165

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

9 

operations of financial technology companies. In addition, banks may find it difficult to 

authenticate customers under the BSA/AML requirements (“know your customer”), due 

to increased automation and distribution of services and products. Such opacity may 

lead to inadequate and deficient compliance with legal standards and requirements. 

Strategic Risk – Traditional banks risk losing substantial market share and profits due 

to financial innovation. For example, large-scale use of distributed ledger technology30

to process payments, such as the use of blockchain and Bitcoin, has the potential to 

disrupt the banking sector’s payment system. 

The FDIC should ensure that banks have proper governance and risk management practices 

around these technologies. The FDIC may need to increase training and adjust staffing to 

ensure examiners have the skills to effectively supervise the risks involved with new technology. 

Further, the FDIC may need to modify examination policies and procedures that pre-date 

financial innovation to improve supervision of financial innovation risk. The FDIC also must 

monitor for potential disruption to the banking sector from technological change and anticipate 

losses to the Deposit Insurance Fund. 

The FDIC Chairman noted in October 2018 that “[w]hat is different today is the speed and 

tremendous impact of technological innovation in and on banking, and the potential for 

technology to disrupt not just an institution or two, but banking as we know it.” As such, the 

FDIC Chairman announced that the agency was planning to set up an Office of Innovation, 

which would review how the FDIC can promote technological development at community banks, 

while still providing a safe regulatory environment.31 We will continue to monitor the 

developments and activities of this new Office at the FDIC. 

Financial technology innovation continues to grow and impact the banking system. Institutions 

must have robust and effective governance and management practices to mitigate risks 

associated with adoption of financial technology. The FDIC should evaluate the impact of these 

innovations on banks, assess emerging risks, and expeditiously adjust its processes and 

supervisory strategies. 

 

30 According to the National Institute of Standards and Technology (NIST), distributed ledgers, such as blockchains, 

are tamper-resistant digital records of transactions that once established cannot be changed. Blockchain Technology 

Overview, NIST Internal Report 8202. 

31 FDIC Chairman McWilliams noted her plans for an Office of Innovation in remarks at the Federal Reserve Bank of 

Philadelphia, “Fintech and the New Financial Landscape” (November 13, 2018). 
APPENDICES

ANNUAL REPORT 

166

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

10 

3 | STRENGTHENING FDIC INFORMATION SECURITY MANAGEMENT 

The U.S. Computer Emergency Readiness Team (US-CERT) reported 35,277 information 

security incidents for Federal Executive Branch civilian agencies in 2017. In May 2018, the 

Office of Management and Budget (OMB) and the Department of Homeland Security (DHS) 

conducted a review of Federal cybersecurity capabilities at 96 civilian agencies across 

76 metrics to determine each agency’s ability to identify, detect, respond, and recover from 

cyber incidents. The review found that 74 percent (71 agencies) had cybersecurity programs 

that were either “At Risk” or “High Risk.32 

As a bank regulator, the FDIC collects and maintains a significant volume of sensitive PII, such 

as names, home addresses, Social Security Numbers, dates and places of birth, bank account 

numbers, and credit card information.33 The FDIC also maintains business proprietary 

information that is sensitive, including banks’ internal operations regarding counterparties, 

vendors, suppliers, and contractors. 

The FDIC has encountered a number of information security incidents over the last several 

years. In August 2011, the FDIC began to experience a sophisticated, targeted attack on its 

own network whereby an entity gained unauthorized access to the network, escalated its 

privileges, and maintained an ongoing presence in the network. The attacker penetrated more 

than 90 workstations or servers within the FDIC’s network over a significant period of time, 

including computers used by a former Chairman and other senior FDIC officials, and gained 

unauthorized access to a significant quantity of sensitive data. 

During late 2015 and early 2016, the FDIC experienced eight additional incidents as departing 

employees improperly took sensitive information shortly before leaving the FDIC. Seven 

incidents involved PII, including Social Security Numbers, and thus constituted data breaches. 

In the eighth incident, the departing employee took highly sensitive components of resolution 

 

32 Federal Cybersecurity Risk Determination Report and Action Plan (May 2018). “At Risk” meant that some 

essential policies, processes, and tools were in place to mitigate overall cybersecurity risk, but significant gaps 

remained; and “High Risk” meant that fundamental cybersecurity policies, processes, and tools were either not in 

place or not deployed sufficiently. 

33 PII is any information about an individual maintained by an agency, including (1) any information that can be used 

to distinguish or trace an individual‘s identity, such as name, Social Security Number, date and place of birth, 

mother‘s maiden name, or biometric records; and (2) any other information that is linked or linkable to an individual, 

such as medical, educational, financial, and employment information. 

The FDIC maintains thousands of terabytes of sensitive data within its IT systems and has 

more than 180 IT systems that collect, store, or process Personally Identifiable Information 

(PII) of FDIC employees; bank officials at FDIC-supervised institutions; and bank customers, 

depositors, and bank officials associated with failed banks. FDIC systems also hold 

sensitive supervisory data about the financial health of banks, bank resolution strategies, 

and resolution activities. The FDIC must continue to strengthen its implementation of 

governance and security controls around its IT systems to ensure that information is 

safeguarded properly. 
APPENDICES

2018

167

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

11 

plans submitted by certain large systemically important financial institutions without 

authorization; this former FDIC employee was recently convicted for theft of government 

property.34 Our OIG Special Inquiry35 regarding these breaches revealed systemic weaknesses 

that hindered the FDIC’s ability to respond to multiple information security incidents and 

breaches efficiently and effectively. We made 13 recommendations in our OIG Special Inquiry 

report; of these recommendations, 5 remained unimplemented at the time of completion of this 

Top Challenges report. 

IT Governance 

The FDIC relies extensively on IT to accomplish its mission and must subject its IT initiatives to 

appropriate governance and oversight. IT governance provides organizations with a structured 

process to support IT investment decisions while promoting accountability, due diligence, and 

the efficient and economic delivery of IT services.36 As illustrated in Figure 2, the FDIC’s IT 

governance structure consists of two principal elements: 

 The Governance 

Framework. Reflects the 

goals and priorities of the 

FDIC through multiple 

components, including the IT 

Strategic Plan and 

Enterprise Architecture. 

 The Governance 

Processes. Consist of 

controls and procedures to 

make IT capital investments 

and oversee individual 

projects. 

In our OIG report entitled The FDIC’s Governance of Information Technology Initiatives

(July 2018), we found that the FDIC faced a number of challenges and risks related to the 

governance of its IT initiatives. For example, the FDIC did not fully develop a strategy to move 

IT services and applications to the cloud or obtain the acceptance of key FDIC stakeholders 

before taking steps to initiate cloud migration projects. The FDIC also had not implemented an 

effective Enterprise Architecture to guide the three IT initiatives we reviewed or the FDIC’s 

broader transition of IT services to the cloud. An ineffective Enterprise Architecture limited the 

FDIC’s ability to communicate to business stakeholders how it intended to implement its new IT 

strategies. In turn, this caused stakeholders to question the decision to adopt new cloud 

technologies and the impact on business processes. We made eight recommendations to 

 

34 United States Attorney’s Office, Eastern District of New York, Department of Justice Press Release, Former Senior 

Employee at FDIC Convicted of Embezzling Confidential Documents (December 11, 2018). 35 OIG Special Inquiry Report, The FDIC’s Response, Reporting, and Interactions with Congress Concerning 

Information Security Incidents and Breaches (April 2018). 36 OIG Report, The FDIC’s Governance of Information Technology Initiatives (July 2018). 

 Figure 2: FDIC’s IT Governance Structure

Source: OIG analysis of IT governance documentation. 
APPENDICES

ANNUAL REPORT 

168

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

12 

improve the FDIC’s governance processes, two of which remained unimplemented at the time 

of completion of this Top Challenges report. 

Information Security Controls 

In our annual Federal Information Security Modernization Act (FISMA) audit report, The FDIC’s 

Information Security Program – 2018 (October 2018), we identified security control weaknesses 

that limited the effectiveness of the FDIC’s information security program and practices and 

placed the confidentiality, integrity, and availability of the FDIC’s information systems and data 

at risk. Although the FDIC was working to address previously identified control weaknesses, the 

FDIC had not yet completed corrective actions for eight prior recommendations (as of 

December 2018). We made four additional recommendations in this report. The following 

briefly describes the highest risk areas and weaknesses that can be described in a public report: 

 Information Security Risk Management. The FDIC had not fully defined or 

implemented an enterprise-wide and integrated approach to identifying, assessing, 

and addressing the full spectrum of internal and external risks, including those 

related to cybersecurity and the operation of information systems. Notably, the FDIC 

had not finalized a Risk Appetite, Risk Tolerance Level, and Risk Profile. Without 

these fundamental elements, the FDIC faced difficulties integrating risk into its 

budget, strategic planning, performance reporting, and internal controls. 

