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1. Management’s discussion and analysi

TheYear 

During 2011, the FDIC continued to 

pursue an ambitious agenda in meeting 

its responsibilities. The FDIC continued 

implementation of Dodd-Frank, issued guidance, and 

piloted programs designed to help consumers. The 

FDIC also enhanced risk management procedures and 

created a branch to manage risks of mid tier insured 

depository institutions (IDIs), which further strengthened 

supervisory and consumer protection programs. 

Highlighted in this section are the FDIC’s 2011 

accomplishments in each of its major business lines—

Insurance, Supervision, Consumer Protection, and 

Receivership Management—as well as its program 

support areas. 

In

The FDIC insures bank and savings association deposits. As 

insurer, the FDIC must continually evaluate and effectively 

manage how changes in the economy, the financial markets, 

and the banking system affect the adequacy and the 

viability of the Deposit Insurance Fund (DIF).

State of the Deposit Insurance Fu

Estimated losses to the DIF were $7.9 billion from failures 

occurring in 2011 and were lower than losses from failures 

in each of the previous three years. The fund balance 

became positive in the second quarter of 2011 following 

seven quarters of negative balances. Assessment revenue 

and fewer anticipated bank failures drove the increase in 

the fund balance. The fund reserve ratio rose to positive 

0.17 percent at December 31, 2011 from negative 0.12 

percent at the beginning of the year. 

Long-Term Comprehensive Fun

Management Plan

As a result of the Dodd-Frank Act revisions to its 

fund management authority, the FDIC developed a 

comprehensive, long-term management plan for the 

DIF designed to reduce pro-cyclicality and achieve 

moderate, steady assessment rates throughout economic 

and credit cycles while also maintaining a positive fund 

balance even during a banking crisis. The plan was 

finalized in rulemakings adopted in December 2010 

and February 2011.

Setting the Designated Reserve Ratio

Using historical fund loss and simulated income data 

from 1950 to the present, the FDIC analyzed how high 

the reserve ratio would have had to have been before 

the onset of the two crises that occurred since the late 

1980s to have maintained both a positive fund balance 

and stable assessment rates throughout the period. The 

analysis concluded that a moderate, long-term average 

industry assessment rate would have been sufficient to 

have prevented the fund from becoming negative during 

the crises, though the fund reserve ratio would have had 

to exceed 2.0 percent before the onset of the crises. 

Therefore, under provisions in the Federal Deposit 

Insurance Act that require the FDIC Board to set the 

Designated Reserve Ratio (DRR) for the DIF annually, 

the FDIC Board adopted in December 2010 a DRR of 

2.0 percent for 2011 and voted in December 2011 to 

maintain a 2.0 percent DRR for 2012. The FDIC views the 

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

level needed to withstand future crises of the magnitude 

of past crises. The 2.0 percent DRR should not be viewed 

as a cap on the fund. The FDIC’s analysis shows that a 

reserve ratio higher than 2.0 percent would increase the 
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chance that the fund will remain positive during a future 

economic and banking downturn similar to or more 

severe than past crises. 

Long-Term Assessment Rate Schedules and 

Dividend Policies

Once the reserve ratio reaches 1.15 percent, assessment 

rates can be reduced to a moderate level. Therefore, under 

its statutory authority to set assessments, in February 

2011, the FDIC Board adopted a lower assessment rate 

schedule to take effect when the fund reserve ratio exceeds 

1.15 percent. To increase the probability that the fund 

reserve ratio will reach a level sufficient to withstand 

a future crisis, the FDIC also suspended dividends 

indefinitely when the fund reserve ratio exceeds 1.5 

percent. In lieu of dividends, the FDIC Board adopted 

progressively lower assessment rate schedules when the 

reserve ratio exceeds 2.0 percent and 2.5 percent. These 

lower assessment rate schedules serve much the same 

function as dividends, but provide more stable and 

predictable effective assessment rates. 

Restoration Plan 

In October 2010, under the comprehensive plan, the FDIC 

adopted a Restoration Plan to ensure that the reserve ratio 

reaches 1.35 percent by September 30, 2020, as required by 

the Dodd-Frank Act. The Act also requires that the FDIC 

offset the effect on institutions with less than $10 billion 

in assets of increasing the reserve ratio from 1.15 percent 

to 1.35 percent. The FDIC will promulgate a rulemaking 

that implements this requirement at a later date to better 

take into account prevailing industry conditions at the 

time of the offset.

Change in the Deposit Insurance Assessment Rul

The Dodd-Frank Act also required the FDIC to adopt 

a rule revising the deposit insurance assessment base. 

The final rule implementing the requirement, adopted 

in February 2011, also made conforming changes to the 

deposit insurance assessment system. In addition, the rule 

substantially revised the assessment system applicable to 

large IDIs.

New Assessment Base

Dodd-Frank requires the FDIC to amend its regulations 

to define the assessment base as average consolidated total 

assets minus average tangible equity, rather than total 

domestic deposits (which, with minor adjustments, it has 

been since 1935). The Act allows the FDIC to modify the 

assessment base for banker’s banks and custodial banks. 

The FDIC finalized these changes to the assessment base 

in February 2011, and they became effective April 1, 2011. 

Dodd-Frank also requires that, for at least five years, the 

FDIC must make available to the public the reserve ratio 

and the DRR using both estimated insured deposits and 

the new assessment base. As of December 31, 2011, the 

FDIC estimates that the reserve ratio would have been 0.10

percent using the new assessment base (compared to 0.17

percent using estimated insured deposits) and that the 2.0 

percent DRR using estimated insured deposits would have 

been 1.2 percent using the new assessment base.

Conforming Changes to Risk-Based Premium 

Rate Adjustments

The changes to the assessment base necessitated changes 

to existing risk-based assessment rate adjustments. 

The previous assessment rate schedule incorporated 

adjustments for types of funding that either pose 

heightened risk to the DIF or that help to offset risk to the 

DIF. Because the magnitude of these adjustments and the 

cap on the adjustments had been calibrated to a domestic 

deposit assessment base, the rule changing the assessment 

base also recalibrated the unsecured debt and brokered 

deposit adjustments. Since secured liabilities are now 

included in the assessment base, the rule eliminated the 

secured liability adjustment.

The assessment rate of an institution is also adjusted 

upwards if it holds unsecured debt issued by other 

IDIs. The issuance of unsecured debt by an IDI usually 

lessens the potential loss to the DIF if an institution fails; 

however, when the debt is held by other IDIs, the overall 

risk in the system is not reduced. 
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Conforming Changes to Assessment Rates

The new assessment base under Dodd-Frank, defined as 

average consolidated total assets minus average tangible 

equity, is larger than the previous assessment base, defined 

as total domestic deposits (with minor adjustments). 

Applying the current rate schedule to the new assessment 

base would have resulted in larger total assessments 

than had been previously collected. Accordingly, the rule 

changing the assessment base also established new rates 

that took effect in the second quarter of 2011. These 

rates resulted in collecting nearly the same amount of 

assessment revenue under the new base as under the 

previous rate schedule using the domestic deposit base. 

The new rate schedule also incorporates the changes from 

the proposed large bank pricing rule that was finalized in 

February 2011 (discussed below) along with the change 

in the assessment base. The initial base rates for all 

institutions range from 5 to 35 basis points. 

The initial base assessment rates, range of possible rate 

adjustments, and minimum and maximum total base 

rates are shown in the table below.

Changes to the assessment base, assessment rate 

adjustments, and assessment rates took effect April 1, 

2011. As explained above, the rate schedule will decrease 

when the reserve ratio reaches 1.15, 2.0, and 2.5 percent. 

Current Initial and Total Base Assessment Rates1

Ris

Categor

Ris

Category

Ris

Category 

Ris

Category

Large and

Complex

Ins

Initial base 

assessment rate 5–9 14 23 35 5–35

Unsecured debt 

adjustment2 (4.5)–0 (5)–0 (5)–0 (5)–0 (5)–0

Brokered deposit 

adjustment ...... 0–10 0–10 0–10 0–10

Total Base 

Assessment Rate 2.5–9 9–24 18–33 30–45 2.5–45

1 Total base assessment rates do not include the depository institution debt adjustment.

2 The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an IDI’s initial base assessment rate; thus, for example, an 

IDI with an initial base assessment rate of 5 basis points would have a maximum unsecured debt adjustment of 2.5 basis points and could not have a 

total base assessment rate lower than 2.5 basis points.
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Changes to the Large Bank Assessment System 

The FDIC continued its efforts to improve risk 

differentiation and reduce pro-cyclicality in the deposit 

insurance assessment system by issuing a final rule in 

February 2011. The rule revises the assessment system 

applicable to large IDIs to better reflect risk at the time a 

large institution assumes the risk, to better differentiate 

large institutions during periods of good economic 

conditions, and to better take into account the losses that 

the FDIC may incur if such an institution fails. The rule 

became effective April 1, 2011.

The rule eliminates risk categories for large institutions. 

As required by Dodd-Frank, the FDIC no longer uses longterm debt issuer ratings to calculate assessment rates for 

large institutions. The rule combines CAMELS1 ratings 

and financial measures into two scorecards—one for most 

large institutions and another for the remaining very 

large institutions that are structurally and operationally 

complex or that pose unique challenges and risks in case 

of failure (highly complex institutions). In general, a 

highly complex institution is an institution (other than 

a credit card bank) with more than $50 billion in total 

assets that is controlled by a parent or intermediate parent 

company with more than $500 billion in total assets, or a 

processing bank or trust company with at least $10 billion 

in total assets. 

Both scorecards use quantitative measures that are readily 

available and useful in predicting an institution’s longterm performance to produce two scores—a performance 

score and a loss severity score—that are combined into 

a total score and converted to an initial assessment 

rate. The performance score measures an institution’s 

financial performance and its ability to withstand stress. 

The loss severity score quantifies the relative magnitude 

of potential losses to the FDIC in the event of the 

institution’s failure. 

The rule also authorizes the FDIC to adjust an 

institution’s total score by as much as 15 points, up or 

down. The FDIC proposed in April 2011 and adopted 

in September 2011 guidelines that describe the process 

the FDIC follows to determine whether to make an 

adjustment, to determine the size of any adjustment, and 

to notify an institution of an adjustment and how large it 

will be. 

Effect of Implementing Changes to Assessment 

Base, Assessment Rates, and Large Bank 

Assessment System

Consistent with the intent of Congress, the change to 

the assessment base resulted in an increase in the share 

of overall assessments paid by large institutions, which 

rely less on domestic deposits for their funding than do 

smaller banks. For the second quarter of 2011, when the 

changes to the assessment base and other assessment 

system changes described above became effective, banks 

with more than $10 billion in assets accounted for 

approximately 80 percent of assessments, up from 70 

percent in the first quarter and commensurate with the 

increase in their share of the assessment base. Second 

quarter assessments for banks with less than $10 billion 

in assets were 33 percent lower in aggregate than first 

quarter assessments. 

Temporary Liquidity Guarantee Progra

On October 14, 2008, the FDIC announced and 

implemented the Temporary Liquidity Guarantee 

Program (TLGP). The TLGP consisted of two 

components: (1) the Transaction Account Guarantee 

Program (TAGP), an FDIC guarantee in full of 

noninterest-bearing transaction accounts; and (2) the 

Debt Guarantee Program (DGP), an FDIC guarantee of 

certain newly issued senior unsecured debt. 

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

the adequacy of Liquidity, and the Sensitivity to market risk, and ranges from “1” (strongest) to “5” (weakest).
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The TAGP initially guaranteed in full all domestic 

noninterest-bearing transaction deposits held at 

participating banks and thrifts through December 31, 

2009. The deadline was extended twice and expired on 

December 31, 2010. 

Under the DGP, the FDIC initially guaranteed in full, 

through maturity or June 30, 2012, whichever came first, 

the senior unsecured debt issued by a participating entity 

between October 14, 2008, and June 30, 2009. In 2009 the 

issuance period was extended through October 31, 2009. 

The FDIC’s guarantee on each debt instrument also was 

extended in 2009 to the earlier of the stated maturity date 

of the debt or December 31, 2012. 

Program Statistics

Over the course of the DGP’s existence, 122 entities issued 

TLGP debt. At its peak, the DGP guaranteed almost 

$345.8 billion of debt outstanding (see chart below). As of 

December 31, 2011, the total amount of remaining FDICguaranteed debt outstanding was $167.4 billion.

