I. 

MANAGEMENT'S 

DISCUSSION 

AND ANALYSIS 
MANAGEMENT'S DISCUSSION AND ANALYSIS 25 

2020

 

OVERVIEW 

During 2020, the FDIC continued to fulfill its missioncritical responsibilities while also addressing 

unprecedented challenges related to the COVID-19 

pandemic. In addition, the agency worked to further 

strengthen the banking system, modernize its 

approach to supervision, and increase transparency 

surrounding its programs. The FDIC also continued to 

engage in several community banking and community 

development initiatives. 

Cybersecurity remained a high priority for the FDIC in 

2020; the agency worked to strengthen infrastructure 

resiliency, manage information security risks, enhance 

data governance, help financial institutions mitigate 

risk, and respond to cyber threats. This Annual Report 

highlights these and other accomplishments during 

the year. 

DEPOSIT INSURANCE 

As insurer of bank and savings association deposits, the 

FDIC must continually evaluate and efectively manage 

how changes in the economy, financial markets, and 

banking system afect the adequacy and the viability 

of the Deposit Insurance Fund (DIF). 

Long-Term Comprehensive Fund 

Management Plan 

Nearly a decade ago, the FDIC developed a 

comprehensive, long-term DIF management plan to 

reduce the efects 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. 

Under the long-term DIF management plan, to increase 

the probability that the fund reserve ratio (the ratio of 

the fund balance to estimated insured deposits) would 

reach a level suficient 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 November 2020, the Board voted to maintain 

the 2.0 percent ratio for 2021. 

Additionally, as part of the long-term DIF management 

plan, the FDIC suspended dividends indefinitely. In lieu 

of dividends, the plan prescribes progressively lower 

assessment rates that will become efective when the 

reserve ratio exceeds 2.0 percent and 2.5 percent. 

State of the Deposit Insurance Fund 

Extraordinary growth in insured deposits during the first 

and second quarters of 2020 caused the reserve ratio to 

decline below the statutory minimum to 1.30 percent as 

of June 30, 2020. The decline in the reserve ratio during 

the first half of 2020 was solely a result of extraordinary 

insured deposit growth, as the DIF balance grew and 

did not experience material losses over this period. 

Assessment revenue was the primary contributor to 

the increase in the fund balance, and four institutions 

with total assets of approximately $455 million failed 

during 2020. The fund reserve ratio was 1.30 percent 

at September 30, 2020, down from 1.41 percent a 

year earlier. 

Restoration Plan 

As of June 30, 2020, the DIF reserve ratio was 1.30 

percent, below the statutory minimum of 1.35 percent. 

In September, as required by the Federal Deposit 

Insurance Act (FDI Act), the FDIC adopted a Restoration 

Plan to restore the reserve ratio to at least 1.35 percent 

within eight years, absent extraordinary circumstances, 

as required by the FDI Act. The Restoration Plan 

maintains the current schedule of assessment rates 

for all insured depository institutions (IDIs), and directs 

the FDIC to monitor deposit balance trends, potential 

losses, and other factors that afect the reserve ratio 

and provide semiannual updates to the FDIC Board. 

While subject to considerable uncertainty, based on 

a range of reasonable estimates of future losses, and 

assuming a return to normal insured deposit growth, 

the Plan forecasts that the reserve ratio will return to the 

statutory minimum level of 1.35 percent without further 

action by the FDIC within the eight-year period. 

Conclusion of Small Bank Assessment Credits 

FDIC regulations provided assessment credits 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 new minimum reserve 

ratio as mandated by the Dodd-Frank Act.  Upon 

achieving this minimum reserve ratio as of September 

30, 2018, the FDIC applied small bank assessment 

credits to ofset assessment invoices for four quarterly 
26 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

assessment periods, starting with second quarter 2019 

deposit insurance assessments through first quarter 

2020 deposit insurance assessments. 

As noted above, the reserve ratio declined to 1.30 

percent as of June 30, 2020, below the 1.35 percent 

required for remittance of remaining assessment credits. 

Nevertheless, in September 2020, the Board waived the 

provision of the FDIC’s assessment regulations requiring 

that the reserve ratio must be at least 1.35 percent 

for the FDIC to remit the full nominal value of an IDI’s 

remaining assessment credits. In so doing, the FDIC was 

able to remit to IDIs the full nominal value of remaining 

credits in the deposit insurance assessment period that 

ended on June 30, 2020, with an invoice payment date 

of September 30, 2020. This remittance eliminates the 

small bank assessment credits. 

SUPERVISION 

Supervision and consumer protection are cornerstones 

of the FDIC’s eforts 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 eforts are at the 

core of its supervisory program. As of December 31, 

2020, the FDIC was the primary federal regulator for 3,230 

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, CRA, and other specialty examinations, 

the FDIC assesses an institution’s operating condition, 

management practices and policies, and compliance 

with applicable laws and regulations. 

During the course of 2020, the FDIC conducted 

1,345 statutorily required risk management 

examinations, including reviews of BSA compliance, 

and all required follow-up examinations for FDICsupervised problem institutions, within prescribed 

time frames. The FDIC also conducted 1,029 CRA/ 

consumer compliance examinations (805 joint CRA/ 

consumer compliance examinations, 221 consumer 

compliance-only examinations, and three CRA-only 

examinations). In addition, the FDIC performed 3,025 

specialty examinations (which include reviews for BSA 

compliance) within prescribed timeframes. 

The table on the following page illustrates the number 

of examinations by type, conducted from 2018 through 

2020. 

Risk Management 

All risk management examinations have been conducted 

in accordance with statutorily-established timeframes. 

As of September 30, 2020, 56 insured institutions with 

total assets of $53.9 billion were designated as problem 

institutions (i.e., institutions with a composite CAMELS2 

rating of 4 or 5) for safety and soundness purposes. By 

comparison, on September 30, 2019, there were 55 

problem institutions with total assets of $48.8 billion. 

This represents a 2 percent increase in the number 

of problem institutions and a 10 percent increase in 

problem institution assets. 

For the 12 months ended September 30, 2020, 13 

institutions with aggregate assets of $1.5 billion were 

removed from the list of problem financial institutions, 

while 14 institutions with aggregate assets of $3.4 billion 

were added to the list. The FDIC is the primary federal 

regulator for 40 of the 56 problem institutions, with total 

assets of $5.3 billion. 

In 2020, the FDIC’s Division of Risk Management 

Supervision (RMS) initiated 87 formal enforcement 

actions and 66 informal enforcement actions. 

Enforcement actions against institutions included, 

but were not limited to 18 actions under Section 8(b) 

of the FDI Act (one of which was a notice of charges), 

3 civil money penalties (CMPs), 65 memoranda of 

understanding (MOUs), and one Section 39 Compliance 

Plan. Of these enforcement actions against institutions, 

11 consent orders, one adjudicated cease and desist 

order, 3 CMPs, and 11 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 

2 The CAMELS composite rating represents an institution’s adequacy of Capital, quality of Assets, capability of Management, quality and level of Earnings, 

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

2020 2019 2018 

Risk Management (Safety and Soundness): 

State Nonmember Banks 1,219 1,310 1,333 

Savings Banks 125 148 159 

State Member Banks 0 0 0 

Savings Associations 0 0 0 

National Banks 1 0 0 

Subtotal–Risk Management Examinations 1,345 1,458 1,492 

CRA/Consumer Compliance Examinations: 

Consumer Compliance/Community Reinvestment Act 805 933 876 

Consumer Compliance-only 221 210 337 

CRA-only 3 4 2 

Subtotal–CRA/Compliance Examinations 1,029 1,147 1,215 

Specialty Examinations: 

Trust Departments 308 313 308 

Information Technology and Operations 1,345 1,466 1,503 

Bank Secrecy Act 1,372 1,491 1,523 

Subtotal–Specialty Examinations 3,025 3,270 3,334 

TOTAL 5,399 5,875 6,041 

to, 37 removal and prohibition actions under Section 

8(e) of the FDI Act (33 consent orders and 4 notices of 

intention to remove/prohibit), 2 actions under Section 

8(b) of the FDI Act, and 13 CMPs (9 orders to pay and 

4 notices of assessment), including one CMP related 

to BSA. 

The FDIC continues its risk-focused, forward-looking 

supervision program by assessing risk management 

practices during the examination process to address 

risks before they lead to financial deterioration. 

Examiners make supervisory recommendations, 

including Matters Requiring Board Attention (MRBA), in 

their Reports of Examination to address these risks. The 

FDIC’s RMS met its goal of following up on at least 90 

percent of these supervisory recommendations within 

six months of transmittal of the Report of Examination. 

RMS additionally established a new tracking system 

to gather more information about the subject of 

MRBA supervisory recommendations, which will aid 

supervisory planning going forward. 

While mindful of the unique challenges the pandemic 

presented to both institutions and examination staf, 

during the year, RMS implemented enhanced monitoring 

procedures to assess pandemic-related impacts 

on financial institutions. Initial eforts focused on 

institutions’ ability to adapt to the operational challenges 

of working of-site while continuing to meet customers’ 

needs and their ability to withstand the efects of the 

economic shock caused by the pandemic. As financial 

markets calmed and financial institutions were able to 

implement modified operating plans, the focus shifed, 

and RMS adopted new procedures to better understand 

the challenges being faced by institutions of all sizes. 

RMS is also engaged in a business process 

modernization initiative to move its technology systems 

from an applications-based environment to a businessprocess environment. This efort will allow RMS to 

expand its use of machine learning technology to 

identify emerging trends from examination activities, 

among other improvements. 

Consumer Compliance 

As of December 31, 2020, 36 insured state nonmember 

institutions (collectively, with total assets of $21 billion), 

about 1 percent of all supervised institutions, were 

problem institutions for consumer compliance, CRA, 

MANAGEMENT'S DISCUSSION AND ANALYSIS 27 

2020
28 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

 

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;” only two were 

rated “Substantial Noncompliance.” As of December 31, 

2020, all follow-up examinations for problem institutions 

were performed on schedule. 

As of December 31, 2020, the FDIC conducted and 

achieved 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 

achieved its internally established time standards for the 

issuance of final examination reports and enforcement 

actions. 

As of December 31, 2020, the FDIC’s Division of Depositor 

and Consumer Protection (DCP) initiated eight formal 

enforcement actions and 16 informal enforcement 

actions to address consumer compliance examination 

findings. This included two consent orders to strengthen 

consumer compliance management systems, and 

one cease and desist order to take corrective action 

in a number of areas, one notice of assessment, four 

CMPs, and 11 MOUs. The CMPs were issued against 

institutions to address violations of the Flood Disaster 

Protection Act. The CMP orders totaled in excess of 

$63,400. In addition to the consumer refunds resulting 

from the assistance provided by the FDIC’s Consumer 

Response Center (see discussion under the Consumer 

Complaints and Inquiries section), consumer compliance 

examination findings resulted in banks making voluntary 

restitution of approximately $7.4 million to more than 

67,300 consumers and Truth-in-Lending Act (TILA) 

reimbursements of approximately $575,000 to more than 

2,600 consumers. 

Large Bank Supervision 

For state nonmember banks with assets exceeding $10 

billion, the FDIC generally employs a continuous risk 

management examination program, whereby dedicated 

staf conduct targeted examinations and ongoing 

institution monitoring based on a comprehensive annual 

supervisory planning process. Consumer protection and 

CRA examinations are generally conducted on a point-intime basis, although DCP initiated a pilot program during 

2020 to employ a continuous supervision model. 

The Large Insured Depository Institution (LIDI) Program 

remains the primary instrument for of-site monitoring 

of these institutions. 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. 

The LIDI Program focuses on institutions’ potential 

vulnerabilities to asset, funding, and operational 

stresses, and supports efective large bank supervision 

by using individual institution information to focus 

resources on higher-risk areas, determine the need for 

supervisory action, and support insurance assessments 

and resolution planning. In 2020, the LIDI Program 

covered 106 institutions with total assets of $3.7 trillion. 

The Shared National Credit (SNC) Program is an 

interagency initiative administered jointly by the FDIC, 

OCC, and FRB to promote 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 2020, outstanding 

credit commitments in the SNC Program totaled over 

$5 trillion. The FDIC, FRB, and OCC report the results of 

their review in an annual joint public statement. 

Information Technology and Cybersecurity 

The FDIC examines information technology (IT) risk 

management practices, including cybersecurity, at 

each bank it supervises as part of the risk management 

examination. Examiners assign an IT rating using 

the FFIEC Uniform Rating System for Information 

Technology (URSIT). The IT rating is incorporated into 

the management component of the CAMELS rating, in 

accordance with the FFIEC Uniform Financial Institutions 

Rating System. 

During 2020, the FDIC conducted 1,319 IT examinations 

at state nonmember institutions, issuing 24 enforcement 

actions. 

The FDIC also examines the services provided to 

institutions by bank service providers. In addition to 

routine examination procedures, this year the FDIC, 

FRB, and OCC horizontally reviewed services provided 

by a sample of service providers to understand 

system capabilities for a potential zero interest rate 

environment, to assess readiness for the transition from 

LIBOR as the standard reference rate, and to obtain 

a high-level understanding of their ability to manage 

applicable aspects of the CARES Act. 
MANAGEMENT'S DISCUSSION AND ANALYSIS 29 

2020

 

The FDIC also continued to build its IT examination 

workforce. Following the creation of an entry-level IT 

and Cyber Risk Management Analyst (ITCA) position in 

2019, the first 26 ITCAs were hired in 2020. The ITCAs will 

focus only on IT (including cybersecurity) examinations, 

and are expected to reach proficiency at those tasks 

more quickly than entry level examiners who have 

broader responsibilities. 

