2016

 5

For 83 years, the FDIC has carried out its mission 

of maintaining public confidence and stability in the 

U.S. financial 

system. The 

FDIC does this 

by insuring 

deposits; 

supervising 

and examining 

financial 

institutions 

for safety, 

soundness, 

and consumer 

protection; 

and managing 

receiverships 

when banks fail.

At the end of September 2016, the FDIC insured 

deposits of $6.8 trillion in almost 600 million 

accounts at nearly 6,000 institutions, supervised 

3,827 institutions, and managed 404 active 

receiverships having total assets of $3.759 billion.

The U.S. economy and the banking industry 

continued to improve in 2016. After experiencing the 

most severe financial crisis and economic downturn 

since the 1930s, the United States is now well into the 

recovery. The economy is expanding, although the 

pace of economic growth has been weaker than the 

long-term trend, and bank profitability remains lower 

than pre-crisis levels. Still, the industry has been 

strengthening balance sheets by building capital and 

enhancing liquidity. 

Stronger balance sheets indicate ample capacity for 

FDIC-insured institutions to continue to support the 

economic recovery. During the 12 months ended 

September 30, loan balances at banks increased by 

$591 billion, the largest 12-month dollar gain since 

the year ending June 2008. Moreover, that growth 

was broad-based, with all major loan categories 

posting increases, and more than three-quarters of 

all institutions reporting larger loan balances. Loan 

growth was strongest at community banks, which 

posted a 9.4 percent gain versus 6.8 percent for the 

industry overall. Rising loan demand and a recent 

pickup in the pace of economic activity are creating 

favorable conditions for FDIC-insured institutions, 

although the global economic outlook remains 

uncertain and poses a potential downside risk for the 

U.S. economy and financial system. 

The number of both failed and problem institutions 

declined again in 2016, and the Deposit Insurance 

Fund (DIF) balance, which was almost $21 billion in 

the red during the financial crisis, was $83.2 billion in 

the black at year-end.

The FDIC is working to wind down the receiverships 

of failed institutions, address emerging supervisory 

challenges and cybersecurity threats, and support the 

formation of new banks. This shift is indicative of the 

move from a post-crisis recovery environment to one 

of expanding economic growth and financial activity. 

Following is an overview of the FDIC’s important 

accomplishments over the past year, as well as the 

strategic challenges we face. 

REBUILDING THE DIF AND 

RESOLVING FAILED BANKS

Under a restoration plan that reflects Dodd-Frank Act 

requirements to rebuild the DIF, the fund balance 

has increased every quarter since the end of 2009, 

when it reached an all-time low. In 2016, the DIF 

balance increased to $83.2 billion, owing primarily 

to assessment income, as well as lower than estimated 

losses for past bank failures. On September 30, 2016, 

the reserve ratio—the ratio of the DIF balance to 

estimated insured deposits—was 1.18 percent, the 

highest level in more than eight years. 

The Dodd-Frank Act raised the minimum reserve 

ratio of the DIF from 1.15 percent to 1.35 percent, 

MESSAGE FROM THE CHAIRMAN

MESSAGE FROM THE CHAIRMAN
ANNUAL REPORT

6 MESSAGE FROM THE CHAIRMAN

and requires that the reserve ratio reach that level 

by September 30, 2020. The Dodd-Frank Act also 

makes banks with $10 billion or more in total assets 

responsible for the increase. 

To ensure that the reserve ratio reaches 1.35 percent 

by the statutory deadline, the FDIC adopted a rule 

in March 2016 that imposes a temporary surcharge 

on banks with at least $10 billion in assets. The 

surcharge is 4.5 cents per $100 of each bank’s 

assessment base per annum, after making certain 

adjustments. The rule became effective on July 1 of 

this year. As a result, the FDIC expects the reserve 

ratio to reach 1.35 percent in approximately two 

years, well ahead of the statutory deadline. 

The FDIC also has worked to ensure that the costs 

of maintaining a strong Deposit Insurance Fund 

are better allocated across the industry. In early 

2011, the FDIC adopted a rule that reduces regular 

assessment rates for all banks when the reserve ratio 

reaches 1.15 percent. In April of this year, the FDIC 

reaffirmed that decision with a rule that revises the 

FDIC’s methodology for determining risk-based 

assessments to better reflect risks and to help ensure 

that banks that take on greater risks pay more for 

deposit insurance than their less risky counterparts. 

