ANNUAL REPORT 2012 5

I am pleased to 

present the Federal 

Deposit Insurance 

Corporation’s (FDIC) 

2013 Annual Report. 

SUMMARY

During 2013, the 

banking industry 

continued to 

experience a 

process of gradual 

recovery that has 

been evident for 

the past four years 

since the financial crisis. Fewer institutions reported 

quarterly losses, lending grew at a modest pace, credit 

quality continued to improve, the number of problem banks 

declined, and fewer banks failed.

In addition, we have seen sustained improvement in all 

the key bank performance indicators: three years of net 

income growth; improved credit quality; and growth in loan 

balances. Lower loan-loss provisions, reflecting improved 

credit quality, drove much of the improvement in earnings 

over the last few years. Revenue growth has remained 

flat. Going forward, industry earnings will depend more on 

increased lending, consistent with sound underwriting.

Internal indicators for the FDIC also continued to move in a 

positive direction. The numbers of both failed and problem 

institutions continued to decline in 2013, although they still 

remain elevated. Meanwhile, the Deposit Insurance Fund 

(DIF), which had been nearly $21 billion in the red during 

the financial crisis, stood at over $47 billion at year-end.

While some uncertainties remain, we now seem to be 

moving from an environment where the key focus had 

been repairing the damage from the financial crisis and the 

economic recession, into one where institutions are likely 

to explore opportunities to expand lending as conditions 

improve. One key issue lies with rising interest rates, which 

will provide banks an opportunity to increase margins, but 

also the challenge of managing interest rate risk. From a 

supervisory standpoint, interest rate risk will be a key focus 

of our examiners.

The FDIC is well prepared to carry out our mission of 

maintaining stability and public confidence in the nation’s 

financial system by insuring deposits, examining and 

supervising financial institutions for safety and soundness 

and consumer protection, and managing receiverships. At 

the end of 2013, the FDIC insured $6.0 trillion of deposits in 

over 600 million accounts at 6,800 institutions. 

In addition to carrying out our basic core mission 

responsibilities, our policy agenda includes the following:

♦ Carrying forward our major new responsibilities for 

reviewing and evaluating the resolution plans submitted 

by the largest bank holding companies and certain other 

systemically important financial institutions (SIFIs) 

under Title I of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank Act), continuing 

to develop a strategy for resolving SIFIs under the 

new authorities provided the FDIC under Title II of the 

Dodd-Frank Act, and promoting cross-border cooperation 

and coordination with respect to an orderly resolution of 

a globally active SIFI;

♦ Implementing new capital, liquidity, trading and 

derivatives rules to reduce systemic risk and improve the 

resilience of the financial system; 

♦ Continuing the FDIC’s Community Banking Initiatives, 

including further research on the future of community 

banks and providing technical assistance to community 

banks such as our recently-released series of training 

videos on key risk management and consumer 

compliance issues; and

♦ Continuing our focus on expanding access to the 

mainstream banking system for everyone who lives in the 

United States, including the national household survey of 

the unbanked and underbanked that the FDIC conducts 

jointly with the U.S. Census Bureau.

The FDIC also recognizes that information technology 

and cybersecurity developments pose increasing risk to 

MESSAGE FROM THE CHAIRMAN 5

Message from the Chairman
ANNUAL REPORT 2013

6 MESSAGE FROM THE CHAIRMAN

the financial services sector. We are actively engaged 

in efforts to promote the security and resilience of the 

financial services sector through the newly formed FFIEC 

Cybersecurity and Critical Infrastructure Working Group 

and the Financial and Banking Information Infrastructure 

Committee. The FDIC has also taken steps to ensure its 

operational readiness and response capabilities through 

internal exercises and the execution of several cyber-related 

performance goals.

A great strength of the FDIC continues to be a highly 

dedicated and motivated workforce. The FDIC’s employees 

understand the agency’s mission and how it relates to what 

they do. For the third year in a row, the FDIC took a top 

spot in the Best Places to Work in the Federal Government

based on a survey conducted by the Office of Personnel 

Management. 

STRENGTHENING THE 

DEPOSIT INSURANCE FUND 

AND RESOLVING FAILED BANKS

The FDIC has made significant progress in rebuilding 

the DIF. In 2010 and 2011, the FDIC Board of Directors 

approved a comprehensive, long-term plan for fund 

management based on Dodd-Frank Act requirements and on 

an FDIC historical analysis of DIF losses. We experienced 

a steady increase in the year-end fund balance from 2011 

through this year. The DIF balance rose to $47.2 billion 

at the end of 2013. Assessment revenue, a decrease in the 

estimate of losses from banks that have failed, and fewer 

bank failures were the main drivers of fund growth in 2013. 