 Enterprise Security Architecture. The FISMA audit report issued in 2017 

recommended that the FDIC develop an enterprise security architecture and 

integrate it into an enterprise architecture consistent with the Federal Government’s 

enterprise architecture requirements and the FDIC’s business and mission 

requirements. According to NIST, an enterprise security architecture describes the 

structure and processes of an organization’s security processes, information security 

systems, and responsibilities of personnel and units, and shows their alignment with 

the organization’s mission and strategic plans. The lack of an effective enterprise 

security architecture increases the risk that the FDIC’s information systems could be 

developed with inconsistent security controls that are costly to maintain. In 

July 2018, the FDIC provided the OIG with documentation describing its enterprise 

security architecture. The OIG is reviewing the corrective actions undertaken by the 

FDIC at the time of this Top Challenges report. 

 Security Control Assessments. FISMA requires agencies to test and evaluate 

their information security controls periodically to ensure they are effectively 

implemented. We identified instances in which security control assessments 

performed by contractors did not include testing of security control implementation. 

Instead, assessors relied on narrative descriptions of the controls in FDIC policies, 

procedures, and system security plans and/or interviews of FDIC or contractor 

personnel. Without actual testing, assessors did not have a basis for concluding on 

the effectiveness of security controls. Moreover, we found that the FDIC did not 
APPENDICES

2018

169

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

13 

have adequate oversight of security control assessments performed by contractor 

personnel. 

 Patch Management. Software vendors release patches as needed or on a periodic 

basis to address faults in operating systems or applications. Vendors may also issue 

patches to alter functionality, address new security threats, or modify software 

configurations to improve security. Effective patch management is, therefore, critical 

to maintaining the integrity, availability, and security of the FDIC’s IT infrastructure 

and the data that resides within it. We found that the FDIC’s patch management 

processes were not always effective in ensuring that the FDIC implemented patches 

within defined timeframes. Unpatched systems increase the risk of exposing the 

FDIC’s network to a security incident. 

 Backup and Recovery. Our FISMA audit report issued in 2017 noted that the 

FDIC’s IT restoration capabilities were limited, and that the FDIC had not taken 

timely action to address limitations in its ability to maintain or restore critical IT 

systems and applications during a disaster. The FDIC will continue to have limited 

assurance that it can maintain and restore mission-essential functions within 

applicable timeframes during an emergency, until the completion of the Backup Data 

Center Migration Project in 2019. 

The FDIC has increased the 2019 Operating Budget for the Office of the Chief Information 

Security Officer by approximately $650,000 (1.3 percent), up to a total of $51 million. The 

increased funding is intended to enhance the protection of the FDIC’s applications systems and 

databases from breaches and intrusions, and improve the FDIC’s responsiveness and 

resilience. 

In another OIG report entitled Controls over System Interconnections with Outside 

Organizations, (December 2018), we reviewed the FDIC’s controls for managing system 

interconnections37 with Federal agencies and non-governmental entities. We found that the 

FDIC’s policies and procedures did not define the types of technologies and configurations that 

constituted a system interconnection and, therefore, required a written agreement. In addition, 

the FDIC’s policies and procedures did not articulate the roles and responsibilities for all 

stakeholders involved in managing system interconnections. Also, the FDIC did not establish 

documentation requirements for key activities, and it did not create written agreements to 

govern several of its system interconnections. Further, we identified instances in which written 

agreements governing system interconnections had expired, even though the underlying 

connections remained enabled. We made seven recommendations to improve the FDIC’s 

policies, procedures, and contracts governing system interconnections. 

 

37 NIST SP 800-47, Security Guide for Interconnecting Information Technology Systems, defines a “system 

interconnection” as a direct connection of two or more information technology systems for the purpose of sharing data 

and other information resources. 
APPENDICES

ANNUAL REPORT 

170

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

14 

We have a number of planned and ongoing audits of the FDIC’s internal IT operations, including 

the FDIC's privacy program and practices; security of a system that supports the FDIC’s bank 

supervision and consumer compliance; and security of mobile devices. 

The FDIC must safeguard information held within its IT systems, much of which contains 

sensitive information about banks, depositors, and FDIC employees. Unauthorized access and 

disclosure of this information could cause significant harm to individuals, banks, and the FDIC. 

The FDIC must remain vigilant in its efforts to institute necessary controls and properly protect 

the information entrusted to it. 

4 | PREPARING FOR CRISES 

Crisis readiness requires advanced preparation, regardless of whether the crisis results from 

financial disruption in the markets, economic turmoil, a cyber attack, natural disaster, or other 

event. “When the unexpected, enterprise-threatening crisis strikes, it is too late to begin the 

planning process. Events will quickly spin out of control, further adding to the loss of reputation 

and avoidable costs necessary to survive and recover with minimal damage.”38 

Although crises may be 

different in their cause or 

complexity, implementation of 

fundamental principles allows 

agencies, such as the FDIC, to 

plan and prepare for such 

events. Figure 3 illustrates the 

Crisis Management 

Preparedness Cycle, which 

includes the following five 

components:39

 

38 Hastings Business Law Journal, The Board’s Responsibility for Crisis Governance (Spring 2017), 290. 39 Federal Emergency Management Agency National Incident Management System. 

Central to the FDIC’s mission is readiness to address crises in the banking system. The 

FDIC must be prepared for a broad range of crises that could impact the banking sector. 

These readiness activities should help to ensure the safety and soundness of institutions, as 

well as the stability and integrity of our nation’s banking system. 

Figure 3: Crisis Management Preparedness Continuous Cycle 

Source: Federal Emergency Management Agency. 
APPENDICES

2018

171

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

15 

 Plan – Supports effective operations by identifying objectives, describing 

organizational structures, assigning tasks to achieve objectives, identifying 

responsibilities to accomplish tasks, and contributing to the goals. 

 Organize – Identifies necessary skillsets and technical capabilities. 

 Train – Provides personnel with the knowledge, skills, and abilities to respond to a 

crisis. 

 Exercise – Identifies strengths and weaknesses through an assessment of gaps and 

shortfalls with plans, policies, and procedures to respond to a crisis. 

 Evaluate and Improve – Compiles lessons learned, develops improvement plans, 

and tracks corrective actions to address gaps and deficiencies identified. 

Early Risk Identification and Mitigation 

The Financial Crisis Inquiry Commission stated that financial regulators “had ample power in 

many arenas [to protect the financial system], and they chose not to use it,” thus rejecting the 

regulators’ claim that they did not have the necessary authorities.40 The current FDIC Director 

(former FDIC Chairman) noted that when banks are profitable, as in 2018, the FDIC and other 

regulators must maintain supervisory vigilance.41 

In 2011, the FDIC developed a Forward-Looking Supervision initiative as part of the lessons 

learned from the financial crisis. The goal of the initiative was to “identify and assess the 

potential impact of an institution’s new and/or growing risks and ensure early mitigation if 

necessary.”42 In our OIG evaluation report, Forward-Looking Supervision (August 2018), we 

found that the FDIC did not have a comprehensive policy guidance document on ForwardLooking Supervision and should clarify guidance associated with its purpose, goals, roles, and 

responsibilities. We also found that examiners identified overall concentration risk management 

conclusions and concerns in the examination report; however, only 27 percent of reports 

sampled elevated concerns to the financial institution’s board of directors. 

In addition, the FDIC uses other systems and risk-monitoring tools to identify financial institution 

emerging risks. For example, the Offsite Review Program (ORP) analyzes quarterly financial 

institution data against benchmark indicators developed by the FDIC. When an institution falls 

outside these benchmarks, FDIC examiners must review the bank’s information, document the 

risks, and select an appropriate supervisory strategy to address the risks. We are currently 

conducting a review to examine the extent to which the ORP identifies supervisory concerns 

and potential problems, and appropriately adjusts supervisory strategies. 

 

40 Financial Crisis Inquiry Commission, Final Report of the National Commission on the Causes of the Financial and 

Economic Crisis in the United States (January 21, 2011). The Financial Crisis Inquiry Commission was established 

as part of the Fraud Enforcement and Recovery Act (Public Law 111-21) to examine the causes of the financial crisis. 41 “Financial Regulation: A Post-Crisis Perspective”, Remarks by Martin J. Gruenberg, then-Chairman of the FDIC, 

Brookings Institution (November 14, 2017). 