The rule went into effect on July 1 of this year, after 

the reserve ratio surpassed 1.15 percent, and resulted 

in lower assessment rates for approximately 93 percent 

of banks with less than $10 billion in assets. 

Bank failures in 2016 totaled five, down dramatically 

from a peak of 157 in 2010, while the number of 

banks on the problem bank list (banks rated 4 or 5 

on the CAMELS rating scale) fell to 132 at the end of 

September 2016 from a high of 888 in March 2011. 

The United States continues to approach pre-crisis 

levels for failed banks and problem banks. 

During 2016, the FDIC successfully used various 

resolution strategies to protect insured depositors of 

failed institutions at the least cost to the DIF. The 

FDIC actively marketed failing institutions and sold 

them to other financial institutions. These strategies 

protected insured depositors and preserved banking 

relationships in many communities, providing 

depositors and customers with uninterrupted access 

to essential banking services. 

MANAGING FDIC RESOURCES

As the banking industry continues to recover, 

the FDIC requires fewer resources. The agency’s 

authorized workforce for 2016 was 6,533 full-time 

equivalent positions compared with 6,886 the year 

before. The 2016 FDIC Operating Budget was 

$2.21 billion, a decrease of 4.7 percent from 2015.

The FDIC remains committed to fulfilling its mission 

while prudently managing costs. We reduced our 

budget for 2017 from the prior year by 2.4 percent 

to $2.16 billion and reduced authorized staffing by 

approximately 2.6 percent to 6,363 positions, in 

anticipation of a further drop in bank failure activity 

in the years ahead. This is the seventh consecutive 

reduction in the FDIC’s annual operating budget. 

However, contingent resources are included in 

the budget to ensure readiness should economic 

conditions unexpectedly deteriorate.

FOCUSING ON INTEREST-RATE 

RISK AND CREDIT RISK

While the banking industry continues to improve, 

evidence of growing interest-rate risk and credit risk 

merit attention. In an effort to alleviate the impact 

of low interest rates and increase net interest margins, 

banks have been investing in longer-term assets and 

increasing the mismatch between asset and liability 

maturities. Lending in higher-risk loan categories has 

been growing as well. The recent Shared National 

Credits review of large syndicated loans noted that 

credit risk in the portfolio remains elevated. Such risk 

stems from the “high inherent risk in the leveraged 

loan portfolio and growing credit risk in the oil and 

gas (O&G) portfolio,” the Shared National Credits 

report, issued in July 2016, said. 

At the same time risk profiles have been rising, 

banks have not seen corresponding growth in

overall revenue.
2016

MESSAGE FROM THE CHAIRMAN 7

These examples of increasing interest-rate risk and 

credit risk are noteworthy as it is during this phase of 

the credit cycle when underwriting and investment 

decisions are made that may lead to losses in the 

future. Addressing these risks before losses materialize 

will benefit banks and contribute to the stability 

and resilience of the industry. We will continue to 

focus our supervisory attention on these risk areas 

going forward.

STRENGTHENING BANK RESILIENCE 

AND PUBLIC CONFIDENCE

During the financial crisis, a number of large banking 

organizations failed, or experienced serious difficulties, 

in part because of severe liquidity problems. In May 

2016, the FDIC and other banking agencies proposed 

a rule that would reduce the vulnerability of large 

banking organizations to liquidity risk. The Net 

Stable Funding Ratio Rule would require certain large 

banks to maintain sufficient levels of stable funding, 

including capital, long-term debt, and other stable 

sources over a one-year window, to account for the 

liquidity risks arising from their assets, derivatives, 

and off-balance-sheet activities. 

In addition, the FDIC with four other federal agencies 

established margin requirements for non-cleared 

swaps.  The margin rule, applicable to dealers and 

major participants in swaps, was finalized in October 

2015 and began to be phased in starting in September 

2016.  The margin requirements promote financial 

stability and help ensure the safety and soundness of 

banks engaging in significant swap activity.