The fund is on track to build up the reserve ratio, the ratio 

of the DIF to all insured deposits, to the statutorily required 

level of 1.35 percent by September 2020. 

Bank failures in 2013 totaled 24, 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 467 from a high of 888 in March 2011. 

These trends are still significantly higher than historical 

averages. As a result, although these trends are positive 

and may be accelerating to some degree, the FDIC must still 

devote considerable resources to managing receiverships, 

examining problem institutions, and implementing 

provisions of the Dodd-Frank Act.

Nonetheless, as the banking industry continues to recover, 

the FDIC will require fewer resources. The FDIC’s 

authorized workforce for 2013 was 8,026 full-time equivalent 

positions compared with 8,713 the year before. The 2013 

Corporate Operating Budget was $2.7 billion, a decrease of 

$600 million (18 percent) from 2012. 

For 2014, the Board reduced the budget by 11 percent 

to $2.4 billion and reduced authorized staffing by 

approximately 10 percent to 7,199 positions, in anticipation 

of a further drop in bank failure activity in the years ahead. 

Two temporary satellite offices that were set up to handle 

the crisis-related workload have now closed. The last of 

them, in Jacksonville, Florida, will close in 2014. However, 

contingent resources are included in the budget to ensure 

readiness should economic conditions unexpectedly 

deteriorate.

During 2013, the FDIC successfully continued to use 

resolution strategies instituted in 2008 to protect insured 

depositors of failed institutions at the least cost to the 

DIF. The FDIC actively marketed failing institutions and 

sold a large majority 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. [All told, these strategies 

saved the FDIC over $40 billion since the beginning of the 

financial crisis.]

IMPLEMENTING THE FDIC’S 

NEW AUTHORITIES UNDER THE 

DODD-FRANK ACT AND OTHER 

FINANCIAL REFORMS

The Dodd-Frank Act included far-reaching changes to make 

financial regulation more effective in addressing systemic 

risks and provided significant new authorities to the FDIC 

and other U.S. regulators to plan for and manage the orderly 

failure of a SIFI. In particular, Title I of the Act requires 

all bank holding companies with assets over $50 billion, as 

well as nonbank financial companies designated as systemic 

by the Financial Stability Oversight Council, to prepare 

resolution plans (or “living wills”) to demonstrate how they 

would be resolved in a rapid and orderly manner under the 

Bankruptcy Code in the event of material financial 
MESSAGE FROM THE CHAIRMAN 7

distress or failure. Title II of the Act provides the FDIC 

with back-up authority to place a failing SIFI, including a 

consolidated bank holding company or a nonbank financial 

company deemed to pose a risk to the financial system, into 

an FDIC receivership, should an orderly resolution under 

the Bankruptcy Code not be possible. In 2013, the FDIC 

made considerable progress in implementing both of these 

new authorities. Significant progress has also been made 

on the implementation of key improvements to supervisory 

standards included in the Act, as well as those that are the 

product of international efforts. 

With respect to the living will process, it is widely 

recognized that U.S. SIFIs present a challenge to resolution 

in bankruptcy or under an FDIC receivership, because they 

are organized under a holding company structure with 

potentially thousands of interconnected subsidiaries that 

span legal and regulatory jurisdictions across international 

borders and share funding and critical support services. 

Title I provided new authority intended to make these 

companies more resolvable under the Bankruptcy Code, 

in a process jointly overseen by the FDIC and the Board of 

Governors of the Federal Reserve System. 

By the end of 2013, all covered bank holding companies 

had submitted their initial plans, and the 11 largest, most 

systemically significant companies had submitted their 

second round resolution plans by October 1st. The FDIC 

and Federal Reserve Board developed guidance with 

specific benchmarks for those companies to address in 

the second-round submissions. The benchmarks included 

global cooperation with foreign regulators, multiple 

insolvencies of subsidiaries, counterparty derivative 

actions, maintenance of critical operations, funding, and 

liquidity. The companies were required to provide analysis 

to support the strategies and assumptions contained in 

their resolution plans. The FDIC and Federal Reserve 

Board have been evaluating the plans under the standards 

provided in the statute.

When bankruptcy is not a viable option and a resolution 

under the bankruptcy process would pose a systemic 

risk to the U.S. financial system and economy, the Title II 

Orderly Liquidation Authority (OLA) of the Dodd-Frank 

Act provides broad new back-up authorities to place any 

systemically important financial institution into an FDIC 

receivership. The FDIC has worked for several years to 

develop the strategic and operational capability to carry out 

this new authority. 