The FDIC actively engages with both the public and 

private sectors to assess emerging cybersecurity threats 

and other operational risk issues. The information 

obtained from these engagements is shared with 

financial institutions and examiners, when appropriate. 

FDIC staf meet regularly with the Financial and Banking 

Information Infrastructure Committee, the Financial 

Services Sector Coordinating Council for Critical 

Infrastructure Protection, the Department of Homeland 

Security (DHS), the Financial Services Information 

Sharing and Analysis Center, other regulatory agencies, 

and law enforcement to share information regarding 

emerging issues and to coordinate responses. For 

example, in January 2020, the FDIC, FRB, OCC, and 

CSBS sent a DHS cybersecurity alert to all FDIC-insured 

institutions highlighting the need to defend against a rise 

in malicious cyber activity directed at the United States.  

Additionally, in October 2020, in order to improve the 

analysis and sharing of cybersecurity threat information 

with financial institutions, the FDIC and other FFIEC 

members conducted a webinar on heightened 

cybersecurity risks. Finally, in response to the 

SolarWinds compromise discovered in December 2020, 

the FDIC with other agencies communicated with banks 

to point them to authoritative government sources for 

related information, and with examiners to help them 

evaluate the impact on banks and service providers. 

Bank Secrecy Act/Anti-Money Laundering 

The FDIC examines institutions’ compliance with the 

requirements of the BSA and the FDIC’s implementing 

regulations at each bank it supervises as part of the risk 

management examination. The FDIC also examines BSA 

compliance during examinations conducted by State 

banking authorities if the State is unable to do so. During 

2020, the FDIC conducted BSA examinations at 1,372 

state nonmember institutions. 

Throughout 2020, the FDIC, FRB, OCC, NCUA, and the 

Department of the Treasury (including the Financial 

Crimes Enforcement Network (FinCEN)), continued to 

focus on improving the eficiency and efectiveness 

of the BSA/AML regime. In August 2020, the Federal 

banking agencies issued an updated joint statement on 

the enforcement of BSA/AML requirements, describing 

circumstances in which an agency will issue a mandatory 

cease and desist order to address noncompliance. 

The FDIC, FRB, NCUA, OCC, and FinCEN also issued 

a statement on BSA due diligence requirements for 

customers whom banks may consider to be politically 

exposed persons. Additionally, in October 2020 the 

FDIC, FRB, OCC, and NCUA — with the concurrence of 

FinCEN — granted an exemption from the requirements 

of the customer identification program rules for 

loans extended by banks and their subsidiaries to 

all customers to facilitate purchases of property and 

casualty insurance policies. 

The FFIEC further updated the FFIEC BSA/AML 

Examination Manual in 2020. In April 2020 updates 

were published to sections on scoping and planning, 

BSA/AML risk assessment, assessing the BSA/AML 

compliance program, developing conclusions, and 

finalizing the examination. The FFIEC conducted 

examiner and industry outreach webinars in April and 

June 2020, respectively, to discuss the 2020 updates 

to the FFIEC BSA/AML Examination Manual. The FFIEC 

expects to release the next set of updates in 2021. 

Revised sections of the manual reinforce instructions to 

examiners regarding depository institutions’ reasonably 

designed policies, procedures, and processes to meet 

the requirements of the BSA and safeguard institutions 

from money laundering, terrorist financing, and other 

illicit financial activity. The manual emphasizes that 

examiners should tailor the BSA/AML examination scope 

and planned procedures consistent with the money 

laundering and terrorist financing risk profile of the 

depository institution. 

Cyber Fraud and Financial Crimes 

The FDIC has undertaken a number of initiatives in 2020 

to protect the banking industry from criminal financial 

activities.  These include preparing to host a financial 

crimes-focused conference in 2021 for examiners, 

lawyers, and others from federal banking and law 

enforcement agencies; helping financial institutions 

identify and shut down “phishing” websites that attempt 

to fraudulently obtain an individual’s confidential 

personal or financial information; and publishing 
30 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

 

 

a number of Consumer News articles that ofer tips 

consumers can use to protect themselves from imposter 

scams and phishing. 

Examiner Training and Development 

In 2020, the FDIC continued to emphasize the 

importance of delivering timely and efective examiner 

training programs. While on-the-job training remained 

the most significant portion of developmental activities, 

the historical mix of classroom, virtual instructor-led, 

and asynchronous (such as computer-based) training 

was modified in response to the pandemic. The inability 

to ofer classroom-based instruction beginning in midMarch led to a significant efort to convert the entire 

curriculum of pre-commissioned examiner core training 

to a virtual delivery format, resulting in the successful 

conversion of 10 courses and rescheduling of 58 

sessions. By year-end 2020, RMS and DCP, in partnership 

with FDIC’s Corporate University, were able to deliver all 

pre-commissioned examiner training originally 

scheduled for the year. 

All training and development activities are overseen by 

senior and mid-level management to ensure that FDIC 

staf and state regulatory partners receive training that 

is efective, appropriate, and current. The FDIC works 

in collaboration with partners across the organization 

and at the FFIEC to ensure emerging risks and topics are 

incorporated and conveyed timely. FDIC courses are 

mostly developed internally and delivered by a tenured 

and knowledgeable examiner instructor pool. Training 

and development activities are targeted for all levels of 

examination staf. As an additional informal component 

to development, the FDIC acknowledges the essential 

role that peer-to-peer knowledge transfer plays in skills 

enhancement and the preservation of institutional 

knowledge. 

London Inter-bank Offered Rate 

(LIBOR) Transition 

In 2020, the FDIC, in coordination with the FFIEC, 

participated in industry outreach and monitored 

community and regional bank readiness for the 

transition from LIBOR to alternative reference rates. 

FDIC monitoring includes interdisciplinary supervision 

coordination by risk management, capital markets, 

policy, technology, and consumer compliance to 

conduct banker outreach and communication to stay 

abreast of the latest LIBOR transition developments. The 

FDIC gathers information on LIBOR transition readiness 

during examinations and other contacts with FDIC 

supervised institutions. The data are evaluated across 

institutions to identify trends and inform the supervisory 

process for areas that may require increased oversight 

and supervisory attention. 

On July 1, 2020 the FFIEC issued a statement highlighting 

the risks that will result from the transition away 

from LIBOR and encouraging banks to continue their 

eforts to transition to alternative reference rates.  On 

November 6, 2020, the FDIC, FRB, and OCC issued a 

statement reiterating that they are not endorsing a 

specific replacement rate for LIBOR for loans and that 

a bank may use any reference rate for its loans that a 

bank determines to be appropriate for its funding model 

and customer needs; however, banks should include 

robust fallback language in its lending contracts to 

mitigate the risks associated with the discontinuation 

of LIBOR.  The banking agencies issued an additional 

statement on November 30, 2020, encouraging banks 

to transition away from LIBOR as soon as practicable as 

the administrator of LIBOR had announced its intention 

to cease the publication of key LIBOR rates beginning on 

December 31, 2021. 

During 2020, the Alternative Reference Rates Committee 

(ARRC), continued the development of the Secured 

Overnight Financing Rate (SOFR) as a replacement for 

LIBOR.  To address concerns related to the lack of a 

credit spread for loan products, on February 25, 2020, 

the banking agencies, the Federal Reserve Bank of New 

York, and the Department of the Treasury established 

a Credit Sensitivity Group (CSG) comprised of 

representatives from a number of U.S. banks to discuss 

ways to support the transition of loan products away 

from LIBOR.  During the year, the CSG held a series of 

working sessions to explore the development of a credit 

risk sensitive spread to SOFR. 

Appeals of Material 

Supervisory Determinations 

Section 309(a) of the Riegle Community Development 

and Regulatory Improvement Act of 1994 required 

each of the federal banking agencies to establish an 

independent intra-agency appellate process to review 

supervisory determinations. To satisfy this requirement, 

the FDIC established a Board level committee, the 
MANAGEMENT'S DISCUSSION AND ANALYSIS 31 

2020

 

Supervision Appeals Review Committee (SARC), and 

adopted related guidelines for appeals. In 2019, the 

FDIC explored potential improvements to the current 

supervisory appeals process. As part of this review, 

the FDIC Ombudsman hosted a webinar and in-person 

listening sessions in each FDIC Region, which ofered 

bankers and other interested parties an opportunity to 

provide input and recommendations. 

Afer considering all of the feedback received, on 

September 1, 2020, the FDIC published in the Federal 

Register, a Notice and Request for Comment on 

proposed changes to its Guidelines for Appeals of 

Material Supervisory Determinations.  The proposal 

would establish an independent ofice, which would be 

known as the Ofice of Supervisory Appeals (Ofice) that 

would generally replace the existing Supervision Appeals 

Review Committee. As proposed, the Ofice would 

report to the Ofice of the FDIC Chairman and would 

have delegated authority to independently consider and 

resolve intra-agency supervisory appeals. The Ofice 

would be fully independent of the Divisions that have 

authority to issue supervisory determinations. The 

Ofice would be stafed with individuals who have bank 

supervisory or examination experience (e.g., retired bank 

examiners). These individuals would be hired as FDIC 

employees and may serve staggered terms. 

Under the proposed process, the FDIC would continue 

to encourage institutions to make good-faith eforts 

to resolve disagreements with examiners and/or the 

appropriate Regional Ofice. If these eforts are not 

successful, the institution could submit a request for 

review to the appropriate Division Director. Upon 

receiving a request for review, the Division Director 

would have the option of issuing a written decision or 

sending the appeal directly to the Ofice of Supervisory 

Appeals. If the Division Director issues a decision, 

institutions that disagree with the decision could appeal 

to the Ofice. The comment period for this proposal 

closed on October 20, 2020, and the FDIC issued final 

procedures on January 25, 2021. 

Improvements to Regulatory 

Framework 

In addition to the Covid-19-related rulemakings 

described above, the FDIC finalized a number of 

key rulemakings in 2020 to improve the regulatory 

framework applicable to insured banks. 

Brokered Deposits 

At its December 2020 meeting, the FDIC Board approved 

a final rule that makes significant revisions to the 

brokered deposit rules applicable to IDIs that are less 

than well capitalized. The final rule represents the first 

meaningful update to the brokered deposits regulations 

since the rules were first put in place approximately 

thirty years ago. The new framework reflects the 

dramatic changes in technology, law, business models, 

and financial products over that time period. 

The final rule creates a more transparent and consistent 

regulatory approach by establishing bright line tests 

for the “facilitation” component of the deposit broker 

definition and a formal process for application of the 

primary purpose exception.  The final rule is intended to 

encourage innovation in how banks ofer services and 

products to customers by reducing obstacles to certain 

types of partnerships.  And it would continue to protect 

the Deposit Insurance Fund by ensuring that certain 

types of funding, including the specific types of deposits 

Section 29 was intended to address, continue to be 

treated as brokered deposits. 

Interest-Rate Restrictions 

In December 2020, as part of the brokered deposit 

rulemaking described above, the FDIC Board approved 

modifications to the calculation of interest rate 

restrictions applicable to banks that are less than well 

capitalized. Under the final rule, the national rate cap 

will generally be the higher of (1) the average rate paid on 

deposits (including credit unions), plus 75 basis points, or 

(2) 120 percent of U.S. Treasury obligations, plus 75 basis 

points.  This combines the FDIC’s original methodology 

for interest rate restrictions, in efect from 1992 through 

2009, and the current methodology, in efect since 2010, 

with slight modifications.  While neither methodology 

proved durable on its own through a range of interest 

rate environments, the methodology adopted by the 

final rule is designed to more accurately reflect rates 

ofered in both high- or rising-rate environments and 

low- or falling-rate environments. 

The rule also amends the calculation of the local rate 

cap, which is defined by the rule as 90 percent of the 

highest ofered rate in the institution’s local market 

area for a specific deposit product. A less than wellcapitalized institution is generally permitted to ofer a 
32 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

 

rate that is above the national rate cap on new deposits 

if the rate is below the local rate cap. 

Federal Interest Rate Authority 

In June 2020, the FDIC Board approved a final rule 

that clarifies the law governing the interest rates that 

state-chartered banks and insured branches of foreign 

banks may charge. The final rule codifies longstanding 

legal interpretations of the FDI Act and provides that a 

permissible interest rate on a loan, as permitted by the 

law where the bank is located, would not be afected 

by subsequent events, such as a change in state law, a 

change in the relevant commercial paper rate, or the 

sale/assignment/transfer of the loan. 

Parent Companies of Industrial Banks 

In March 2020, the FDIC Board issued a final rule to 

establish a framework to approve filings for deposit 

insurance, mergers, and changes in bank control 

involving industrial banks. The rule requires each 

industrial bank and its parent company to enter into 

one or more written agreements with the FDIC to ensure 

the safe and sound operation of the industrial bank. 

Through the written agreements and restrictions, the 

rule imposes certain conditions and commitments, 

and prohibits the industrial bank from taking certain 

actions without the FDIC’s prior written approval. This 

includes a requirement that a parent company commit 

to maintaining the capital and liquidity of a subsidiary 

bank at such levels as the FDIC deems appropriate. The 

rule generally codifies existing practices utilized by the 

FDIC and ensures that a parent company can serve as 

a source of strength for a subsidiary industrial bank. 

The rule provides important safety and soundness 

protections to the industrial bank and the DIF without 

imposing undue costs and provides transparency to 

interested parties concerning the FDIC’s determinations 

on filings involving industrial banks. 