The FDIC collected $10.4 billion in fees and surcharges 

under the DGP. As of December 31, 2011, the FDIC paid 

or accrued $152 million in estimated losses resulting 

from six participating entities defaulting on debt issued 

under the DGP. The majority of these estimated losses 

($112 million) arose from banks with outstanding DGP 

notes that failed in 2011 and were placed into receivership. 

The FDIC expects to pay an additional $682 thousand in 

interest payments on defaulting notes in 2012. 

The FDIC collected $1.2 billion in fees under the TAGP. 

Cumulative estimated TAGP losses on failures as of 

December 31, 2011, totaled $2.2 billion. 

Overall, TLGP fees are expected to exceed the losses from 

the program. From inception of the TLGP, it has been 

FDIC’s policy to recognize revenue to the DIF for any 

deferred revenue not absorbed by losses upon expiration 

of the TLGP guarantee period (December 31, 2012) or 

earlier for any portion of guarantee fees determined in 

excess of amounts needed to cover potential losses. As 

of December 31, 2011, $2.6 billion in TLGP assets were 

transferred to the DIF. If fees are insufficient to cover 

the costs of the program, the difference will be made up 

through a systemic risk special assessment. 

Outstanding TLGP Debt by 
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Temporary Unlimited Coverage for NoninterestBearing Transaction Accounts Under th

Dodd-Frank Act

Dodd-Frank provides temporary unlimited deposit 

insurance coverage for noninterest-bearing transaction 

accounts from December 31, 2010, through December 

31, 2012, regardless of the balance in the account and the 

ownership capacity of the funds. This coverage essentially 

replaced the TAGP, which expired on December 31, 2010, 

and is available to all depositors, including consumers, 

businesses, and government entities. The coverage is 

separate from, and in addition to, the standard insurance 

coverage provided for a depositor’s other accounts held at 

an FDIC-insured bank. 

A noninterest-bearing transaction account is a deposit 

account in which interest is neither accrued nor 

paid, depositors are permitted to make transfers and 

withdrawals, and the bank does not reserve the right to 

require advance notice of an intended withdrawal. 

Similar to the TAGP, the temporary unlimited coverage 

also includes trust accounts established by an attorney 

or law firm on behalf of clients, commonly known as 

IOLTAs, or functionally equivalent accounts. Money 

market deposit accounts (MMDAs) and NOW accounts 

are not eligible for this temporary unlimited insurance 

coverage, regardless of the interest rate and even if no 

interest is paid. 

As of December 31, 2011, insured institutions had $1.4

trillion in domestic noninterest-bearing transaction 

accounts above the basic coverage limit of $250,000 per 

account. This amount is fully insured until the end of 2012 

under Dodd-Frank.

Large Bank Program

The FDIC’s responsibilities for IDIs include deposit 

insurance, primary supervision of state nonmember 

(FDIC-supervised) IDIs, back-up supervision of nonFDIC-supervised IDIs, and resolution planning. For 

large IDIs, these responsibilities often present unique 

and complex challenges. The FDIC’s ability to analyze 

and respond to risks in these institutions is of particular 

importance, as they make up a significant share of the 

banking industry’s assets. The Large Bank Program’s 

objectives are achieved through two primary centralized 

groups that work extensively with the FDIC and the other 

bank and thrift regulators.

Office of Complex Financial Institutions

The Office of Complex Financial Institutions (OCFI) 

was created in 2010 to focus on the expanded 

responsibilities of the FDIC by Dodd-Frank. The OCFI 

is responsible for oversight and monitoring of large, 

systemically important financial institutions (SIFIs) 

and for resolution strategy development and planning. 

During 2011, OCFI began to carry out its new statutory 

responsibilities to monitor risks in these large SIFIs, 

conduct resolution planning to respond to potential crisis 

situations, and coordinate with foreign regulators on 

significant cross-border resolution issues.

In 2011, OCFI established its complex financial institution 

monitoring program and engaged in continuous review, 

analysis, examination and assessment of key risks and 

control issues at institutions with assets over $100 billion. 

This work is being accomplished both off- and on-site at 

designated complex financial institutions throughout the 

United States. The FDIC is working with other federal 

regulators to analyze and gain a solid understanding 

of the risk measurement and management practices of 

these institutions and assessing the potential risks these 

companies pose to financial stability. In addition, off-site 

financial analysts complete the monitoring function by 

providing subject matter expertise in analyzing complex 

financial institution’s key business lines and potential 
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critical areas of risk. These efforts ensure that the FDIC 

has established advance in-depth institutional knowledge 

required to identify and evaluate risks in financial 

institutions that are designated as systemically important. 

Substantial progress has been made in developing 

resolution planning and implementation capabilities 

within OCFI to meet the expanded responsibilities and 

authorities under Dodd-Frank, including completing 

regulations governing these responsibilities. In July 2011, 

the FDIC approved a final rule implementing the Orderly 

Liquidation Authority that provides the authority to 

resolve SIFIs. During 2011 OCFI established its internal 

frameworks for SIFI resolution under Title II of DoddFrank, and began developing the capabilities necessary to 

implement such resolutions. Additionally, OCFI revised 

and built out specific resolution plans for the largest 

domestic SIFIs. In 2011, the FDIC adopted two rules 

regarding resolution plans (living wills) that covered 

financial institutions will be required to prepare. The first 

rule, which implements requirements of the Dodd-Frank 

Act, became final and was published jointly with the Federal 

Reserve Board in the Federal Register on November 1, 2011, 

and was effective on November 30, 2011. It requires bank 

holding companies with total consolidated assets of $50 

billion or more and certain nonbank financial companies 

designated by the Financial Stability Oversight Council 

for supervision by the Federal Reserve Board to develop, 

maintain, and periodically submit plans for their rapid 

and orderly resolution under the Bankruptcy Code, in the 

event they experience material financial distress. Under the 

rule, covered companies with nonbank U.S. assets greater 

than $250 billion are required to submit initial plans by 

July 1, 2012. A second rule, (issued as an Interim Final 

Rule on September 14, 2011, and adopted in final form on 

January 17, 2012) requires IDIs with assets greater than $50 

billion to submit plans for resolution under the Federal 

Deposit Insurance Act. OCFI, working in partnership with 

the Federal Reserve, has been developing structure and 

guidance for the initial Dodd-Frank rule submissions, so 

that these submissions may be more effectively evaluated 

for completeness and compliance with rule requirements.

The overall focus will be on the covered company’s strategy 

for orderly resolution, including an assessment of its 

resolvability and its analysis of potential impediments to 

implementing a resolution in an orderly manner.

Also in 2011, OCFI commenced activities to manage its 

global outreach, communication and coordination with 

appropriate domestic and foreign financial supervisory, 

regulatory and resolution authorities and representatives 

of financial institutions for the purpose of planning and 

executing the resolution of globally active SIFIs. The 

International Coordination Group of OCFI maintains close, 

collaborative relations with key international stakeholders 

to facilitate effective domestic and global cooperation on 

matters relating to cross-border resolution for all covered 

institutions. OCFI actively participates in the Financial 

Stability Board’s (FSB) Cross-Border Crisis Management 

Working Groups and supports related policy development 

initiatives by the FSB’s Resolution Steering Group.

Mid Tier Bank Branch

The FDIC established a Mid Tier Bank Branch (MTB) 

within its Division of Risk Management and Supervision 

in January 2011. MTB is responsible for monitoring 

the risk management supervision of IDIs with total 

assets of $10 billion to $100 billion. For large FDICsupervised institutions, the supervision programs are 

staffed and administered at the regional office level. 

MTB provides oversight and examination and analytical 

support to ensure consistency in FDIC’s large bank 

supervisory programs. MTB examination specialists 

also provide examination support when the FDIC 

exercises its backup authority at these large institutions. 

MTB is also responsible for managing nationwide risk 

management programs including the Large Insured 

Depository Institution (LIDI) Program, the interagency 

Shared National Credit Program, and certain initiatives 

established under the Dodd-Frank Act such as resolution 

planning for banking companies with total assets from 

$50 billion to $100 billion. 
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The LIDI Program remains the primary instrument for 

off-site monitoring of IDIs with $10 billion or more in 

total assets. The LIDI Program provides a comprehensive 

process to standardize data capture and reporting through 

nationwide quantitative and qualitative risk analysis of 

large and complex institutions. The LIDI Program was 

refined in 2011 to better quantify risk, to provide a more 

prospective assessment of large institutions’ vulnerability 

to both asset and funding stress, and to more closely align 

with the large bank deposit insurance pricing program. 

The comprehensive LIDI Program is essential to effective 

large bank supervision by capturing information on 

risks, determining the need for supervisory action, and 

supporting large bank insurance assessment decisions and 

resolution planning efforts. As of December 31, 2011, the 

LIDI Program encompassed 112 institutions with total 

assets of $11.0 trillion. 

Center for Financial Resear

The Center for Financial Research (CFR) is responsible for 

encouraging and supporting innovative research on topics 

that are important to the FDIC’s role as deposit insurer 

and bank supervisor. During 2011, the CFR co-sponsored 

two major research conferences.

The CFR organized and sponsored the 21st Annual 

Derivatives Securities and Risk Management Conference 

jointly with Cornell University’s Johnson Graduate 

School of Management and the University of Houston’s 

Bauer College of Business. The conference was held in 

March 2011 at the Seidman Center and attracted over 

100 researchers from around the world. Conference 

presentations were on topics including options markets, 

derivatives pricing, fixed income markets, volatility risk 

premiums, sovereign risk and commodity markets. 

The CFR also organized and sponsored the 11th Annual 

Bank Research Conference jointly with The Journal for 

Financial Services Research (JFSR) in September 2011. The 

conference theme, Lessons from the Crisis, focused on the 

recent financial crisis included 13 paper presentations and 

was attended by over 120 participants. Experts discussed 

a range of topics including government support and bank 

behavior, measuring risk, bank performance and lending, 

and CEO compensation. 

In addition to conferences, workshops and symposia, 

eight CFR working papers were completed and made 

public on topics including global retail lending, 

foreclosure trends, systemic risk, and the use of credit 

default swaps. 

International Outreach

Throughout 2011, the FDIC played a leading role among 

international standard-setting, regulatory, supervisory, 

and multi-lateral organizations by contributing to the 

development of policies with respect to reducing the 

moral hazard and other risks posed by SIFIs. Among the 

institutions the FDIC collaborated with, were the Basel 

Committee on Banking Supervision (BCBS), the FSB, and 

the International Association of Deposit Insurers (IADI). 

Key to the international collaboration was the ongoing 

dialogue among the FDIC Chairman, Acting Chairman, 

other senior FDIC leaders and a number of senior 

financial regulators from the United Kingdom (UK) 

about the implementation of Dodd-Frank, Basel III, 

compensation policies, and how changes in the US 

financial regulations compare to regulatory developments 

in the UK and Europe. In light of the large crossborder operations, the primary areas of discussion 

and collaboration were development of recovery and 

resolution plans for SIFIs, the FDIC’s plans for executing 

a SIFI resolution, and the importance of cross-border 

coordination in the event a SIFI becomes distressed.

The FDIC participated in Governors and Heads of 

Supervision and BCBS meetings and the supporting 

work streams, task forces, and Policy Development Group 

meetings to address the BCBS’s work to calibrate and 

finalize the implementation of Basel III, monitor the 

new leverage ratio and liquidity standards, and complete 

work on the treatment of counterparty credit risk and 
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determination of surcharges on globally systemically 

important banks (G-SIBs). In addition to Basel III capital 

and liquidity reforms, the FDIC also participated in 

the BCBS initiatives related to surveillance standards, 

remuneration, supervisory colleges, operational risk, 

accounting issues, corporate governance, the fundamental 

review of the trading book, and credit ratings and 

securitization. Other major issues in these work streams 

include the recalibration of risk weights for securitization 

exposures, the comprehensive review of capital charges for 

trading positions, and the imposition of a capital charge 

for exposures to central counterparties.

Under the leadership of the FDIC Vice Chairman, who 

also serves as the President of IADI and the Chairman 

of its Executive Council, IADI made significant progress 

in advancing the 2009 IADI and the BCBS Core Principles 

for Effective Deposit Insurance Systems (Core Principles). The 

IADI and the BCBS released a Methodology for assessing 

compliance with the Core Principles in December 2010. 