42 FDIC RMS Perspectives, Vol 1, Issue 2, (Second Quarter 2014). 
APPENDICES

ANNUAL REPORT 

172

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

16 

Crisis Preparedness and Planning 

According to the FDIC’s analysis of the 2008-2011 financial crisis, the events unfolded more 

quickly than the FDIC expected and were more severe than the FDIC’s planning efforts 

anticipated.43 For example, in July 2008, the FDIC resolved IndyMac, the most expensive FDIC 

failure, estimated to cost about $12.3 billion, and in September 2008, Washington Mutual, the 

sixth-largest FDIC-insured institution, also failed. The FDIC had not planned for several large 

and small banks to fail at the same time, and these failures occurred at a quicker pace than in 

previous crises. 

Consequently, the FDIC needed to hire staff quickly to manage the escalating workload 

associated with what would ultimately be nearly 500 failed banks. To address its staffing 

shortfall, the FDIC authorized funding for additional personnel during the crisis but faced 

challenges expediting the hiring process to on-board needed staff. For example, in 

September 2008, the Division of Resolutions and Receiverships had an authorized staff of 825, 

but only 259 staff was on board.44 

The FDIC also faced challenges dealing with the increased volume of contracts needed. During 

the financial crisis, the FDIC awarded over 6,000 contracts totaling more than $8 billion. The 

size of its acquisition staff was initially insufficient, which resulted in delays to modify existing 

contracts and issue new contracts. The FDIC needed to rapidly hire and train personnel to 

oversee the contracts. 

Over the past several years, the FDIC developed goals and objectives to prioritize certain crisis 

readiness planning activities. According to the FDIC 2018-2022 Strategic Plan, the agency 

aims to “develop, test, and maintain contingency plans to ensure it is prepared to handle a wide 

range of potential failure scenarios, including the failure of a large financial institution; 

simultaneous, multiple failures; the failure of an institution with large international holdings; and 

the failure of an insured institution that operates primarily through the internet.” The FDIC is 

developed a draft “surge staffing” plan that addresses resources needs for concurrent 

community bank failures in conjunction with the failure of a moderately large ($25 to $50 billion) 

bank. 

We are conducting an evaluation to assess the FDIC’s preparedness efforts to address future 

crises. The scope of our evaluation includes examining the FDIC's crisis readiness plans, its 

tools and mechanisms to implement the plans, roles and responsibilities, training on crisis 

response, and actions to evaluate and improve readiness.

The FDIC’s ability to mitigate risk and resolve failed banks affects the safety and soundness of 

institutions as well as the stability of the banking system. The FDIC should maintain robust 

processes to plan, prepare, train, exercise, and maintain readiness for scenarios that could lead 

to crises. 

 

43 FDIC, Crisis and Response, An FDIC History, 2008-2013 (November 30, 2017). 44 Crisis and Response, An FDIC History, 2008-2013.
APPENDICES

2018

173

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

17 

5 | MATURING ENTERPRISE RISK MANAGEMENT 

According to FDIC Directive 4010.3, Enterprise Risk Management and Internal Control 

Program, “Congress, the Office of Management and Budget (OMB), and the Government 

Accountability Office (GAO) have directed attention to the need for federal agencies to adopt 

[Enterprise Risk Management (ERM)].” OMB introduced ERM through revised governmentwide circulars, including OMB Circular No. A-123, Management’s Responsibility for Enterprise 

Risk Management and Internal Control. The FDIC Directive states that while not legally 

obligated to follow executive directives, the FDIC “embrace[s] the spirit of ERM as outlined in 

OMB Circular No. A-123.”45

According to OMB Circular No. A-123, Federal agencies face internal and external risks to 

achieving their missions, including “economic, operational, and organizational change factors, 

all of which would negatively impact an Agency’s ability to meet goals and objectives if not 

resolved.”46 OMB Circular No. A-123 further requires that agencies take risk into account when 

designing internal controls. ERM should be an element of the agency’s overall governance 

process that focuses specifically on the identification, assessment, and management of risk, 

and it should include these elements: 

 A risk management governance structure; 

 A methodology for developing a risk profile; and 

 A process, guided by an organization’s senior leadership, to consider risk appetite 

and risk tolerance levels that serves as a guide to establish strategy and select 

objectives. 

OMB urges agencies to adopt an enterprise-wide view of ERM—a “big picture” perspective— 

thus synthesizing the management of risks into the very fabric of the organization; it should not 

be viewed in “silos” among different divisions or offices. ERM should integrate risk 

management into the agency’s processes for budgeting, including strategic planning, 

performance planning, and performance reporting practices. 

 

45 OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and Internal Control, 

(July 15, 2016). 

46 OMB Circular No. A-123 (July 5, 2016), 7. 

Enterprise Risk Management (ERM) is a critical part of an agency’s governance, as it can 

inform prudent decision-making at an agency, including strategic planning, budget 

formulation, and capital investment. ERM program requirements include identifying risks 

that could affect the organization (Risk Profile and Inventory), establishing the amount of risk 

an organization is willing to accept (Risk Appetite), prioritizing strategies to address risks in 

the proper sequence, and responding to and mitigating the risks. The FDIC established an 

ERM program office in 2011, but has neither developed the underlying ERM program 

requirements nor realized the benefits of a mature ERM program. 
APPENDICES

ANNUAL REPORT 

174

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

18 

Figure 4 illustrates the manner 

in which ERM should be 

implemented in an organization, 

and the junctures at which it 

should be considered when 

making decisions concerning 

the agency’s strategy, budget, 

program management, and 

operations. Effective ERM 

implementation starts with an 

agency establishing a 

customized ERM program that 

fits its organizational mission, 

culture, operating environment, 

and business processes. 

GAO identified six essential elements to assist Federal agencies’ implementation of ERM, 

including:47

1. Align the ERM process to agency goals and objectives – Ensuring that ERM 

contributes to achieving mission and results. 

2. Identify Risks – Assembling a list of risks and opportunities that could affect the agency 

from achieving its goals and objectives. 

3. Assess Risks – Prioritizing risk responses based on an assessment of the likelihood 

and impact of a risk on the agency’s mission. 

4. Select Risk Response – Selecting a strategy to respond to or mitigate risk based on 

management’s risk appetite, such as acceptance, avoidance, reduction sharing, or 

transfer of risk. 

5. Monitor Risks – Determining whether risks are changing and if responses are 

successful. 

6. Report on Risks – Communicating with management and other stakeholders on the 

status of addressing risks. 

The FDIC’s Enterprise Risk Management Program 

In June 2010, the FDIC hired a consulting firm to address five key issues regarding its ERM 

program: Identification and management of risks; Organizational structure; Risk management 

activities and processes; Capabilities and infrastructure for risk management; and Actionable 

transparency. The consulting report identified gaps in all five areas, recommended that the 

FDIC establish a Chief Risk Officer (CRO), and submitted several organizational options to be 

evaluated by the FDIC. In response to the firm’s recommendations, the then-FDIC Chairman 

 

47 GAO, Enterprise Risk Management: Selected Agencies’ Experiences Illustrate Good Practices in Managing Risk, 

GAO-17-63 (December 1, 2016). 

Figure 4: Enterprise Risk Management Program 

Source: Playbook: Enterprise Risk Management for the U.S. Federal Government. 
APPENDICES

2018

175

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

19 

appointed a Risk Steering Committee to evaluate alternatives and recommend an organizational 

structure for risk management. 

The Risk Steering Committee recommended to the FDIC Board the establishment of an Office 

of Corporate Risk Management (OCRM), headed by a CRO, with total staffing of 16. The Board 

approved changes recommended by the Risk Steering Committee in January 2011. The 

changes were intended to provide an office within the FDIC that was assigned to review internal 

risks with a system-wide perspective; facilitate sharing of information regarding existing, 

emerging, and potential risks; and instill risk governance as part of the FDIC’s culture. 

By May 2016, the CRO had retired and only five staff remained in OCRM by 2017. 

Consequently, in 2017, the FDIC initiated an organizational review of its existing ERM program 

to assess whether changes to the program should be made based on its experience-to-date 

with its ERM framework. In June 2017, the FDIC placed the CRO under the Division of Finance 

(DOF) as a Deputy Director, and combined OCRM with the Corporate Management Control 

Branch, to form a newly constituted Risk Management and Internal Controls Branch (RMIC) 

within DOF. RMIC responsibilities included not only ERM, but also internal control as well as 

management of risks in individual programs and projects. 