Volcker Rule 

In June 2020, the FDIC, FRB, OCC, SEC, and Commodity 

Futures Trading Commission approved a final rule to 

modify regulations implementing the Volcker Rule’s 

general prohibition on banking entities investing in or 

sponsoring hedge funds or private equity funds – known 

as “covered funds.” The final rule was broadly similar 

to a notice of proposed rulemaking issued in January 

2020. The rule aims to improve and streamline the 

covered funds portion of the rule, address the treatment 

of certain foreign funds, and permit banking entities to 

ofer financial services and engage in other permissible 

activities that do not raise concerns that the Volcker 

Rule was intended to address. The rule is intended to 

facilitate capital formation by enabling banking entities 

to provide credit through fund investments that will 

increase the availability of capital for businesses. The 

final rule became efective in October 2020. 

Net Stable Funding Ratio 

In October 2020, the FDIC, FRB, and OCC approved a final 

rule to implement the net stable funding ratio (NSFR), a 

one-year liquidity standard that examines the stability 

of a bank’s funding profile. The NSFR complements the 

liquidity coverage ratio rule, which requires large banking 

organizations to hold a minimum amount of high-quality 

liquid assets that can be easily and quickly converted 

into cash to meet net cash outflows over a 30-day stress 

period. The NSFR requirement is designed to reduce the 

likelihood that disruptions to a banking organization’s 

regular sources of funding will compromise its liquidity 

position, as well as to promote improvements in 

the measurement and management of liquidity risk. 

Consistent with the agencies’ tailoring rule, issued in 

November 2019, the NSFR would apply based on a 

bank’s size, risk profile, and systemic footprint. 

Total Loss-Absorbing Capacity Requirement 

In October 2020, the FDIC, FRB, and OCC issued a final 

rule to limit the interconnectedness of the largest 

banking organizations and mitigate the impact on 

financial stability from failure that could arise from the 

largest banking organizations holding the total lossabsorbing capacity (TLAC) debt of a global systemically 

important bank holding company (G-SIB). The final rule 

is substantially similar to the proposal issued in 2019 and 

complements other measures the agencies have taken 

to limit interconnectedness among the largest banking 

organizations. 

U.S. G-SIBs, as well as U.S. intermediate holding 

companies of foreign G-SIBs, are required to issue debt 

with certain features under the Federal Reserve Board’s 

TLAC rule. That debt could be used to recapitalize 

the holding company during bankruptcy or resolution 

if it were to fail. To discourage the largest banking 

organizations from purchasing TLAC debt, the final 

rule prescribes a more stringent regulatory capital 
MANAGEMENT'S DISCUSSION AND ANALYSIS 33 

2020

 

treatment for such banks’ holdings of TLAC debt. This 

rulemaking also will require G-SIBs to report publicly 

their outstanding TLAC debt. The final rule is efective 

on April 1, 2021. 

Swap Margin Rule 

In June 2020, the FDIC, FRB, OCC, Farm Credit 

Administration, and Federal Housing Finance Agency 

issued a final rule amending the agencies’ swap margin 

rule to facilitate the implementation of prudent risk 

management strategies at banks and other entities 

with significant swap activities, among other purposes. 

Under the final rule, a depository institution is no longer 

required to hold a specific amount of initial margin for 

uncleared swaps with afiliates so long as the depository 

institution’s total exposure to all afiliates does not 

exceeds 15 percent of its Tier 1 capital. Inter-afiliate 

swaps typically are used for internal risk management 

purposes by transferring risk to a centralized risk 

management function within the firm. The final rule 

will give firms additional flexibility to allocate collateral 

internally and support prudent risk management and 

safety and soundness. Under the final rule, inter-afiliate 

swaps will still remain subject to variation margin 

requirements. 

To help transition from LIBOR to alternative reference 

rates, the final rule allows swap entities to amend 

legacy swaps to replace the reference to LIBOR or 

other reference rates that are expected to end without 

triggering margin exchange requirements. The final 

rule also clarifies that swap entities may conduct riskreducing portfolio compression or make certain other 

non-substantive amendments to their legacy swap 

portfolios without altering their legacy status. For 

smaller swap market participants, the agencies finalized 

as proposed the additional phased compliance period 

for the smallest covered swap entities and financial enduser counterparties. 

Simultaneously with the final rule, the agencies issued an 

interim final rule that extend the compliance date of the 

initial margin requirements of the swap margin rules to 

September 1, 2021 for swap entities and counterparties 

with average annual notional swap portfolios of $50 

billion to $750 billion. This interim final rule also extends 

the initial margin compliance date to September 1, 2022, 

for counterparties with average annual notional swap 

portfolios of $8 billion to $50 billion. 

Final Basel III Standards 

The FDIC continues to work with the other federal 

banking agencies to develop a proposed rulemaking 

that would seek comment on the implementation of 

the revised Basel III standards in the U.S. and expect to 

issue the proposed rulemaking in 2021. The final Basel 

III standards to be implemented in the United States 

for the largest and most complex institutions would 

address concerns regarding excessive variability in the 

measurement of risk-weighted assets (RWAs) across 

large internationally active banking institutions. These 

revisions are designed to reduce RWA variability by 

enhancing the robustness and risk sensitivity of the 

standardized approach for credit risk and operational 

risk and constraining the use of internal models. In 

addition, the Basel III revisions will enhance the market 

risk framework by introducing: a clearer boundary 

between the trading book and the banking book, 

an internal models approach that relies upon the 

use of expected shortfall models, separate capital 

requirements for risk factors that cannot be modeled, 

and a risk-sensitive standardized approach that is 

designed and calibrated to be a credible fallback to the 

internal models approach. 

Codification of Section 19 Statement of Policy 

In July 2020, afer considering public comments, the 

FDIC approved a final rule to revise and codify the FDIC’s 

existing Statement of Policy for Section 19 of the FDI Act 

regarding individuals with a record of certain criminal 

ofenses who seek employment in the banking industry. 

The final rule is intended to enhance transparency 

and accountability concerning the FDIC’s Section 19 

application process and reduce burden for financial 

institutions and individuals impacted by Section 19. 

The changes narrow the circumstances under which 

the FDIC’s written consent is required for a financial 

institution to hire individuals with minor criminal 

ofenses. The final rule became efective on September 

21, 2020, superseding existing policy. 

Rulemaking on Guidance 

On November 5, 2020, the FDIC, FRB, OCC, CFPB, and 

NCUA issued a proposed rule describing the agencies’ 

use of supervisory guidance and codifying a statement, 

as amended, issued in 2018 that, among other things, 

clarified the diferences between regulations and 

guidance. The codified Statement includes provisions 
34 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

 

stating that supervisory guidance does not create 

binding, enforceable legal obligations; that the agencies 

do not issue supervisory criticisms (which includes, 

in the FDIC’s case, matters requiring board attention 

(MRBAs)) for “violations” of or “non-compliance” with 

supervisory guidance; and describes the appropriate use 

of supervisory guidance. The FDIC finalized the proposal 

in January 2021. 

Statements of Policy on National Historic 

Preservation Act and National Environmental 

Policy Act 

In October 2020, the FDIC adopted amendments to its 

regulations regarding the establishment and relocation 

of branches and ofices, including the establishment 

of branches in connection with deposit insurance 

applications. The amendments removed historic 

preservation and environmental policy requirements 

that were previously addressed in application 

procedures and related statements of policy. These 

actions reduced the burden on proposed and existing 

institutions and ensure consistency with the application 

procedures for national banks and insured state member 

banks supervised by the OCC and FRB, respectively. 

Ofice of Thrif Supervision Regulations 

Throughout 2020, the FDIC continued to streamline FDIC 

regulations and eliminate unnecessary and duplicative 

regulations applicable to state savings associations 

in order to improve the public’s understanding of 

the rules, to improve the ease of reference and to 

promote parity between state savings associations 

and state nonmember banks. The FDIC removed 

rules transferred from the Ofice of Thrif Supervision 

relating to application processing procedures, nondiscrimination requirements, requirements for 

subordinate organizations, and directives to take prompt 

corrective action, and made conforming amendments 

to its existing regulations to reference state savings 

associations as appropriate. Upon removal of these 

transferred regulations, all FDIC-supervised institutions 

would be subject to the same set of regulations. 

Supervision Policy 

The goal of supervision policy is to provide clear, 

consistent, meaningful, and timely information to 

financial institutions and examiners. 

Examination Documentation Modules 

In late 2019, RMS updated the Risk Management 

Manual of Examination Policies by inserting Part 

VI, Appendix: Examination Processes and Tools, 

Examination Documentation Modules. The Examination 

Documentation Modules were developed in 1997 by 

the FDIC, FRB, and the state banking supervisors to 

provide examiners with common tools to identify and 

assess the range of matters considered during safety and 

soundness examination activities. The modules direct 

examiners to use a risk-focused approach in conducting 

examination activities, thereby facilitating an eficient 

and efective supervisory program. 

In 2020, the FDIC updated its documentation processes 

to establish completion of the Core Analysis Decision 

Factors within the primary Examination Documentation 

Modules as the national standard for documenting a 

full-scope examination for FDIC-supervised institutions. 

The FDIC adopted this policy to promote nationwide 

consistency in documentation standards, to promote 

consistency in examination practices of state chartered 

institutions, to support the eventual migration to a more 

modern “end-to-end” supervision process as part of a 

business process modernization initiative, and to serve 

as an internal control for examination practices during 

the period when all examination activity has been 

conducted of-site. 

Risk Management Manual of Examination Policies 

In January 2020, the FDIC memorialized more robust 

examination planning procedures in a new section of 

the Risk Management Manual of Examination Policies 

titled “Examination Planning.” Additionally, various 

updates were undertaken to address recent changes 

to accounting standards and capital rules, reinforce 

instructions to examination staf regarding the conduct 

of interim contacts and director involvement, and make 

various other technical edits. 

Management of Credit Risk, Liquidity 

Risk, and Interest-Rate Risk 

Financial institutions showed resiliency in 2020 despite 

economic stress related to the COVID-19 pandemic. 

Institutions entered the period of stress with low loan 

portfolio delinquency rates. Loan deferrals, made to 

assist borrowers as segments of the economy closed, 

kept delinquency rates low. 
MANAGEMENT'S DISCUSSION AND ANALYSIS 35 

2020

 

The system also saw loan growth that was primarily 

driven by banks of all sizes supporting their customers 

and communities by originating Small Business 

Administration (SBA)-guaranteed PPP loans. The 

PPP provided businesses with low-cost funds to pay 

employees and support operations during the slowdown 

in business or temporary closures related to stay-athome orders. Financial institutions facilitated the PPP, 

generating fee income and in many cases using the FRB’s 

PPP Liquidity Facility to provide the loans. 

Temporary and permanent business closures caused 

by physical-distancing requirements and consumer 

reaction to the pandemic are impacting borrower 

balance sheets. The continued economic strains, 

uncertainty about asset quality when loan deferral 

periods end, and behavioral shifs caused by the 

pandemic create a challenging environment for 

managing credit risk. 

As individuals and businesses sought safety during the 

uncertain economic environment, banks experienced 

record new deposit growth. These inflows demonstrate 

public confidence in the banking system in what could 

become a “low for long” interest rate environment. 

Notwithstanding the banking industry’s strengthened 

liquidity, the retention rate of these new deposits 

remains unclear. 

Supervisory Guidance 

Regulatory Relief - Areas Afected 

by Severe Storms 

During 2020, the FDIC issued 16 advisories through FILs 

to provide guidance to financial institutions in areas 

afected by hurricanes, tornadoes, flooding, wildfires, 

and other severe storms, and to facilitate recovery. In 

these advisories, the FDIC encouraged banks to work 

constructively with borrowers experiencing financial 

dificulties as a result of natural disasters, and clarified 

that prudent extensions or modifications of loan terms 

in such circumstances can contribute to the health 

of communities and serve the long-term interests of 

lending institutions. 

Allowance for Credit Losses 

In June 2020, the FDIC, OCC, FRB and NCUA, with 

input from CSBS, released the Final Interagency Policy 

Statement on Allowances for Credit Losses (Final ACL 

Policy Statement) in response to CECL, to replace the 

agencies’ December 2006 Interagency Policy Statement 

on the Allowance for Loan and Lease Losses (ALLL) and 

the July 2001 Policy Statement on Allowance for Loan 

and Lease Losses Methodologies and Documentation for 

Banks and Savings Institutions (collectively, the 2006 and 

2001 ALLL Policy Statements). 

The new policy statement addresses most of the topics 

covered in the 2006 and 2001 ALLL Policy Statements, 

but in the context of CECL. Thus, the Final ACL Policy 

Statement describes: 

♦ The measurement of expected credit losses 

under CECL and the accounting for impairment 

on available-for-sale (AFS) debt securities in 

accordance with the new credit losses accounting 

standard; 

♦ Principles related to designing, documenting, 

and validating expected credit loss estimation 

processes, including the internal controls over these 

processes; 

♦ Maintaining appropriate ACLs; 

♦ The responsibilities of boards of directors and 

management; and 

♦ Examiner reviews of ACLs. 

The principles outlined in the Final ACL Policy Statement 

will become applicable to an institution upon the 

institution’s adoption of CECL. Once CECL is efective 

for all institutions, the agencies will rescind the 2006 

and 2001 ALLL Policy Statements. The agencies may 

individually issue additional information to provide 

clarification beyond what is presented in the final policy 

statement as deemed necessary. 

Credit Risk Review 

In May 2020, the FDIC, FRB, OCC, and NCUA, issued 

Interagency Guidance on Credit Risk Review Systems 

(credit risk review guidance), which updates, replaces, 

and issues as a standalone document, guidance that 

was previously codified in Attachment 1 - Loan Review 

Systems - to the 2006 Interagency Policy Statement on the 

Allowance for Loan and Lease Losses. 