The development of the Methodology was a collaborative 

effort led by IADI in partnership with the BCBS, the 

International Monetary Fund (IMF), the World Bank, 

the European Forum of Deposit Insurers (EFDI), and 

the European Commission (EC). Early in 2011, the Core 

Principles and Methodology were officially recognized by 

the IMF and the World Bank to assess the effectiveness 

of deposit insurance systems in the Financial Sector 

Assessment Program (FSAP), where the IMF and World 

Bank undertake comprehensive analyses of countries’ 

financial sectors. Subsequently, in February 2011, the 

FSB approved the Core Principles and Methodology for 

inclusion in their Compendium of Key Standards for 

Sound Financial Systems. The official recognition of the 

Core Principles and Methodology by the IMF, the World 

Bank, and the FSB represent an important milestone in 

the acceptance of the role of effective systems of deposit 

insurance in maintaining financial stability. 

The FSB Standing Committee on Standards 

Implementation (SCSI) agreed in late 2010 to conduct a 

thematic peer review of G20 deposit insurance systems. 

The key objectives of the review are threefold: to take 

stock of members’ deposit insurance systems using, as a 

benchmark, the Core Principles; to identify any planned 

changes in national systems in response to the crisis; and 

to identify lessons on implementing deposit insurance 

reforms. In May 2011, the SCSI appointed a review team 

headed by the Deputy Chief Executive of the Hong 

Kong Monetary Authority, which included the FDIC’s 

Director of Division of Insurance and Research. The FDIC 

completed the questionnaire addressing key features 

of the U.S. deposit insurance system, reforms recently 

undertaken, and the status of implementing the Core 

Principles. The SCSI discussed the preliminary FSB report 

on December 13–14, 2011, and presented the report to the 

FSB in early 2012. 

Senior FDIC officials participated in meetings of the FSB 

Resolution Steering Group (ReSG), and on September 

26, 2011, the FDIC hosted a meeting of the ReSG at the 

Seidman Center. With input from the various working 

groups, the ReSG prepared a number of documents 

for consideration by the FSB and G20 Leaders. These 

documents covered a range of subjects relating to 

cross-border resolutions including the Key Attributes of 

Effective Resolution Regimes for Financial Institutions, which 

covered such areas as cross-border cooperation agreements, 

resolvability assessments, recovery and resolution plans, 

and temporary stays on early termination rights. The 

Key Attributes document was released as a consultative 

document for public comment in July, and in November 

2011, was presented to the G20 Leaders Summit in 

Cannes, France, as part of the overall recommendations to 

address threats to global financial stability. 

In continuing support of the Association of Supervisors 

of Banks of the Americas (ASBA) mission and strategic 

development, the FDIC participated in ASBA’s Board and 

technical committee meetings throughout 2011, led three 

technical assistance training missions in 2011, hosted 

the XIV ASBA Annual Assembly and Conference, and 

established a secondment program for ASBA members. 

Under the newly created secondment program, up to four 
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20

ASBA members per year will be selected to participate in 

a ten-week developmental program at the FDIC wherein 

the selected officials will get an “insider’s view” of key 

Division of Risk Management Supervision (RMS) policy 

and operational systems. In recognition of the FDIC’s 

leadership in the Association, the General Assembly 

elected FDIC’s Director of RMS to serve a two-year term as 

Vice Chairman. 

The FDIC continued to provide technical assistance 

through training, consultations, and briefings to foreign 

bank supervisors, deposit insurance authorities, and other 

governmental officials, including the following: 

★ The FDIC, on behalf of IADI, provided the content and 

technical subject matter expertise in the development 

of a tutorial on the Core Principles, which was released 

through the Financial Stability Institute’s (FSI) 

Connect online system. The FDIC led the development 

of the IADI training seminar on “Deposit Insurance 

Assessments and Fund Management” and hosted the 

IADI executive training seminar. Working with the IADI 

Core Principles Working Group, the FDIC designed 

and led workshops on conducting assessments of the 

Core Principles. The design included development of 

a Handbook for Conducting an Assessment, applying the 

methodology approved by the IADI and BCBS. The 

training seminars were held in Washington, DC; Tirana, 

Albania; Basel, Switzerland; and Abuja, Nigeria.

★ The FDIC provided speakers to ASBA for several 

technical seminars including Credit Risk Analysis, 

Supervision of Operational Risk, and Financial 

Institution Analysis Training.

★ The FDIC hosted 106 visits with over 825 visitors 

from approximately 48 jurisdictions in 2011. In 

addition to several meetings with UK officials, the 

FDIC met with representatives from the Bank of 

Canada, Canada Department of Finance, the Office 

of the Superintendent of Financial Institutions, and 

the Canada Deposit Insurance Corporation. The 

purpose of the meeting with the Canadians was to 

discuss living wills and the resolution process for 

large complex financial institutions. The heads of the 

Indonesia Deposit Insurance Corporation, the Fondo 

Interbancario di Tutela dei Depositi (FITD) from Italy, 

the Instituto para la Protección de Ahorro Bancario 

(IPAB) from Mexico, and other senior staff from their 

respective agencies visited the FDIC for multi-day 

study tours. The delegations met with senior FDIC 

management and staff to learn about FDIC policies and 

procedures in a range of areas, including public affairs, 

bank resolutions, and fund management. 

★ June 1, 2011, marked the four-year anniversary of the 

secondment program agreed upon by the Financial 

Services Volunteer Corps (FSVC) and the FDIC to 

place one or more FDIC employees full-time in FSVC’s 

Washington, DC, office. In 2011, the FDIC provided 

support to several projects supporting the Central 

Bank of Iraq’s (CBI) bank supervision program. The 

support included multiple training sessions, as well as 

a commentary addressing strategic recommendations 

and an overview of the effectiveness of the current bank 

supervisory program. Under the FDIC’s guidance, the 

CBI has begun to build the technical skills needed for 

effective regulation of Iraq’s banks. In addition, the 

FDIC welcomed two examiners from the Central Bank 

of Russia to shadow FDIC examiners during the onsite examination of a commercial bank in Texas. This 

A delegation from Ukraine visits the FDIC’s Dallas Regional Office to learn 

about franchise and asset marketing and other bank resolution topics. 

Delegation members with FDIC staff, from left: Sergii Naboka, Roman 

Rym, Andrii Olenchyk, Nataliia Lapaieva, and Liudmyla Lashchuk, all of the 

Deposit Guarantee Fund, Ukraine; George Fitz, DRR; Oleksii Tkachenko, 

National Bank of Ukraine; Jim Gallager, DRR; and Bob Carpenter, Legal.
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shadowing assignment provided the Russians a unique 

opportunity to observe a U.S. bank examination and to 

develop new skills in their risk analysis toolkit. 

★ As an additional element of its leadership role in 

promoting effective bank supervision practices, the 

FDIC provides technical assistance, training, and 

consultations to international governmental banking 

regulators in the area of Information Technology (IT) 

examinations. The FDIC sent two IT examiners to Serbia 

on December 5–9, 2011. The IT examiners participated 

in an assessment of the National Bank of Serbia’s IT 

Supervision Program. The assessment included banking 

practices, applicable regulations, and staff skill levels.

This assessment will be used to identify and prioritize 

measures needed to strengthen and improve the IT 

supervision program in Serbia. The engagement was 

organized by the World Bank as part of a larger program 

to strengthen independent banking in Serbia.

★ In 2011, the FDIC hosted the China Banking Regulatory 

Commission (CRBC) to provide an overview of the IT 

examination process and the roles and responsibilities 

of the FDIC in the US bank regulatory environment.

★ As part of IPAB’s visit in September 13, 2011, Acting 

Chairman Gruenberg and IPAB Executive Secretary 

Mr. José Luis Ochoa signed a technical assistance 

memorandum of understanding (MOU) that formally 

establishes a collaborative and cooperative relationship 

between the FDIC and IPAB. An MOU for technical 

assistance was also established with the Deposit 

Guarantee Fund (DGF) of Ukraine that provides for 

ongoing communication with the DGF as they await 

the passage of a new law granting the DGF expanded 

powers to resolve problem banks and serve as receiver of 

the failed bank estates. 

★ During 2011, the FDIC provided subject matter experts 

to participate in 17 FSI seminars around the world. The 

topics included implementation of an international 

leverage ratio, effective macro prudential tools, 

stress testing, supervising credit risk, SIFI and bank 

resolutions, governance, accounting, deposit insurance, 

and risk-based supervision. 

Supevision

Supervision and consumer protection are cornerstones 

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

confidence in the nation’s financial system. The FDIC’s 

supervision program promotes the safety and soundness 

of FDIC-supervised IDIs, protects consumers’ rights, and 

promotes community investment initiatives. 

Examination Program 

The FDIC’s strong bank examination program is the core 

of its supervisory program. As of December 31, 2011, 

the FDIC was the primary federal regulator for 4,626 

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 and Community Reinvestment Act (CRA), 

and other specialty examinations, the FDIC assesses an 

institution’s operating condition, management practices 

and policies, and compliance with applicable laws 

and regulations. The FDIC also educates bankers and 

consumers on matters of interest and addresses consumer 

questions and concerns.

As of December 31, 2011, the FDIC conducted 2,712 

statutorily required risk management (safety and 

soundness) examinations, including a review of Bank 

Secrecy Act (BSA) compliance, and all required follow-up 

examinations for FDIC-supervised problem institutions 

within prescribed time frames. The FDIC also conducted 

1,757 statutorily required CRA/compliance examinations 

(825 joint CRA/compliance examinations, 921 complianceonly examinations, and 11 CRA-only examinations) and 
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6,002 specialty examinations. As of December 31, 2011, 

all CRA/compliance examinations were conducted within 

the time frame established by policy. The following table 

compares the number of examinations, by type, conducted 

from 2009 through 2011. 

FDIC Examinations 2009 – 20

2011 2010 2009

Risk Management (Safety and Soundness): 

 State Nonmember Banks 2,477 2,488 2,398

 Savings Banks 227 225 203

 Savings Associations 3 0 1

 National Banks 1 3 0

 State Member Banks 4 4 2

Subtotal—Risk 

Management Examinations 2,712 2,720 2,604

CRA/Compliance Examinations:

Compliance/Community 

Reinvestment Act 825 914 1,435

 Compliance-only 921 854 539

 CRA-only 11 12 7

Subtotal—CRA/Compliance 

Examinations 1,757 1,780 1,981

Specialty Examinations:

 Trust Departments 466 465 493

 Data Processing Facilities 2,802 2,811 2,780

 Bank Secrecy Act 2,734 2,813 2,698

Subtotal—Specialty 

Examinations 6,002 6,089 5,971

Total 10,471 10,589 10,556

Risk Management

As of December 31, 2011, there were 813 insured 

institutions with total assets of $319.4 billion designated 

as problem institutions for safety and soundness purposes 

(defined as those institutions having a composite 

CAMELS rating of “4” or “5”), compared to the 884 

problem institutions with total assets of $390.0 billion 

on December 31, 2010. This constituted a 5 percent 

decline in the number of problem institutions, and a 13 

percent decrease in problem institution assets. In 2011, 

196 institutions with aggregate assets of $83.2 billion were 

removed from the list of problem financial institutions, 

while 156 institutions with aggregate assets of $77 billion 

were added to the list. Superior Bank, Birmingham, 

Alabama, was the largest failure in 2011, with $3.0 billion 

in assets. The FDIC is the primary federal regulator for 533 

of the 813 problem institutions, with total assets of $175.4 

billion and $319.4 billion, respectively. 

During 2011, the FDIC issued the following formal 

and informal corrective actions to address safety and 

soundness concerns: 146 Consent Orders, and 297 MOUs. 

Of these actions, 15 Consent Orders and 17 MOUs were 

issued based, in part, on apparent violations of the Bank 

Secrecy Act.

The FDIC is required to conduct follow-up examinations 

of all state nonmember institutions designated as problem 

institutions within 12 months of the last examination. 

As of October 31, 2011, all follow-up examinations for 

problem institutions were performed on schedule. 
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Compliance

As of December 31, 2011, 51 insured state nonmember 

institutions, about 1 percent of all supervised institutions, 

having total assets of $37.0 billion were rated “4” or “5” for 

consumer compliance purposes. As of December 31, 2011, 

all follow-up examinations for problem institutions were 

performed on schedule. 

