Management’s 

Discussion and 

Analysis

I.

The Year in Review

Overvi

Much of our work during 2012 

focused on a number of key areas, 

all mission-based. First was moving 

forward on implementing our new 

responsibilities under the Dodd-Frank 

Act. This effort included continuing 

implementation of FDIC’s systemic 

resolution responsibilities under the 

Dodd-Frank Act, including resolution 

planning and promoting cross border 

cooperation and cooperation with 

respect to any orderly resolution of a 

globally active, systemically important 

financial institution. We commenced 

a Community Banking Initiative to 

further the understanding of the future 

of community banking, which included 

outreach, research, and efforts to 

streamline examinations without 

compromising safe and sound banking 

practices. As always, our mission 

to maintain stability and public 

confidence in the nation’s financial 

system guided our work. The sections 

below fill in the details and highlight 

some of our accomplishments during 

the year.

Insura

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).

Long-Term Comprehensive 

Fund Management Plan 

In 2010 and 2011, the FDIC developed 

a comprehensive, long-term 

management plan designed to reduce 

the effects of cyclicality and achieve 

moderate, steady assessment rates 

throughout economic and credit 

cycles, while also maintaining a 

positive fund balance even during a 

banking crisis. The plan is designed 

to ensure that the reserve ratio will 

reach 1.35 percent by September 30, 

2020, as required by the Dodd-Frank 

Act.1 The plan includes a reduction 

in rates that the FDIC Board has 

adopted to become effective once the 

reserve ratio reaches 1.15 percent. 

To increase the probability that the 

fund reserve ratio will reach a level 

sufficient to withstand a future crisis, 

the FDIC Board has—pursuant to 

the plan—suspended dividends 

indefinitely. The plan prescribes 

progressively lower assessment rates 

that will become effective when the 

reserve ratio exceeds 2.0 percent and 

2.5 percent. These lower assessment 

rates serve almost the same function 

as dividends, but provide more stable 

and predictable effective assessment 

rates.

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 voted 

in December 2012 to maintain the 

2.0 percent DRR for 2013. Using 

historical fund loss and simulated 

income data from 1950 to 2010, FDIC 

analysis showed the reserve ratio 

would have had to exceed 2.0 percent 

before the onset of the two crises 

that occurred since the late 1980s, to 

1 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.

Managmensc
ANNUAL REPORT 2012

have maintained both a positive fund 

balance and stable assessment rates 

throughout both crises. The analysis 

assumes a moderate, long-term 

average industry assessment rate, 

consistent with the rates set forth in 

the plan. The 2.0 percent DRR should 

not be viewed as a cap on the fund. 

The FDIC views the 2.0 percent DRR 

as a long-term goal and the minimum 

level needed to withstand future crises 

of the magnitude of past crises. 

State of the Deposit 

Insurance Fund 

Estimated losses to the DIF were 

$2.7 billion from failures occurring in 

2012, and were lower than losses from 

failures in each of the previous four 

years. The fund balance continued 

to grow through the fourth quarter of 

2012, with 12 consecutive quarters of 

positive growth. Assessment revenue, 

fewer anticipated bank failures, 

and the transfer of fees previously 

set aside for debt guaranteed under 

the Temporary Liquidity Guarantee 

Program (TLGP) have driven the 

increase in the fund balance. The fund 

reserve ratio rose to 0.35 percent at 

September 30, 2012, from 0.17 percent 

at the beginning of the year. 

Assessment System for Large 

and Highly Complex Institution

On October 9, 2012, the FDIC Board 

approved a final rule to amend the 

assessment system for large and 

highly complex institutions. The rule 

amends definitions adopted in the 

February 2011 large bank pricing rule 

used to identify concentrations in 

higher-risk assets. This rule, which 

went into effect on April 1, 2013, 

amends the definitions of leveraged 

loans and subprime loans, which are 

areas of significant potential risk. 

The revised definition of leveraged 

loans, renamed higher-risk C&I 

(commercial and industrial) loans 

and securities, focuses on large loans 

to the riskiest borrowers—those that 

are highly leveraged as the result of 

loans to finance a buyout, acquisition, 

or capital distribution. The revised 

definition of subprime consumer 

loans, renamed higher-risk consumer 

loans, focuses on the most important 

characteristic—the probability of 

default. The final rule resulted from 

concerns raised by the industry about 

the cost and burden of reporting under 

the definitions in the February 2011 

rule. Nonetheless, the new definitions 

better reflect the risk that institutions 

pose to the DIF.

Temporary Liquidity 

Guarantee Progra

On October 14, 2008, as part of a 

coordinated response by the U.S. 

government to the disruption in the 

financial system and the collapse of 

credit markets, the FDIC implemented 

the Temporary Liquidity Guarantee 

Program (TLGP). By calming market 

fears and encouraging lending, 

the TLGP helped bring stability to 

financial markets and the banking 

industry during the crisis period. The 

TLGP consisted of two components: 

(1) the Transaction Account Guarantee 

Program (TAG), 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. 

The TAG Program initially guaranteed 

in full all domestic noninterestbearing transaction deposits held at 

participating banks and thrifts through 

December 31, 2009. The deadline 

was extended twice and expired on 

December 31, 2010.

The TAG Program brought stability 

and confidence to banks and their 

business customers by removing the 

risk of loss from deposit accounts 

that are commonly used to meet 

payroll and other business transaction 

purposes. Deposits provide the 

primary source of funding for most 

banks, and they are particularly 

important for smaller institutions. 

The temporary coverage allowed 

institutions, particularly smaller ones, 

to retain these accounts and maintain 

the ability to make loans within their 

communities. 