The guidance articulates a broad set of practices, which 

include a system of qualified, independent, ongoing 
36 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

 

 

credit risk review and communication to management 

and the board of directors regarding the performance 

of the institution’s loan portfolio. The guidance also 

reflects current industry practices and terminology 

associated with the CECL methodology. It describes 

principles to be considered when developing and 

maintaining a credit risk review system, including the 

qualifications and independence of credit risk review 

personnel; the frequency, scope, and depth of reviews; 

and the review, follow–up, communication, and 

distribution of results. The expectations for efective 

credit review systems are scalable to an institution’s 

size, risk profile, loan type, and risk management 

practices; and the principles are consistent with the 

Interagency Guidelines Establishing Standards for Safety 

and Soundness, Appendix A of Part 364 of FDIC Rules and 

Regulations. 

Stress Testing Guidance 

The FDIC staf worked with staf from the other banking 

agencies to update the interagency stress testing 

guidance, which was issued in 2012. Revisions were 

delayed to refocus resources during the pandemic. 

RESEARCH 

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 have published papers 

in leading banking, finance, and economics journals, 

including the American Economic Review, Review 

of Economic Dynamics, and The Journal of Law and 

Economics. In addition, CFR researchers presented their 

research at major conferences, regulatory institutions, 

and universities. 

The CFR also developed and maintained many financial 

models used throughout the FDIC, including of-site 

models that inform the examination process. CFR 

economists also provided ongoing support to RMS through 

on-site examinations. 

In October 2020, the CFR hosted the 10th Annual 

Consumer Research Symposium virtually using virtual 

Chairman Jelena McWilliams delivered 

opening remarks at the 10th Annual 

Consumer Research Symposium. 

conferencing 

technology. 

FDIC Chairman 

McWilliams opened 

the conference 

by highlighting 

the importance of 

scholarly research 

in providing a 

solid foundation 

on which to make 

good public policy. 

Discussion sessions 

focused on the 

puzzle presented by 

the coexistence of high cost credit and low yield savings 

on consumer balance sheets, behavioral household 

finance, consumer credit under distress, consumption 

and credit, and financial decision-making in mortgage 

markets, among other topics. Each session included 

presentations by leading researchers from academia 

and the public sector. The symposium was attended 

by more than 200 researchers and practitioners 

from academia, government, and private-sector 

organizations. 

How America Banks: Household Use of 

Banking and Financial Services 

Section 7 of the Federal Deposit Insurance Reform 

Conforming Amendments Act of 2005 mandates that 

the FDIC regularly report on unbanked populations and 

bank eforts to bring individuals and families into the 

mainstream banking system. In response, since 2009, 

the FDIC has conducted biennial surveys to measure 

the banked and unbanked populations in the U.S. and 

study household use of banking and financial products 

and services. This eforts is the most comprehensive 

analysis of its kind. The information it generates informs 

the FDIC, as well as the public, financial institutions, 

policymakers, regulators, researchers, academics, 

and others. 

The most recent survey was conducted in 2019 and 

reached more than 33,000 U.S. households. Results 

were reported in October 2020, in How America Banks: 

Household Use of Banking and Financial Services. The 

report provided updated banked and unbanked rates for 
MANAGEMENT'S DISCUSSION AND ANALYSIS 37 

2020

 

 

U.S. households at the national and state levels and for 

more than 100 Metropolitan Statistical Areas (MSAs). The 

report also analyzed the methods used by households 

to access their bank accounts, households’ visits to 

bank branches, and their use of prepaid cards, nonbank 

financial services, and bank and nonbank credit. 

Results of the most recent survey — and all previous 

surveys — are available at the FDIC’s website at https:// 

economicinclusion.gov. In addition, this public website 

provides users with the ability to generate custom 

tabulations and access a wide range of pre-formatted 

information, including five-year estimates that provide 

additional granularity for state and MSA results. 

The FDIC will be implementing several revisions to 

the survey questionnaire for the 2021 survey. These 

revisions were discussed in a November 2020 notice in 

the Federal Register. 

National and Regional Risk Analysis 

The FDIC’s National and Regional Risk Analysis Branch 

identifies, analyzes, monitors, and communicates 

developments and key risks in the economy, financial 

markets, and banking industry that may impact FDICinsured institutions and the DIF. As part of this work, 

the Branch publishes the Quarterly Banking Profile — a 

comprehensive summary of financial results for all FDICinsured institutions. This report card on industry status 

and performance includes written analyses, graphs, and 

statistical tables. 

In addition, the branch publishes topical quarterly 

articles. In 2020, this included “2019 Summary of 

Deposits Highlights,” which highlights trends in bank 

deposit and branch growth and “The Importance of 

Community Banks in Paycheck Protection Program 

Lending,” which describes the role that community 

banks played in supporting small businesses through the 

SBA’s Paycheck Protection Program. 

INNOVATION/FINANCIAL 

TECHNOLOGY 

The FDIC continuously monitors developments in 

technology to better understand how it may afect the 

financial industry. 

FDiTech and FDIC Emerging 

Technology Steering Committee 

In 2020, the FDIC’s Ofice of Innovation — or FDiTech 

— continued its work to encourage innovation and 

partnerships at community banks. FDiTech was 

announced and established by Chairman McWilliams in 

2019, with the following mission: 

♦ Engage bankers, fintechs, technologists, and 

other regulators on innovations that will lay the 

foundation for banking’s future; 

♦ Conduct “tech sprints” and pilot projects to test 

emerging technologies in cooperation with states 

and afected federal regulators; 

♦ Support and promote the adoption of new 

technologies by financial institutions, particularly at 

community banks; and 

♦ Expand banking services to the unbanked, 

underbanked, and individuals in underserved 

communities through new technologies. 

FDiTech took the following steps in 2020 toward fulfilling 

that mission: 

♦ In February 2020, FDiTech released a guide to help 

financial technology companies and others partner 

with banks. Conducting Business with Banks: A 

Guide for Third Parties is designed to help third 

parties understand the environment in which 

banks operate and navigate the requirements 

unique to banking. 

♦ In June 2020, the FDIC announced a rapid 

prototyping competition, a type of procurement 

process tech sprint, to develop a new and 

innovative approach to real-time financial reporting, 

particularly for community banks. More than 30 

technology firms were invited to participate in the 

competition, representing leaders in the financial 

services, data management, data analytics, and 

artificial intelligence/machine learning fields. 

Competitors developed proposed solutions that 

were presented to the FDIC for consideration. The 

competition is intended to lead to the development 

of modern tools that will help make financial 

reporting seamless and less burdensome for banks, 

provide more timely and granular data to the FDIC 

on industry health, and promote more eficient 
38 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

supervision of individual banks. In October, 14 

competitors advanced to the second phase of the 

competition. 

♦ In July 2020, as part of the FDiTech initiative, the 

FDIC issued a Request for Information to seek 

the public’s input on the potential for a public/ 

private standard-setting partnership and voluntary 

certification program to promote the eficient and 

efective adoption of innovative technologies, 

such as models, at FDIC-supervised financial 

institutions and to create eficiencies in the due 

diligence process of on-boarding third-party service 

providers of technological products and services. 

Given rapid technological developments and 

evolving consumer behavior, this public/private 

partnership model program has the potential to 

help promote innovation across the banking sector 

and streamline a costly and ofen duplicative 

system for both banks and technology firms. 

The FDIC is considering the comments received 

and the next steps with regard to the formation, 

structure and utility of establishing a standard 

setting organization and certification organization 

and program. 

In addition to FDiTech, the agency has dedicated 

significant resources to identify and understand 

emerging technology and ensure the agency is prepared 

to address the changing landscape in financial services. 

Since 2016, these eforts have been led by the FDIC’s 

Emerging Technology Steering Committee, which is 

supported by two staf-level working groups. The 

committee is comprised of the Directors of RMS, DCP, 

Division of Insurance and Research (DIR), Division of 

Resolutions and Receiverships (DRR), and Division of 

Complex Institution Supervision and Resolution (CISR), 

as well as the General Counsel, the Chief Financial 

Oficer, the Chief Risk Oficer, and the Chief Information 

Oficer. 

In 2020, 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 of emerging 

technology on the banking system, the deposit 

insurance system, efective 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. 

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; 

♦ An interagency fintech discussion forum, which 

focuses on issues related to consumer compliance; 

♦ The Global Financial Innovation Network; 

♦ The US-UK Financial Innovation Partnership; and 

♦ The Financial Stability Board Financial Innovation 

Network. 

In 2020, the Legal Division formed the Financial 

Technology and Innovation Group within the Ofice of 

the General Counsel.  That group houses the FinTech 

Innovation Team of attorneys, which focuses on legal 

issues facing both the FDIC and its supervised and 

insured banks and savings associations arising from 

emerging forms of technology, innovative banking 

products and services, new approaches to the business 

of banking, and adapting relationships with third-parties.  

The Team’s mission focuses on not only providing direct 

legal services and support to the other Divisions and 

FDiTech, but also advising on legal policy in an area of 

law that is dynamic and still developing. 

In addition, the FDIC Supervision Modernization 

Subcommittee considered how the FDIC can leverage 

technology and refine processes to make the 

examination program more eficient, as well as manage 

and train a geographically dispersed workforce. 
MANAGEMENT'S DISCUSSION AND ANALYSIS 39 

2020

COMMUNITY BANKING 

RESEARCH PROGRAM 

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 91 percent of all FDIC-insured institutions 

at September 30, 2020. While these banks hold just 12 

percent of banking industry assets, community banks 

are of critical importance to the U.S. economy and local 

communities across the nation. They hold 39 percent 

of the industry’s small loans to farmers and businesses, 

making them the lifeline to entrepreneurs and small 

enterprises of all types. 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 2020, 

community banks held more than 75 percent of deposits 

in 1,152 U.S. counties. In more than 600 of these 

counties, the only banking ofices available to consumers 

were those operated by community banks. 

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 published a study of community banks in 2020, 

that updates the 2012 study on the same topic. The 

2020 study reviews several areas covered previously, 

including community-bank financial performance, trends 

in community-bank consolidation, and communitybank lending strategies. The 2020 study also includes a 

discussion of demographic changes afecting community 

banks, adoption of new technologies, and the efect of 

regulatory changes. 

The FDIC Quarterly Banking Profile 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 

declined 1.9 percent on a merger-adjusted basis in the 

first nine months of 2020 compared with the first nine 

months of 2019, in the face of the recession which began 

in the first quarter. The decline in net income during 

the first nine months of 2020 was due to a sharp rise in 

provisions for credit losses as a result of the economic 

and financial uncertainty associated with the COVID-19 

pandemic. 

The long-term trend of consolidation has done little to 

diminish the role of community banks in the banking 

industry. Just over 75 percent of the community banks 

that merged between September 2019 and September 

2020, 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 2020. (See the chart on 

the following page.) From June 2019 to June 2020, on a 

merger-adjusted basis noncommunity banks reduced 

the number of ofices they operate by 2.5 percent. In 

contrast, the number of ofices operated by community 

banks increased slightly on a merger-adjusted basis. 

Community Bank Advisory Committee 

The FDIC’s Advisory Committee on Community Banking 

is an ongoing forum for discussing current issues faced 

by community banks and receiving valuable feedback 

from the industry. The Committee, which met virtually 

twice during 2020, is composed of as many as 18 

community bank executives 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 both of the 2020 Advisory Committee meetings, there 

was a discussion of local banking conditions, supervisory 

issues, insurance and research matters, and the FDIC’s 

Rapid Prototyping Technology Competition as well as 

an update from the Minority Depository Institutions 

Subcommittee. Further, at the July 2020 meeting, there 

was a discussion of diversity and inclusion at financial 

institutions, and representatives from the Financial 

Accounting Standards Board provided an update on 

the CECL accounting standard. At the October 2020 

meeting, FDIC staf also discussed proposed changes 
40 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

 

-

COMMUNITY BANK LOAN GROWTH HAS EXCEEDED GROWTH 

AT NONCOMMUNITY BANKS FOR NINE CONSECUTIVE YEARS 

Merger Adjusted Annual Growth in Total Loans and Leases 

Source: FDIC. 

Note: Data as of third quarter for 2020 and as of year-end for all other years. 

-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% 

4.1% 

6.5% 

4.4% 

2.3% 

6.0% 

12.3% 

2007 2008 2009 2010 2011 

Community Banks 

Noncommunity Banks 

2012 2014 2015 2017 2018 20202019 2013 

10% 

0% 

-5% 

5% 

15% 

-10% 

9.0% 8.3% 

4.8% 

COMMUNITY BANKS ADDED OFFICES 

WHILE NONCOMMUNITY BANKS CLOSED OFFICES 

JUNE 2019 TO JUNE 2020 

Ofices of 

CurrentlyOperating 

Banks in 

June 2019 

Ofices of 

Acquired 

Banks 

Number of 

Ofices in 

June 2019 

(Merger 

adjusted) 

New 

Ofices 

Opened 

Ofices 

Closed 

Net Ofices 

Purchased 

or Sold 

Number of 

Ofices in 

June 2020 

Community Banks 28,317 569 28,886 606 440 15 29,067 

Noncommunity Banks 54,805 2,626 57,431 607 2,050 -15 55,973 

TOTAL 83,122 3,195 86,317 1,213 2,900 0 85,040 

Source: FDIC Summary of Deposits Data as of June 2020. 

to the supervisory appeals process and a request for 

information on a proposed voluntary certification 

program to promote new technologies. 

De Novo Banks 

Throughout 2020, the FDIC continued multiple initiatives 

aimed at streamlining the deposit insurance application 

process, and ensuring timely consideration and eficient 

processing of deposit insurance applications. 