Overall, banks demonstrated strong consumer compliance 

programs. The most significant consumer protection issue 

that emerged from the 2011 compliance examinations 

involved banks’ failure to adequately monitor thirdparty vendors. As a result, we found violations involving 

unfair or deceptive acts or practices, resulting in 

consumer restitution and civil money penalties. The 

violations involved a variety of issues including failure to 

disclose material information about new products being 

offered, deceptive marketing and sales practices, and 

misrepresentations about the costs of products. In many 

instances, the violations were the result of banks entering 

into new product markets through third-parties without 

maintaining sufficient oversight of vendors’ activities.

During 2011, the FDIC issued the following formal 

and informal corrective actions to address compliance 

concerns: 38 Consent Orders, 111 MOUs, and 163 Civil 

Money Penalties (CMPs). In certain cases, the Consent 

Orders issued by the FDIC contain requirements for 

institutions to pay restitution in the form of refunds 

to consumers for different violations of laws. During 

2011, over $11 million was refunded to consumers by 

institutions subject to Consent Orders. These refunds 

primarily related to unfair or deceptive practices by 

institutions, mainly related to different credit card 

programs, as discussed above. 

In the case of CMPs, institutions pay penalties to the U.S. 

Treasury. Approximately 90 percent of the CMPs involved 

repeated errors in the submission of required data under 

the Home Mortgage Disclosure Act (HMDA) or statutorily 

mandated penalties for violations of the regulations 

entitled Loans in Areas Having Special Flood Hazards. The 

average CMP for HMDA and Flood Insurance violations 

was $8,400. 

Bank Secrecy Act/Anti-Money Launderi

The FDIC pursued a number of BSA, Counter-Terrorist 

Financing (CFT), and Anti-Money Laundering (AML) 

initiatives in 2011. 

The FDIC conducted an Advanced International AML and 

CFT training session in 2011 for twenty-seven financial 

sector supervisors and regulatory staff from Ethiopia, 

Ghana, Kenya, Nigeria, and Tanzania. The training 

focused on AML/CFT controls, the AML examination 

process, customer due diligence, suspicious activity 

monitoring, and foreign correspondent banking. The 

session also included presentations from the Federal 

Bureau of Investigation (FBI), the Financial Crimes 

Enforcement Network (FinCEN), the Drug Enforcement 

Administration (DEA), and U.S. Immigration and 

Customs Enforcement (ICE). Topics addressed by invited 

speakers included combating terrorist financing, tradebased money laundering, bulk cash smuggling and 

investigations, law enforcement use of BSA information, 

and the role of financial intelligence units in detecting and 

investigating illegal activities.

Additionally, the FDIC met with several foreign officials 

from Pakistan, at the request of the FinCEN, to provide 

an overview of the FDIC and the AML examination 

process used in the United States. The FDIC also met 

with eleven foreign officials from United Arab Emirates 

as a part of the U.S. Department of State’s International 

Visitor Leadership Program to discuss the FDIC’s AML 

Supervisory Program. 

Minority Depository Institution Activiti

The preservation of Minority Depository Institutions 

(MDIs) remains a high priority for the FDIC. In 2011, the 

FDIC continued to seek ways to improve communication 

and interaction with MDIs and to respond to the concerns 

of minority bankers. Many of the MDIs took advantage of 

the technical assistance offered by the FDIC, requesting 
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technical assistance on a number of bank supervision 

issues, including but not limited to, the following: 

★MDI Policy Statement and Program

★ Small Business Lending Fund 

★ Deposit insurance assessments

★ FDIC Overdraft Guidance

★ Guidance on prepaid cards

★ Application process for change of control and 

shelf-charter applications

★ Filing branch and merger applications

★Monitoring commercial real estate 

(CRE) concentrations

★ Reducing adversely classified assets

★Maintaining adequate liquidity

★ Compliance issues 

★ Community Reinvestment Act (CRA)

The FDIC continued to offer the benefit of having an 

examiner or a member of regional office management 

return to FDIC-supervised MDIs from 90 to 120 days 

after an examination to help management understand 

and implementing examination recommendations, or 

to discuss other issues of interest. Several MDIs took 

advantage of this initiative in 2011. Also, the FDIC 

regional offices held outreach training efforts and 

educational programs for MDIs.

A major highlight in 2011 was the biannual Interagency 

MDI Conference. The 2011 conference was held on 

June 14–16, 2011 in New York City. The conference 

theme was Preserving the Future of Minority Depository 

Institutions, and the activities included a session where 

potential investors in financial institutions had an 

opportunity to meet with senior managers and directors 

of MDIs attending the conference. 

The FDIC held conference calls and banker roundtables 

with MDIs in the geographic regions. Topics of 

discussion for the calls included both compliance and 

risk management, and additional discussions included 

the economy, overall banking conditions, deposit 

insurance assessments, accounting, and other bank 

examination issues. 

Capital and Liquidity Rulemaking and Guidanc

OTC Derivatives Margin and Capital NPR

In April 2011, the FDIC, along with the other federal banking 

agencies, the Farm Credit Administration, and the Federal 

Housing Finance Agency (FHFA), published a proposed 

rule intended to enhance the stability of the financial 

system by preventing certain large financial firms from 

entering into uncollateralized derivatives exposures with 

each other. This proposed rule would implement certain 

requirements contained in Sections 731 and 764 of the 

Dodd-Frank Act, which provides that the largest and most 

active participants in the over-the-counter (OTC) derivatives 

market, that is, those designated as swaps dealers or major 

swaps participants by the Commodity Futures Trading 

Commission (CFTC) or the Securities Exchange Commission 

(SEC), to collect initial margin and variation margin. Final 

rulemaking is expected to be completed in 2012.

Retail Foreign Exchange Transactions

In May 2011, the FDIC Board of Directors approved the 

publication of a Notice of Proposed Rulemaking (NPR) 

that proposed disclosure, recordkeeping, capital and 

margin, reporting, business conduct, and documentation 

requirements on certain retail foreign currency 

transactions entered into between FDIC-supervised 

institutions and retail customers. The FDIC proposed 

these requirements in response to Section 742 of DoddFrank. In July 2011, the FDIC issued final regulations.
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Advanced Approaches Floor Final Rule

In June 2011, the FDIC, along with the other federal 

banking agencies, approved a final rule to implement 

certain requirements of Section 171 of Dodd-Frank. 

Section 171 requires that the agencies’ generally applicable 

capital requirements serve as a floor for other capital 

requirements the agencies may establish and, specifically, 

as a permanent floor for the advanced approaches riskbased capital rule. 

Stress Testing Guidance

In June 2011, the FDIC along with the other federal 

banking agencies, issued proposed guidance on stress 

testing by banking organizations with more than $10 

billion in total consolidated assets. The proposed 

guidance highlights the importance of stress testing as 

an ongoing risk management practice that supports a 

banking organization’s forward-looking assessment of its 

risks, and provides principles that a banking organization 

should follow to develop, implement, and maintain an 

effective stress testing framework.

Counterparty Credit Risk Guidance

In July 2011, the FDIC, along with the other federal 

banking agencies, issued guidance to clarify supervisory 

expectations and sound practices for an effective 

counterparty credit risk management framework. The 

guidance was issued primarily for banks with significant 

derivatives portfolios and emphasizes that such banks 

should use appropriate reporting metrics and limits 

systems, have well-developed and comprehensive stress 

testing, and maintain systems that facilitate measurement 

and aggregation of counterparty credit risk throughout 

the organization. The agencies believe this guidance will 

address deficiencies exposed during the financial crisis by 

reinforcing sound practices related to the management 

and ongoing monitoring of counterparty exposure limits 

and concentration risks.

Volcker Rule NPR

In October 2011, the FDIC, along with the other federal 

banking agencies, and the SEC, published a joint NPR to 

implement the provisions of Section 619 of Dodd-Frank, 

which restricts the ability of banking entities to engage in 

proprietary trading and limits investments in hedge funds 

and private equity funds. Final rulemaking is expected to 

be completed in 2012.

Depositor and Consumer Protection Rulemaking

and Guidanc

SAFE Act

In January 2011, the FDIC along with the other federal 

banking agencies, issued an update related to the 

requirements of the Secure and Fair Enforcement for 

Mortgage Licensing Act of 2008 (SAFE Act). The update 

reminded mortgage loan originators of the requirement to 

register with the Nationwide Mortgage Licensing System 

and Registry within 180 days of the date the Registry 

began accepting federal registrations. 

Overdraft Guidance

In March 2011, the FDIC hosted a teleconference to 

discuss the 2010 Overdraft Payment Program Supervisor 

Guidance (Guidance) that was issued in November 

2010. The Guidance encouraged institutions to monitor 

and oversee usage of overdraft payment programs to 

address the risks related to excessive and inappropriate 

use of automated overdraft programs as forms of highcost, short-term credit. The teleconference was held to 

address many examination and implementation issues 

based on discussions with, and questions received from, 

FDIC-supervised institutions. The FDIC also published 

written answers to a series of Frequently Asked Questions 

concurrently with the teleconference. Examiners began 

monitoring banks’ efforts to address the risks identified 

in the Guidance in July 2011. The FDIC will continue 

to monitor banks’ efforts to manage risks of automated 

programs and assess the efficacy of the Guidance.
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Examination Procedures

In August 2011, the FDIC issued revised examination 

procedures incorporating the model privacy notice. The 

Gramm-Leach-Bliley Act requires financial institutions 

to provide initial and annual notices to consumers with 

whom they have ongoing customer relationships to 

explain how nonpublic personal information is collected 

and shared. Financial institutions may use a model privacy 

notice issued by the federal banking agencies and the 

National Credit Union Administration, the Federal Trade 

Commission, the CFTC, and the SEC to comply with 

this requirement. 

In December 2011, the FDIC, along with the other 

federal banking agencies, issued revised examination 

procedures for the regulations that implement the Truth 

in Lending Act (TILA). TILA requires various disclosures 

relating to the cost of consumer credit as well as several 

other requirements relating to credit for individual, 

consumer, or household purposes including residential 

real estate loans.

Other Guidance Issu

During 2011, the FDIC issued and participated in 

the issuance of other guidance in several areas as 

described below.

Incentive-Based Compensation

On April 14, 2011, the FDIC joined the other federal 

banking agencies, and the SEC and FHFA in issuing a 

joint NPR that would implement section 956 of DoddFrank (Enhanced Compensation Structure Reporting). 

Section 956 requires the participating agencies, as defined, 

to jointly: (a) prescribe regulatory reporting standards 

for incentive-based compensation and (b) prohibit 

incentive-based compensation that is “excessive” or “could 

lead to material financial loss” at a covered institution. 

Implementing this proposed rule would address a key 

safety and soundness issue that contributed to the recent 

financial crisis─that poorly designed compensation 

structures can misalign incentives and induce excessive 

risk-taking at financial organizations. Importantly, this 

interagency proposal will apply across all types of financial 

institutions, limiting the opportunity for regulatory 

arbitrage. Per section 956, financial institutions with 

total assets less than $1.0 billion are exempt from this 

provision. Final rulemaking is expected to be completed 

in 2012.

Regulatory Actions Related to Foreclosure Activities 

by Large Servicers and Practical Implications for 

Community Banks

In May 2011, the FDIC published a special foreclosure 

edition of Supervisory Insights. This edition describes 

lessons learned from an interagency review of foreclosure 

practices at the 14 largest residential mortgage servicers, 

and includes examples of effective mortgage servicing 

practices derived from these lessons.

Regulatory Relief

During 2011, the FDIC issued 31 Financial Institutions 

Letters (FILs) that provided guidance to help financial 

institutions and facilitate recovery in areas damaged 

by hurricanes, wildfires, tornadoes, flooding, and other 

natural disasters. In addition, FIL-60-2001 dated August 

26, 2011, reminded institutions how to prepare for 

business continuity during significant storms.