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 

was also extended in 2009 to the 

earlier of the stated maturity date of 

the debt or December 31, 2012. 

The DGP enabled financial institutions 

to meet their financing needs during 

a period of record high credit spreads 

and aided the successful return of 

the credit market to near normalcy, 

despite the recession and slow 

economic recovery. This improvement 

in the credit markets was reflected 

in the increasing ability of banks 

and their holding companies to issue 

longer-term debt over the course 

of the DGP issuance period. At 

the inception of the program, firms 

heavily relied upon the DGP to roll 

over short-term liabilities because 

of the fragility of the credit markets 

and investors’ continued aversion to 

risk. By providing the ability to issue 

debt guaranteed by the FDIC, the 

DGP allowed institutions to extend 

maturities and obtain more stable 

unsecured funding.

14 Managme
Program Statistics

Over the course of the DGP’s 

existence, 122 entities issued TLGP 

debt. At its peak, the DGP guaranteed 

$345.8 billion of debt outstanding (see 

the chart above). The DGP guarantee 

on all TLGP debt that had not already 

matured, expired on December 31, 

2012. Therefore, at the end of 2012, no 

debt guaranteed by the DGP remained.

The FDIC collected $10.4 billion in 

fees and surcharges under the DGP. 

As of December 31, 2012, the FDIC 

paid $153 million in losses resulting 

from six participating entities 

defaulting on debt issued under the 

DGP. The majority of these losses 

($113 million) arose from banks 

with outstanding DGP notes that 

failed in 2011 and were placed into 

receivership. 

The FDIC collected $1.2 billion in fees 

under the TAG Program. Cumulative 

estimated TAG Program losses on 

failures as of December 31, 2012, 

totaled $2.1 billion. 

Overall, TLGP fees exceeded the 

losses from the program. From 

inception of the TLGP, it was the 

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. In total, $9.3 billion in TLGP 

fees and surcharges were deposited 

into the DIF. 

Temporary Unlimited Coverage 

for Noninterest-Bearing 

Transaction Accounts under the 

Dodd-Frank Act Ends

The Dodd-Frank Act provided 

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 TAG Program, which 

expired on December 31, 2010, 

and was available to all depositors, 

including consumers, businesses, 

and government entities. The 

coverage was separate from, and in 

addition to, the standard insurance 

coverage provided for a depositor’s 

other accounts held at an FDICinsured bank. 

Outstandig

12-09 2-10 4-10 6-10 8-10 10-10 12-10 2-11 4-11 6-11 8-11 10-11 12-11 2-12 4-12 6-12 8-12 10-12 12-12

Dollars in Bilions

350

200

250

300

150

100

50

0

Managmenis
ANNUAL REPORT 2012

James Wigand, 

Director of the Office 

of Complex Financial 

Institutions, outlines 

the FDIC’s resolution 

strategy for systemically 

important financial 

institutions during a 

committee meeting.

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 TAG Program, the temporary 

unlimited coverage also included 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 

and negotiable order of withdrawal accounts 

were not eligible for this temporary 

unlimited insurance coverage, regardless 

of the interest rate and even if no interest 

was paid.

As of September 30, 2012, insured 

institutions had $1.5 trillion above the 

basic coverage limit of $250,000 per 

account in domestic noninterest-bearing 

transaction accounts. This amount was fully 

insured through the end of 2012 under the 

Dodd-Frank Act. 

The provision of the Dodd-Frank Act 

extending unlimited FDIC coverage to 

noninterest-bearing transaction accounts 

through 2012, like the original TAG Program, 

served as a source of stability to both banks 

and their business customers in the wake of 

the financial crisis and economic downturn.

Activities

Systemically Imp

Financial I

Risk Monitoring Activities 

for Systemically Important 

Financial Institutions

The Dodd-Frank Act expanded the 

FDIC’s responsibilities for overseeing and 

monitoring the largest, most complex 

banking organizations and large systemically 

important financial institutions designated 

by the FSOC for Federal Reserve Board 

supervision. In 2012, the FDIC’s complex 

financial institution program activities 

included ongoing reviews of selected 

banking organizations with more than $100 

billion in assets as well as certain nonbank 

financial companies. In addition, the FDIC 

continued to work closely with other federal 

regulators to gain a better understanding 

of the risk measurement and management 

practices of these institutions, and assess the 

potential risks they pose to financial stability.

Title I Resolution Plans

In 2012, according to the “living will” rules 

promulgated by the FDIC and Federal 

Reserve, under Title I of the Dodd-Frank 

Act, Section 165(d), covered companies 

with nonbank assets over $250 billion or 

insured depository institution (IDI) assets 

over $50 billion, were required to submit 

plans for a nonsystemic resolution under 

the bankruptcy code. By July 2012, the 

FDIC and Board of Governors of the Federal 

Reserve System received the first set of plans 

from these companies and began the process 

of reviewing the plans for completeness 

and sufficiency. These plans are intended 

to provide information about each firm’s 

critical operations and core business lines 

and to identify key obstacles to an orderly 

resolution in bankruptcy. The first set 

16 Managme
of companies filing resolution plans will 

submit revised plans by July 2013. Covered 

companies with nonbank assets over $100 

billion will submit their first resolution 

plans by July 2013, and all other covered 

companies must submit their first resolution 

plans by December 2013.