The FDIC, in its 2018 Performance Goals, identified enterprise risk as a priority initiative.48 

However, as noted above, we reported in our recent FISMA audit, The FDIC’s Information 

Security Program – 2018 (October 2018) that the FDIC had not fully defined or implemented an 

enterprise-wide and integrated approach to identifying, assessing, and addressing the full 

spectrum of internal and external risks. The FDIC had not finalized its Risk Appetite, Risk 

Tolerance Level, and Risk Profile. Without these key fundamental elements, the FDIC faced 

difficulties integrating risk into its budget, strategic planning, performance reporting, and internal 

controls. In addition, FDIC Divisions and Offices were not able to evaluate risk determinations 

in the context of the agency’s overall risk levels, tolerance, and profile. As a result, the FDIC 

could not be sure that its resources were being allocated toward addressing the most significant 

risks in achieving strategic objectives. 

The FDIC issued its revised Enterprise Risk Management and Internal Control Program Policy

(ERM Policy) in October 2018.49 This ERM Policy aims to “identify, assess, and address major 

risks (including emerging risks) that have a potential broad impact to the FDIC’s ability to 

achieve its goals, objectives, and mission.” The ERM Policy indicates that the agency’s ERM 

would be implemented through the FDIC’s existing structure, and that FDIC Divisions and 

Offices would identify key activities and risks, and take actions to address these risks. 

The FDIC’s ERM Policy identified key requirements for the program, including establishing a 

Risk Appetite and Risk Profile. The ERM Policy also requires that the FDIC establish a Risk 

Inventory which is a “comprehensive, detailed list of risks that could affect the FDIC’s ability to 

 

48 2018 FDIC Performance Goals, Priority 2018 Initiatives, Goal 6: Identify and address enterprise risk. 49 FDIC, Enterprise Risk Management and Internal Control Program, Directive 4010.3 (October 25, 2018). 
APPENDICES

ANNUAL REPORT 

176

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

20 

meet its strategic objectives,” and that the ERM program includes the following essential 

elements: 

 Process Alignment to Goals and Objectives; 

 Risk Identification; 

 Risk Assessment; 

 Risk Response Selection; 

 Risk Monitoring; and 

 Communication and Reporting. 

We are initiating an evaluation of the FDIC’s ERM program to assess the extent to which the 

FDIC has implemented an effective ERM program consistent with guidance and best practices. 

The FDIC should develop an integrated approach to ERM. This ERM program should 

synthesize the management of risks into the FDIC’s organizational culture, so that these risks 

may be considered and incorporated into the FDIC’s budget, strategic planning, performance 

reporting, and internal controls for the agency as a whole. 

6 | SHARING THREAT INFORMATION WITH BANKS AND EXAMINERS

Presidential Policy Directive 21, Critical Infrastructure Security and Resilience, identified the 

financial services sector as one of 16 critical infrastructure sectors vital to public confidence and 

the nation’s safety, prosperity, and well-being. The FFIEC recognized that financial institutions 

should be prepared to address a variety of threats, including terrorists attacks, pandemics, and 

cybersecurity.50 For example, cyberattacks at financial institutions prevented public access to 

websites, compromised personal information of tens of millions of customers, and millions of 

dollars were lost due to systems breaches where criminals transferred funds from customer 

accounts and from automated teller machines.51 Further, information such as that provided by 

the Centers for Disease Control and Prevention allows financial institutions to monitor potential 

 

50 FFIEC, Business Continuity Planning (February 2015). 51 GAO, Cybersecurity: Bank and Other Depository Regulators Need Better Data Analytics and Depository 

Institutions Want More Usable Threat Information, GAO-15-509 (July 2015). 

Federal Government agencies and private-sector entities share information about threats to 

U.S. critical infrastructure sectors, including the financial sector. Sharing actionable and 

relevant threat information among Federal and private-sector participants protects the 

financial system by building threat awareness and allowing for informed decision-making. 

The FDIC must ensure that relevant threat information is shared with its supervised 

institutions and examiners as needed, in a timely manner, so that actions can be taken to 

address the threats. Threat information also provides FDIC examiners with context to 

evaluate banks’ processes for risk identification and mitigation strategies. 
APPENDICES

2018

177

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

21 

pandemic health outbreaks to ensure institutions have the capability to continue critical 

operations when large numbers of staff are unavailable for prolonged periods of time.52

FSOC noted, in its 2018 Annual Report, the critical importance of sharing timely and actionable 

threat information among the Federal Government and the private sector. FSOC stated that 

Federal agencies should consider how to share information and when possible “declassify (or 

downgrade classification) of information to the extent practicable, consistent with national 

security needs.”53 GAO also identified various sources of threat information that could be 

shared with financial institutions. Figure 5 illustrates how GAO captured threat information flows 

from multiple sources. 

Figure 5: Selected Sources of Threat Information 

In July 2018, DHS launched a new initiative called the National Risk Management Center 

(NRMC). According to DHS, the NRMC was established in response to “the increasingly 

complex threat environment and corresponding demand from industry for greater integrated 

support from the U.S. federal government.”54 The NRMC will work across industry sectors and 

Federal agencies, including the banking sector, so that participants can have a more 

comprehensive perspective on systemic risk; the goal is to promote collaborative risk strategies. 

 

52 Centers for Disease Control and Prevention Pandemic Intervals Framework, (September 26, 2014); and FFIEC, 

Business Continuity Planning, Appendix D: Pandemic Planning. 53 FSOC 2018 Annual Report, 7. 54 DHS, National Risk Management Center Fact Sheet (July 2018). 
APPENDICES

ANNUAL REPORT 

178

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

22 

According to the FDIC’s 2017 Annual Report, the FDIC continues to engage with the Financial 

and Banking Information Infrastructure Committee, Financial Services Sector Coordinating 

Council for Critical Infrastructure Protection, DHS, and other regulatory agencies and law 

enforcement to share information and coordinate responses. 

Banks’ Access to and Use of Threat Information 

In November 2014, the FDIC and other FFIEC members encouraged financial institutions to join 

the Financial Services Information Sharing and Analysis Center (FS-ISAC), through its 

Statement on Cybersecurity Threat and Vulnerability Monitoring and Sharing (Cybersecurity 

Sharing Statement).55 FS-ISAC is a group of 7,000 member organizations, and its purpose is to 

share timely, relevant, and actionable security threat information. The Cybersecurity Sharing 

Statement also suggested using other resources such as the Federal Bureau of Investigation’s 

(FBI) InfraGard,56 U.S. Computer Emergency Readiness Team,57 and Secret Service Electronic 

Crimes Task Force.58 

According to the FFIEC, financial institutions should have business continuity plans that 

“[a]nalyze threats based upon the impact to the institution, its customers, and the financial 

market it serves.”59 Further, the FFIEC notes that financial institutions should have “a means to 

collect data on potential threats that can assist management in its identification of information 

security risks.”60 FDIC-supervised institutions are links of the chain in the financial services 

system interconnections; an incident involving one community bank has the potential to affect 

the broader financial sector.61 Therefore, as part of its examination process, the FDIC must 

ensure that supervised institutions can receive and access threat information, and that they 

have business continuity plans to address such threats. 

FDIC and Examiners’ Access to and Use of Threat Information 

FDIC Headquarters staff has access to significant amounts of threat information held by the 

U.S. Government, and much of the information is confidential and highly sensitive. The FDIC 

should develop sound practices to review threat information and take necessary actions based 

upon such information. In doing so, the agency should ensure that it develops and maintains 

processes to assess the sensitivity and classification of this information. 

 

55 FFIEC, Statement on Cybersecurity Threat and Vulnerability Monitoring and Sharing. 56 InfraGard is a web-based portal that provides collaboration between the FBI and the private sector to exchange 

information about critical infrastructure. 

57 US-CERT is a component of the Department of Homeland Security; its mission is to reduce the nation’s risk of 

systemic cybersecurity and communications challenges. 

58 The Electronic Crimes Task Force is a nationwide network designed to support and assist state, local, and Federal 

law enforcement agencies in order to combat criminal activity involving the use of new technology. 

59 FFIEC, Business Continuity Planning Booklet, Risk Assessment, (Available on the FFIEC website). 60 FFIEC IT Examination Handbook Infobase, Information Security Booklet, II, Information Security Program 

Management (Available on the FFIEC website). 61 Departments of the Treasury and of Homeland Security, Financial Services Sector-Specific Plan (2015), 9. 
APPENDICES

2018

179

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

23 

In addition, the FDIC should ensure that the threat information can be disseminated to specific 

examiners as needed, and that such examiners are authorized to receive access to sensitive 

threat information. For example, if the FDIC has access to threat information about a particular 

FDIC-supervised bank, the examiners overseeing this institution should have access to such 

threat information. Given the volume of information, the FDIC faces challenges to analyze, 

distill, and convey relevant and actionable threat information from FDIC Headquarters to 

examiners in the FDIC’s Regional and Field Offices. 