During 2020, the FDIC released a number of resources 

to aid organizers in developing draf deposit insurance 

proposals. The resources update the process that 

the FDIC introduced in December 2018 and provide 

information regarding the FDIC experience in receiving 

and reviewing draf proposals. Further, the resources 

highlight practices that support the submission of 

efective draf proposals and detail the procedures by 

which FDIC staf reviews proposals. The draf review 
MANAGEMENT'S DISCUSSION AND ANALYSIS 41 

2020

 

 

process is available to all organizing groups, but may 

be particularly helpful for organizers pursuing deposit 

insurance proposals that present novel, unusual, or 

complex aspects, and for organizers seeking technical 

assistance. Interested parties may access applicationrelated information through the FDIC’s Bank Applications 

webpage located at https://www.fdic.gov/resources/ 

supervision-and-examinations/bank-applications/index. 

html. 

In February 2020, the FDIC released a Supplement to its 

Deposit Insurance Application Procedures Manual that 

addresses deposit insurance applications that involve 

unique or complex proposals, including proposals from 

applicants that are not traditional community banks. 

The supplement provides insights into the review of 

such applications, including the evaluation of statutory 

factors and the use of approval conditions and written 

agreements, and reflects the agency’s commitment to 

transparency in its processes and decision-making. 

The FDIC has established a goal of acting on 75 percent 

of deposit insurance applications within 120 days afer 

the application is accepted as substantially complete. 

The FDIC received 22 applications in 2020, 15 of 

which are still in process. Of the remaining seven, five 

applications were returned or withdrawn before being 

accepted as substantially complete. The remaining two 

applications were approved in excess of 120 days, one 

in 128 days and one in 134 days. Processing of these 

applications was delayed while awaiting additional 

information from the applicants. In addition, the FDIC 

approved 14 applications for deposit insurance that 

were received during 2019, while 8 applications received 

in 2019 were returned or withdrawn in 2020, but these 

applications were not subject to the 2020 Annual 

Performance Goal. 

Technical Assistance Program 

As part of the Community Banking Initiative, the FDIC 

continued to provide a robust technical assistance 

program for bank directors, oficers, and employees. 

The technical assistance program includes a Banker 

Resource Center, Directors’ College events held across 

the country, industry teleconferences and webinars, and 

a video program. 

In June 2020, the FDIC launched a new Banker Resource 

Center on its website. This one-stop resource for 

bankers. It contains detailed information on almost 20 

supervisory topics and general information in a number 

of other areas for bankers and is located at https://www. 

fdic.gov/resources/bankers. 

In 2020, the FDIC hosted Directors’ College events in five 

of its six regions. These events were 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 ofered a series of banker events, in 

order to maintain open lines of communication and to 

keep bank management and staf informed regarding 

important banking regulatory and emerging issues of 

interest to community bankers. In 2020, the FDIC 

ofered 12 teleconferences or webinars focused on the 

following topics: 

♦ How to Become a Paycheck Protection Program 

(PPP) Lender (with the FRB, OCC, and NCUA); 

♦ Revised Statement on Loan Modifications and 

Reporting for Institutions Working with Customers 

Afected by the Coronavirus (with the FRB, OCC, 

and NCUA); 

♦ New Transition Provision to Delay the Impact of 

CECL on Regulatory Capital for Institutions Required 

to Adopt CECL in 2020 (with the FRB and OCC); 

♦ Community Bank Leverage Ratio Framework; 

♦ Current Expected Credit Losses (CECL) accounting 

methodology; 

♦ Banks’ Use of Artificial Intelligence, including 

Machine Learning; 

♦ The Business Continuity Management Booklet of 

the IT Handbook, through FFIEC; 

♦ Additional Loan Accommodations (with the FRB 

and OCC); 

♦ 2020 updates to the FFIEC BSA/AML Manual, 

through FFIEC; 

♦ Loan Forgiveness and Other Matters Relative to the 

Paycheck Protection Program; 

♦ Loan modifications – Coronavirus (COVID-19) 

Information for Bankers; and 

♦ New Standardized Approach for Calculating the 

Exposure Amount of Derivatives Contracts. 
42 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

Finally, in 2020, the FDIC released six videos as a highlevel overview to help FDIC-supervised institutions 

understand how FDIC examiners look at fair lending 

compliance, and provide resources that may assist 

institutions in assessing and mitigating diferent types 

of fair lending risks. 

Advisory Committee of State Regulators 

In October 2020, the FDIC held the inaugural meeting 

of its Advisory Committee of State Regulators. The 

FDIC Board of Directors approved the formation of this 

advisory committee in November 2019, as another 

mechanism for state regulators and the FDIC to discuss 

current and emerging issues that have potential 

implications for the regulation and supervision of 

state-chartered financial institutions. The Advisory 

Committee members include regulators of statechartered financial institutions from across the United 

States as well as other individuals with expertise in the 

regulation of state-chartered financial institutions. At 

the meeting, the Committee discussed state banking 

conditions, community bank consolidation, state-federal 

coordination, financial inclusion eforts, the FDIC’s Rapid 

Prototyping Technology Competition, and a request 

for information on a proposed voluntary certification 

program to promote new technologies. 

ACTIVITIES RELATED TO 

LARGE AND COMPLEX 

FINANCIAL INSTITUTIONS, 

INCLUDING SYSTEMICALLY 

IMPORTANT FINANCIAL 

INSTITUTIONS 

The FDIC is committed to addressing the unique 

challenges associated with the supervision, deposit 

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. The 

Division of Complex Institution Supervision and 

Resolution (CISR) was established in 2019 to centralize 

and integrate the FDIC’s operations related to the 

supervision and resolution of large and complex 

financial institutions, including systemically important 

financial institutions (SIFIs), financial market utilities (e.g., 

central counterparties), and all FDIC-IDIs with assets 

above $100 billion for which the FDIC is not the primary 

federal regulatory authority (i.e., large complex financial 

institutions (LCFIs) in the CISR portfolio). 

CISR performs ongoing risk monitoring of G-SIBs, 

large foreign banking organizations (FBOs), other large 

domestic banks in the FDIC’s portfolio, and FSOCdesignated nonbank financial companies; provides 

backup supervision of the firms’ related IDIs; and 

evaluates the firms’ required resolution plans. CISR 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 FSOC for supervision 

by the FRB are periodically required to submit resolution 

plans to the FDIC and FRB. 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. 

Recent Title I Submissions 

In December 2019, the FDIC and FRB jointly announced 

that their review of the 2019 resolution plans of the 

eight largest and most complex domestic banking 

organizations did not find any deficiencies; however, 

plans from six of the eight banking organizations 

had shortcomings.  The shortcomings related to the 

ability of the firms to reliably produce, in stressed 

conditions, data needed to execute their resolution 

strategies. Action plans to address the shortcomings 

were due to the agencies by April 30, 2020.  The action 

plans demonstrated progress towards addressing the 

shortcomings.  The agencies will review whether the 

shortcomings have been addressed adequately, in 

connection with their review of the firms’ 2021 

Targeted Plans. 

In light of the challenges arising from the COVID-19 

pandemic, in May 2020, the FDIC and FRB extended the 

2020 resolution plan submission deadline by 90 days, 

to September 29, 2020, for four FBOs.  By that extended 

submission deadline, the four FBOs submitted their 

resolution plans to remediate certain weaknesses — 

deemed “shortcomings” — previously identified by 
MANAGEMENT'S DISCUSSION AND ANALYSIS 43 

2020

the agencies. The agencies announced on December 

9, 2020, that weaknesses previously identified in 

the resolution plans of those four FBOs had been 

remediated.   Additionally, the agencies extended the 

2021 targeted resolution plan submission deadline for 

foreign and domestic banks in Category II and Category 

III under the agencies’ tailoring rule. 

In July 2020, the agencies provided information to the 

eight largest and most complex domestic banking 

organizations to guide their next resolution plans, 

which are due by July 1, 2021. The 2021 plans will be 

required to include core elements of a firm’s resolution 

plan—such as capital, liquidity, and recapitalization 

strategies—as well as how each firm has integrated 

changes to, and lessons learned from, its response to 

COVID-19 into its resolution planning process.  

Additionally, on July 1, 2020, the FDIC and FRB 

announced that they had completed a review of 

“critical operations,” at certain firms whose failure or 

discontinuance would threaten U.S. financial stability, 

and informed the firms of their findings. The agencies 

also announced their plan to complete another such 

review by July 2022, and this review will include a further, 

broader evaluation of the framework used to identify 

critical operations. 

Furthermore, in 2020, the FDIC and FRB hosted Crisis 

Management Group (CMG) meetings for U.S. G-SIBs to 

discuss home-and-host resolvability assessments for 

the firms to facilitate cross-border resolution planning. 

Other Large Bank Holding Company Filers 

On December 9, 2020, the agencies finalized guidance for 

certain foreign banking organizations that are Category 

II firms according to their combined U.S. operations 

under the Federal Reserve Board’s tailoring rule and are 

required to have a U.S. intermediate holding company.  

The final guidance included tailored expectations 

around resolution capital and liquidity, derivatives 

and trading activity, as well as payment, clearing and 

settlement activities.  Additionally, the agencies provided 

information for Category II and Category III foreign 

and domestic banking organizations that will inform 

the content of their next resolution plans, which are 

due December 17, 2021.  These targeted plans will be 

required to discuss capital, liquidity, and recapitalization 

strategies, among other things. 

Insured Depository Institution Resolution Planning 

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. 

In April 2019, the FDIC issued an ANPR seeking 

comments on potential changes to the IDI rule 

requirements and adopted a resolution extending 

the due date for future plans submissions, pending 

completion of the rulemaking process. 

In May 2020, the FDIC issued a statement announcing 

plans to carry out targeted engagement and capabilities 

testing with certain IDIs on an as-needed basis. The 

statement noted the approach was consistent with both 

the requirements of the FDIC’s existing IDI Plan rule and 

the approach envisioned under the ANPR. 

In January 2021, the FDIC announced plans to resume 

requiring resolution plan submissions from IDIs with 

$100 billion or more in total consolidated assets. 

Monitoring and Measuring Systemic Risks 

The FDIC monitors risks related to G-SIBs as well as 

other large domestic banks and FBOs at the firm level 

and industry wide to inform supervisory planning and 

response, policy and guidance considerations, and 

resolution planning eforts. As part of this monitoring, 

the FDIC analyzes each company’s risk profile, 

governance and risk management capabilities, structure 

and interdependencies, business operations and 

activities, management information system capabilities, 

and recovery and resolution capabilities. Capital 

and liquidity adequacy and resiliency under stressed 

conditions are also key parts of monitoring. Further, 

because of the COVID-19 pandemic there has been 

heightened risk monitoring. 

The FDIC continues to work closely with the other 

federal banking agencies as well as foreign regulators 

to analyze institution-specific and industry-wide 

conditions and trends, emerging risks and outliers, risk 
44 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

 

 

 

management, and the potential risk posed to financial 

stability by G-SIBs, other large domestic banks and 

FBOs, and nonbank financial companies. To support 

risk monitoring that informs supervisory and resolution 

planning eforts, 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) and the SIFI Risk 

Report (SRR). The SMS provides an individual risk profile 

and assessment for LCFIs 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. Information from SMS and other FDICprepared reports is used to prioritize activities relating 

to LCFIs and to coordinate supervisory and resolutionrelated activities with the other banking agencies. 

The SRR identifies key vulnerabilities of systemically 

important firms, and includes an independent 

assessment of the appropriateness of supervisory 

CAMELS ratings for the IDIs 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 this 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 back-up 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 staf work closely with other regulatory 

authorities to identify emerging risks and assess the 

overall risk profile of large and complex institutions. The 

FDIC has assigned dedicated staf to IDIs that are LCFIs, 

to enhance risk-identification capabilities and facilitate 

the communication of supervisory information. These 

individuals work with the staf of the FRB and OCC in 

monitoring risk at their assigned institutions. 

Through December 2020, FDIC staf participated in 

90 targeted and 8 horizontal 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 the evaluation of corporate 

governance, BSA/AML compliance, credit risk, model 

risk management, market risk, interest-rate risk, capital 

adequacy, asset management, and third-party risk 

management. FDIC staf also participated in various 

interagency horizontal review activities, including the 

FRB’s Comprehensive Capital Analysis and Review, 

Comprehensive Liquidity Analysis and Review, and 

Pandemic Capital Examination, as well as SNC reviews, 

and examinations of model risk management, risk 

appetite and risk limits, insider threat, and cyber, and 

operational resiliency. 

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 efects to U.S. financial 

stability, Title II of the Dodd-Frank Act provides a 

back-up 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 is updating its systemic 

resolution framework to incorporate enhanced firm 

capabilities established through the Title I planning 

process and other domestic and foreign resolution 

planning and policy developments. The FDIC continues 

to build out process documents to facilitate the 
MANAGEMENT'S DISCUSSION AND ANALYSIS 45 

2020

 

 

 

implementation of the framework in a Title II resolution. 

In addition, work continues in the development of 

resolution strategies for financial market utilities, 

particularly central counterparties (CCPs). 

The FDIC also undertakes institution-specific resolution 

planning under the FDI Act for IDIs that are LCFIs, 

drawing on both IDI plans submitted by firms and followon engagement with the firms. A large regional bank 

resolution framework is being developed, building on 

lessons learned from historical bank resolutions and 

practices developed in connection with Title II resolution 

readiness planning for LCFIs. 

Cross-Border Cooperation 

Cross-border cooperation and advance planning are 

critical components of resolution planning for G-SIFIs 

due to the international nature of their services and 

their extensive operations overseas. In 2020, the 

FDIC continued its robust engagement with foreign 

authorities to deepen mutual understanding of the 

complex legal and operational issues related to crossborder resolution. This work is underpinned by an 

understanding that transparency and confidence in 

resolution planning will serve as a stabilizing force during 

times of stress. 