At the same time, the FDIC must be prepared to 

provide depositors with prompt access to their funds 

in the event of a large bank failure. This is essential to 

maintaining public confidence in the banking system. 

For the typical bank resolved by the FDIC, insured 

deposits are available the next business day. However, 

for a bank with a large number of deposit accounts, 

payment might be delayed if the bank’s records are 

unclear or incomplete. 

To address this type of scenario, the FDIC in 

November issued a final rule requiring depository 

institutions with more than two million deposit 

accounts to improve the quality of their deposit 

data and make certain changes to their information 

systems. This rule bolsters the FDIC’s ability to 

provide depositors at banks with a large number 

of deposit accounts the same rapid access to their 

insured funds in the case of a failure as the FDIC 

does in smaller resolutions. We will work closely 

with institutions as they develop new capabilities, and 

intend to issue functional design assistance for system 

programming prior to the effective date to aid in 

this process.

ADDRESSING CYBERSECURITY RISK

The rapidly evolving nature of cybersecurity 

risks reinforces the need for regulators, financial 

institutions, and critical technology service providers 

to have appropriate procedures to effectively respond 

to cybersecurity risk. The FDIC collaborates 

with other federal agencies, law enforcement, and 

a number of government groups and industry 

coordinating councils to analyze and respond to 

emerging cyber threats, security breaches, and other 

harmful or disruptive technology-related incidents. 

In October 2016, the FDIC, the Board of Governors 

of the Federal Reserve System, and the Office of 

the Comptroller of the Currency (OCC) issued an 

Advance Notice of Proposed Rulemaking inviting 

comment on a proposed set of enhanced cybersecurity 

risk-management and resilience standards that would 

apply to large and interconnected entities under their 

supervision. The standards would apply to services 

provided by third parties to these firms as well. 

Feedback on the notice will inform development of a 

proposed rule.

Throughout the year, the FDIC added to the 

cybersecurity risk-management resources it provides 

to the industry. 

♦ We produced a new video, “Vendor Management 

– Outsourcing Technology Services,” to 
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8 MESSAGE FROM THE CHAIRMAN

help community bank directors and senior 

management develop a comprehensive vendormanagement program and understand their 

responsibilities and regulatory requirements when 

outsourcing technology services. 

♦ We enhanced our “Cyber Challenge: A 

Community Bank Cyber Exercise,” a tool that 

can help start an important dialogue between 

bank management and staff about operational 

risk and techniques to mitigate it.

♦ We co-authored updates to the FFIEC 

Information Technology Examination Handbook. 

The new version, published in September 2016, 

outlines a framework for assessing security 

risks in information systems and evaluating an 

information security program’s integration into 

overall risk management. Other updates to the 

handbook focus on risks associated with mobile 

financial services.

♦ Finally, in conjunction with National Consumer 

Protection Week, we launched an expanded 

cybersecurity awareness website that provides 

access to a wide range of presentations, 

brochures, and tips to help consumers 

understand and avoid cybersecurity risks. 

The FDIC monitors cybersecurity issues on a 

regular basis through on-site bank examinations. 

In July 2016, we introduced the Information 

Technology Risk Examination (InTREx) program 

to enhance our ability to identify, assess, and 

validate information technology and operations 

risks in financial institutions. The program also 

gathers data about information technology that the 

FDIC can use to improve industry-wide safety and 

soundness. The InTREx program will allow the 

FDIC to provide more granular ratings with respect 

to information technology, which can help financial 

institutions address the most important examination 

recommendations first.

Information security is critical to the FDIC’s ability 

to carry out its mission of maintaining stability and 

public confidence in the nation’s financial system. 

This year, the FDIC also implemented policies and 

technologies to strengthen its own cybersecurity 

posture. 

For example, the FDIC: 

♦ expanded our use of multi-factor authentication 

for securely downloading assessment invoices and 

official FDIC correspondence, and performing 

other secure file exchanges;

♦ discontinued individuals’ ability to copy 

information to removable media such as CDs, 

DVDs, external hard drives, and thumb drives;

♦ signed a memorandum of understanding to 

migrate to an intrusion prevention, detection, 

and monitoring system from the Department 

of Homeland Security that will help detect and 

block outside cyber threats;

♦ launched an Insider Threat and 

Counterintelligence Program as part of 

the FDIC’s efforts to safeguard employees, 

information, operations, and facilities; 

♦ implemented new controls to limit printing 

of sensitive information and better monitor 

information printed in the highest risk areas; and 

♦ engaged an independent, third-party firm to 

conduct an end-to-end assessment of the FDIC 

IT security and privacy programs. 