Title II Resolution 

Strategy Development

Title II of the Dodd-Frank Act authorizes 

the FDIC to resolve certain systemically 

important bank holding companies and 

other financial companies (other than IDIs 

which the FDIC resolves under provisions 

of the Federal Deposit Insurance Act and 

insurance companies, which are resolved 

under applicable state law), if their failure 

would have serious adverse consequences 

on U.S. financial stability. During 2012, the 

FDIC reviewed the characteristics of each 

domestic company and studied the systemic 

effects and channels of contagion of 

previous financial downturns and consulted 

with external practitioners and experts on 

key resolution components and options. 

As a result of these activities, the FDIC 

developed a baseline conceptual approach 

that could be used across a spectrum of 

large financial institutions. Throughout 2012, 

the FDIC discussed this concept at outreach 

events with other domestic government 

agencies, the Systemic Resolution Advisory 

Committee, industry groups, the academic 

community, and international financial 

regulators.

Systemic Resolution 

Advisory Committee

In 2011, the FDIC Board approved the 

creation of the Systemic Resolution Advisory 

Committee. During 2012, the Committee 

continued to provide important advice to the 

FDIC regarding systemic resolutions. The 

Committee advises the FDIC on a variety 

of issues including the effects on financial 

stability and economic conditions resulting 

from the failure of a SIFI, the ways in which 

specific resolution strategies would affect 

stakeholders and their customers, the tools 

available to the FDIC to wind down the 

operations of a failed organization, and 

the tools needed to assist in cross-border 

relations with foreign regulators and 

governments when a systemic company has 

international operations. Members of the 

Committee have a wide range of experience 

including managing complex firms; 

administering bankruptcies; and working 

in the legal system, accounting field, and 

academia.

Coordinating Interagency 

Resolution Planning

In 2012, the FDIC conducted events to 

promote interagency information-sharing 

and cooperative resolution planning. 

Coordinating with the other federal 

regulators, these events covered a variety of 

topics, including the following: 

♦ QFC Tabletop – focused on issues 

arising from derivative instruments, and 

other financial contracts considered as 

Then-Acting 

Chairman Gruenberg 

(center) discusses 

the FDIC’s progress 

on implementing 

the Dodd-Frank Act 

during a meeting 

of the Systemic 

Resolution Advisory 

Committee. 

Also pictured 

are (from left) 

William H. 

Donaldson, 

Chairman, Donaldson 

Enterprises; 

Paul A. Volcker, 

former Chairman 

of the Board of 

Governors, Federal 

Reserve System; 

John S. Reed, 

Chairman of the 

Massachusetts 

Institute of 

Technology's 

Corporation; and 

Thomas Curry, 

FDIC Director.

MANAGEMENT DISCUSSION AND ANALYSIS 17
ANNUAL REPORT 2012

“Qualified Financial Contracts,” held 

by a hypothetical company subject 

to resolution under Title II. 

♦ Funding Tabletop – covered 

the operational implementation 

of funding a potential global 

systemically important financial 

institution (G-SIFI) resolution, 

subject to Title II of the Dodd-Frank 

Act.

♦ Three Keys Tabletop – explored the 

logistical and practical components 

involved in making the decision to 

“turn the keys,” and place a SIFI into 

a Title II receivership.

♦ Systemic Risk Committee (SRC) 

Tabletop on Hedge Funds and 

Systemic Risk – focused on whether 

there is sufficient actionable 

information available to FSOC 

members to determine the systemic 

impact associated with the failure of 

a large derivatives counterparty that 

is not a G-SIFI, e.g., a large domestic 

hedge fund. 

♦ Central Counterparty (CCP) 

Informational Lecture – explained 

the nature of central counterparties, 

their primary concerns and 

rule-based requirements, and 

potential resolution considerations; 

this lecture was a prelude to a 

facilitated discussion on CCPs and 

Title II.

The FDIC also conducted an 

interagency simulation “Getting to 

Title II Implementation” in November 

2012 that involved evaluating 

the required steps and possible 

alternatives when making a decision 

to implement a Title II resolution for 

a failing SIFI. The simulation tested 

the intra- and inter-agency decisionmaking process leading up to a Title 

II resolution, identified issues and 

resolution alternatives, and improved 

interagency communication and 

coordination in the context of Title II.

Financial Stability 

Oversight Council 

The Financial Stability Oversight 

Council (FSOC) was created by 

the Dodd-Frank Act in July 2010 

to monitor and mitigate systemic 

risk largely through filling gaps in 

regulatory oversight. The FSOC is 

composed of ten voting members, 

including the FDIC, and five 

non-voting members. 

FSOC responsibilities include the 

following:

♦ Identifying risks to financial stability, 

responding to emerging threats in 

the system, and promoting market 

discipline.

♦ Designating whether a nonbank 

financial company should be 

supervised by the Board of 

Governors of the Federal Reserve 

System and subject to heightened 

prudential standards.

♦ Designating financial market utilities 

(FMUs) and payment, clearing, or 

settlement activities that are, or 

are likely to become, systemically 

important.

♦ Facilitating regulatory coordination 

and information-sharing regarding 

policy development, rulemaking, 

supervisory information, and 

reporting requirements. 

♦ Issuing specialized studies and 

reports.

♦ Producing annual financial stability 

reports and requiring each voting 

member to submit a signed 

statement indicating whether the 

member believes that the FSOC 

is taking all reasonable actions to 

mitigate systemic risk.

During 2012, the FSOC issued a 

final rule on designating nonbank 

financial companies for supervision 

by the Board of Governors of the 

Federal Reserve System and subject 

to enhanced prudential standards.