During 2013, the FDIC released for public comment a 

Federal Register Notice on the Single Point of Entry (SPOE) 

strategy, developed by the FDIC to manage an orderly 

resolution of a SIFI. Under the strategy, the FDIC would 

take control of the top-tier holding company, allowing the 

firm’s operating subsidiaries, both domestic and foreign, 

to remain open and operating. The strategy is designed 

to diminish contagion effects while removing culpable 

management and imposing losses on shareholders and 

unsecured creditors without imposing costs on taxpayers. 

The Federal Register Notice provides a detailed overview 

of what would be a complex resolution process, describing 

how it would address key issues of liquidity, capital, 

restructuring, and governance consistent with purposes and 

authorities contained in Title II. 

The FDIC’s Systemic Risk Advisory Committee continued 

to provide advice and guidance on a wide range of issues 

regarding the resolution of large SIFIs. The Committee 

members have a wide range of knowledge and experience, 

including leading federal regulatory agencies; managing 

complex firms; administering bankruptcies; and working in 

the legal system, the accounting field, and academia. 

Also during the year, the FDIC continued to engage our 

major foreign counterparts with whom we would have 

to collaborate on a cross-border basis in resolving failing 

global SIFIs. We worked directly with regulators in the 

United Kingdom, Switzerland, Germany, Japan, and the 

European Union. As part of our efforts in this area, the 

FDIC, in conjunction with the prudential regulators in 

our jurisdictions and internationally, has been working 

to develop contingency plans for the failure of Global 

SIFIs (G-SIFIs). Of the 28 G-SIFIs designated by the 

Financial Stability Board of the G-20 countries, eight are 

headquartered in the United States. 

The FDIC made progress with efforts to develop 

international capital standards as a member of the Basel 

Committee on Banking Supervision and implement 

Dodd-Frank Act reforms to strengthen the safety and 

soundness of the financial system. 
ANNUAL REPORT 2013

8 MESSAGE FROM THE CHAIRMAN

In July 2013, the FDIC approved an interim final rule that 

implemented the international Basel III capital agreement. 

The interim final rule adopted, with revisions, the June 

2012 proposals related to the Basel III, Standardized, 

and Advanced Approaches rules. The interim final rule 

on Basel III strengthens both the quality and quantity of 

risk-based capital for all banks. The FDIC and the other 

federal banking agencies carefully considered more 

than 2,500 comments, the majority of which were from 

community banking institutions. Most of the key concerns 

of community banks were addressed through a few 

significant modifications to the proposed rule. The new 

capital requirements become effective for most banking 

organizations on January 1, 2015.

Also in July 2013, the FDIC approved a joint Notice 

of Proposed Rulemaking that would increase the 

supplementary leverage capital requirements for the largest, 

most systemically important banking organizations. The 

NPR addresses one of the main causes of the financial 

crisis, the excessive leverage that had built up in the system. 

In October 2013, the FDIC and the other federal banking 

agencies issued a Notice of Proposed Rulemaking to 

implement the Basel III liquidity coverage ratio (LCR) 

standard. The LCR requires covered companies to 

maintain a sufficient amount of high quality liquid assets 

to cover a short-term stress event and applies to large, 

internationally active banking organizations and certain of 

their subsidiaries. 

Finally, in December 2013, the FDIC with four other 

agencies jointly issued final rules to implement Section 619 

of the Dodd-Frank Act (often referred to as the “Volcker 

Rule”). The purpose of the Volcker Rule is to limit the type 

and amount of speculative risk that can be undertaken by 

entities that are supported by the public safety net. In order 

to achieve that goal, the provision places prohibitions and 

restrictions on the ability of depository institution holding 

companies, insured depository institutions, and their 

subsidiaries and affiliates to engage in proprietary trading or 

investing in, or having relationships with, hedge funds and 

private equity funds. 

COMMUNITY BANKING INITIATIVE

The financial crisis and its aftermath had significant 

consequences for community banks, which play a crucial 

role in the U.S. financial system. Community banks account 

for about 14 percent of the banking assets in the United 

States, but provide nearly 46 percent of the small loans that 

FDIC-insured depository institutions make to businesses 

and farms.

The FDIC is the lead federal supervisor for the majority 

of community banks, and the insurer of all. The FDIC has 

a particular responsibility for the safety and soundness 

of community banks, and for understanding and 

communicating the role they play in the banking system. 

We launched a number of community banking initiatives 

in 2012, including the first comprehensive study on the 

role and future of community banks in the United States. 

Our research efforts continued through 2013. During the 

year, we published an update of trends in community bank 

structure and performance through year-end 2012. This 

updated study showed that, by a number of measures, 

community banks in 2012 enjoyed their best year since 

before the financial crisis began. Our research efforts will 

continue into the coming year as we address topics such 

as banking industry consolidation, rural depopulation, and 

Minority Depository Institutions. 