These actions are in addition to protections that were 

already in place, such as:

♦ encryption of some of our most sensitive 

information; 

♦ encrypted laptop hard drives; and 

♦ a Data Loss Prevention program that monitors 

information in emails, information being 

transferred to websites, and information printed.  

The FDIC requires employees to take annual security 

and privacy training so they are aware of our security 

standards. This is also supplemented by periodic 

phishing tests to help ensure employees stay watchful 

to possible outside threats.
2016

MESSAGE FROM THE CHAIRMAN 9

Information security will remain a top priority at the 

FDIC. We will continue to enhance our security 

controls in light of the changing threat landscape. 

REVIEWING REGULATION

The Economic Growth and Regulatory Paperwork 

Reduction Act of 1996 (EGRPRA) requires that 

regulations adopted by the Federal Financial 

Institutions Examination Council (FFIEC) and the 

federal banking agencies, including the FDIC, be 

reviewed by the agencies at least once every 10 years. 

The current cycle began in late 2014, and a report to 

Congress with findings and recommendations will 

be issued by the agencies soon. The purpose of this 

review is to identify and eliminate, as appropriate, 

outdated or otherwise unnecessary regulatory 

requirements that are imposed on insured depository 

institutions, while, at the same time, ensuring that 

safety and soundness and consumer compliance 

standards are maintained. 

The regulatory review process is one we take very 

seriously. Over the course of the review, the federal 

banking agencies hosted six public outreach meetings 

nationwide to hear firsthand from insured depository 

institutions, trade associations, consumer and 

community groups, and other interested parties. 

The agencies received numerous oral and written 

comments from panelists and the public at these 

outreach meetings. In addition, the agencies sought 

comment through the issuance of four Federal Register

notices, which garnered more than 230 comment 

letters. The agencies have summarized and reviewed 

these comments, and considered appropriate changes 

to reduce regulatory burdens on institutions. The 

FDIC recognizes that regulatory burden does not 

result solely from statutes and regulations, so we also 

explored opportunities to improve the transparency 

and clarity of our supervisory policies and procedures, 

especially as they apply to community banks. 

Together with the other federal banking agencies 

on the FFIEC, we have already taken significant 

steps to reduce the regulatory burden on supervised 

institutions. For example, the agencies finalized 

revisions to streamline the Call Report and proposed 

a new, streamlined Call Report for institutions that 

do not have a foreign office and hold total assets of 

less than $1 billion. This new Call Report would 

take effect March 31, 2017, would be optional for 

eligible small institutions, would reduce the length of 

the Call Report for eligible small institutions from 85 

pages to 61 pages, and would remove approximately 

40 percent of the data items currently required by the 

Call Report for all institutions with domestic 

offices only. 

In addition to streamlining the Call Report, in 

December of this year, the agencies finalized a rule 

to increase the number of small banks and savings 

associations eligible for an 18-month examination 

cycle rather than a 12-month cycle. As a result, 

approximately 4,800 well-capitalized and wellmanaged banks and savings associations are now 

eligible for the expanded examination cycle. 

The federal banking agencies also are jointly 

developing simplifications to the regulatory capital 

rules, including modifications of high volatility 

commercial real estate (HVCRE) and select other 

revisions to the agencies’ generally applicable capital 

rules, and would seek industry comment on these 

changes through the notice and comment process. 

In addition, the agencies are developing a proposal 

to increase the threshold for requiring an appraisal 

on commercial real estate loans to reduce regulatory 

burden in a manner consistent with safety and 

soundness.

The FFIEC agencies also revisited and issued revised 

guidance on the Community Reinvestment Act 

(CRA) this year. In July, the FFIEC issued the revised 

guidance which aims to:

♦ Improve consistency of examinations across and 

within the agencies, 

♦ Clarify the activities considered to meet the test 

for qualifying economic development activities, 

♦ Distinguish between community development 

services and retail products tailored to meet 

the needs of low- and moderate-income 

individuals, and
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10 MESSAGE FROM THE CHAIRMAN

♦ Provide examples of the types of activities that are 

eligible for CRA consideration.