Additionally, several nonbank 

financial companies were moved 

to the advanced stage of review for 

potential designation as systemically 

important financial companies. The 

FSOC also designated eight companies 

as systemically important FMUs, 

which may subject them to additional 

risk management standards. Also 

during 2012, the FSOC released its 

second annual report, and reports 

regarding contingent capital and use 

of prompt corrective action at credit 

unions. Moreover, in November 

2012, the FSOC published options for 

money market mutual fund reform 

for a 60-day comment period, which 

was extended for 30 days. Generally, 

at each meeting, the FSOC discusses 

various risk issues, and in 2012, 

addressed U.S. fiscal issues, the status 

of Eurozone economies, mortgage 

servicing and foreclosure issues, 

energy prices, reforms in the tri-party 

repurchase agreement market, the 

status of the investigation regarding 

potential manipulation of LIBOR, and 

implications of Superstorm Sandy, 

among other items.

Supervisio

Consumer Pro

Supervision and consumer protection 

are cornerstones of the FDIC’s efforts 

to maintain the stability 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.

18 Managme
Examination Program 

The FDIC’s strong bank examination 

program is the core of its supervisory 

program. As of December 31, 2012, 

the FDIC was the primary federal 

regulator for 4,472 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 the 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, 2012, the FDIC 

conducted 2,563 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 1,665 statutorily required 

CRA/compliance examinations (1,044 

joint CRA/compliance examinations, 

611 compliance-only examinations, 

and 10 CRA-only examinations) 

and 5,673 specialty examinations. 

As of December 31, 2012, all CRA/

compliance examinations were 

conducted within the time frame 

established by policy. The table on 

this page compares the number of 

examinations, by type, conducted 

from 2010 through 2012. 

Risk Management

As of December 31, 2012, there were 

651 insured institutions with total 

assets of $232.7 billion designated 

as problem institutions for safety 

and soundness purposes (defined 

as those institutions having a 

composite CAMELS2 rating of “4” 

or “5”), compared to the 813 problem 

institutions with total assets of $319.4 

billion on December 31, 2011. This 

constituted a 20 percent decline in 

the number of problem institutions 

and a 27 percent decrease in problem 

institution assets. In 2012, 256 

institutions with aggregate assets of 

$94.1 billion were removed from the 

list of problem financial institutions, 

while 94 institutions with aggregate 

assets of $34.3 billion were added to 

the list. Tennessee Commerce Bank, 

located in Franklin, Tennessee, was 

the largest failure in 2012, with $1.0 

billion in assets. The FDIC is the 

primary federal regulator for 433 of 

the 651 problem institutions, with total 

assets of $138.7 billion. 

During 2012, the FDIC issued the 

following formal and informal 

corrective actions to address safety 

and soundness concerns: 104 Consent 

Orders and 224 Memoranda of 

Understanding (MOUs). Of these 

actions, 19 Consent Orders and 15 

MOUs were issued, based in whole or 

in part, on apparent violations of 

the BSA.

FDIC Examinations 2010 – 20

2012 2011 2010

Risk Management (Safety and Soundness)

 State Nonmember Banks 2,310 2,477 2,488

 Savings Banks 249 227 225

 Savings Associations 1 3 0

 National Banks 1 1 3

 State Member Banks 2 4 4

Subtotal─Risk Management Examinations 2,563 2,712 2,720

CRA/Compliance Examinatio

 Compliance/Community Reinvestment Act 1,044 825 914

 Compliance-only 611 921 854

 CRA-only 10 11 12

Subtotal─CRA/Compliance Examinations 1,665 1,757 1,780

Specialty Examinations

 Trust Departments 446 466 465

 Data Processing Facilities 2,642 2,802 2,811

 Bank Secrecy Act 2,585 2,734 2,813

Subtotal─Specialty Examinations 5,673 6,002 6,089

Total 9,901 10,471 10,589

2 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).

Managmenis
ANNUAL REPORT 2012

Compliance

As of December 31, 2012, 29 insured 

state nonmember institutions, 

about 1 percent of all supervised 

institutions, having total assets of 

$54.0 billion were rated “4” or “5” for 

consumer compliance purposes. As 

of December 31, 2012, 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 2012 compliance examinations 

involved banks’ failure to adequately 

monitor third-party 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. 

During 2012, the FDIC issued the 

following formal and informal 

corrective actions to address 

compliance concerns: 23 Consent 

Orders, 92 MOUs, and 109 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 2012, over $294 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 85 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 $8,700. 

Bank Secrecy Act/

Anti-Money Laundering 

The FDIC pursued a number of BSA, 

Anti-Money Laundering (AML), and 

Counter-Terrorist Financing (CTF) 

initiatives in 2012. 

The FDIC conducted a Basic 

International AML and CTF training 

session in May 2012, for 22 financial 

sector supervisors and regulatory staff 

from Bangladesh, Djibouti, Ethiopia, 

India, and Niger. Also, two Advanced 

International AML and CTF training 

sessions were held in October and 

December 2012 for 47 participants 

from Bahrain, Indonesia, Kuwait, 

Malaysia, Oman, Qatar, Philippines, 

Thailand, and Yemen. The training 

focused on AML/CTF 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, the Financial Crimes 

Enforcement Network (FinCEN), and 

the Department of Homeland Security. 

Topics addressed by invited speakers 

included combating terrorist financing, 

trade-based money laundering, 

bulk cash smuggling and related 

investigations, law enforcement’s 

use of BSA reporting by financial 

institutions, and the role of financial 

intelligence units in detecting and 

investigating illegal activities. The 

basic training session concentrated on 

core areas of AML risk (e.g., customer 

due diligence, suspicious activity 

reporting, private banking, wire 

transfers, and foreign correspondent 

banking), while the advanced 

class focused more on effective 

implementation of AML examination 

processes, such as expectations for 

enhanced due diligence.