Threat information can assist FDIC examiners in prioritizing and focusing their work on 

emerging issues, and modifying the depth or scope of an examination. Understanding the 

nature of threats provides context for examiners when evaluating financial institutions’ 

processes for identifying and considering relevant risks and implementing risk mitigation 

strategies. Further, threat information may result in changes to examination policy or 

procedures to address emerging issues. 

RMS instituted Regional Cyber Incident Reporting and Response Guides (Reporting and 

Response Guides) to outline the steps to be taken by Regional and Field Offices when banks 

report threats and incidents. These steps include gathering information about an incident; 

providing advice to the affected entity; determining whether the incident warrants escalation to 

FDIC Headquarters; and conducting ongoing monitoring and communications. RMS also has a 

Cyber Incident Response Plan for use by FDIC Headquarters staff to evaluate threats and 

incidents reported by banks through the Field and Regional Offices. The Plan uses 

predetermined criteria and thresholds to determine when threat and incident information should 

be escalated to FDIC senior management. 

Neither the RMS Cyber Incident Response Plan nor the Reporting and Response Guides 

provide procedures for the FDIC to disseminate information to its Regional and Field Offices 

and examiners. RMS officials stated that they review threat information from multiple sources 

and regularly convey relevant information to Regional and Field Office examiners, depending 

upon the criticality and sensitivity of the information. 

Based on our research, as of the end of 2018, the FDIC did not have a policy that (i) defined 

criteria for selecting relevant, actionable threat information, or (ii) outlined the process to share 

such threat information among Headquarters, Regional Offices, and examiner personnel. 

Without policies to guide those processes, information selection and dissemination is left to the 

discretion of individuals, which may lead to inconsistencies, uncertainty, and a lack of uniformity 

in sharing threat information. We have work planned to evaluate the effectiveness of the FDIC’s 

procedures for the collection and dissemination of threat information. 

Sharing threat information allows for the consideration of these risks in developing and 

examining bank mitigation strategies and continuity plans. Absent such threat information, 

financial institutions and examiners may not have a full understanding of the risks facing the 

banks, and thus, risk mitigation and supervisory strategies might have gaps which could affect 

the safety and soundness of institutions. 
APPENDICES

ANNUAL REPORT 

180

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

24 

7 | MANAGING HUMAN CAPITAL 

GAO has identified human capital management as a high risk since 2001 and noted that 

“[m]ission-critical skills gaps within the federal workforce pose a high risk to the nation.” 62 GAO 

noted that such gaps, if left unaddressed, can “impede the federal government from costeffectively serving the public and achieving results.” The percentage of FDIC employees 

eligible to retire more than doubles (2.3 times) over the next 5 years, increasing from 18 percent 

in 2018 to 42 percent in 2023, as shown in Figure 6. 

These figures could lead to a wave of retirements at the FDIC in the near term. As recognized 

by GAO, retirement waves can result in leadership voids, which could impede the capabilities of 

any agency to achieve its mission, unnecessarily delay decision-making, and reduce program 

management and oversight.63 According to GAO, such agencies may face gaps in skillsets, 

which could result in the agency not being able to complete its mission-critical work in a timely 

manner. Further, retirements might have financial implications for the FDIC’s budget, since the 

FDIC would be required to expend lump-sum payments based on accumulated annual leave.64 

The FDIC should be prepared to address any resultant budget issues and gaps in skillsets and 

leadership. 

In addition, the FDIC faces an even higher rate of potential retirements among seasoned senior 

and mid-level managers. As of July 31, 2018, approximately two-thirds of the Executive 

 

62 GAO, High-Risk Series: Progress in Many High-Risk Areas, While Substantial Efforts Needed on Others, GAO-17-

317 (February 2017), 61. 

63 GAO, High-Risk Series: Progress in Many High-Risk Areas, While Substantial Efforts Needed on Others, GAO-17-

317 (February 2017), 61. 

64 Office of Personnel Management, Fact Sheet: Lump Sum Payment for Annual Leave. 

December 2018

1,049 (18%)

December 2021

2,044 (35%)

December 2023

2,477 (42%)

Figure 6: FDIC Employees Eligible for Retirement between December 2018 and 

December 2023 

Source: OIG analysis of FDIC employee information as of July 31, 2018. 

The FDIC relies on skilled personnel to fulfill its mission, and about 63 percent of the 

FDIC’s operating budget for 2019 ($2 billion) was for salaries and associated benefits for 

employees. Forty-two percent of FDIC employees are eligible to retire within 5 years, which 

may lead to knowledge and leadership gaps. To ensure mission readiness, the FDIC should 

find ways to manage this impending shortfall. In addition, the FDIC should seek to hire 

individuals with advanced technical skills needed for IT examinations and supervision of 

large and complex banks. 
APPENDICES

2018

181

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

25 

Management employees (66 percent) were eligible to retire within 5 years, and another 

57 percent of FDIC Corporate Managers are eligible in that same timeframe. Without proper 

succession planning strategies, these retirements can result in further leadership gaps. 

Retirement Eligibility – Impact on Divisions (Headquarters and Regions) 

Between 34 and 63 percent of employees in the following FDIC driver and primary support 

Divisions were eligible to retire within 5 years (as of July 31, 2018): 

 63 percent of employees within the Division of Resolutions and Receiverships 

(243 employees); 

 59 percent of employees within the Legal Division (268 employees); 

 57 percent of employees within the Division of Administration (201 employees); 

 45 percent of employees within the Division of Information Technology 

(133 employees); 

 38 percent of employees within the Division of Risk Management Supervision 

(929 employees); and 

 34 percent of employees within the Division of Depositor and Consumer Protection 

(276 employees). 

While employees do not always retire when first eligible,65 there is a risk that a wave of 

retirements could lead to gaps in leadership positions and skillsets at the FDIC. Leadership 

gaps can result in delayed decision-making, reduced program oversight, and failure to achieve 

goals and agency missions when positions are unfilled or leaders remain in acting status. 

Skillset gaps can undermine the ability of the FDIC to achieve its goals and missions. 

In addition, in 2017, the Division of Insurance and Research (DIR) experienced higher than 

normal attrition rates of 13 percent. Over this period of time, 27 individuals (out of 208 in DIR) 

departed DIR, 74 percent of whom were specialized economists with advanced degrees. These 

unique skillsets may be more difficult to replace in an expanding economy. 

Retirement Eligibility – Impact on Regional Offices 

In the six FDIC Regional Offices, more than one-third of employees are eligible to retire within 

the next 5 years. Those retirements are predominantly for examination staff. Between 34 and 

53 percent of employees in the FDIC Regional Offices were eligible to retire within this 

timeframe (as of July 31, 2018): 

 53 percent of employees within the FDIC Dallas Regional Office (413 employees); 

 38 percent of employees within the FDIC Atlanta Regional Office (176 employees); 

 37 percent of employees within the FDIC San Francisco Regional Office 

(164 employees); 

 34 percent of employees within the Chicago Regional Office (172 employees); 

 

65 Our analysis shows that employees tend to remain with the FDIC for approximately 8 years after their retirement 

eligibility date. 
APPENDICES

ANNUAL REPORT 

182

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

26 

 34 percent of employees within the Kansas City Regional Office (169 employees); 

and 

 34 percent of employees within the New York Regional Office (195 employees). 

The FDIC is working to hire and train new examiners to address the retirement shortfall, but it 

takes approximately 4 years from the time an employee is hired until that employee earns an 

examination commission. Such commissioning requires that employees meet benchmarks, 

training, and other technical requirements, including passing a Technical Examination. 

In its review of the financial crisis of 2008-2011, the FDIC stated that one of its strengths was “a 

core of seasoned examiners and supervisors.”66 These experienced employees were crucial in 

tailoring “informal and formal enforcement actions that helped make it possible for many banks 

to return to health.” As noted by the FDIC in its review, the crisis experience highlighted the 

importance of a steady flow of new examiners who can benefit from the knowledge and 

experience of seasoned examiners. The FDIC may be challenged to build on innovative 

strategies used in prior crises for any future banking crisis without these experienced examiners 

and supervisors or the transfer of their knowledge to newer examiners. 