We are also working jointly with the other federal 

banking agencies on flood insurance guidance, 

amendments to the rules implementing Depository 

Institution Management Interlocks Act, and guidance 

on Regulation O.

The FDIC has also taken independent action this 

year to reduce regulatory burden. For example, a 

particular interest to the FDIC is the impact of our 

regulations on new banks. In 2016, we reduced the 

period of enhanced supervision for newly insured 

depository institutions (i.e., de novo banks) from 

seven years to three. We also issued updated guidance 

on the deposit insurance application process and 

identified subject matter experts in each of the 

Regional Offices to assist with deposit insurance 

applications.

We also implemented an electronic pre-examination 

planning tool for both risk-management and 

compliance examinations that allows examiners to 

tailor request lists to ensure that only those items 

that are necessary for the examination process are 

requested from each institution, minimizing the 

burden for supervised institutions and reducing 

on-site examination hours.

In 2016, we also enhanced our information 

technology (IT) examination procedures to require 

less pre-examination information from bankers. The 

revised IT Officer’s Questionnaire that is completed 

by bankers prior to an examination, asks 65 percent 

fewer questions, reducing the amount of time needed 

to prepare for an examination. We also established 

a process to allow for our institutions to submit 

audit reports electronically, eliminating the need for 

institutions to mail hard copies. 

In addition, we issued a Financial Institution Letter 

(FIL) to supervised institutions, clarifying our 

treatment of requests from S-corporation institutions 

to pay dividends to their shareholders to cover taxes 

on their pass-through share of bank earnings. We 

told banks that, unless there are significant safety and 

soundness concerns, we will generally approve 

those requests.

COMMUNITY BANKING INITIATIVE

Community banks are critically important to our 

economy and the banking system. Community 

banks account for 13 percent of the banking assets in 

the United States, but also account for 43 percent of 

the small loans to businesses and farms made by all 

banks, making them key partners in supporting local 

economic development and job creation. Because the 

FDIC is the primary federal supervisor of the majority 

of community banks in the United States, community 

banking will continue to be an important focus of 

FDIC supervision, technical assistance, and research.

In 2016, the FDIC hosted a conference that brought 

together community bankers, regulators, researchers, 

and others to discuss the community banking model, 

regulatory developments affecting community banks, 

management of technology challenges, and ownership 

structure and succession planning. We also hosted 

a Joint Mutual Forum with the OCC to promote 

and support the operations of mutual depository 

institutions and discuss industry trends, the economic 

outlook, technology challenges, and regulatory 

compliance topics. The community banking sector 

continues to demonstrate resilience and innovation in 

meeting new challenges and competing in an evolving 

financial marketplace.

The FDIC’s Community Banking Initiative includes 

an extensive technical assistance program for bank 

directors, officers, and employees. We continue to 

expand and enhance our series of online videos to 

help community bankers better understand their 

responsibilities. New or updated videos in 2016 

address corporate governance, vendor management, 

outsourcing technology services, interest-rate risk, 

mortgage rules, and flood insurance. We also 

distributed a Community Bank Resource Kit, which 

includes a variety of useful tools for community 

bankers, to FDIC-supervised institutions. 

In addition, this year, we launched an online resource, 

the Affordable Mortgage Lending Center, which 
2016

MESSAGE FROM THE CHAIRMAN 11

community bankers can use to understand and 

compare the mortgage-lending products and services 

offered by federal and state housing finance agencies, 

the Federal Home Loan Banks, and governmentsponsored enterprises. 

Further, in 2016, the FDIC launched a new survey 

regarding banks’ small business lending practices. 

This survey is designed to provide information on 

the general characteristics of banks’ small business 

borrowers, the types of credit offered to small 

businesses, and the relative importance of commercial 

lending for banks of different sizes and business 

models. It is important to understand how banks 

of all sizes are lending to small businesses, which is 

crucial to job creation. I look forward to seeing the 

results of the survey in 2017.