Minority Depository 

Institution Activities

The preservation of Minority 

Depository Institutions (MDIs) 

remains a high priority for the 

FDIC. In 2012, the FDIC appointed 

a dedicated permanent executive 

to lead the National Minority 

Depository Institution and Community 

Development Financial Institution 

programs. The FDIC is developing 

a more comprehensive approach to 

preserving the number of minority 

financial institutions, preserving the 

minority character in cases of merger 

or acquisition, and promoting and 

encouraging the creation of new MDIs.

In 2012, 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 FDIC technical assistance on 

a number of bank supervision, 

compliance, and resolution and 

receivership issues, including but not 

limited to, the following: 

♦ Overview of the MDI program

♦ Commercial real estate appraisal 

guidelines, monitoring and stress 

testing

♦ Allowance for loan and lease losses 

methodology

♦ Guidance on third party risk

♦ Interest rate risk monitoring systems

20 Managme
♦ Liquidity funds management

♦ FDIC overdraft guidance 

♦ Achieving compliance with 

outstanding corrective programs

♦ Regulatory guidance on 

implementing pre-paid card 

programs

♦ Financial education for unbanked 

and underbanked customers, 

including the Money Smart Program

♦ Bank Secrecy Act, Anti-Money 

Laundering, currency transaction 

reporting, financial recordkeeping, 

and the USA Patriot Act

♦ Application process for a variety of 

regulatory applications including 

branch activity and change in 

control

♦ Flood insurance and the Real Estate 

Settlement Procedures Act

♦ Bidding on failed financial 

institutions

♦ Purchasing assets from FDIC 

receiverships

The FDIC continued to offer the 

benefit of having an examiner 

or a member of regional office 

management return to FDICsupervised MDIs from 90 to 120 

days after an examination, to 

help management understand 

and implement examination 

recommendations, or to discuss 

other issues of interest. Several 

MDIs took advantage of this initiative 

in 2012. Also, the FDIC regional 

offices held outreach training 

efforts and educational programs 

for MDIs through conference calls 

and banker roundtables with MDIs 

in the geographic regions. Topics 

of discussion for these sessions 

included both compliance and 

risk management, and additional 

discussions included the economy, 

overall banking conditions, proposed 

Basel III capital rules, asset 

disposition, accounting, and other 

bank examination issues.

Capital Rulemaking 

and Guidance

Market Risk Final Rule

In June 2012, the FDIC and the 

federal banking agencies published a 

final rule that revises the risk-based 

capital treatment for trading assets 

and liabilities for certain banking 

organizations. This final rule applies 

to a banking organization with 

aggregate trading assets and liabilities 

equal to 10 percent of total assets, 

or $1 billion or more. Additionally, 

the final rule includes alternative 

standards of creditworthiness for the 

use of credit ratings consistent with 

Section 939A of the Dodd-Frank Act. 

The final rule became effective on 

January 1, 2013.

Regulatory Capital Rules Notices 

of Proposed Rulemaking

Also in June 2012, the FDIC and the 

federal banking agencies published 

several Notices of Proposed 

Rulemaking (NPRs):

♦ Basel III NPR – published 

consistent with agreements 

reached by the Basel Committee 

on Banking Supervision (BCBS), 

would apply to all insured banks 

and savings associations, top-tier 

bank holding companies domiciled 

in the United States with more 

than $500 million in assets, and 

savings and loan holding companies 

that are domiciled in the United 

States. The NPR would implement 

a new common equity tier 1 

minimum capital requirement, a 

higher minimum tier 1 risk-based 

capital requirement, and, for 

banking organizations subject to 

the advanced approaches capital 

rules, a supplementary leverage 

ratio that incorporates a broader 

set of exposures. Additionally, 

the Basel III NPR would apply 

limits on a banking organization’s 

capital distributions and certain 

discretionary bonus payments if 

the banking organization does not 

hold a specified “buffer” of common 

equity tier 1 capital, in addition to 

the minimum risk-based capital 

requirements. Lastly, the NPR 

would revise the federal banking 

agencies’ prompt corrective action 

framework by incorporating the new 

regulatory capital minimums.

♦ Advanced Approaches NPR – would 

revise the advanced approaches 

risk-based capital rules consistent 

with Basel III and other changes 

to the Basel Committee’s capital 

standards. The NPR also revised 

the advanced approaches risk-based 

capital rules to be consistent with 

Section 939A and Section 171 of the 

Dodd-Frank Act. Additionally in this 

NPR, the Office of the Comptroller 

of the Currency (OCC) and the 

FDIC propose that the market risk 

capital rules apply to federal and 

state savings associations, and the 

Board of Governors of the Federal 

Reserve System proposes that the 

advanced approaches and market 

risk capital rules apply to top-tier 

savings and loan holding companies 

domiciled in the United States, if 

stated thresholds for trading activity 

are met. Generally, the advanced 

approaches rules would apply to 

such institutions with $250 billion or 

more in consolidated assets or $10 

billion or more in foreign exposure, 

and the market risk rule would 

apply to savings and loan holding 

Managmenis
ANNUAL REPORT 2012

companies with significant 

trading activity.

♦ Standardized Approach NPR –

would revise and harmonize rules 

for calculating risk-weighted assets 

to enhance risk sensitivity and 

address weaknesses identified 

over recent years. The NPR also 

proposes alternatives to credit 

ratings consistent with section 

939A of the Dodd-Frank Act. The 

revisions include methods for 

determining risk-weighted assets for 

residential mortgages, securitization 

exposures, and counterparty credit 

risk. The NPR also would introduce 

disclosure requirements that would 

apply to U.S. banking organizations 

with $50 billion or more in total 

assets. The Standardized Approach 

NPR would apply to the same set of 

institutions as the Basel III NPR. 