Even with additional hires, Regional Offices may not have sufficient experience among their 

examiners. As a result, senior examiners may be required to travel more frequently in order to 

supervise less experienced staff and sign reports of examination (since pre-commissioned 

examiners cannot sign those reports). In addition, experienced examiners may be required to 

travel more often, in order to fill staffing needs where there have been significant retirements. 

This increase in travel requirements could be costly and may affect the morale of examiners, 

since it has been cited as the top reason for voluntary attrition by examiners. 

RMS also identified a need to build out skill sets. In 2012, RMS initiated a multi-year Subject 

Matter Expert Project to build out workforce capacity and focus on developing advanced skills in 

the areas of accounting, capital markets, information technology, and anti-money laundering 

compliance. The FDIC also recently updated employees about a Field Office Modernization 

initiative, aimed, in part, to maintain a reasonable work/life balance for field examiners. 

In 2013, the FDIC established a Workforce Development Initiative (WDI) to address succession 

planning and other workforce development challenges and opportunities. Five years after its 

establishment, however, the FDIC noted, in its 2018 Annual Performance Plan, that the WDI is 

“in the early stages of a multi-year effort to identify future workforce and leadership 

requirements, assess current workforce capabilities, support employees who aspire to 

leadership and management roles, and develop and source the talent to meet emerging 

workforce needs.” 

The management of human capital is critical to the FDIC’s achieving its mission. To meet its 

goals and objectives, the FDIC must continue to focus on managing the life cycle of human 

 

66 Crisis and Response, An FDIC History, 2008-2013 (November 30, 2017), 143-144. 
APPENDICES

2018

183

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

27 

capital activities – planning, recruitment, on-boarding, compensation, engagement, succession 

planning, and retirement programs. 

8 | ADMINISTERING THE ACQUISITIONS PROCESS 

According to GAO’s Framework for Assessing the Acquisition Function at Federal Agencies, 

agencies should effectively manage their acquisitions process in order to ensure that contract 

requirements are defined clearly and all aspects of contracts are fulfilled.67 Agencies must 

properly oversee contractor performance and identify any deficiencies. 

In 2018, the Administration recognized the importance of improving Federal Government 

acquisitions in finding that such acquisitions “often fail to achieve their goals because many 

Federal managers lack the program management and acquisition skills to successfully manage 

and integrate large and complex acquisitions into their projects.”68 In 2018, GAO reported that 

agencies continue to award contracts warranting increased management attention.69 In 

addition, GAO found that government contracting officials were carrying heavier workloads, and 

thus, it was more difficult for these officials to oversee complex contracts and ensure that 

contractors adhered to contract terms. Further, in the Framework for Assessing the Acquisition 

Function at Federal Agencies, GAO noted the importance of agencies defining their contracting 

needs and identifying, selecting, and managing providers of goods and services. 

Federal Government agencies also should conduct due diligence to recognize potential threats 

in supply chains for products and services. When an organization hires contractors who, in turn, 

may sub-contract services to third-parties, the organization is likely to have reduced visibility, 

understanding, and control of the underlying relationships, as illustrated in Figure 7. 

 

 

67 GAO, Framework for Assessing the Acquisition Function at Federal Agencies, GAO-05-218G (September 2005). 68 The President’s Management Agenda: Modernizing Government for the 21st Century, 12. 69 GAO, Federal Acquisitions: Congress and the Executive Branch have Taken Steps to Address Key Issues, but 

Challenges Endure, GAO-18-627 (September 2018). 

The FDIC relies heavily on contractors for support of its mission, especially for IT and 

administrative support services. The average annual expenditure by the FDIC for contractor 

services over the past 5 years has been approximately $587 million. The FDIC should 

maintain effective controls to ensure proper oversight and management of such contracts 

and should conduct regular reviews of contractors. In addition, the FDIC should also 

perform due diligence to mitigate security risks associated with supply chains for goods and 

services. 
APPENDICES

ANNUAL REPORT 

184

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

28 

If not managed properly, organizations may 

face supply chain risks, including installation of 

malicious or counterfeit hardware or software, 

disruption of critical production, and reliance on 

nefarious or unqualified service providers.70 

Government agencies may not discover the 

consequences of these risks until much later, 

after the fraud or compromise 

Contract Oversight 

The FDIC awarded $2.3 billion in contracts from 

January 2015 through September 2018. For 

the first 7 months of 2018, the FDIC issued 

372 contract awards for a total of $383 million. 

In addition, the FDIC budget for 2019 includes 

more than $420 million in contracting expenses 

for outside services. 

Between January 2015 and September 2018, the 

Divisions of Administration (DOA), Information Technology (DIT), and Resolutions and 

Receiverships (DRR) accounted for 96 percent ($1.38 billion) of all contract awards through the 

Acquisition Services Branch. Contracting Officers are responsible for ensuring the performance 

of all actions necessary for efficient and effective contracting, compliance with contract terms, 

and protection of the FDIC’s interests in all of its contractual relationships. In addition, FDIC 

program offices develop contract requirements, and Oversight Managers and Technical 

Monitors oversee the contractor’s performance and technical work. 

Our OIG analysis indicates that there has been an increase in the average dollar amount per 

contract awarded by the FDIC from 2016 to 2017. The average contract size has increased 

18 percent during this time. Over the past 2 years, DRR and DIT oversaw 127 contracts valued 

at $1 million or more each. Many of these contracts are for computer-related and administrative 

services that range in value from $1 million to $98 million. According to GAO, these types of 

contracts require increased oversight and management attention due to the risk that contractors 

may perform tasks reserved for the Government.71 

Our work has identified a number of issues related to the FDIC’s contract administration. In 

our OIG report, The FDIC’s Failed Bank Data Services Project (March 2017), we reviewed 

transition costs ($24.4 million) of a 10-year project to change information systems on failed 

financial institutions. We found that the FDIC faced challenges related to defining contract 

requirements, coordinating contracting and program office personnel, and establishing 

 

70 GAO, Information Security: Supply Chain Risks Affecting Federal Agencies, GAO-18-667T (July 12, 2018), 7-8. 71 GAO, Federal Acquisitions: Congress and the Executive Branch have Taken Steps to Address Key Issues, but 

Challenges Endure, GAO-18-627 (September 2018). 

Source: NIST Publication 800-161, Supply Chain Risk 

Management Practices for Federal Information Systems and 

Organizations. 

Figure 7: Supply Chain Risk View 
APPENDICES

2018

185

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

29 

implementation milestones. We reported that FDIC personnel did not fully understand the 

requirements for transitioning failed financial institution data and services to a new contractor, 

or communicate these requirements to bidders in a comprehensive transition plan as part of 

the solicitation. Further, the FDIC did not establish clear expectations in the contract 

documents and did not implement a project management framework and plans. 

In addition, our OIG report on the Follow-on Audit of the FDIC’s Identity, Credential, and 

Access Management Program (June 2017) found that the FDIC did not maintain current, 

accurate, and complete contractor personnel data needed to manage Personal Identity 

Verification (PIV) cards, and management had not finalized and approved a plan for retiring the 

FDIC’s legacy PIV card system. 

In our OIG Memorandum, Infrastructure Support Contract 3 (ISC-3) with CSRA, Inc. (July 2018), 

we concluded that based on limited testing, while we did not see instances of inaccurate or 

unsupported invoices, there was an increased risk that both errors and fraudulent activity would 

go undetected due to the complexity of CSRA’s accounting entries for contractor and 

subcontractor billing. Of the seven DIT individuals overseeing the contract, two individuals 

never took the required training on contract oversight, and the training certificates for two other 

individuals had already expired in 2008. 

In addition, in our OIG report, Payments to Pragmatics, Inc. (December 2018), we determined 

that about 10 percent ($47,489) of the labor charges we reviewed were not adequately 

supported or allowable under the contract and related task orders. The unsupported labor 

charges were for hours billed by two subcontractor employees who did not access the FDIC’s 

network or facilities on the days they charged the hours. In addition, we identified unallowable 

labor charges for work performed offsite, away from FDIC facilities. 

We currently have an ongoing evaluation to assess the FDIC’s contract management oversight 

process. The evaluation objective includes assessing the monitoring of contracts; capacity of 

oversight managers to oversee assigned contracts; oversight managers’ experience and 

qualifications; and security risks posed by contractors and their personnel. 