Finally, the FDIC’s Advisory Committee on 

Community Banking is an ongoing forum for 

discussing current issues and receiving valuable 

feedback from the industry. The committee, which 

met three times during 2016 with the FDIC Board, 

is composed of 15 community bank CEOs from 

around the country. It is a valuable resource for 

input on a wide variety 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.

Supporting De Novo Banks

De novo institutions fill important gaps in local 

banking markets, provide credit and services to 

communities that may be overlooked by larger 

institutions, and help to preserve the vitality of the 

community banking sector. The FDIC is committed 

to working with, and providing support to, any 

group with an interest in starting a de novo bank, and 

welcomes applications for deposit insurance. 

The current environment, with low interest rates 

and narrow net interest margins, is challenging 

for the formation of new banks. Nevertheless, we 

have seen tentative signs of an uptick in de novo

formations, including increased interest from 

prospective organizing groups in filing applications 

for new insured depository institutions. To encourage 

this interest and help organizing groups navigate 

the application process, this year the FDIC hosted 

outreach meetings throughout the country to discuss 

FDIC requirements for new bank applications and 

highlight strategies for successful business models, 

supplemented its Deposit Insurance Q&As, and 

issued for public comment a handbook to guide 

organizing groups through the application process. 

In April, the FDIC reduced from seven years to three 

years the period of enhanced supervisory monitoring 

of state nonmember de novo institutions. The sevenyear period was established during the financial crisis 

in response to the disproportionate number of de 

novo institutions that were experiencing difficulties 

or failing. In the current environment, and in light 

of strengthened, forward-looking supervision, it is 

appropriate to return to the three-year period.

RESOLUTION OF SYSTEMICALLY 

IMPORTANT FINANCIAL INSTITUTIONS 

The FDIC continues to make progress toward 

developing strategies to facilitate the orderly failure 

of large, complex, systemically important financial 

institutions without taxpayer support and market 

breakdowns. 

Living Wills

In 2016, the FDIC remained committed to carrying 

out the statutory mandate that systemically important 

financial institutions (SIFIs) demonstrate a clear path 

to an orderly failure under bankruptcy at no cost to 

taxpayers. Under the Dodd-Frank Act, bankruptcy is 

the statutory first option for resolving a SIFI, and the 

largest bank holding companies and certain non-bank 

financial companies are required to prepare resolution 

plans, also referred to as “living wills.” These living 

wills must demonstrate that the firm could be resolved 

under bankruptcy without severe adverse 
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consequences for the financial system or the 

U.S. economy. 

The FDIC and the Federal Reserve Board are charged 

with reviewing and assessing each firm’s resolution 

plan. In 2016, we reviewed the resolution plans 

submitted by the eight U.S. SIFIs in 2015 and 

provided firm-specific feedback on the plans. The 

agencies jointly determined that five of those plans 

were not credible or would not facilitate an orderly 

resolution under the Bankruptcy Code. The agencies 

issued joint notices of deficiencies in July 2016 to 

the five firms detailing the deficiencies in their plans 

and the actions the firms must take to address them. 

Each firm was required to remedy its deficiencies 

by October 1, 2016, or risk being subject to more 

stringent prudential requirements or to restrictions on 

activities, growth, or operations. 

The agencies received and reviewed those 

submissions, and determined that four of the firms 

had satisfactorily remediated their deficiencies. The 

agencies jointly determined that one firm did not 

adequately remedy two of the firm’s three deficiencies. 

In light of the nature of the deficiencies and the 

resolvability risks posed by the firm’s failure to remedy 

them, the agencies jointly determined to impose 

restrictions on the growth of international and nonbank activities of the firm and its subsidiaries. The 

firm is expected to file a revised submission addressing 

the remaining deficiencies by March 31, 2017 or risk 

facing limits to the size of the firm’s non-bank and 

broker-dealer assets.

All eight SIFIs must submit their next plan in 

July 2017, in which they must address identified 

shortcomings and additional guidance from the 

agencies.