The agencies extended the comment 

period from September 7, 2012, to 

October 22, 2012, to allow interested 

parties more time to review and 

evaluate the proposals, and prepare 

written comments. The agencies 

received over 2,300 comment 

letters. The majority of the comment 

letters addressed the Basel III and 

Standardized Approach NPRs, and 

most were submitted by community 

banks. Final rulemaking on the capital 

NPRs is expected in 2013. 

Stress Testing Guidance 

and Rulemaking 

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. After consideration of 

comments received, the FDIC issued 

a final rule in October 2012 that 

implements requirements of Section 

165(i) of the Dodd-Frank Act. The 

rule reinforces the need to establish an 

effective stress testing framework as 

an ongoing risk management practice 

that supports a banking organization’s 

forward-looking assessment of 

its risks. The rule delayed the 

implementation of the annual stress 

requirements for institutions with 

total consolidated assets between 

$10 and $50 billion until September 

30, 2013, to ensure these institutions 

have sufficient time to develop highquality stress testing programs. The 

FDIC reserved the authority to allow 

covered institutions above $50 billion 

to delay implementation of the rule on 

a case-by-case basis.

In May 2012, the FDIC, jointly 

with the other federal banking 

regulators, issued a public statement 

to clarify that stress testing 

expectations applicable to large 

banking organizations do not apply 

to institutions with $10 billion or 

less in total assets. Instead, the 

agencies noted that community 

banks are subject to the stress testing 

expectations contained in existing 

guidance covering interest rate risk 

management, commercial real estate 

concentrations, and funding and 

liquidity management.

Other Rulemaking Under 

the Dodd Frank Act

The Dodd Frank Act required and 

the Corporation’s 2012 Annual 

Performance Plan established goals 

for the completion of rules and/or 

policy guidance on five topics that 

were not successfully completed 

during 2012: proprietary trading 

and other investment restrictions 

(the “Volcker Rule”); restrictions 

on Federal assistance to swaps 

entities; capital, margin, and other 

requirements for OTC derivatives; 

credit risk retention requirements 

for securitizations; and enhanced 

compensation structure and incentive 

compensation requirements. The 

bank regulatory agencies and other 

financial regulatory agencies were 

tasked to issue these rules and policy 

guidance on an interagency basis.

They worked diligently throughout the 

year to complete final rules on each of 

these topics and made considerable 

progress. In each case, NPRs have 

been issued (one in 2011), and 

extensive comments were received.

Working groups have been carefully 

reviewing the comments received.

Completion of final rules was delayed, 

however, by the complex issues raised 

in the comments and the agencies’ 

desire to give careful and thorough 

consideration to those comments. The 

agencies hope to issue final rules on all 

or most of these topics in 2013. More 

detail is provided below on the OTC 

Derivatives and Volcker Rule NPRs.

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 to 

enhance the stability of the financial 

system by preventing certain large 

financial firms from entering into 

uncollateralized derivatives exposure 

with each other. This proposed rule 

would implement certain requirements 

contained in Sections 731 and Section 

764 of the Dodd-Frank Act, which 

direct the federal banking agencies 

to jointly adopt rules requiring 

dealers and major participants in 

derivatives covered by Title VII to 

collect both initial and variation 

margin. In October 2012, the agencies 

reopened the comment period for 

22 Managme
the proposed rule to allow interested 

parties additional time to analyze and 

comment on the proposed margin 

rule, in light of the consultative 

document on margin requirements 

for non-centrally-cleared derivatives, 

recently published for comment 

by the BCBS, and the International 

Organization of Securities 

Commissions. The comment period 

closed on November 26, 2012. Final 

rulemaking is expected in 2013.

Volcker Rule NPR 

On November 7, 2011, the FDIC, 

along with the other federal banking 

agencies, and the Securities and 

Exchange Commission, published a 

joint NPR to implement the provisions 

of Section 619 of the Dodd-Frank Act, 

which restricts the ability of banking 

entities to engage in proprietary 

trading, and limits investments 

in hedge funds and private equity 

funds. In January 2012, the agencies 

extended the comment period 

until February 13, 2012, due to the 

complexity of the issues involved 

and to facilitate coordination of the 

rulemaking. The agencies received 

approximately 300 substantive 

comment letters, with approximately 

16,400 form comment letters in 

response to the NPR. In April 2012, 

the agencies issued guidance on the 

statutory conformance period that will 

extend through July 21, 2014. Final 

rulemaking is expected in 2013.

Investment Securities Rules 

and Guidanc

Investments in Corporate 

Debt Securities by Savings 

Associations 

In July 2012, the FDIC issued a 

final rule that prohibits any insured 

savings associations from acquiring 

or retaining a corporate debt security, 

when the security’s issuer does not 

have adequate capacity to meet all 

financial commitments under the 

security for the security’s projected 

life. The final rule was issued to 

comply with Section 939A of the 

Dodd-Frank Act. Insured savings 

associations must comply with the 

rule by January 1, 2013. The rule 

was accompanied by guidance that 

sets forth due diligence standards for 

determining the credit quality of a 

corporate debt security. 

Guidance on Revised Standards 

of Creditworthiness for 

Investment Securities

In November 2012, the FDIC issued 

a Financial Institution Letter 

(FIL) to remind FDIC-supervised 

institutions of recent regulatory 

changes regarding the permissibility 

of certain investment activities. 