Other Policy Matter

Study on Core Deposits and Brokered Deposits

As required by Section 1506 of Dodd-Frank, the FDIC 

completed a study on the use of core and brokered 

deposits and provided a written report to Congress on its 

findings on July 8, 2011. The FDIC solicited comments 

from the banking industry and the public in preparing 

this study. The FDIC received approximately 75 written 

comments and organized a roundtable discussion with 

representatives from bank trade groups, bank regulators, 

deposit brokers, banks that use brokered deposits, and the 

academic community. Discussions on the issues were also 
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held with the FDIC Advisory Committee on Community 

Banking and in several separate meetings with banks, 

trade groups, and other interested parties. In addition, the 

FDIC undertook a statistical analysis of core and brokered 

deposits and conducted a literature review of academic 

studies on core and brokered deposits. The study 

evaluated the definitions of core and brokered deposits 

and recommended that Congress not amend or repeal the 

brokered deposit statute, which defines brokered deposits 

and prevents failing banks from increasing their brokered 

deposits and taking on more risk in an effort to grow out 

of their troubles. 

Small Business Lending Forum

On January 13, 2011, the FDIC hosted a forum on 

“Overcoming Obstacles to Small Business Lending.” The 

forum fostered communication among policymakers, 

regulators, small business owners, lenders, and other 

stakeholders regarding ways in which credit can be made 

more accessible to the small business sector. In addition to 

identifying common obstacles small businesses currently 

face, forum participants also assessed existing efforts and 

suggested additional policies to ensure that creditworthy 

small businesses have access to the credit they need to 

grow, create jobs, and help fuel the economic recovery. 

The FDIC addressed the key issues raised at the forum, 

including small businesses’ demand for credit, banks’ 

supply of credit, and bank regulators’ approaches to 

evaluating small business loans. 

Promoting Economic Inclusio

The FDIC has a strong commitment to promoting 

consumer access to a broad array of banking products 

to meet consumer financial needs. To promote financial 

access to responsible and sustainable products offered by 

IDIs, the FDIC: 

★ conducts research into the unbanked and underbanked

★ engages in research and development on models of 

products meeting needs of lower-income consumers

★ supports partnerships to promote consumer access and 

use of banking services 

★ advances financial education and literacy

★ facilitates partnerships to support community and 

small business development.

FDIC Survey of Banks’ Efforts to Serve the Unbanked 

and Underbanked

The FDIC is committed to ensuring that consumers have 

access to basic banking and other financial services, and 

to developing more and better data about unbanked 

and underbanked households, including factors that 

hinder them from fully utilizing the mainstream financial 

system. In line with this commitment, Congress mandated 

in Section 7 of the Federal Deposit Insurance Reform 

Conforming Amendments Act of 2005 (Reform Act), 

that the FDIC conduct periodic surveys of banks’ efforts 

to bring individuals and families into the conventional 

finance system.

Consequently, during 2011 and part of 2012, the FDIC 

will conduct a second set of nationwide surveys of 

households and FDIC-IDIs (banks survey) to assess efforts 

to serve unbanked and underbanked individuals and 

families. The first phase of the bank survey will gather 

information from a sample of bank headquarters and 

a second phase will collect data at the branch level. The 

2011 survey focused on banks’ basic transaction and 

savings account programs, auxiliary product and service 

offerings, and financial education and outreach efforts. 

The results will complement the previously collected data 

and will help banks improve their abilities to meet the 

diverse financial needs of U.S. households. The survey also 

helps to inform the public about the FDIC’s continuing 

economic inclusion efforts.
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Model Safe Account Pilot 

The FDIC began a one-year pilot program in January 

2011 to determine the feasibility of IDIs offering safe, 

low-cost transactional and savings accounts to help meet 

the needs of the 25 percent of U.S. households that are 

unbanked and underbanked. These accounts are FDIC 

insured and are covered under consumer protection laws 

and regulations, such as Regulation E (Electronic Funds 

Transfer), in the same way as traditional deposit accounts. 

Through the pilot, nine participating institutions are 

offering electronic deposit accounts with product features 

identified in the FDIC Model Safe Accounts Template. 

These accounts do not allow for overdraft or nonsufficient 

funds fees. At the completion of the pilot, in early 2012, 

the FDIC will report on the findings and lessons learned.

Affordable Small-Dollar Loan Guidelines and 

Pilot Program

The FDIC continued to promote the results of the FDIC 

Small-Dollar Loan Pilot. In May 2011, the FDIC hosted 

a meeting of the FFIEC CRA subcommittee to examine 

opportunities to enhance understanding of small-dollar 

lending among regulated institutions and to promote 

consistent emphasis in CRA examinations. The meeting, 

attended by senior staff from the banking regulatory 

agencies, CSBS, the New York State Banking Department, 

and the National Credit Union Administration, reviewed 

the findings from the FDIC research and pilot, and related 

outreach and education work. On September 22, 2011, 

FDIC offered testimony on the FDIC’s Small-Dollar 

Loan Pilot at a hearing of the House Financial Services 

Committee Subcommittee on Financial Institutions 

and Consumer Credit entitled “An Examination of the 

Availability of Credit for Consumers.” In addition, results 

from the pilot were discussed at several conferences 

throughout the year, including the Microfinance USA 

Conference in New York at the Association of Military 

Bankers of America, and in media interviews.

Safe Mortgage Lending in Low- and 

Moderate-Income (LMI) Communities

In early 2011, the FDIC Chairman’s Advisory Committee 

on Economic Inclusion held a public meeting at 

headquarters and discussed principles for responsible 

low- and moderate-income (LMI) mortgage lending, 

the impact of the housing crisis on LMI families, and 

potential future market structures to safely serve LMI 

borrowers. In addition, FDIC researchers presented two 

papers at widely attended conferences, analyzing some 

of the outcomes of the mortgage crisis on housing 

mobility, and trends in mortgage refinancing among 

low-income households. 

Partnerships to Promote Consumer Access: Alliance for 

Economic Inclusion 

The goal of the FDIC’s Alliance for Economic Inclusion 

(AEI) initiative is to collaborate with financial institutions; 

community organizations; local, state, and federal 

agencies; and other partners in select markets, to 

launch broad-based coalitions to bring unbanked and 

underserved consumers into the financial mainstream. 

The FDIC expanded its AEI efforts during 2011 to 

increase measurable results in the areas of new bank 

accounts, small-dollar loan products, and the delivery 

of financial education to underserved consumers. 

Specifically, during 2011:

★More than 494 banks and organizations joined AEI 

nationwide, bringing the total number of AEI members 

to 1,613. The 2011 figure represents a 44 percent growth 

over the AEI membership base at the end of 2010.

★ At least 171,591 consumers opened a bank account 

as a result of AEI efforts, an increase of 138 percent 

over the number of new accounts opened during 2010. 

Combined, more than 404,591 bank accounts have been 

opened through the AEI program. 

★ Approximately 87,476 consumers received financial 

education through the AEI, bringing the total number 

of consumers educated to 270,476. The 2011 figure is a 

56 percent improvement over the 2010 figure.
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Also, twenty-four banks were in the process of offering or 

developing small-dollar loans, and seventeen AEI banks 

were providing deposit accounts consistent with the FDIC 

Model Safe Account Template through the AEI at the end 

of 2011. To facilitate broader economic inclusion, FDIC 

leads AEI members in other work appropriate to the needs 

of the local market. For example, the 4th Annual AEI Small 

Business Conference in New Orleans reached more than 

200 entrepreneurs, bankers, and small business resource 

providers, while the Los Angeles AEI promoted small 

business development through two guides (one to help 

small businesses save money by “greening” their business 

and the other to help gain access to the export market). 

During 2011, FDIC also expanded the geographic reach of 

the AEI program. Initially in fourteen markets, the FDIC 

began the formation of AEI initiatives in three additional 

markets: Milwaukee, Wisconsin; the Appalachian region 

of West Virginia; and the Metro Detroit/Southeast 

Michigan area. These markets were selected because 

of their sizable concentrations of unbanked and 

underbanked households. In collaboration with the 

Wisconsin Women's Business Initiative Corporation, 

FDIC launched the Milwaukee AEI initiative on January 

19, 2011, consisting of twenty-one financial institutions 

and community-based partners. And on December 

19, 2011, the FDIC and the United Way of Southeast 

Michigan launched the Southeast Michigan AEI coalition. 

The launch was attended by forty-eight financial 

institutions and community-based organizations, 

including the Consulate of Mexico and Bank On Detroit 

representatives. The FDIC collaborated with the West 

Virginia Development Office and Appalachian Regional 

Commission on the AEI proposal for launch in West 

Virginia during 2012. 

Additionally, the FDIC provided program guidance and 

technical assistance in the development, launch, and the 

expansion of 26 Bank On programs. In AEI markets where 

there is a Bank On initiative, FDIC and its AEI partners 

generally collaborate with representatives from the 

Bank On initiative towards shared objectives. For example, 

FDIC provided technical assistance on recruitment from 

the financial services industry for Bank On/Save Up Kansas 

City, Missouri, which is a local effort to market savings 

and checking accounts to the unbanked and underbanked 

that was launched on June 4, 2011, conducted in 

collaboration with the Kansas City AEI. FDIC staff also 

provided technical, marketing, and financial education 

product support for the new Bank On Chicago initiative, 

and the Bank On Los Angeles initiative conducted under 

the FDIC AEI umbrella.

Advancing Financial Education 

The FDIC’s award-winning Money Smart curriculum has 

reached more than 2.75 million consumers in the ten years 

since its launch in 2001. During 2011, the FDIC reached 

approximately 265,000 consumers with Money Smart. The 

curriculum is currently available in instructor-led versions 

to teach adults and young adults, as well as in self-paced 

computer-based and audio versions. 

The FDIC expanded its financial education efforts 

during 2011 through a multi-part strategy that included 

making available timely, high-quality financial education 

products, sharing best practices, and working through 

partnerships to reach consumers. 

Recognizing the growing role of entrepreneurs in the 

economy, the Money Smart program started its second 

decade by expanding the reach of the curriculum to small 

businesses. During 2011, the FDIC collaborated with the 

Small Business Administration on the development of 

a new instructor-led financial education curriculum for 

small businesses. It consists of ten modules that introduce 

prospective or current small businesses to basic strategies 

to manage a small business effectively from a financial 

standpoint. The pilot curriculum is being refined in 

advance of an early 2012 launch.
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On February 10, 2011, the FDIC released an enhanced 

version of its instructor-led Money Smart for Young Adults 

financial education curriculum. The updated curriculum 

reflects changes to the financial landscape such as 

amendments to the rules pertaining to credit cards, the 

overdraft opt-in rule, and information on financing 

higher education and instructional best practices since the 

curriculum’s release in 2008. 

On November 7, 2011, the FDIC released the Money 

Smart curriculum for the first time in Haitian-Creole 

and Hindi, making the instructor-led curriculum available 

in nine languages, in addition to the large-print and 

Braille versions. Also, on this date, updated versions of 

the Chinese, English, Haitian-Creole, Hindi, Hmong, 

Korean, Russian, Spanish, and Vietnamese language 

versions of Money Smart were released. These updated 

curriculums reflect the enhancements made to the English 

language version of Money Smart released in November 

of 2010, which include the addition of a new module on 

financial recovery.

Improvements were also made to the self-paced versions 

of Money Smart. The Money Smart Computer-Based 

Instructions (CBI) was rewritten and significantly 

enhanced. For example, the new CBI includes ageappropriate tracks for adults and young adults aligned 

with the respective updated instructor-led curriculums. 

Originally launched in 2004, the new CBI also 

incorporates new technological enhancements and best 

practices in instructional design, such as a game-based 

design and new tools for users to retrieve previously 

earned certificates of completion of modules. The new CBI 

was piloted during 2011 with key partners in advance of a 

first quarter 2012 launch.

Partnerships to Support Community and Small 

Business Development

Through training and technical assistance to diverse 

organizations that use the Money Smart program, the 

FDIC emphasizes the importance of pairing education 

with access to appropriate banking products and services. 

Approximately 1,200 organizations are members of 

the FDIC’s Money Smart Alliance, 1,205 practitioners 

attended the 61 train-the-trainer workshops conducted 

during 2011, and the FDIC worked with many additional 

organizations to promote financial education. 

During 2011, the FDIC expanded on its new2

 partnership 

with the National Credit Union Administration and 

the U.S. Department of Education to promote financial 

education and access for low- and moderate-income 

students. The FDIC focused its work through this 

partnership by promoting financial education and 

access resources to the U.S. Department of Education’s 

grantees by participating in both national and four 

regional/state conferences to conduct workshops to 

reach managers of Federal TRIO Programs3

 and Gear-UP 

programs that reach low- and moderate-income students 

and their families.