Security and Supply Chain Risk 

The FDIC also must continue to ensure that its contractors and contracting personnel meet 

security and suitability standards for employment and access to sensitive information. In 

addition, contractors must meet criteria for integrity and fitness, including the elimination of 

conflicts of interest, adherence to ethics obligations, and security of confidential information.72

These protections are important since the contractors often have access to FDIC space and 

information and use FDIC equipment, including sensitive information related to bank closings, 

as well as PII for bankers, bank customers, and FDIC employees. The FDIC’s DOA (Security 

 

72 12 C.F.R. Part 366. 
APPENDICES

ANNUAL REPORT 

186

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

30 

and Emergency Preparedness Section) is responsible for establishing and implementing the 

security policy for contractor personnel. DOA reviews include background investigations, 

evaluation of any derogatory information, adjudication, and approvals and clearances.73 

In addition, NIST identified the best practices for organizations to manage security risks 

associated with supply chains of goods and services; these standards require the integration of 

risk management throughout an organization.74 Currently, the FDIC does not have policy 

guidance with respect to these supply chain risks. In addition, the duty of managing supply 

chain risk is a collateral responsibility for the FDIC’s Insider Threat Program Manager. 

The FDIC also faces challenges to mitigate supply chain risk if threats are reported through 

highly sensitive security information. Currently, DOA acquisition staff does not have authorized 

access to highly sensitive security information. Therefore, if the FDIC learns of or identifies a 

threat to its supply chain through the receipt of such information, the FDIC would not have 

contracting personnel to respond to the threat, as the current staff is not authorized to access 

the underlying threat information. 

The FDIC depends on contracts and contractors for its mission-critical systems and operations, 

especially in times of crisis. The FDIC should maintain strong contracting oversight and 

effective controls over its contractors. In addition, the FDIC should protect against supply chain 

and other risks posed by goods and services procured through third-party contractors and 

vendors. 

9 | IMPROVING MEASUREMENT OF REGULATORY COSTS AND 

BENEFITS 

In a report issued in February 2018, GAO noted that “representatives of community banks and 

credit unions expressed concerns about the burden that additional regulations create for them,” 

such as increasing their overall compliance burden and adversely affecting lending.75 In April 

2018, the FDIC updated its Statement of Policy on the Development and Review of Regulations 

and Policies, and the revised policy states that once the FDIC has found the need for a 

regulation, “the FDIC evaluates benefits and costs, based on available information, and 

 

73 FDIC, Circular 1610.2, Personnel Security Policy and Procedures for FDIC Contractors (January 2010). 74 NIST Publication 800-161, Supply Chain Risk Management Practices for Federal Information Systems and 

Organizations, 7. 75 GAO, Community Banks and Credit Unions: Regulators Could Take Additional Steps to Address Compliance 

Burdens, GAO-18-213 (February 2018), 1-2. 

Before issuing a rule, the FDIC should ensure that the benefits accrued from a regulation 

justify the costs imposed. The FDIC should establish a sound mechanism to measure both 

costs and benefits at the time of promulgation, and it should continue to evaluate the costs 

and benefits of a regulation on a regular basis, even after it has been issued. 
APPENDICES

2018

187

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

31 

considers reasonable and possible alternatives.” While some regulations implement a statutory 

requirement, the FDIC should develop and maintain strong processes to measure both costs 

and benefits. 

Analysis of Costs and Benefits 

The difficulties of cost-benefit analysis lie in the uncertainty over how to measure and calculate 

regulatory costs.76 For example, the FDIC experienced challenges in quantifying the costs and 

benefits of a proposed rule on Recordkeeping for Timely Deposit Insurance Determination. The 

FDIC engaged a contractor that initially estimated the costs of this rule at $328 million, to be 

incurred by 36 financial institutions (80 cents per deposit account). However, the FDIC 

encountered difficulties in determining the benefits of the rule, explaining that “[b]ecause there is 

no market in which the value of these public benefits can be determined, it is not possible to 

monetize these benefits.” Based upon the comments received on the proposed rule, the FDIC 

revised the total cost in the final rule to $478 million (an increase of $150 million). The 

estimated cost would be allocated to covered institutions at $386 million, while the remaining 

costs of $92 million were to be borne by bank customers (depositors) and the FDIC. 

In 2018, GAO reviewed regulatory procedures for the financial regulators and found several 

weaknesses with analyses done by six financial regulators, including the FDIC.77 In particular, 

the regulators did not account for the burden that certain rules would have on small entities. 

The Regulatory Flexibility Act (RFA) requires that Federal agencies, including the financial 

regulators, analyze the impact of proposed regulations on small entities and consider 

alternatives that could lessen the regulatory burden. Alternatively, the head of the agency may 

certify that the rule would not pose a significant impact on a substantial number of small entities. 

The then-FDIC Chairman certified that a rule would not pose a significant impact on a 

substantial number of small entities for over 75 percent of the rules issued by the FDIC between 

2010 and 2016 that were subject to RFA requirements.78 GAO concluded that for two of the 

three rules it sampled, the FDIC did not provide any supporting information for the 

certifications. For example, GAO found that the FDIC did not include any of the Office of 

Advocacy’s79 suggested components: (i) a description of the number of affected entities; (ii) the 

size of the economic impacts; or (iii) the justification for the certification.80

 

76 Yale Law Journal, Cost-Benefit and Other Analysis Requirements in the Rulemaking Process, Congressional 

Research Service (2014); Cost-Benefit Analysis of Financial Regulations Case Studies and Implications (2015). 77 GAO, Financial Services Regulations: Procedures for Reviews under Regulatory Flexibility Act Need to Be 

Enhanced, GAO-18-256 (January 2018). 78 GAO focused only on the RFA sections and not the other regulatory analysis in the Federal Register notice, despite 

agencies being allowed by statute to combine analysis to avoid duplication. 

79 The Office of Advocacy is a component of the Small Business Administration and serves as a watchdog for the 

RFA. 

80 GAO, Financial Services Regulations: Procedures for Reviews under Regulatory Flexibility Act Need to Be 

Enhanced, GAO-18-256 (January 2018). 
APPENDICES

ANNUAL REPORT 

188 32 

For the rules for which the FDIC did perform a regulatory flexibility analysis,81 GAO reported 

that while the FDIC’s analyses described and quantified the rules compliance costs, they did 

not include descriptions or assessments of regulatory alternatives, issues raised in public 

comments, or steps to minimize effects on small entities.82 GAO recommended that the FDIC 

adopt policies and procedures to comply with RFA requirements and key aspects of Office of 

Advocacy and OMB guidance in order to improve consistency. The FDIC adopted additional 

policies and procedures in 2018; however, the GAO recommendation remains 

unimplemented. 

In a subsequent report issued the following month, GAO found that there were additional 

inadequacies in the financial regulators’ consideration of regulatory burden on small institutions 

– particularly with respect to the quantification of data and cumulative effects of regulations.83 

The Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) requires 

that at least every 10 years, the FDIC must review its rules and regulations to determine if any 

are outdated, unnecessary, or unduly burdensome. However, GAO found that the regulators, 

including the FDIC, did not conduct or report on quantitative analyses as part of their EGRPRA 

review process. Instead, as GAO noted, “regulators generally only provided their arguments 

against taking actions and did not cite analysis or data to support their narrative.” GAO further 

found that “regulators ha[d] not assessed the ways that the cumulative burden of the regulations 

they administer may have created overlapping or duplicative requirements.” According to GAO, 

Congress specifically intended for EGRPRA to require regulators to measure the cumulative 

effect of regulations. 

In August 2018, the FDIC Chairman stated that a top priority for the agency was to examine the 

regulatory burden on small banks. The following month, in September 2018, the FDIC issued a 

proposal to retire 374 of 664 Financial Institution Letters (FIL) related to risk-management 

supervision. These FILs contained outdated information or guidance that was available 

elsewhere from the FDIC. In announcing this proposal, the FDIC committed to a review of the 

remaining 290 FILs.84 We are currently conducting an evaluation to determine the effectiveness 

of the FDIC’s cost-benefit analysis process for ensuring that rules are efficient and appropriately 

tailored. 

Financial regulations significantly affect financial institutions and bank customers, and before 

imposing costs on such entities, the FDIC should ensure that the benefits of the rule justify the 

costs associated with its implementation. To do so, the FDIC should obtain concrete, valid, and 

reliable data, and analyze the information, so that it can accurately measure the costs and 

benefits of a regulation. 

 

81 For three of the four regulatory flexibility analyses it performed, the FDIC indicated that the rules were not subject 

to the requirements of the RFA. 