Under FDIC regulations, insured 

state banks generally are prohibited 

from engaging in an investment 

activity that is not permissible for a 

national bank under OCC regulations, 

including the requirements of the 

OCC final rule titled, Alternatives to 

the Use of External Credit Ratings 

in the Regulations of the OCC. 

The FDIC’s rule on corporate debt 

securities investments by federal 

and state savings associations is 

consistent with the OCC’s final rule 

and related guidance on due diligence 

considerations and creditworthiness 

standards for investment securities. 

Depositor and Consumer 

Protection Rulemaking and 

Guidanc

Guidance on Military 

Homeowners with Permanent 

Change of Station Orders

In June 2012, the FDIC issued 

interagency guidance jointly with 

the Consumer Financial Protection 

Bureau (CFPB), the Board of 

Governors of the Federal Reserve 

System, the OCC, and the National 

Credit Union Administration (NCUA) 

to address unique circumstances 

involving some military homeowners 

who received Permanent Change of 

Station (PCS) orders. The guidance 

highlights concerns about practices 

that have the potential to mislead or 

otherwise cause harm to homeowners 

with PCS orders, and reminds 

mortgage servicers to ensure that 

appropriate risk management policies, 

procedures, and training are in place.

Deposit Insurance 

Assessment Fees

In July 2012, the FDIC issued an 

FIL addressing complaints received 

that certain IDIs are charging 

customers an “FDIC fee” or similarly 

described fee for deposit insurance. 

The FIL discourages institutions 

from specifically designating that a 

customer’s fee is for deposit insurance, 

or from stating or implying that the 

FDIC is charging such a fee, due to 

the potential to reveal information 

that could be used to determine an 

IDI’s confidential supervisory ratings, 

mislead customers into believing that 

the FDIC charges IDI customers or 

requires IDIs to charges customers, 

or both.

Examination Procedures

In August 2012, the FDIC published 

examination procedures for reviewing 

an institution’s compliance with 

the Secure and Fair Enforcement 

for Mortgage Licensing Act (SAFE 

Act) and regulations. The SAFE Act 

was enacted on July 30, 2008, and 

mandated a nationwide licensing and 

registration system for mortgage loan 

originators (MLOs). The procedures 

Managmenis
ANNUAL REPORT 2012

focus on the federal residential MLO 

registration requirements, and an 

institution’s obligation to implement 

appropriate policies and procedures, 

and conduct annual independent 

compliance testing.

Other Rulemaking and 

Guidance Issue

During 2012, the FDIC issued and 

participated in the issuance of other 

rulemaking and guidance in several 

areas as described below.

Appraisal Requirements for 

Higher-Risk Mortgages

On August 15, 2012, the FDIC jointly 

with the Board of Governors of the 

Federal Reserve System, CFPB, FHFA, 

NCUA, and the OCC, issued an NPR to 

implement the appraisal requirements 

for higher-risk mortgages as stated 

in Section 1471 of the Dodd-Frank 

Act. Section 1471 adds a new 

Section 129H to the Truth in Lending 

Act. For residential mortgage loans 

secured by the consumer’s principal 

dwelling, with an annual percentage 

rate that exceeds the average prime 

offer rate by a specified percentage, 

the proposed rule would require 

creditors to (1) obtain an appraisal or 

appraisals meeting certain specified 

standards, (2) provide applicants with 

a notification regarding the use of the 

appraisals, and (3) give applicants 

a copy of the written appraisals 

used. The comment period closed on 

October 15, 2012, and the agencies 

worked to finalize the rule.

Interagency Guidance on 

Section 612 of the Dodd-Frank 

Act, Restrictions on Conversions 

of Troubled Banks

On November 26, 2012, the FDIC 

and the other federal and state 

banking agencies issued guidance 

to clarify supervisory expectations 

for regulatory conversion subject 

to Section 612 of the Dodd-Frank 

Act. This section prohibits charter 

conversions by certain institutions 

that are subject to a formal corrective 

program or an MOU with respect 

to a significant supervisory matter. 

Institutions may request an exception 

to the conversion prohibition as 

described in the statute. The agencies 

expect that exceptions will be rare and 

generally would occur only when an 

enforcement action’s provisions have 

been substantially addressed.

Regulatory Relief

During 2012, the FDIC issued nine 

FILs that provide guidance to help 

financial institutions and facilitate 

recovery in areas damaged by 

hurricanes, wildfires, tornadoes, 

flooding, and other natural disasters. 

In these FILs, the FDIC encouraged 

banks to work constructively with 

borrowers experiencing financial 

difficulties as a result of natural 

disasters, and clarified that prudent 

extensions or modifications of 

loan terms in such circumstances 

can contribute to the health of 

communities and serve the long-term 

interests of lending institutions. In 

addition, the FDIC jointly with the 

other federal banking agencies, issued 

a Statement on Supervisory Practices 

Regarding Financial Institutions and 

Borrowers Affected by Hurricane Sandy

to provide regulatory assistance 

to affected financial institutions.

On October 16, 2012, the FDIC, 

through the auspices of the Federal 

Financial Institutions Examination 

Council (FFIEC) issued a statement 

encouraging financial institutions to 

work with agricultural customers 

impacted by the significant drought 

conditions affecting the Midwest 

and southern states. The statement 

encourages banks to continue making 

credit available to agricultural 

borrowers and to provide prudent loan 

modifications when appropriate. 