2 This partnership began on November 15, 2010.

3 The Federal TRIO Programs (TRIO) are federal outreach and student services programs designed to identify and provide services for individuals from 

disadvantaged backgrounds.
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Leading Community Developmen

The FDIC hosted its sixth Community Bank Advisory 

Committee meeting in May 2011. Fourteen members, 

most of them heads of community banks throughout the 

nation, discussed trends and issues involving community 

banking and the future of this sector.

FDIC community affairs staff is located in each of the 

FDIC’s regions nationwide and lead a range of community 

development activities. In 2011, the FDIC undertook 

over 676 community development, technical assistance, 

financial education, and outreach activities and events. 

These activities were designed to promote awareness 

of investment opportunities to financial institutions, 

access to capital within communities, knowledge-sharing 

among the public and private sector, and wealth-building 

opportunities for families. 

The FDIC collaborated with the Office of Comptroller 

of the Currency and Federal Reserve Banks to conduct 

35 CRA/Community Development roundtables to help 

financial institutions learn how to more effectively meet 

community credit needs and promote compliance with 

CRA regulations.

Recognizing the importance of small business growth 

and job creation as an essential component in America’s 

economic recovery, the FDIC continued its emphasis on 

facilitating small-business development, expansion, and 

recovery. In 2011, the FDIC and the SBA co-sponsored 

28 small-business information, resource, and capacitybuilding seminars. The events provided information 

and resources to over 2,276 small business owners, 

entrepreneurs, banking professionals, and others.

The FDIC also continued to help consumers and the 

banking industry avoid unnecessary foreclosures and 

stop foreclosure “rescue” scams that promise false hope 

to consumers at risk of losing their homes. The FDIC 

focused its foreclosure mitigation efforts in three areas:

★ Direct outreach to consumers with information, 

education, counseling, and referrals. During 2011, in 

collaboration with NeighborWorks®America, the FDIC 

sponsored eight events at which 7,392 homeowners 

attended, 68 counseling organizations provided direct 

services and 18 loan servicers participated.

★ Industry outreach and education targeted to 

lenders, loan servicers, local governmental agencies, 

housing counselors, and first responders (faithbased organizations, advocacy organizations, social 

service organizations, etc.). During 2011, the FDIC 

co-hosted one major loan modification scam outreach 

event in collaboration with NeighborWorks®America 

and supported several ongoing loan modification scam 

campaigns. These outreach activities are targeted to local 

agencies and nonprofits that have the capacity to educate 

stakeholders. These activities resulted in more than 

35,372 scam complaint calls since the campaign began.

Vice Chairman Martin J. Gruenberg makes a point during the sixth 

Community Bank Advisory Committee meeting.
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★ Support for capacity-building initiatives 

to help expand the quantity and quality of 

foreclosure counseling assistance that is 

available within the industry. Working closely 

with NeighborWorks®America and other national 

and local counselors and intermediaries, the FDIC 

supported industry efforts to build the capacity of 

housing counseling agencies. The FDIC facilitated 

the development of a new course, Marketing Your 

Neighborhood for Stabilization and Revitalization that was 

offered at two NeighborWorks training institutes 

to approximately twenty-one homeownership 

professionals. Also, more than 1,680 participants 

from 1,071 organizations completed six community 

stabilization e-learning courses offered through 

NeighborWorks®America sponsored by FDIC. These 

e-learning courses include the new Introduction to 

Affordable Housing launched on October 10, 2011.

Information Technology, Cyber Fraud, a

Financial Crime

The FDIC, jointly with the U.S. Department of Justice, 

sponsored a Financial Crimes Conference in May 2011 

that focused on all types of financial fraud, and how the 

law enforcement community and regulators can respond 

effectively to fraud. Other major accomplishments during 

2011 in promoting information technology (IT) security 

and combating cyber fraud and other financial crimes 

included the following: 

★ Issued, in conjunction with the FFIEC, the Supplement 

to Authentication in an Internet Banking Environment 

guidance, which strengthens the controls banks use to 

protect online banking transactions. 

★ Issued revised guidance describing potential risks 

associated with relationships with third-party entities 

that process payments for telemarketers, online 

businesses, and other merchants.

★ Issued a risk advisory to examiners describing the risks 

of mobile banking.

★ Held an Emerging Technology Risk Analysis Center 

Event on January 12, 2011, with five industry experts 

who discussed emerging technologies and associated 

risks that may affect the banking industry. 

★ Established an intra-divisional FDIC Payments Risk 

Working Group to strengthen awareness of current 

and emerging payments-related supervisory issues. 

Representatives from all examination disciplines are 

participating in the Working Group.

★ Assisted financial institutions in identifying 

and shutting down “phishing” websites. The 

term “phishing”—as in “fishing” for confidential 

information—refers to a scam that encompasses 

fraudulently obtaining and using an individual’s 

personal or financial information. 

★ Issued 28 Special Alerts to FDIC-supervised 

institutions on reported cases of counterfeit or 

fraudulent bank checks. 

★ Issued 4 Consumer Alerts pertaining to e-mails 

and telephone calls fraudulently claiming to be from 

the FDIC.

The FDIC conducts IT examinations of financial 

institutions and technology service providers (TSP). These 

examinations ensure that institutions and TSPs have 

implemented adequate risk management practices for 

the confidentiality, integrity, and availability of sensitive, 

material, and critical information assets. The result of 

the examination is a FFIEC Uniform Rating System for 

Information Technology (URSIT) rating. In 2011, the 

FDIC conducted 2,802 IT examinations at financial 

institutions and TSPs. Further, as part of its ongoing 

supervision process, the FDIC monitors significant events, 

such as data breaches and natural disasters that may affect 

financial institution operations or customers.
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Consumer Complaints and Inquiri

The FDIC investigates consumer complaints concerning 

FDIC-supervised institutions and answers inquiries from 

the public about consumer protection laws and banking 

practices. As of December 31, 2011, the FDIC received 

12,942 written complaints, of which 5,997 involved 

complaints against state nonmember institutions. The 

FDIC responded to over 98 percent of these complaints 

within time frames established by corporate policy, and 

acknowledged 100 percent of all consumer complaints 

and inquiries within fourteen days. The FDIC also 

responded to 2,608 written inquiries, of which 484 

involved state nonmember institutions. In addition, the 

FDIC responded to 6,134 telephone calls from the public 

and members of the banking community, of which 4,293 

concerned state nonmember institutions.

Coordination with the Consumer Financi

Protection Burea

Under the Dodd-Frank Act, the Consumer Financial 

Protection Bureau (CFPB) began operations on July 

21, 2011. The CFPB was given primary supervisory 

responsibility for certain enumerated consumer 

protection laws and regulations for institutions with 

assets over $10 billion, and their affiliates. The FDIC 

coordinated with the CFPB throughout 2011 to ensure 

an orderly transfer of forty-one institutions to the CFPB’s 

consumer protection jurisdiction. The FDIC continues 

to work with the CFPB to implement other requirements, 

including simultaneous examinations for other laws, 

such as the CRA, for which the FDIC retains primary 

responsibility for all state chartered, nonmember banks, 

including those with assets over $10 billion.

Between July 21 and December 31, 2011, the FDIC 

received 935 complaints involving FDIC-supervised banks 

under the jurisdiction of the CFPB. Under the agreement 

between the FDIC and the CFPB, the FDIC investigated 

576 of the 935 complaints and referred the remaining 359 

to the CFPB. 

The FDIC provided substantial resources to the CFPB 

during 2011 on a temporary basis. The FDIC helped 

the CFPB develop its consumer complaint processing 

functions, enforcement program, and community affairs 

program. Under a cooperative agreement between the 

FDIC and the CFPB, FDIC employees were also offered 

voluntary transfer opportunities to become permanent 

CFPB employees. A total of forty-one FDIC employees 

transferred to the CFPB as of July 2011.

Public Awareness of Deposit Insurance Covera

The FDIC provides a significant amount of education 

for consumers and the banking industry on the rules for 

deposit insurance coverage. An important part of the 

FDIC’s deposit insurance mission is ensuring that bankers 

and consumers have access to accurate information about 

the FDIC’s rules for deposit insurance coverage. The FDIC 

has an extensive deposit insurance education program 

consisting of seminars for bankers, electronic tools 

for estimating deposit insurance coverage, and written 

and electronic information targeted for both bankers 

and consumers. 

In 2011, the FDIC continued its efforts to educate 

bankers and consumers about the rules and requirements 

for FDIC insurance coverage. The FDIC conducted 

seventeen telephone seminars for bankers on deposit 

insurance coverage, reaching an estimated 57,000 bankers 

participating at over 16,000 bank locations throughout 

the country. The FDIC also updated its deposit insurance 

coverage publications and educational tools for 

consumers and bankers, including brochures, resource 

guides, videos, and the Electronic Deposit Insurance 

Estimator (EDIE). 
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During 2011, the FDIC received and answered 

approximately 119,300 telephone deposit insurancerelated inquiries from consumers and bankers. The FDIC 

Call Center addressed 86,700 of these inquiries, and 

deposit insurance coverage subject matter experts handled 

the other 32,600. In addition to telephone inquiries about 

deposit insurance coverage, the FDIC received 2,500 

written inquiries from consumers and bankers. Of these 

inquiries, 99 percent received responses within two weeks, 

as required by corporate policy.

Resoltions an

The FDIC has the unique mission of protecting depositors 

of insured banks and savings associations. No depositor 

has ever experienced a loss on the insured amount of 

his or her deposit in an FDIC-insured institution due 

to a failure. Upon closure of an institution typically by 

its chartering authority—the state for state-chartered 

institutions, and the Office of the Comptroller of the 

Currency (OCC) for national banks, and federal savings 

associations4—the FDIC is appointed receiver, and the 

FDIC is responsible for resolving the failed bank or 

savings association. 

The FDIC employs a variety of business practices to 

resolve a failed institution. These business practices are 

typically associated with either the resolution process or 

the receivership process. Depending on the characteristics 

of the institution, the FDIC may recommend several of 

these practices to ensure the prompt and smooth payment 

of deposit insurance to insured depositors, to minimize 

the impact on the DIF, and to speed dividend payments to 

creditors of the failed institution. 

The resolution process involves valuing a failing 

institution, marketing it, soliciting and accepting bids 

for the sale of the institution, determining which bid is 

least costly to the insurance fund, and working with the 

acquiring institution through the closing process.

To minimize disruption to the local community, the 

resolution process must be performed quickly and as 

smoothly as possible. There are three basic resolution 

methods: purchase and assumption transactions, 

deposit payoffs, and Deposit Insurance National Bank 

(DINB) assumptions. 

The purchase and assumption (P&A) transaction is 

the most common resolution method used for failing 

institutions. In a P&A transaction, a healthy institution 

purchases certain assets and assumes certain liabilities of 

the failed institution. A variety of P&A transactions can be 

used. Since each failing bank situation is different, P&A 

transactions provide flexibility to structure deals that 

result in the highest value for the failed institution. For 

each possible P&A transaction, the acquirer may either 

acquire all or only the insured portion of the deposits. 

Loss sharing may be offered by the receiver in connection 

with a P&A transaction. In a loss-share transaction, the 

FDIC as receiver agrees to share losses on certain assets 

with the acquirer. The FDIC usually agrees to absorb a 

significant portion (for example, 80 percent) of future 

losses on assets that have been designated as “shared loss 

assets” for a specific period of time (for example, five to 

ten years). The economic rationale for these transactions 

is that keeping shared loss assets in the banking sector 

can produce a better net recovery than would the FDIC’s 

immediate liquidation of these assets.

Deposit payoffs are only executed if a bid for a P&A 

transaction does not meet the least-cost test or if no bids 

are received, in which case the FDIC, in its corporate 

capacity as deposit insurer, makes sure that the customers 

of the failed institution receive the full amount of their 

insured deposits. 

4 OCC assumed this responsibility from the Office of Thrift Supervision (OTS) on July 21, 2011.
2011

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The Banking Act of 1933 authorizes the FDIC to establish 

a DINB to assume the insured deposits of a failed bank. 

A DINB is a new national bank with limited life and 

powers that allows failed bank customers a brief period 

of time to move their deposit account(s) to other insured 

institutions. Though relatively seldom used, a DINB 

allows for a failed bank to be liquidated in an orderly 

fashion, minimizing disruption to local communities and 

financial markets. 