With the release of the joint findings, the agencies 

took a number of important steps to make the 

resolution planning process more transparent to the 

public and the market. This is important because 

it allows for the development of realistic market 

expectations about how the resolution of a SIFI might 

proceed. To this end, the Federal Reserve Board as 

the holding company supervisor released to the public 

decision letters regarding the 2015 submissions and 

remediation of the 2016 joint deficiencies, which 

included the actions the eight U.S. firms are required 

to take. Further, the agencies released the assessment 

framework under which the Federal Reserve Board 

and the FDIC review each firm’s plan and the 

guidance provided by the agencies to the firms to 

assist them with the development of their 2017 plans.

These actions have provided transparency to 

both firms and the public regarding the agencies’ 

assessment framework, the important changes firms 

have made to their structure and operations to 

improve resolvability, and the agencies’ expectations 

for further improvement in these plans. Our 

expectation is that these collaborative efforts will 

continue, and that the agencies will continue to 

prioritize transparency for firms and the public. 

Overall, theliving will process has proved to be an 

important means for identifying and implementing 

measures to enhance SIFIs’ resolvability.  We have 

seen firms make significant changes, including 

restructurings, operational continuity planning, 

and options for separating assets, business lines, and 

entities from a failing company. Firms also have 

improved their management information systems 

capabilities, financial resource measurement and 

process development, and resolution planning 

governance, all of which are key elements for 

enhancing resolvability. 

Orderly Liquidation Authority

Given the challenges and the uncertainty surrounding 

any particular failure scenario, Title II of the DoddFrank Act provides the Orderly Liquidation Authority, 

which is a public-sector special resolution regime, as 

a backstop to the bankruptcy process for institutions 

whose failure or distress would pose significant risks to 

U.S. financial stability. 

The Orderly Liquidation Authority is the mechanism 

for ensuring that policymakers will not be faced with 

the same poor choices they faced in 2008. Its tools 

are intended to enable the FDIC to carry out the 

process of winding down and liquidating the firm 
2016

MESSAGE FROM THE CHAIRMAN 13

in an orderly way, while ensuring that shareholders, 

creditors, and culpable management are held 

accountable and taxpayers do not bear losses. In the 

years since enactment of Dodd-Frank, the FDIC 

has made significant progress in developing the 

operational capabilities to carry out a resolution if 

needed. 

As in the United States, the other leading jurisdictions 

of the world have enacted expanded authorities for 

the resolution of SIFIs. The FDIC has worked closely 

with all the major financial jurisdictions, including 

the United Kingdom, the European Banking Union, 

Switzerland, and Japan. 

In 2016, the FDIC hosted a Trilateral Principals 

Level Exercise involving the United States, the United 

Kingdom, and the European Banking Union. The 

purpose of the exercise was to identify issues and 

address obstacles to cross-border resolution. U.S. 

participants included senior officials from the 

Treasury Department, the Board of Governors of 

the Federal Reserve System, the OCC, the Securities 

and Exchange Commission, the Commodity Futures 

Trading Commission, and the Federal Reserve 

Bank of New York. Participants from Europe 

included senior officials from HM Treasury, the 

Bank of England, the U.K. Prudential Regulation 

Authority, the Single Resolution Board, the 

European Commission, and the European Central 

Bank. Deepening our relationships with key foreign 

jurisdictions is an ongoing priority for the FDIC’s 

work on systemic resolution, and includes not only 

this exercise, but also our continuing engagement in 

cross-border Working Groups, Crisis Management 

Groups, and Resolution Colleges. 

In September, the FDIC Board and senior staff 

from across the agency took part in an operational 

exercise designed to test and enhance our policies 

and protocols for the liquidation and wind down of 

a systemically important financial institution. The 

2016 operational exercise followed a similar event 

held in 2015, and highlighted the agency’s significant 

ongoing progress in this vital area. 

EXPANDING ACCESS TO 

BANKING SERVICES AND 

PROTECTING CONSUMERS

Expanding access to mainstream banking services 

helps strengthen confidence in the nation’s financial 

system, a fundamental component of the FDIC’s 

mission. This year, we released the 2015 FDIC 

National Survey of Unbanked and Underbanked 

Households, a biennial survey conducted with the 

U.S. Census Bureau that provides detailed national, 

state, and local data to inform economic inclusion 

efforts. There were positive indications for consumers: 

The unbanked rate fell to 7 percent in 2015, down 

from 8.2 percent in 2011. The decline occurred 

broadly, across population segments, and outpaces 

what one would expect even in light of improving 

economic conditions. 