The FDIC continued to enhance cooperation on 

cross-border resolution through institution specific 

engagement, as well as through bilateral and multilateral 

outreach, including through international fora such 

as the Financial Stability Board’s (FSB’s) Resolution 

Steering Group and its subgroups on banks, insurance, 

and financial market infrastructures. This year, the 

FDIC continued to show leadership in FSB work, in 

particular through the FDIC’s membership in the 

Resolution Steering Group and its various committees, 

including co-chairing the Cross-Border CMG for financial 

market infrastructures and working on standards and 

implementation, and through work on the FSB’s report 

Evaluation of the Efects of Too Big to Fail Reforms. 

With regard to the FDIC’s institution-specific 

engagement, the FDIC co-chaired Cross-Border CMGs 

of supervisors and resolution authorities for U.S. G-SIFIs 

and participated as a host authority in CMGs for foreign 

G-SIFIs. Work through these CMGs allows the FDIC to 

improve resolution preparedness by strengthening our 

working relationships with key authorities, providing a 

forum to address institution-specific resolution planning 

considerations, and supporting information-sharing 

arrangements. The FDIC held meetings of four U.S. G-SIB 

CMGs in the April/May 2020 timeframe and meetings of 

two U.S. CCP CMGs in June 2020, having successfully 

transitioned to using a virtual format due to pandemicrelated travel restrictions. 

In addition to firm-specific work on resolution planning 

for U.S. CCPs through CMGs, the FDIC works with 

staf from the FRB, CFTC, and SEC, and with foreign 

supervisors and resolution authorities and within 

international groups, to understand risks, identify 

resolution options, and address related CCP resolution 

planning issues. 

The FDIC also continued its bilateral and multilateral 

outreach through ongoing resolution-related dialogues 

with key foreign counterparts. In 2020, the FDIC led 

significant principal and staf-level engagements with 

foreign jurisdictions to discuss cross-border issues and 

potential impediments that could afect the resolution 

of a G-SIB. For example, in 2020, the FDIC participated 

in ongoing trilateral work with UK and European 

financial regulatory authorities. The FDIC also continued 

its ongoing work with international authorities to 

enhance coordination on cross-border bank resolution. 

Participants included senior staf from the U.S. and key 

foreign jurisdictions. FDIC staf continued to pursue 

follow-on work endorsed by senior oficials from 

participating agencies. 

The FDIC maintains a close working relationship 

on cross-border resolution planning topics with EU 

authorities, including through joint Working Group 

meetings with the European Commission (EC). FDIC, 

FRB, and EC stafs held phone sessions to discuss 

cross-border resolution planning topics. FDIC staf also 

participated in two Joint US-EU Financial Regulatory 

Forum meetings held in 2020, as a member of the U.S. 

delegation led by Department of the Treasury staf, along 

with FRB, CFTC, SEC, and OCC staf. Staf from the EC, 

European Banking Authority, European Securities and 

Markets Authority, European Insurance and Occupational 

Pensions Authority, European Central Bank, Single 

Supervisory Mechanism, and Single Resolution Board 

represented the EU. The Forum meetings addressed the 

economic response to, and potential financial stability 

implications of, the COVID-19 pandemic, supervisory and 
46 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

regulatory cooperation in capital markets (including in 

the areas of derivatives, central clearing, and benchmark 

transition), multilateral and bilateral engagement in 

banking, CCP recovery and resolution, and other topics. 

The FDIC also maintains a close working relationship 

on cross-border resolution planning topics with UK 

authorities, including through dialogue as a participating 

agency in the U.S.-UK Financial Regulatory Working 

Group (FRWG), which the Department of the Treasury 

and Her Majesty’s Treasury established in 2018 to 

serve as a forum for bilateral regulatory cooperation 

between the U.S. and the UK. In addition to the FDIC, 

participating U.S. regulators include the FRB, OCC, SEC, 

and CFTC; participating UK regulators include the Bank 

of England and the Financial Conduct Authority. In 2020, 

FRWG participants met once to discuss topics across the 

key themes of the economic response to, and potential 

financial stability impacts of, the COVID-19 pandemic, 

international cooperation and 2021 priorities; crossborder rules and overseas recognition/equivalence/ 

substituted compliance regimes; sustainable finance; 

and financial innovation. 

Title II Broker Dealer Rule 

Title II of the Dodd-Frank Act provides the authority for 

the appointment of the FDIC as receiver to conduct the 

orderly liquidation of systemically important financial 

companies. Section 205 of Title II of the Act sets forth 

certain provisions specifically relating to the orderly 

liquidation of systemically important brokers or dealers. 

Section 205(h) of the Act requires the FDIC and the SEC, 

in consultation with the Securities Investor Protection 

Corporation (SIPC), jointly to issue rules to implement 

Section 205. On July 24, 2020, the FDIC and SEC adopted 

a final rule, implementing Section 205. 

In keeping with the statutory mandate, the final rule: 

♦ Clarifies how the relevant provisions of the 

Securities Investor Protection Act of 1970 

(15 U.S.C. 78aaa-lll) (SIPA) would be incorporated 

into a Title II proceeding; 

♦ Specifies the purpose and content of the 

application for a protective decree required by 

section 205 of the Dodd-Frank Act; 

♦ Clarifies the FDIC’s powers as receiver with respect 

to the transfer of assets of a covered broker or 

dealer to a bridge broker or dealer; 

♦ Specifies the roles of the FDIC as receiver and 

SIPC as trustee with respect to a covered broker 

or dealer; 

♦ Describes the claims process applicable to 

customers and other creditors of a covered 

broker or dealer, including the interaction of the 

determination of customer claims under SIPA with 

the Title II claims process; 

♦ Provides for SIPC’s administrative expenses; and 

♦ Provides that the treatment of qualified financial 

contracts of the covered broker or dealer is 

governed exclusively by section 210 of the 

Dodd-Frank Act. 

Systemic Resolution Advisory Committee 

The FDIC created the Systemic Resolution Advisory 

Committee (SRAC) in 2011 to provide advice and 

recommendations on a broad range of issues relevant 

to the failure and resolution of systemically important 

financial companies pursuant to the Dodd-Frank Act. 

Members of the SRAC have a wide range of experience, 

including managing complex firms, serving as 

bankruptcy judges, and working in the legal system, 

accounting field, and academia. The SRAC Charter was 

renewed in 2019, and this year’s SRAC meeting was held 

virtually on October 1, 2020. 

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. 

Promoting Economic Inclusion 

The FDIC is strongly committed to promoting access to 

a broad array of responsible and sustainable banking 

products to meet consumers’ financial needs. In 

support of this goal, the FDIC: 
MANAGEMENT'S DISCUSSION AND ANALYSIS 47 

2020

 

 

♦ Conducts research on consumer use of financial 

services to inform eforts to expand and sustain 

participation in the banking system; 

♦ Researches strategies, products, and services that 

banks can use to meet the needs of lower-income 

consumers; 

♦ Supports bank consideration of opportunities to 

ofer additional products and services that have the 

potential to support, expand, and sustain consumer 

participation in the banking system; 

♦ 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 support 

expanding consumer and community access and 

sustainable engagement with the nation’s banking 

system. This includes reviewing basic retail financial 

services (e.g., low-cost, safe transaction accounts; 

afordable small-dollar loans; and savings accounts), 

as well as demand-side factors such as consumers’ 

perceptions of financial institutions. 

In 2020, the ComE-IN met and discussed the following 

topics: 1) results of a 2019 FDIC national household 

survey and an accompanying report entitled “How 

America Banks”; 2) the changing circumstances of 

consumers during the COVID-19 pandemic; and 3) the 

role of minority-owned depository institutions and the 

importance of diverse bank workforces in ensuring the 

banking sector is well-positioned to address the needs of 

the nation. 

Expanding Account Access 

In 2020, in addition to the resources provided to 

consumers related to economic impact payments noted 

above, FDIC also conducted outreach to banks and 

community-based organizations to enhance consumer 

access to financial services that would allow receipt of 

economic impact payments directly and safely. The 

FDIC supports coalitions nationwide that share its 

commitment to expanded access to safe and afordable 

bank accounts. Additional consumer outreach raised 

awareness of pandemic-driven scams, while promoting 

financial education as well as state and local assistance 

and recovery programs. 

As of December 31, 2020, the FDIC hosted more than 

122 events, which provided opportunities for partners 

to collaborate on ways to increase consumer access 

to FDIC-insured bank accounts and credit services; 

opportunities to build savings and improve credit 

histories; and initiatives to strengthen the financial 

capability of community service providers that directly 

serve low- and moderate-income (LMI) consumers and 

small businesses. 

Public Awareness Campaign 

The FDIC developed the strategy, messaging, and 

communications plan for a new public awareness 

campaign to motivate unbanked consumers in two 

metropolitan statistical areas (MSAs) to join the banking 

system. The two areas are the Atlanta-Sandy SpringsAlpharetta MSA in Georgia, and the Houston-The 

Woodlands-Sugar Land MSA in Texas. 

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 FDIC rules for 

deposit insurance coverage. The FDIC has an extensive 

deposit insurance education outreach program 

consisting of seminars for bankers, a web-based 

calculator for estimating deposit insurance coverage, 

and written and other web-based resources targeted to 

both bankers and consumers. For example, bankers and 

consumers can use the FDIC’s BankFind tool to verify 

whether a website is operated by a legitimate FDICmember bank. Through December 31, 2020, the FDIC 

identified and took appropriate action on more than 100 

websites, some of which included the Member FDIC logo, 

but were not operated by FDIC-member banks. 

During 2020, the FDIC continued its eforts to 

educate bankers and consumers about the rules and 

requirements for FDIC insurance coverage. For example, 

as of December 31, 2020, the FDIC held four telephone 

seminars for bankers on deposit insurance coverage. 

Approximately 4,855 bankers were in attendance, 
48 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

 

representing 1,872 bank sites. The FDIC also provides 

deposit insurance training videos on its public website 

and YouTube channel. 

As of December 31, 2020, the FDIC Call Center had 

received 141,607 telephone calls, 27,417 of those were 

identified as deposit insurance-related inquiries. In 

addition to telephone inquiries about deposit insurance 

coverage, the FDIC received 1,472 written inquiries from 

consumers and bankers. Of these inquiries, 99 percent 

received responses within two weeks, as required by 

corporate policy. 

Rulemaking and Guidance 

Interagency Lending Principles for Ofering 

Responsible Small-Dollar Loans 

In May 2020, the FDIC, FRB, OCC, and NCUA issued 

interagency guidance to recognize the role small-dollar 

loans can play in helping borrowers meet credit needs 

due to cash-flow imbalances, unexpected expenses, or 

temporary income shortfalls. The guidance establishes 

a set of core lending principles and clarifies regulatory 

expectations in a manner that encourages financial 

institutions to ofer responsible small-dollar loans. 

CRA Modernization 

In December 2019, the FDIC and OCC announced 

a proposal to modernize the regulations under the 

CRA. Stafs of the FDIC and OCC reviewed the many 

comments received in response to the proposal and 

worked collaboratively. In May, the OCC released their 

final rule on the CRA, and the FDIC Chairman announced 

that while the FDIC strongly supports the eforts to 

make the CRA rules clearer, more transparent, and less 

subjective, in light of the COVID-19 pandemic, the agency 

did not believe it was appropriate to finalize the CRA 

proposal during 2020. 

Home Mortgage Disclosure Act 

In February 2020, the FDIC and other FFIEC members 

issued a revised version of A Guide to HMDA Reporting: 

Getting It Right. The 2020 edition of the Guide applies 

to 2020 Home Mortgage Disclosure Act (HMDA) data 

reported in 2021 and incorporates amendments made 

to HMDA by the Dodd-Frank Act and the Economic 

Growth, Regulatory Relief, and Consumer Protection Act 

(EGRRCPA). The Guide was designed to help financial 

institutions better understand the HMDA requirements, 

including data collection and reporting provisions. 

Interagency Questions and Answers 

Regarding Flood Insurance 

In June 2020, the FDIC, FRB, OCC, and NCUA, issued 

a notice with a request for comment on proposed 

new and revised Interagency Q&As Regarding Flood 

Insurance. The proposal seeks to incorporate 

amendments to federal flood insurance laws regarding 

the escrow of flood insurance premiums, the detached 

structure exemption, and force placement of insurance. 

The notice is intended to help lenders meet their 

responsibilities pursuant to the federal flood 

insurance laws. 

Updated Examination Procedures 

Throughout 2020, the FDIC reviewed and updated the 

examination procedures outlined in the FDIC Consumer 

Compliance Examination Manual with respect to Truth-inLending. These procedures were updated to reflect the 

CFPB’s 2017 and 2018 TILA-RESPA Integrated Disclosure 

Rule amendments to Regulation Z. The procedures also 

include amendments to TILA relating to the EGRRCPA. 

Consumer Compliance Supervisory Highlights 

The second issue of the FDIC Consumer Compliance 

Supervisory Highlights was released in April 2020. The 

purpose of this publication is to enhance transparency 

regarding the FDIC’s consumer compliance supervisory 

activities. The publication includes a high-level overview 

of consumer compliance issues identified during 2019 

through the FDIC’s supervision of state non-member 

banks and thrifs. 