The receivership process involves performing the closing 

functions at the failed institution, liquidating any 

remaining failed institution assets, and distributing 

any proceeds of the liquidation to the FDIC and other 

creditors of the receivership. In its role as receiver, the 

FDIC has used a wide variety of strategies and tools to 

manage and sell retained assets. These include, but are 

not limited to asset sale and/or management agreements, 

structured transactions, and securitizations. 

Financial Institution Failur

During 2011, there were 92 institution failures, compared 

to 157 failures in 2010. For the institutions that failed, 

the FDIC successfully contacted all known qualified and 

interested bidders to market these institutions. The FDIC 

also made insured funds available to all depositors within 

one business day of the failure if it occurred on a Friday 

and within two business days if the failure occurred on 

any other day of the week. 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 last three years. 

Failure Activity 2009–2011

Dola

2011 2010 2009

Total Institutions 92 157 140

Total Assets of Failed 

Institutions* $34.9 $92.1 $169.7

Total Deposits of 

Failed Institutions* $31.1 $79.5 $137.1

Estimated Loss to the DIF $7.9 $22.3 $37.1

*Total assets and total deposits data are based on the last Call Report 

filed by the institution prior to failure.

Asset Management and Sal

As part of its resolution process, the FDIC makes every 

effort to sell as many assets as possible to an assuming 

institution. Assets that are retained by the receivership 

are evaluated; for 95 percent of the failed institutions, at 

least 90 percent of the book value of marketable assets are 

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

for cash sales and 120 days for structured sales. 

Structured sales for 2011 totaled $2.8 billion in unpaid 

principal balances from commercial real estate and 

residential loans acquired from various receiverships. 

These transactions often involved FDIC-guaranteed and 

nonguaranteed purchase money debt and equity in a 

limited liability company shared between the respective 

receivership that contributed the assets to the sale and 

the successful purchaser. Cash sales of assets for the 

year totaled $1.1 billion in book value. In addition to 

structured and cash sales, FDIC also use securitizations to 

dispose of bank assets. In 2011, securitization sales totaled 

$1.1 billion.
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As a result of our marketing and collection efforts, 

the book value of assets in inventory decreased by $6.1 

billion (23 percent) in 2011. The following chart shows the 

beginning and ending balances of these assets by 

asset type.

Assets in Inventory by Asset Type

Dol

Asset T

Ass

Inve

01/01/11

Ass

Inve

12/31/11

Securities $2,376 $1,225

Consumer Loans 56 31

Commercial Loans 1,029 585

Real Estate Mortgages 5,683 2,208

Other Assets/Judgments 2,103 1,396

Owned Assets 2,086 1,007

Net Investments in 

Subsidiaries 881 290

Structured and 

Securitized Assets 12,784 14,171

Total $26,998 $20,913

The FDIC uses contractors extensively to manage and sell 

the assets of failed institutions. Multiple improvements 

were made to controls over contractor costs and the 

quality of their deliverables, including the development 

of invoice review checklists, a standard contractor 

performance evaluation review process, and a series of 

peer-to-peer reviews.

Receivership Management Activitie

The FDIC, as receiver, manages failed banks and their 

subsidiaries with the goal of expeditiously winding up 

their affairs. The oversight and prompt termination of 

receiverships help to preserve value for the uninsured 

depositors and other creditors by reducing overhead and 

other holding costs. Once the assets of a failed institution 

have been sold and the final distribution of any proceeds 

is made, the FDIC terminates the receivership. In 2011, 

the number of receiverships under management increased 

by 27 percent, due to the increase in failure activity. The 

following chart shows overall receivership activity for the 

FDIC in 2011. 

Receivership Activity

Active Receiverships as of 01/01/11* 344

New Receiverships 92

Receiverships Terminated 5

Active Receiverships as of 12/31/11* 431

 *Includes five FSLIC Resolution Fund receiverships.

Minority and Women Outrea

In 2011, the FDIC awarded 1,936 contracts. Of these, 558 

contracts (29 percent) were awarded to Minority- and 

Women-Owned Businesses (MWOBs). The total dollar 

value of contracts awarded was $1.4 billion, of which $417 

million (29 percent) was awarded to MWOBs, compared 

to 24 percent for all of 2010. In addition, engagements 

of Minority- and Women-Owned Law Firms (MWOLFs) 

were 30 percent of all engagements; total payments of $23 

million to MWOLFs were 17 percent of all payments to 

outside counsel, compared to 10 percent for all of 2010. 

Policy modifications and contracting procedures have also 

resulted in the following changes and/or new initiatives:

★ The Office of Minority and Women Inclusion (OMWI) 

participates on contracting Technical Evaluation Panels 

as a voting member.

★ The FDIC entered into an MOU with the U.S. Small 

Business Administration to participate in their 8(a) 

Program in May 2011.

★ The FDIC issues some contracts on a regional basis, 

or allows contractors to bid on a subset of a contract, 

rather than requiring them to bid on the entire contract, 

in order to allow MWOBs and small businesses to be 

more competitive.
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In 2011, the FDIC exhibited at 18 procurement-specific 

trade shows to provide participants with the FDIC’s 

general contracting procedures, prime contractors’ 

contact information, and possible upcoming solicitations. 

Prime contractors are reminded of the FDIC’s emphasis 

on MWOB participation and are encouraged to 

subcontract or partner with MWOBs. The FDIC also 

exhibited at seven non-procurement events where 

contracting information was provided. In addition, the 

FDIC’s Legal Division was represented at trade shows 

where information was provided to MWOLFs about 

outside counsel opportunities and how to enter into cocounsel arrangements with majority firms.

FDIC personnel frequently met with MWOBs and 

MWOLFs in one-on-one meetings to discuss contracting 

opportunities at the FDIC. MWOBs are encouraged to 

register in the FDIC’s Contractor Resource List, which 

is an online self registration system that can be accessed 

through the FDIC’s website by any firm interested in 

doing business with the FDIC. FDIC personnel use the 

Contractor Resource List to develop source lists 

for solicitations. 

As a result of the Asset Purchaser, Investor, and Minority 

Depository Institutions Outreach seminars conducted 

in 2010, the FDIC developed an Investor Match Program 

(IMP). The IMP was launched in September 2011 to 

encourage and facilitate interaction between small 

investors, asset managers and large investors to bring 

sources of capital together with the expertise needed 

to participate in structured sales transactions. Two 

structured transactions workshops for Minority- and 

Women-Owned Investors and Asset Managers were held 

in New York, New York and Irvine, California. 

Information was presented on how structured 

transactions are planned and conducted, including an 

introduction and overview on the structured transactions 

process and bidder qualification procedures. In addition, 

speakers highlighted some key features of transaction 

documents, their experience in dealing with tax-related 

issues, as well as post-bid management oversight and the 

document reporting process. 

The FDIC piloted a Small Investor Program (SIP) in 2011 

to increase MWOB participation in accordance with 

Section 342 of Dodd-Frank. The SIP is geared towards 

marketing distressed loans under the structured sales 

program to smaller investors, many of whom are MWOBs. 

The SIP offers smaller-sized asset pools than a typical 

multi-bank structured loan sale. For this program, a 

pool of loans would typically be drawn from a single 

receivership resulting in the loan pool being secured by 

collateral in a more concentrated geographical area than 

would be found in a traditional, nationwide or regional 

multibank structured sale. The FDIC also adjusted the 

structure of the SIP to make offerings more accessible 

to smaller investors and to increase participation while 

maintaining a level playing field for all investors. 

In 2012, as the FDIC winds down the operations of failed 

institutions and liquidates residual assets, the FDIC 

will continue to encourage and foster diversity and the 

inclusion of MWOBs in its procurement activities, outside 

counsel engagements, and asset sales programs. 

Protecting Insured Depositors

The FDIC’s ability to attract healthy institutions to 

assume deposits and purchase assets of failed banks and 

savings associations at the time of failure minimizes the 

disruption to customers and allows assets to be returned 

to the private sector immediately. Assets remaining 

after resolution are liquidated by the FDIC in an orderly 

manner, and the proceeds are used to pay creditors, 

including depositors whose accounts exceeded the 

insurance limit. During 2011, the FDIC paid dividends of 

$12 million to depositors whose accounts exceeded the 

insured limit(s). 
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Professional Liability and Financial

Crimes Recoverie

FDIC staff works to identify potential claims against 

directors, officers, fidelity bond insurance carriers, 

appraisers, attorneys, accountants, mortgage loan brokers, 

title insurance companies, securities underwriters, 

securities issuers, and other professionals who may 

have contributed to the failure of an IDI. Once a claim 

is deemed meritorious and cost-effective to pursue, 

the FDIC initiates legal action against the appropriate 

parties. During 2011, the FDIC recovered $240.4 million 

from professional liability claims/settlements. The FDIC 

also authorized lawsuits related to 30 failed institutions 

against 264 individuals for director and officer liability 

with damage claims of $5.1 billion. The FDIC also 

authorized 19 other lawsuits for fidelity bond, liability 

insurance, attorney malpractice, appraiser malpractice, 

and RMBS claims. There also were 189 residential 

mortgage malpractice and fraud lawsuits pending as of 

year-end. At the end of 2011, the FDIC’s caseload included 

52 professional liability lawsuits (up from 27 at year-end 

2010) and 1,811 open investigations (down from 2,750) at 

year-end 2010.

In addition, as part of the sentencing process for those 

convicted of criminal wrongdoing against institutions 

that later failed, a court may order a defendant to 

pay restitution or to forfeit funds or property to the 

receivership. The FDIC, working in conjunction with the 

U.S. Department of Justice, collected $3,633,426 from 

criminal restitutions and forfeitures during the year. At 

year-end, there were 5,192 active restitution and forfeiture 

orders (up from 4,895 at year-end 2010). This includes 

294 FSLIC Resolution Fund orders, i.e., orders inherited 

from the Federal Savings and Loan Insurance Corporation 

on August 10, 1989, and orders inherited from the 

Resolution Trust Corporation on January 1, 1996.

Effective M

Strategi

The FDIC recognizes that it must effectively manage 

its human, financial, and technological resources 

to successfully carry out its mission and meet the 

performance goals and targets set forth in its annual 

performance plan. The FDIC must align these strategic 

resources with its mission and goals and deploy them 

where they are most needed to enhance its operational 

effectiveness and minimize potential financial risks to 

the DIF. Major accomplishments in improving the 

FDIC’s operational efficiency and effectiveness during 

2011 follow. 

Human Capital Managem

The FDIC’s human capital management programs are 

designed to recruit, develop, reward, and retain a highly 

skilled, cross-trained, diverse, and results-oriented 

workforce. In 2011, the FDIC stepped up workforce 

planning and development initiatives that emphasized 

hiring the additional skill sets needed to address 

requirements of Dodd-Frank, especially as it related to 

the oversight of systemically important financial 

institutions. Workforce planning also addressed the 

need to start winding down bank closure activities in 

the next few years, based on the decrease in the number of 

financial institution failures and institutions in atrisk categories. The FDIC also deployed a number of 

strategies to more fully engage all employees in advancing 

its mission.

Succession Management

In 2011, the FDIC expanded its education and training 

curriculum for employees in the business lines and 

support functions, and for leadership development. 

Additionally, classroom learning and development 

opportunities were supplemented and supported with 

the expansion of e-learning, simulations, electronic 

performance support systems, job aids, and tool kits to 

quickly facilitate work processes and overall efficiencies. 

The FDIC also engaged in a number of knowledge 
2011

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management initiatives to capture lessons learned and 

best practices during the financial crisis, in support of 

future corporate readiness.

The FDIC continues to expand leadership development 

opportunities to all employees, including newly hired 

employees. This curriculum takes a holistic approach, 

aligning leadership development with critical corporate 

goals and objectives, and promotes the desired corporate 

culture. By developing employees across the span of 

their careers, the FDIC builds a culture of leadership and 

further promotes a leadership succession strategy. The 

final course of the new leadership curriculum, which 

consists of five core courses, was launched in November 

2011. Four new electives were also delivered in 2011. 

Additionally, the FDIC formalized its Master’s of Business 

Administration (MBA) program for Corporate Managers 

and Executive Managers, in conjunction with the 

University of Massachusetts. Two candidates were selected 

for the 2011–2014 class.