The survey also made significant findings about 

the role of mobile banking in economic inclusion. 

Underbanked households are more likely to own a 

smartphone, more likely to use it to access their bank 

account, and more likely to use it as their primary 

means of managing their account than fully banked 

households. These findings echo a report released 

at a meeting of the FDIC’s Advisory Committee 

on Economic Inclusion this year, which found that 

mobile financial services may help banks address many 

of the core financial service needs of underserved 

consumers, including more timely information about 

balances and transactions and more control over their 

financial lives. 

The FDIC is committed to ensuring that all U.S. 

households have access to safe and affordable 

banking services. In 2016 we provided information 

and technical assistance on safe and affordable 

transaction and savings accounts, otherwise known 

as SAFE Accounts, to local initiatives in more than 

28 communities in 23 states.  We also partnered 

with the Cities for Financial Empowerment Fund 

and the Bank On programs to provide outreach to 

representatives of more than 300 community-based 

organizations and more than 230 bankers at 14 
ANNUAL REPORT

14 MESSAGE FROM THE CHAIRMAN

outreach events across the country.  Bringing these 

groups together creates opportunities to identify 

strategies to reach unbanked populations by lowering 

the barriers to accessing banking services.

As of the end of 2016, nearly nine out of every 10 

people in the United States lives in a county with 

a full-service branch of a bank that offers a SAFE 

transaction account.  The Model SAFE account 

can be accessed through a convenient card without 

overdraft or insufficient funds fees, while including 

low initial and monthly maintenance costs and 

transparent disclosures.

We also continued our efforts to provide and promote 

effective financial education for young people. For 

example, through our Youth Savings Pilot Program, 

we have been able to study the financial education 

programs offered by 21 banks in partnership with 

local schools over a two-year period. These programs 

tie financial education with the opportunity to open 

a safe, low-cost savings account at bank branches, 

some of which are located in the schools and run by 

students. Many of these programs employ the FDIC’s 

Money Smart for Young People financial education 

curriculum, as well as the Model SAFE account 

template. A recent symposium brought together 

representatives from banks, non-profits, and school 

partners to discuss lessons learned from the pilot. We 

gathered these insights for a report we plan to publish 

in early 2017 that will offer a roadmap for banks and 

schools that are teaming up to link financial education 

with opportunities to save.

Our Money Smart program is one example of our 

ongoing efforts to collaborate with other federal 

agencies to develop and promote financial education. 

For example, Money Smart for Older Adults, a resource 

developed jointly by the FDIC and the Consumer 

Financial Protection Bureau, was enhanced this 

year to help people age 62 and older guard against 

financial exploitation and make informed financial 

decisions. 

We also partnered with the U.S. Small Business 

Administration to make enhancements to Money 

Smart for Small Business, a resource that provides 

practical guidance for starting and managing a 

business. In response to feedback from the small 

business community, three new modules were added: 

managing cash flow, planning for a healthy business, 

and determining if owning a business is a good 

fit. The Strategic Alliance Memorandum between 

the FDIC and SBA ensures this collaboration will 

continue through 2018.

Money Smart for Young People, a curriculum that 

involves educators, parents/caregivers, and young 

people in the learning process and is available in 

English and Spanish, continues to be well received. 

There have been more than 39,000 downloads of the 

curriculum since its launch in 2015. We also have 

begun to identify how our Money Smart resources can 

be helpful to workforce development organizations in 

providing financial education to young people.

CONCLUSION

During 2016, the U.S. banking industry continued its 

recovery from the recent financial crisis. The industry 

benefited from stronger balance sheets, fewer problem 

banks and bank closings, increased lending activity, 

and a larger balance in the DIF. At the same time, 

it remains important for bankers and supervisors to 

heed the lessons of the recent crisis by maintaining a 

steady focus on risk management. 

In 2017, the FDIC will continue to work to fulfill its 

mission of maintaining public confidence and stability 

in the nation’s financial system. 

The workforce of the FDIC remains committed to the 

agency’s mission. I am very grateful to the dedicated 

professionals of the FDIC for their commitment to 

public service and for the high level at which they 

carry out their important responsibilities. 

Sincerely,

Martin J. Gruenberg