FFIEC Federal Disclosure Computational Tools 

In April 2020, the FFIEC, on behalf of its member entities, 

announced the availability of FFIEC Federal Disclosure 

Computational Tools, including the Annual Percentage 

Rate Computational Tool and the Annual Percentage 

Yield Computational Tool. The FDIC and other FFIEC 

member agencies collaborated to develop the Federal 

Disclosure Computational Tools, which will help financial 

institutions in their eforts to comply with consumer 

protection laws and regulations. The FFIEC Federal 

Disclosure Computational Tools are available at https:// 

www.fiec.gov/calculators.htm. 
MANAGEMENT'S DISCUSSION AND ANALYSIS 49 

2020

 

Community and Small Business 

Development and Affordable 

Mortgage Lending 

The FDIC is committed to promoting community 

development, small business and afordable mortgage 

lending in underserved communities. As of December 

31, 2020, the FDIC Community Afairs staf had engaged 

with banks and community organizations through more 

than 131 outreach events. These events increased 

shared knowledge and supported collaboration among 

financial institutions and other community, housing, 

and small business development organizations. These 

collaboration eforts enabled banks to ofer responsive, 

reasonably priced mortgages and small business loans 

to borrowers who otherwise might not have qualified for 

bank-sponsored loan products. 

The FDIC promoted community development 

partnerships and access to capital in historically 

underserved markets. Community development 

outreach events were held across all regions of the 

FDIC and spanned a wide variety of topics including 

community and neighborhood stabilization, workforce 

development, and financial capability. 

The FDIC’s Community Afairs Program supports 

the FDIC’s mission to promote stability and public 

confidence in the nation’s financial system by 

encouraging economic inclusion and community 

development initiatives that broaden access to safe 

and afordable credit and deposit services from IDIs, 

particularly for LMI consumers and small businesses. 

The FDIC’s Afordable Mortgage Lending Center’s 

webpage houses various resources, including the 

Afordable Mortgage Lending Guide, a three-part manual 

designed to help community banks identify and access 

afordable mortgage products. The Afordable Mortgage 

Lending Center had more than 274,800 subscribers as of 

December 31, 2020. The webpage is located at https:// 

www.fdic.gov/consumers/community/mortgagelending/ 

index.html. 

The CRA encourages banks to ofer community 

development loans, investments, and services to 

help address the needs of LMI communities with 

respect to housing, community services, revitalization 

and stabilization of neighborhoods, and economic 

development. The FDIC, in partnership with the FRB 

and OCC, hosted basic and advanced training sessions 

for bankers to enhance their understanding of the 

regulation and to encourage them to pursue community 

development opportunities in their markets. In 

response to COVID-19, training sessions also focused 

on partnerships and activities that banks could 

engage in to support consumers and communities 

adversely impacted. 

The agencies also ofered basic CRA training for 

community-based organizations as well as seminars 

on establishing efective bank and community 

collaborations. Finally, the FDIC hosted examiner 

listening sessions with local community-based 

organizations designed to help examiners better 

understand local community credit needs and 

opportunities for bank CRA and community 

development partnerships. 

Advancing Financial Education 

Financial education is central to FDIC eforts to expand 

economic inclusion and promote confidence in the 

banking system. Efective financial education helps 

people gain the skills and confidence necessary to 

sustain a banking relationship, achieve financial goals, 

and improve financial well-being. 

Through the Money Smart suite of curricula, the FDIC 

ofers banks and community-based organizations 

non-copyrighted, high-quality, free financial education 

training resources designed to meet the financial 

education needs of consumers of all ages and small 

business owners. Money Smart materials are available 

in multiple languages, Braille, and large print. Self-paced 

products complement instructor-led tools delivered via 

video conferencing and in person. To incorporate user 

feedback, regulatory changes, and evolving instructional 

best practices, the FDIC updates Money Smart materials 

regularly. 

Money Smart Improvements 

In 2020, the FDIC developed an online suite of 14 games 

and related resources about everyday financial topics 

called “How Money Smart Are You?” These new selfpaced tools, expected for widespread public release in 

2021, will allow adults of all ages to learn about financial 

topics of interest by playing the educational games or 

using the varied resources that support the games. How 
50 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

Money Smart Are You? eventually will replace the Money 

Smart computer-based instruction product currently 

available. 

The FDIC used feedback from Money Smart Alliance 

members to improve instructor-led tools. For example, 

to make it easier for potential trainers to use the 

instructor-led curriculum, Money Smart staf recorded 

and posted train-the-trainer webinars for each of the 

14 Money Smart for Adults modules. In response to the 

pandemic, staf pivoted outreach early in the year to help 

Money Smart Alliance members use Money Smart tools to 

provide remote engagement. 

Finally, the Money Smart website was redesigned to 

improve usability. The FDIC Online Catalog, the website 

feature that allows people to order or download Money 

Smart and deposit insurance resources, was replaced 

with a cloud-based solution that improves the user 

experience, while reducing maintenance costs. 

Outreach Highlights 

The Winter issue of Money Smart News recognized four 

Money Smart Alliance members for their innovative use 

of Money Smart materials: 

♦ University of Wyoming Extension used Money 

Smart for Adults to train staf from community 

organizations across Wyoming to teach money 

management and provide individual coaching. 

♦ First Commonwealth Bank of Indiana, and 

Pennsylvania, partnered with Goodwill of 

Southwestern Pennsylvania in Pittsburgh to 

provide financial education for nonviolent 

ofenders participating in a Goodwill Community 

Reintegration program. 

♦ Haven Neighborhood Services of Los Angeles 

engaged incarcerated women and other people 

struggling financially, ofen in collaboration with 

area banks. 

♦ JPMorgan Chase Bank, N.A. provided monthly 

workshops with Samaritas House Heartline in 

Detroit, Michigan, an organization that provides 

shelter, food, and other assistance to women who 

are homeless or leaving the correctional system. 

While 2020 focused on supporting existing Alliance 

members, activities attracted new organizations to 

the Alliance family. More than 175 organizations joined 

the Alliance during 2020, bringing the total number 

of members to 1,600. In addition, more than 3,500 

prospective trainers learned more about using Money 

Smart via training sessions/webinars. 

FDIC Consumer News 

FDIC Consumer News is a monthly publication that 

provides practical guidance on how to become a 

smarter, safer user of financial services. The FDIC 

released 12 issues in 2020, along with a Special Edition 

on the impacts of COVID-19. Selected articles define 

financial terms, ofer helpful hints, resources, quick tips 

and common–sense strategies to protect and stretch 

consumers’ money. The FDIC promotes FDIC Consumer 

News on four social media platforms, provides English 

and Spanish printable versions, and has more than 

148,000 subscribers nationwide. 

Partnerships for Access to Mainstream Banking 

Across the country, the FDIC supported community 

development and economic inclusion partnerships 

at the local level by providing technical assistance 

and information resources, with a focus on unbanked 

households and LMI communities. Community Afairs 

staf advanced economic inclusion through FDICled Alliances for Economic Inclusion (AEI), as well as 

other local, state and regional coalitions that promote 

collaboration among financial institutions, federal 

agency partners, and local non-profit organizations. 

Among others, the FDIC worked with Bank On, United 

Way, industry trade groups, and other foundations. 

Further, the FDIC worked with fellow financial regulatory 

agencies to provide information and technical assistance 

on community development to banks and community 

leaders across the country. 

The FDIC hosted 25 outreach events with 12 AEI 

coalitions to support working groups of bankers 

and community leaders responding to the financial 

capability and services needs in their communities. 

The Los Angeles AEI conducted eight events at public 

libraries to promote savings by automatic deposit during 

America Saves Week in February. In March, the Boston 

AEI conducted a forum on Healthy Homes, a holistic, 

resident-centered strategy that connects the health and 

wellbeing of residents to safe, secure housing. Webinars 

hosted by the Oklahoma and Mississippi AEIs connected 
MANAGEMENT'S DISCUSSION AND ANALYSIS 51 

2020

 

DCP Senior Community Afairs Specialist Mary Duron (center) at an event celebrating America Saves/Los Angeles Saves Week in the County and 

City of Los Angeles. 

small businesses with banks and other resources to help 

in their economic recovery. 

Consumer Complaints and Inquiries 

The FDIC helps consumers by receiving, investigating, 

and responding to consumer complaints about FDICsupervised institutions and answering inquiries about 

banking laws and regulations, FDIC operations, and 

other related topics. Assessing and resolving these 

matters helps the agency identify trends or problems 

afecting consumer rights, understand the public 

perception of consumer protection issues, formulate 

policy that aids consumers, and foster confidence in 

the banking system. 

The FDIC publishes an annual report regarding the 

nature of the FDIC’s interactions with consumers and 

depositors and also regularly updates metrics on 

requests from the public for FDIC assistance.3 

Consumer Complaints by Topic and Issue 

In 2020, the FDIC’s Consumer Response Center (CRC) 

handled 15,213 written and telephonic complaints 

and inquiries. Of the 12,153 involving written 

correspondence, 4,414 were referred to other agencies. 

The FDIC handled the remaining 7,739. 

The FDIC responded to 99 percent of written complaints 

within time frames established by corporate policy, and 

acknowledged 100 percent of all consumer complaints 

and inquiries within 14 days. 

In 2020, the four most frequently identified topics 

in consumer complaints and inquiries about FDICsupervised institutions concerned checking accounts 

(25 percent), consumer/business credit cards 

(18 percent), consumer lines of credit/installment loans 

(14 percent), and residential real estate (8 percent). 

Through December 2020, consumers received more 

than $942,518 in refunds and voluntary compensation 

from financial institutions as a result of the assistance 

provided by the FDIC’s Consumer Response Center. 

In March 2020, the FDIC began tracking incoming 

complaints and inquiries regarding the COVID-19 

3 The Transparency and Accountability: Consumer Protection and Deposit Insurance 2019 Annual Report is available at https://www.fdic.gov/transparency/ 

trans-account-2019-annual-report.pdf. 
52 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

pandemic by adding specific keywords to case files. 

Keyword included “Coronavirus 2020” to track general 

concerns regarding the pandemic; “IRS Stimulus CSR” 

to track concerns related to the Economic Impact 

Payments; and “SBA-CARES Act” to track business 

owners’ concerns. Through December 31, 2020, the CRC 

received 1,493 complaints and inquiries tagged with one 

or more of these key words, of which 755 cases involved 

FDIC-supervised institutions. 

FAILURE RESOLUTION AND 

RECEIVERSHIP MANAGEMENT 

The Division of Resolutions and Receiverships is 

responsible for resolving the failure of IDIs with assets 

under $100 billion. When an IDI fails, the respective 

chartering authority—the state for state-chartered 

institutions and the OCC for national banks and federal 

savings associations—typically appoints the FDIC 

as receiver. 

To resolve a failed IDI, the FDIC employs a variety of 

strategies to ensure the prompt and smooth payment 

of deposit insurance to insured depositors, minimize 

the impact on the DIF, and speed dividend payments to 

uninsured depositors and other creditors of the failed 

institution. No depositor has ever experienced a loss on 

the insured amount of their deposits in an FDIC-insured 

institution due to a failure. 

The FDIC evaluates and markets a failing IDI by soliciting 

and accepting bids to determine which bid (if any) is least 

costly to the DIF. The FDIC uses two basic resolution 

methods: purchase and assumption (P&A) transactions 

and deposit payouts, with the P&A transaction being 

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 

IDI, including the option of acquiring either all deposits 

or only the insured portion.  Because each failing IDI is 

diferent, P&A transactions provide flexibility to structure 

resolution transactions that result in obtaining the 

highest value. For example, a P&A transaction could 

include a shared-loss feature, in which the FDIC as 

receiver agrees to share in losses on certain assets with 

the acquirer for a specified period (e.g., five to 10 years).  

The FDIC used shared-loss P&A transactions extensively 

during periods of economic distress, when asset values 

became highly uncertain.  While shared-loss P&A 

transactions have not been ofered since 2013, the FDIC 

continues to monitor existing agreements that remain 

in place. At year-end 2020, there were 19 receiverships 

active in the shared-loss program. Total assets covered 

under the shared-loss program were reduced by $1.1 

billion to $3.1 billion. 

Financial Institution Failures 

During 2020, there were four institution failures. In each 

case, the FDIC successfully contacted all qualified and 

interested bidders to market and sell these institutions. 

In all four IDI failures, the assuming institution assumed 

all deposits and all depositors had access to insured 

funds within one business day, as all failures occurred on 

a Friday. 

Further, 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 

Dollars in Billions 

2020 2019 2018 

Total Institutions 4 4 0 

Total Assets of 

Failed Institutions* 

$0.5 $0.2 $0.0 

Total Deposits of 

Failed Institutions* 

$0.4 $0.2 $0.0 

Estimated Loss to the DIF $0.1 $0.03 $0.0 

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

filed by the institution prior to failure. 

Receivership Management Activities

As part of the receivership process, the FDIC as receiver

manages failed IDIs and their subsidiaries with the goal

of expeditiously winding up their afairs. Assets that

are not sold to an assuming institution through the

resolution process are retained by the receivership and

promptly valued and liquidated in order to maximize the

return to the receivership estate.

As a result of the FDIC’s asset marketing and collection

eforts, the book value of assets in inventory decreased

by $241 million (46 percent) in 2020. Total assets in
MANAGEMENT'S DISCUSSION AND ANALYSIS 53 

2020

 

248 

4 

18 

234 

liquidation continued a downward trend, resulting in a 

total book value of $283 million at the end of 2020. 

Also, during 2020, for 95 percent of failed institutions, at 

least 90 percent of the book value of marketable assets 

was marketed for sale within 90 days of an institution’s 

failure for cash sales, and within 120 days for structured 

sales. 

The following chart shows the year-end balances of 

assets in liquidation by asset type. 