Strategic Workforce Planning and Readiness

The FDIC used various employment strategies in 2011 to 

meet the need for additional human resources resulting 

from the number of failed financial institutions and 

the volume of additional examinations. Among these 

strategies, the FDIC reemployed over 200 retired FDIC 

examiners, attorneys, resolutions and receiverships 

specialists, and support personnel, and hired employees 

of failed institutions in temporary and term positions. 

The FDIC also recruited mid-career examiners who had 

developed their skills in other organizations, recruited 

loan review specialists and compliance analysts from the 

private sector, and redeployed current FDIC employees 

with the requisite skills from other parts of the agency. 

In response to the requirements of Dodd-Frank, the FDIC 

worked with the Office of the Comptroller of the Currency 

(OCC), the Office of Thrift Supervision (OTS), and the 

Consumer Financial Protection Bureau (CFPB) to close 

the OTS and transfer the OTS employees to the other 

agencies. In addition, certain employees from the Federal 

banking agencies were transferred to the CFPB. When the 

OTS closed on July 21, 2011, the FDIC received ninetyfive of its employees. Also, as part of the transfer under 

Dodd-Frank, the FDIC became the primary regulator for 

61 state-chartered thrifts. 

As the numbers of failed financial institutions increased 

during 2009 and 2010, the FDIC fully staffed two 

temporary satellite offices on both the West Coast and the 

East Coast to bring resources to bear in especially hard-hit 

areas. The West Coast Temporary Satellite Office opened 

in Irvine, California, in early spring of 2009 and as of yearend 2011 had 308 employees. The East Coast Temporary 

Satellite Office opened in Jacksonville, Florida, in the fall 

of 2009 and as of the end of 2011, had 383 employees. 

In January 2010, the FDIC Board authorized opening 

a third satellite office for the Midwest in Schaumburg, 

Illinois. During 2010, the office was established and, as 

of the end of 2011, had 255 employees. The FDIC also 

increased resolutions and receiverships staff in the Dallas 

regional office. Almost all of the employees in these new 

offices were hired on a nonpermanent basis to handle the 

temporary increase in bank-closing and asset management 

activities expected over the two to four years, beginning 

in 2009. The use of term appointments will allow the 

FDIC staff to return to an adjusted normal size once the 

crisis is over without the disruptions that reductions in 

permanent staff would cause.
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During 2011, plans were formulated, based on projections 

of a drop in the numbers of bank failures in 2012 and 

beyond, to begin the orderly closing of the temporary 

satellite offices, beginning with the Irvine office in 

January 2012. The Midwest Office is scheduled to close 

in September 2012, and the East Coast Office will close 

no earlier than the fourth quarter of 2013. The FDIC will 

provide transition services to the departing temporary and 

term employees. In addition, a number of these employees 

may be hired as permanent staff to complete the FDIC’s 

adjusted core staffing requirements. 

The FDIC continued to build workforce flexibility and 

readiness by increasing its entry-level hiring into the 

Corporate Employee Program (CEP). The CEP is a multiyear development program designed to cross-train new 

employees in FDIC major business lines. In 2011, 130 

new business line employees (1,012 hired since program 

inception in 2005) entered this multi-discipline program. 

The CEP continued to provide a foundation across the 

full spectrum of the FDIC’s business lines, allowing for 

greater flexibility to respond to changes in the financial 

services industry and in meeting the FDIC’s human 

capital needs. As in years past, the program continued 

to provide FDIC flexibility as program participants were 

called upon to assist with both bank examination and 

bank closing activities based on the skills they obtained 

through their program requirements and experiences. 

As anticipated, participants are also successfully earning 

their commissioned bank examiner and resolutions and 

receiverships credentials, having completed their three to 

four years of specialized training in field offices across the 

country. The FDIC had approximately 240 commissioned 

participants by the end of 2011. These individuals are 

well-prepared to lead examination and resolutions and 

receiverships activities on behalf of the FDIC.

Corporate Risk Management

In January of 2011, the FDIC Board authorized the 

creation of an Office of Corporate Risk Management 

and the recruitment of a Chief Risk Officer (CRO). That 

position was filled in August of 2011, and the new CRO 

took a proposal to the Board in December related to the 

organizational structure of the new Office. The Board 

subsequently approved this proposal for a small (15 staff) 

organization that would work with other Divisions and 

Offices to assess, manage and mitigate risks to the FDIC 

in the following major areas:

★ Open bank risks associated with the FDIC’s role as 

principal regulator of certain financial institutions 

and the provider of deposit insurance to all insured 

depository institutions. 

★ Closed bank risks associated with the FDIC 

management of risks associated with assets in 

receivership, including loss share arrangements and 

limited liability corporations. 

★ Economic and financial risks which are created for the 

FDIC and its insured institutions by changes in the 

macroeconomic and financial environment. 

★ Policy and regulatory risks arising in the legislative arena 

and those created by FDIC’s own policy initiatives. 

★ Internal structure and process risks associated with 

carrying out ongoing FDIC operations, including 

human resource management, internal controls, and 

audit work carried out by both OIG and GAO. 

★ Reputational risk associated with all of the 

activities of the FDIC as they are perceived by a range 

of external factors.

The Board also approved the creation of an Enterprise 

Risk Committee, chaired by the CRO, to replace the 

existing National Risk Committee and to broaden the 

mandate of this high level management committee to 

include both external and internal risks facing the FDIC. 

This Committee will help enhance senior management’s 

focus on risk, and support the preparation of quarterly 

reports to the Board on the risk profile of 

the institution.
2011

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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. A 

corporate Culture Change Initiative was instituted in 2008 

to address issues resulting from the 2007 survey.

The Culture Change Initiative has continued to gain 

momentum, and significant progress is being made 

toward completing the goals identified in the Culture 

Change Strategic Plan. As evidenced of the progress 

made under the Culture Change Initiative, the FDIC was 

recognized in the 2011 “Best Places to Work” rankings as 

being the most improved federal agency and the overall 

number one best place to work in the Federal government, 

based on the results of the 2010 Federal Employee 

Viewpoint Survey. 

Employee Learning and Development 

The FDIC has a strong commitment to the learning 

and development of all employees that is embedded in 

its core values. Through its learning and development 

programs, the FDIC creates opportunity, enriches career 

development, and grows employees and future leaders. 

New employees can more quickly and thoroughly 

assume their job functions and assist with examination 

and resolution activities through the use of innovative 

learning solutions. To prepare new and existing employees 

for the challenges ahead, the FDIC has streamlined 

existing courses, promoted blended learning, and created 

online, just-in-time toolkits and job aids.

In support of business requirements, the FDIC provided 

its examiners with several new learning and development 

opportunities. “High Stakes Communication: 

Communicating with Resilience in Tough Situations,” 

was created to provide examiners with strategies and 

examples to enhance their skills in communicating with 

bank management during board and exit meetings. The 

video-based course was delivered to all examiners in 2011. 

The FDIC also increased the length of two of its core 

Acting Chairman Martin J. Gruenberg, shown here accepting the awards for the first-place ranking and most improved agency on the list of Best Places 

to Work in the Federal Government®, with (from left) Arleas Upton Kea, Ira Kitmacher, Pamela Mergen, and Nancy Hughes.
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examiner schools, Loan Analysis School and Compliance 

Management School, to provide more content, instructor 

feedback, and practice time for application. In addition 

to developing new training, the FDIC anticipates a 20 

percent increase in organic growth for examiner training 

in 2012.

In support of knowledge and succession management, 

the FDIC is focused on capturing, maintaining, and 

documenting best practices and lessons learned from 

bank closing activity over the past two years. Capturing 

this information now is strategically important to ensure 

corporate readiness, while at the same time maintaining 

effectiveness as experienced employees retire and the 

temporary positions created to support the closing activity 

expire. The FDIC maintains its commitment to establish 

and maintain an effective solution to capture, maintain, 

and document best practices to help identify and develop 

future training and learning opportunities. 

In 2011, the FDIC provided its employees with 

approximately 170 instructor-led courses and 1,100 webbased courses to support various mission requirements. 

Approximately 12,000 instructor-led courses and 17,200 

web-based courses were completed.

In 2011, the FDIC received two prestigious awards 

for its learning and development programs. The 

Leadership Development Award from the Training 

Officers Consortium recognized the FDIC’s 

comprehensive leadership development curriculum, 

which includes learning opportunities for employees at 

all levels. The Learning Team received the Gold Award 

from Human Capital Media, recognizing the FDIC’s 

excellence in the design and delivery of employee 

development programs, including both technical 

training and leadership development.

Information Technology Manageme

In today’s rapidly changing business environment, 

technology is frequently the foundation for achieving 

many FDIC business goals, especially those addressing 

efficiency and effectiveness in an industry where timely 

and accurate communication and data are paramount for 

supervising institutions, resolving institution failures, and 

monitoring associated risks in the marketplace. 

Strengthening the FDIC’s Privacy Program

The FDIC has a well-established Privacy Program 

that works to maintain privacy awareness and 

promote transparency and public trust. Privacy and 

the protection of Sensitive Information (SI), such as 

personally identifiable information (PII), are integral 

to accomplishing the mission of the FDIC in both the 

banking industry and among U.S. consumers. The 

Privacy Program is a critical part of the FDIC’s 

business operations. 

In response to the surge in bank closings associated with 

the crisis, the FDIC completed the third of three in-depth 

assessments of the bank closing process to identify and 

address risks to the privacy and security of bank-customer 

SI. The recommended action items stemming from 

the third assessment will be incorporated into FDIC’s 

strategic objectives for 2012. In addition, during 2011, the 

FDIC improved the agency’s monitoring of the enterprise 

network to identify at-risk privacy data and prevent the 

loss of that information, particularly Social Security 

numbers. The FDIC proactively conducted unannounced 

privacy assessments of headquarter offices to assess any 

potentially unsecured SI. These walk-throughs were 

instrumental in improving employee and management 

awareness regarding proper privacy safeguards in the 

workplace. Further, the FDIC initiated an annual review 

of the agency’s digital library to identify, monitor, reduce, 

and secure documents containing sensitive data.
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As with information security, the banking crisis has 

resulted in an increased reliance on third-party vendors 

that process significant amounts of SI in support of bank 

closings. To ensure this PII is protected in accord with 

the FDIC’s privacy requirements, the agency performed 

vendor assessments of their controls over this sensitive 

information. In addition, the FDIC held its annual Privacy 

Clean-up Day for employees and contractors to reduce 

the volume of sensitive information held by the agency 

and therefore reduce the risk to internal and external 

individuals, and the FDIC. The FDIC also conducted 

an in-depth review of the FDIC’s thirty-two Privacy Act 

System of Record Notices (SORNs) and provided the 

results to the FDIC Board of Directors. 

IT Support for Regulatory Reform

The FDIC established a program designed to identify 

IT-related tasks needed to support the implementation 

of the requirements of Dodd-Frank. As of October 20, 

2011, twenty IT-related initiatives supporting Dodd-Frank 

requirements had been approved by the related IT Steering 

Committee. Of the approved projects, thirteen have been 

completed and two are in progress. Additional projects 

have been identified for 2012 and are being considered 

under the normal budgeting process.

Establishing a Business Intelligence Service Center 

The recent financial crisis has magnified the FDIC’s need 

to collect, validate, aggregate, and analyze data from 

internal and external sources, and to securely share this 

information via reports and dashboards with authorized 

cross-organizational decision makers. As a result, the 

FDIC established a Business Intelligence Service Center 

(BISC) to provide expert technical advice and assistance to 

line of business users in the acquisition, management, and 

analysis of data from internal and external sources; deliver 

Business Intelligence (BI) technical solutions, contribute 

to the enterprise data architecture, and facilitate corporate 

information sharing and management strategy. Since the 

BISC group was established in early 2011, the demand for 

BI project support has increased. Projects being conducted 

by the FDIC include Strategic Workforce Planning, Large 

Complex Financial Institutions Liquidity Monitoring 

and Reporting, Qualified Financial Contracts Analysis, 

Limited Liability Corporation Data Management, and 

Risk Share Assessment Management (the Chairman’s 

Dashboard). The BISC team also provides primary 

technical support for multiple corporate BI tools that 

support the Executive Resource Information Portal and 

the Office of Complex Financial Institution’s Liquidity 

Monitoring and Reporting.