82 GAO, Financial Services Regulations: Procedures for Reviews under Regulatory Flexibility Act Need to Be 

Enhanced, GAO-18-256 (January 2018). 83 GAO, Community Banks and Credit Unions: Regulators Could Take Additional Steps to Address Compliance 

Burdens, GAO-18-213 (February 2018). 84 Financial Institution Letter 46-2018, FDIC Seeks Comment on Proposed Retirement of Certain Financial Institution 

Letters (September 10, 2018). 

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)
APPENDICES

2018

189

AEI Alliance for Economic Inclusion 

AFS Available-For-Sale 

AIG American International Group, Inc. 

AML Anti-Money Laundering 

AML/CFT Anti-Money Laundering and 

Countering the Financing 

of Terrorism 

ASBA Association of Supervisors of Banks 

of the Americas 

ASC Accounting Standards Codification 

ASU Accounting Standards Update 

BCBS Basel Committee on Banking 

Supervision 

BDC Backup data center

BoA Bank of America 

BSA Bank Secrecy Act 

Call Report Consolidated Reports of Condition 

and Income 

CAMELS

rating scale Capital adequacy; Asset quality; 

Management quality; Earnings; 

Liquidity; Sensitivity to market risks 

CAT Cybersecurity Assessment Tool 

CBAC Advisory Committee on 

Community Banking

CCP Central Counterparties 

CDFI Community Development 

Financial Institution 

CECL Current Expected Credit Losses 

CEO Chief Executive Officer 

CEP Corporate Employee Program 

CFI Complex Financial Institution 

CFO Act Chief Financial Officers’ Act 

CFPB Consumer Financial Protection Bureau 

CFR Center for Financial Research 

CFTC Commodity Futures 

Trading Commission 

CIO Chief Information Officer 

CIOO Chief Information Officer Organization

CMG Crisis Management Group 

CMP Civil Money Penalty 

ComE-IN Advisory Committee on 

Economic Inclusion 

CPI-U Consumer Price Index for All 

Urban Consumers 

CRA Community Reinvestment Act 

CRE Commercial Real Estate

CSIRT Computer Security Incident 

Response Team 

CSF Cybersecurity Framework 

CSBS Conference of State Bank Supervisors

CSRS Civil Service Retirement System 

DCP Division of Depositor and 

Consumer Protection

DFA Dodd-Frank Act 

DIF Deposit Insurance Fund 

DIMIA Depository Institution Management 

Interlocks Act 

DIR Division of Insurance and Research 

DIT Division of Information Technology

DLP Data Loss Prevention 

DOA Division of Administration 

DRR Designated Reserve Ratio 

DRR (FDIC) Division of Resolutions and 

Receiverships 

EC European Commission 

EDIE Electronic Deposit Insurance Estimator

EGRPRA Economic Growth and Regulatory 

Paperwork Reduction Act of 1996 

EGRRCPA Economic Growth, Regulatory Relief, 

and Consumer Protection Act

EU European Union

ERM Enterprise Risk Management 

FAQ Frequently Asked Questions

FASB Financial Accounting Standards Board 

FBIIC Financial and Banking Information 

Infrastructure Committee 

FBO Foreign Bank Organization 

D. ACRONYMS AND INITIALISMS
APPENDICES

ANNUAL REPORT 

190

FDI Act Federal Deposit Insurance Act 

FDIC Federal Deposit Insurance Corporation 

FEHB Federal Employees Health Benefits 

FERS Federal Employees Retirement System 

FFB Federal Financing Bank 

FFIEC Federal Financial Institutions 

Examination Council 

FFMIA Federal Financial Management 

Improvement Act 

FHLB Federal Home Loan Banks 

FICO Financing Corporation 

FIL Financial Institution Letter

FinCEN Financial Crimes Enforcement Network

FinTech Financial Technology 

FIRREA Financial Institutions Reform, 

Recovery and Enforcement Act 

FIs Financial Institutions 

FIS Financial Institution Specialists 

FISMA Federal Information Security 

Modernization Act of 2014

FLEC Federal Financial Literacy and 

Education Commission

FMFIA Federal Managers’ Financial 

Integrity Act 

FMSP Financial Management 

Scholars Program 

FRB Board of Governors of the Federal 

Reserve System 

FRF FSLIC Resolution Fund 

FSB Financial Stability Board 

FS-ISAC Financial Services Information Sharing 

and Analysis Center

FSLIC Federal Savings and Loan Insurance 

Corporation 

FSOC Financial Stability Oversight Council 

FTE Full-Time Employee 

GAAP Generally Accepted Accounting 

Principles 

GAO U.S. Government Accountability Office 

GDP Gross Domestic Product 

GECC General Electric Capital 

Corporation, Inc. 

GPRA Government Performance and 

Results Act 

G-SIBs Global Systemically Important Banks 

G-SIFI Global SIFIs 

HMDA Home Mortgage Disclosure Act

HQLA High quality liquid asset

IADI International Association of 

Deposit Insurers 

ICIPC Intelligence and Critical Infrastructure 

Protection Committee

IDI Insured Depository Institution 

IMF International Monetary Fund 

IMFB IndyMac Federal Bank 

InTREx Information Technology Risk 

Examination Program 

ISM Information Security Manager

IT Information Technology 

ITCIP Insider Threat and Counterintelligence 

Program 

ITSP Information Technology Strategic Plan

LCR Liquidity coverage ratio

LIBOR London Inter-bank Offered Rate

LIDI Large Insured Depository Institution 

LLC Limited Liability Company 

MDI Minority Depository Institutions 

MOL Maximum Obligation Limitation 

MOU Memoranda of Understanding 

MRM Model Risk Management 

MRBA Matters Requiring Board Attention 

MWOB Minority- and Women-Owned Business 

MWOLF Minority- and Women-Owned 

Law Firms

NAMWOLF National Association of Minority- and 

Women-Owned Law Firms

NCATS National Cybersecurity and 

Technical Services

NCUA National Credit Union Administration 
APPENDICES

2018

191

NITTF National Insider Threat Task Force

NPR Notice of Proposed Rulemaking 

NSFR Net Stable Funding Ratio 

OCC Office of the Comptroller 

of the Currency 

OCFI Office of Complex Financial 

Institutions

OIG Office of Inspector General

OJT On-the-Job Training 

OLA Orderly Liquidation Authority 

OLF Orderly Liquidation Fund

OMB U.S. Office of Management and Budget 

OMWI Office of Minority and Women 

Inclusion 

OO Office of the Ombudsmen 

OPM Office of Personnel Management 

ORE Owned Real Estate 

OTS Office of Thrift Supervision 

P&A Purchase and Assumption 

PIV Personal Identity Verification 

Q&A Question and Answer

QBP Quarterly Banking Profile 

QFC Qualified Financial Contracts 

REMA Reasonably Expected Market Area 

ReSG FSB’s Resolution Steering Group 

RESPA Real Estate Settlement Procedures Act

RMIC Risk Management and Internal 

Controls 

RMS Division of Risk Management 

Supervision 

RTC Resolution Trust Corporation 

SBA Small Business Administration

SCRA Servicemembers Civil Relief Act

SEATAB Security and Enterprise Architecture 

Technical Advisory Board 

SEC Securities and Exchange Commission 

SIFI Systemically Important Financial 

Institution 

SLA Shared-Loss Agreement 

SME Subject Matter Expert 

SMS Systemic Monitoring System 

SNC Shared National Credit Program 

SRAC Systemic Resolution Advisory 

Committee 

SRR SIFI Risk Report 

SRB Single Resolution Board 

SSGN Structured Sale of Guaranteed Note

TILA Truth in Lending Act 

TIPS Treasury Inflation-Protected Securities

TSP Federal Thrift Savings Plan 

TSP (IT-related) Technology Service Providers 

UBPR Uniform Bank Performance Report 

UFIRS Uniform Financial Institutions 

Rating System

UK United Kingdom

URSIT Uniform Rating System for Information 

Technology 

VIEs Variable Interest Entities 

WE Workplace Excellence 

WIOA Workforce Investment Opportunity Act 

YSP Youth Savings Program
NOTES
2018

Federal Deposit 

Insurance Corporation

This Annual Report was produced by talented and dedicated 

staff. To these individuals, we would like to offer our sincere 

thanks and appreciation. Special recognition is given to the 

following for their contributions:

❏ Jannie F. Eaddy 

❏ Barbara A. Glasby

❏ Pamela A. Brownfield

❏ Financial Reporting Section Staff

❏ Division and Office Points-of-Contact
FEDERAL DEPOSIT INSURANCE CORPORATION

H H H

H H H

550 17th Street, N.W.

Washington, DC 20429-9990

www.fdic.gov

FDIC-003-2019