ASSETS-IN-LIQUIDATION INVENTORY 

BY ASSET TYPE 

Dollars in Millions 

Asset Type 12/31/20 12/31/19 12/31/18 

Securities $10 $10 $50 

Consumer Loans 0 0 0 

Commercial Loans 6 1 34 

Real Estate Mortgages 3 19 67 

Other Assets/Judgments 24 44 151 

Owned Assets 1 3 3 

Net Investments in 

Subsidiaries 

20 31 19 

Structured and 

Securitized Assets 

219 416 854 

TOTAL $283 $524 $1,178 

Proceeds generated from asset sales and collections are 

used to pay receivership claimants, including depositors 

whose accounts exceeded the insurance limit. During 

2020, receiverships paid dividends of $25,000 to 

depositors whose accounts exceeded the insurance 

limit. 

Once the assets of a failed institution have been sold 

and liabilities extinguished, the final distribution of 

any proceeds is made, and the FDIC terminates the 

receivership. In 2020, a total of 18 receiverships were 

terminated, which resulted in a net decrease of 14 active 

receiverships under management. Further, the FDIC 

terminated 75 percent of new receiverships within three 

years of the date of failure. 

The following chart shows overall receivership activity 

for the FDIC in 2020. 

RECEIVERSHIP ACTIVITY 

Active Receiverships as of 12/31/19 

New Receiverships 

Receiverships Terminated 

Active Receiverships as of 12/31/20 

Professional Liability and 

Financial Crimes Recoveries 

The FDIC investigates bank failures to identify potential 

claims against directors, oficers, 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 IDIs and FDIC receiverships. The 

FDIC will pursue meritorious claims that are expected to 

be cost-efective. 

During 2020, the FDIC recovered $47.4 million from 

professional liability claims and settlements. The FDIC 

authorized two professional liability lawsuits during 

2020. As of December 31, 2020, the FDIC’s caseload 

included 10 professional liability lawsuits (down 

from 11 at year-end 2019), eight residential mortgage 

malpractice and fraud lawsuits (no change), and open 

investigations in 53 claim areas out of nine institutions. 

The FDIC completed investigations and made decisions 

on 82 percent of the investigations related to the one 

failure that reached the 18-month point in 2020 afer the 

institution’s failure date, thereby exceeding the 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 $3.2 million in 

2020. As of December 31, 2020, there were 1,909 active 

restitution and forfeiture orders (down from 2,187 at 

year-end 2019). This includes 19 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). 
54 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

 

INFORMATION TECHNOLOGY 

Information technology (IT) is an essential component 

in virtually all FDIC business processes. This integration 

with the business provides opportunities for eficiencies 

but also requires an awareness of potential risks. In 

2020, the Chief Information Oficer Organization (CIOO) 

focused its eforts on managing information security risk, 

strengthening infrastructure resiliency, and modernizing 

FDIC applications and systems to support the FDIC’s 

business processes and key stakeholders. 

Managing Information Security Risk 

The FDIC’s information security program is integral to the 

agency’s ability to carry out its mission of maintaining 

stability and public confidence in the nation’s financial 

system.  The information security program relies on 

efective and eficient policies and practices to protect 

the agency’s information assets and to protect, detect, 

respond to, and recover from incidents as rapidly as 

possible with minimal disruption to stakeholders.  

The FDIC continues to focus time and resources on 

maturing and strengthening its risk management 

capabilities and internal controls. In 2020, the FDIC: 

♦ Implemented Network Access Controls across the 

enterprise to prevent unauthorized entities from 

connecting to FDIC networks; 

♦ Strengthened information security and privacy 

risk management by introducing new policies and 

procedures for patching, risk assessments, Plans of 

Action and Milestones, remediation plans, firewall 

and network security, and security and privacy 

control assessments; 

♦ Supported closure of OIG audit findings involving 

several areas by expanding internal controls and 

risk mitigation strategies including maturing the 

FDIC Privacy Program and implementing the 

Privacy Continuous Monitoring Strategy; 

♦ Continued to implement Department of 

Homeland Security Continuous Diagnostics and 

Mitigation service requests, enhancing the FDIC’s 

cybersecurity posture by providing monitoring and 

detection information to the federal dashboard; 

and 

♦ Strengthened monitoring practices to ensure that 

network users complete required IT security and 

privacy awareness training. 

Information Security continues to be a top management 

priority at the FDIC. 

Strengthening Infrastructure 

Resiliency 

The FDIC must be able to provide and maintain an 

acceptable level of service in the face of threats 

and challenges to normal computer and network 

operations. The latest challenge was the agencywide mandatory telework requirement caused by the 

COVID-19 pandemic. In short order, the FDIC pivoted 

to provide remote access for the majority of our 

employees. The FDIC successfully transitioned almost 

5,800 employees and more than 1,000 contractors to a 

teleworking model, over a weekend, without a break in 

critical services. This efort provided a prime example 

of the benefits of a continued focus on infrastructure 

resiliency enhancements. In support of the transition 

to mandatory telework, the CIOO took several actions 

to help ensure the FDIC’s employees could continue to 

deliver on its mission: 

Mandatory Telework Enhancements: 

♦ Expanded the lines on the main teleconference 

bridge; 

♦ Increased Internet capacity in the main and backup 

data centers; 

♦ Enhanced infrastructural and foundational 

capabilities (including various Microsof Ofice 365 

components and electronic signatures) to better 

support ongoing telework; 

♦ Accelerated the implementation of internal 

and external digital signature and online forms 

solutions; and 

♦ Identified needed updates for several applications 

to enhance remote access capabilities. 

Ongoing Infrastructure Resiliency Enhancements: 

♦ Planned and developed applications for Divisions 

and Ofices to strengthen emergency preparedness; 

and 
MANAGEMENT'S DISCUSSION AND ANALYSIS 55 

2020

 

♦ Continued the modernization of public-facing 

applications to improve resiliency, availability, and 

functionality for public outreach. 

Mission Sustainment: 

♦ Created a virtual on-boarding process to enable 

the distribution of laptops and other electronic 

equipment to new employees to limit travel to 

FDIC ofices; 

♦ Facilitated safe incoming and outgoing 

correspondence with banks and other external 

stakeholders through the use of secure electronic 

communications (e.g., ZixMail, Enterprise File 

Exchange (EFX) and FDICconnect Examination File 

Exchange (FCX-EFE)); 

♦ Approved the use of DocuSign for external 

electronic signatures; and 

♦ Leveraged FDICLearn and other applications to 

virtualize all mission critical training. 

Modernizing IT and Enhancing 

Data Governance 

The FDIC is committed to providing a robust, resilient, 

and secure IT infrastructure that promotes eficient 

operations, applies modern approaches to the use and 

protection of data, and improves the efectiveness of the 

FDIC’s engagement with regulated institutions.  As part 

of this commitment, the FDIC began the implementation 

of application and data modernization initiatives 

identified in the IT Modernization Roadmap.  In support 

of this commitment the FDIC: 

♦ Released the Common Business Process 

Management Platform required to facilitate the 

replacement of legacy applications; 

♦ Delivered the FDIC Artificial Intelligence strategy, 

roadmap and initiative recommendations; 

♦ Launched a Cloud Technology Migration 

Modernization project and migrated applications 

for two divisions; 

♦ Established the Enterprise Data Governance 

Framework and Enterprise Data Council to 

efectively manage data from a holistic perspective; 

♦ Conducted a data literacy assessment of all 

employees; 

♦ Hired a dedicated Chief Data Oficer; and 

♦ Migrated SharePoint to the cloud. 

INTERNATIONAL OUTREACH 

The FDIC continues to play a leading role 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 virtually hosting foreign oficials, 

conducting training seminars, delivering technical 

assistance, 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 oficials and subject matter experts provided 

continuing support for IADI programs in 2020. This 

included chairing IADI’s Capacity Building Technical 

Committee, which, among other activities, provided 

support for developing and facilitating virtual workshops 

for the Asia-Pacific, and Latin American regions of 

IADI. The FDIC also chaired IADI’s Diferential Premium 

Systems Technical Committee, which published a paper 

on evaluating the efectiveness of diferential deposit 

insurance premium systems. Additionally, the FDIC 

began chairing the Training and Technical Assistance 

Council Committee and the newly established Financial 

Technology Technical Committee. Led and supported 

by FDIC executives and senior staf, IADI technical 

assistance and training activities reached approximately 

520 participants. 

Association of Supervisors of 

Banks of the Americas 

Senior FDIC staf chaired the ASBA Training Committee 

in 2020, which designs and implements ASBA’s training 

strategy to promote the adoption of sound banking 

supervision policies and practices among its members. 

In February a meeting was held with training oficials 

in the ASBA jurisdictions to begin a restructuring of the 

ASBA training program. Due to COVID-19, the on-site 
56 MANAGEMENT'S DISCUSSION AND ANALYSIS

ANNUAL 

REPORT

training programs were cancelled for the year, however, 

many courses were able to be converted to virtual 

events. The training program reached 453 member 

participants in 2020. 

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 FDIC’s contributions include actively participating 

in many of the committee groups, working groups, and 

task forces established by BCBS to carry out its work, 

which focus on policy development, supervision and 

implementation, accounting, and consultation. 

International Capacity Building 

Due to COVID-19, most of the FDIC’s direct assistance 

programs were cancelled or postponed in 2020. 

However, the FDIC was able to provide technical 

expertise to many foreign organizations through 

the use of virtual technology. These engagements 

included supplying staf experts to provide training in 

bank resolution and planning for the Albania Deposit 

Insurance Agency and the Bank of Albania, the Hong 

Kong Monetary Authority, the Central Bank of Brazil, 

and the Kenya Deposit Insurance Corporation; 

discussion of data modernization and institutional 

arrangements in resolution with the Financial Stability 

Institute; discussion of early warning systems and other 

topics with the Kenya Deposit Insurance Corporation; 

discussion of pass-through deposit insurance coverage 

with the International Monetary Fund; and discussion 

of legal issues for the transfer of title in a purchaseand-assumption transaction with the Nigeria Deposit 

Insurance Corporation. The FDIC also hosted eight 

visiting regulators and other government oficials from 

Japan and Spain early in the year. 

EFFECTIVE MANAGEMENT OF 

STRATEGIC RESOURCES 

The FDIC recognizes that it must efectively 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 

efectiveness and minimize potential financial risks to 

the DIF. Following are the FDIC’s major accomplishments 

in improving operational eficiency and efectiveness 

during 2020. 

Human Capital Management 

The FDIC’s human capital management programs are 

designed to attract, train, develop, reward, and retain a 

highly skilled, diverse, and results-oriented workforce. In 

2020, 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 

The FDIC understands that succession planning is 

critical to ensure that gaps in employee aspiration, 

engagement, and readiness for senior leadership and 

technical positions are addressed. The FDIC dedicates 

resources to strengthen and expand its internal pipeline 

of employees who aspire to higher-level positions, have 

the necessary leadership and technical skills and are 

prepared to assume future leadership roles. 

The FDIC conducted targeted workforce and successionplanning initiatives in mission-critical functions to 

ensure it has the workforce and leadership capabilities 

needed in a dynamic environment. The agency 

engaged in defining the capabilities required of subject 

matter experts in mission-critical roles to plan future 

recruitment, professional development, and retention 

strategies and inform human capital investments. 

Individual divisions and ofices continued to plan and 

implement succession-planning activities tailored to 

address their unique workforce and leadership capacity 

needs in evolving conditions. 

During the past few years, the FDIC has witnessed 

an uptick in retirements among its management and 

leadership ranks, requiring a greater emphasis on 

knowledge transfer and long-term succession planning. 

To ensure that critical skills are sustained, the FDIC is 

developing new career paths that encompass emerging 

skills, while ofering leadership training and career 

development opportunities designed to increase the 

internal candidate pool of potential leaders at all levels. 
MANAGEMENT'S DISCUSSION AND ANALYSIS 57 

2020

 

 

 

The FDIC is also undertaking innovative approaches 

to attract and retain a new generation of entry-level 

examiners with specialty and emerging skillsets. 

Through these eforts, the FDIC workforce will be even 

better positioned to respond to dynamic financial and 

technological challenges, now and in the future.  

Employee Learning and Development 

The FDIC has a robust program to train and develop 

its employees throughout their careers to enhance 

technical proficiency and leadership capacity, 

supporting career progression and succession 

management. The FDIC is in the midst of a multi-year 

efort to modernize learning and development, including 

expanding virtual and online oferings, integrating 

modern learning technology, and modernizing the FDIC’s 

training center. 

The FDIC develops and implements comprehensive 

curricula for its business lines to prepare employees 

to meet new challenges. Employees working to 

become commissioned examiners or resolutions and 

receiverships specialists attend a prescribed set of 

specialized, internally-developed and instructed courses. 

Post-commission, employees continue to further their 

knowledge in specialty areas with more advanced 

courses. The FDIC is revising examiner classroom 

training to better support on-the-job application and has 

developed a wide-ranging resolution and receivership 

training curriculum to support readiness. 

The FDIC also ofers 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 opportunities that align with key leadership 

competencies. In addition to a broad array of internally 

developed and administered courses, the FDIC provides 

its employees with funds to participate in external 

training to support their career development. 

In 2020, the FDIC’s Corporate University quickly pivoted 

to convert more than 850 hours of essential training to 

virtual delivery, including all 10 core training courses for 

pre-commissioned examiners. More than 200 virtual 

course oferings were delivered to more than 5,000 

participants. 

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 consistently scores 

highly in all categories of the Partnership for Public 

Service Best Places to Work in the Federal Government® 

list for mid-size federal agencies. Efective 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 TEAM (Transparency, 

Empowerment, Accountability, Mission) FDIC initiative 

that empowers employees to identify and implement 

short-term projects that positively impact the FDIC 

workplace and support the FDIC’s mission; Chairman’s 

Diversity Advisory Councils; 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.