As part of our outreach to community bankers, I 

participated in roundtable discussions with community 

bankers in each of the FDIC’s six supervisory regions during 

the year. Our supervisory and compliance examiners 

undertook an Examination and Rulemaking Review with the 

goal of identifying ways to make the supervisory process 

more efficient, consistent, and transparent. In response to 

concerns about pre- and post-examination processes, our 

supervisory staff developed a web-based tool that generates 

a pre-examination document and information request 

tailored to a specific institution’s operations and business 

lines. We are also improving how information is shared 

electronically between bankers and examiners.

During 2013, the FDIC launched a technical assistance video 

program designed to provide useful information to bank 
MESSAGE FROM THE CHAIRMAN 9

directors, officers, and employees on areas of supervisory 

focus and proposed regulatory changes. Throughout the 

year, we released technical videos that address the roles 

and responsibilities of bank board directors, the FDIC’s 

Risk Management and Compliance Examination processes, 

a virtual version of the FDIC’s Directors’ College Program 

that regional offices deliver throughout the year, and a 

variety of supervisory topics, including interest rate risk, 

troubled debt restructurings, appraisals and evaluations, 

the allowance for loan and lease losses, evaluations of 

municipal securities, and flood insurance. The feedback on 

the videos has been very positive.

Throughout 2013, FDIC supervisory staff also continued 

to offer additional on-site technical training opportunities 

on subjects of interest to community bankers. As part of 

this ongoing effort, our supervisory staff hosted Director 

and Banker Colleges in each region. These Colleges are 

typically conducted jointly with state trade associations 

and address topics of interest to community bankers. We 

conducted extensive outreach to community bankers 

on complex rulemakings, including the Basel III capital 

rulemaking process.

Finally, we continue to rely on our Advisory Committee on 

Community Banking as an ongoing forum for discussing 

critical issues and receiving valuable feedback and input 

from the industry. The advisory committee met three 

times during 2013. The Committee, which is composed 

of 15 community bank CEOs from around the country, 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.

PROTECTING CONSUMERS 

AND EXPANDING ACCESS 

TO BANKING SERVICES

Expanding access to the banking system for all those living 

in the United States is part of the FDIC’s core mission. 

The FDIC biennial National Survey of Unbanked and 

Underbanked Households, conducted jointly with the 

Census Bureau, has documented that a large portion of the 

population in our country has either no access or limited 

access to insured institutions. We have undertaken a major 

effort through a number of initiatives to protect consumers 

and expand access to mainstream banking services. This 

continues to be an important priority for the agency.

The FDIC’s Advisory Committee on Economic Inclusion 

— composed of bankers, community and consumer 

organizations, and academics — has continued to explore 

strategies to bring the unbanked into the financial 

mainstream. In 2013, the committee focused on promoting 

household savings, reaching the underserved through 

mobile technology, examining financial education strategies 

for school-aged youth, and providing access to safe and 

affordable savings and transaction products.

At the local level, the FDIC’s Alliance for Economic 

Inclusion organizes coalitions of financial institutions, 

community organizations, local government officials, and 

other partners in communities across the country to bring 

unbanked and underbanked households into the financial 

mainstream. The effort includes better access to basic retail 

financial services, such as checking and savings accounts, 

affordable remittance products, small-dollar loans, 

targeted financial education programs, and asset-building 

programs. These partnerships are currently operating in 16 

communities nationwide.

Our efforts in this area are also focused on supervisory 

guidance designed to promote safe and sound practices and 

to promote consumer protection. During 2013, the FDIC 

issued final guidance regarding deposit advance products 

that are offered or may be offered by FDIC-supervised 

institutions. The guidance is intended to ensure that banks 

are aware of the potential credit, reputation, operational 

and compliance risks associated with deposit advance 

products. The guidance also recognizes consumers’ need 

for responsible small-dollar credit products and encourages 

institutions to develop new or innovative programs to 

effectively meet the need for small-dollar credit that do not 

exhibit the risks associated with deposit advance products 

and payday loans.
ANNUAL REPORT 2013

10 FEDERAL DEPOSIT INSURANCE CORPORATION

CONCLUSION

The recovery of the banking industry continued to advance 

during 2013 with stronger earnings and improved asset 

quality. The industry is experiencing fewer bank failures 

and problem institutions, and the FDIC’s Deposit Insurance 

Fund is steadily growing. Despite these improvements, we 

remain mindful of uncertainties and potential challenges, 

and are pursuing a number of important policy initiatives. 

The workforce of the FDIC remains committed to carrying 

out our core mission responsibility of maintaining stability 

and public confidence in the nation’s financial system. 

I am very grateful to the dedicated professionals of the 

FDIC for their commitment to public service and their 

continued dedication to the mission of the FDIC. 

Sincerely,

Martin J. Gruenberg

10 MESSAGE FROM THE CHAIRMAN