Other Policy Matters

Interagency Guidance on 

Leveraged Lending

On March 26, 2012, the FDIC and 

the other federal banking agencies 

proposed revisions to the 2001 

interagency guidance on leveraged 

financing. The proposal’s purpose 

is to update the existing guidance 

and clarify regulatory expectations 

in light of significant growth in 

the leveraged lending market, and 

incorporate lessons learned from the 

recent financial crisis. The proposal 

describes expectations for the sound 

risk management of leveraged lending 

activities, including well-defined 

underwriting standards, effective 

management information systems, a 

prudent credit limit and concentration 

framework, and strong pipeline 

management policies. The banking 

agencies are considering revisions to 

the proposal based on the 16 public 

comments that were received by the 

June 8, 2012, due date. 

Banker Teleconferences

In 2012, the FDIC hosted a series of 

banker teleconferences to maintain 

open lines of communication and 

update supervised institutions about 

compliance and consumer protection 

related rulemakings, guidance, and 

emerging issues. Participants included 

bank directors, officers, staff, and 

other banking industry professionals. 

Five teleconferences were held 

in 2012. The topics discussed 

included: Regulations Z’s Mortgage 

Loan Originator Compensation 

24 Managme
Rule, Third-Party Compliance Risk 

Management, Significant MortgageRelated Proposed Regulations (which 

were the subject of two calls), and 

Fair Lending.

Promoting Economic Inclusion

The FDIC is strongly committed 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 on the unbanked 

and underbanked,

♦ engages in research and 

development on models of products 

meeting the needs of lower-income 

consumers,

♦ supports partnerships to promote 

consumer access and use of banking 

services, 

♦ advances financial education and 

literacy, and

♦ facilitates partnerships to support 

community and small business 

development.

Advisory Committee on 

Economic Inclusion 

The Advisory Committee on Economic 

Inclusion (ComE-IN) was originally 

established by former Chairman 

Sheila C. Bair and the FDIC Board 

of Directors pursuant to the Federal 

Advisory Committee Act in November 

2006. The ComEIN provides the FDIC 

with advice and recommendations 

on important initiatives focused on 

expanding access to banking services 

by underserved populations. This may 

include reviewing basic retail financial 

services such as check 

cashing, money orders, remittances, 

stored value cards, short-term loans, 

savings accounts, and other services 

that promote asset accumulation by 

individuals and financial stability. 

During 2012, the Committee met on 

three occasions and discussed the 

FDIC’s research initiatives on the 

Banks’ Efforts to Serve the Unbanked 

and Underbanked, the FDIC’s National 

Survey of Unbanked and Underbanked 

Households, mobile financial services, 

model SAFE accounts, and prepaid 

card products.

Survey of Banks’ Efforts to Serve 

the Unbanked and Underbanked 

Section 7 of the Federal Deposit 

Insurance Reform Conforming 

Amendments Act of 2005 (Reform Act) 

mandates that the FDIC survey IDIs 

every two years to assess their efforts 

to bring individuals and families into 

the conventional finance system. 

In 2011, the FDIC conducted its 

second nationwide survey of 

FDIC-IDIs to assess efforts to 

serve unbanked and underbanked 

individuals and families. The 2011 

survey focused on banks’ basic 

transaction and savings account 

programs, auxiliary product and 

service offerings, and financial 

education and outreach efforts. 

Analysis of the survey results was 

completed in 2012, and the final 

results were released to the public in 

December 2012. The findings from 

the report, 2011 FDIC Survey of 

Banks’ Efforts to Serve Unbanked 

and Underbanked, informs financial 

institutions, community organizations, 

and other stakeholders interested 

in expanding financial products 

and services, to unbanked and 

underbanked consumers.

Partnership 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 underbanked 

consumers into the financial 

mainstream. 

During 2012, the FDIC expanded 

the geographic reach of the AEI 

program. Initially in 14 markets, 

the FDIC launched AEI initiatives 

in two additional markets: the 

Appalachian region of West Virginia 

and Northeastern Oklahoma. The 

West Virginia effort resulted in 30 

organizations joining the AEI as 

of year-end; and the Northeastern 

Oklahoma effort resulted in 

participation from 49 representatives 

from 33 organizations. 

In addition to the new alliances, FDIC 

continued in 2012 to support existing 

AEIs. As a result:

♦ More than 110 banks and 

organizations joined AEI 

nationwide, bringing the total 

number of AEI members to 1,360.

♦ At least 133,578 consumers opened 

a bank account as a result of AEI 

efforts. Combined, more than 

536,000 bank accounts have been 

opened through the AEI program. 

♦ Approximately 116,413 consumers 

received financial education through 

the AEI, bringing the total number of 

consumers educated to 380,000. 

The FDIC also provided program 

guidance and technical assistance 

Managmenis
ANNUAL REPORT 2012

in the expansion of 70 Bank On

programs. Bank On initiatives are 

designed to reduce barriers to banking 

and increase access to the financial 

mainstream. 

Advancing Financial Education 

The FDIC expanded its financial 

education efforts during 2012 through 

a strategy that included providing 

access to timely and high-quality 

financial education products, sharing 

best practices, and working through 

partnerships to reach consumers. 

Money Smart for Small Business

The FDIC joined with the Small 

Business Administration (SBA) on 

April 24, 2012, to launch the new 

Money Smart for Small Business 

curriculum. The ten modules in this 

instructor-led curriculum provide 

introductory training for new and 

aspiring entrepreneurs on the basics of 

organizing and managing a business. 

Money Smart for Small Business is a 

tool for bank-community partnerships. 

The curriculum is intended to be 

delivered by stakeholders experienced 

with small business lending or 

development. Since the release of 

the curriculum, more than 10,000 

copies have been distributed, and 

11 partnerships were developed 

with organizations that can use or 

otherwise promote the curriculum to 

key stakeholders.

Money Smart for Consumers

The FDIC’s award-winning Money 

Smart curriculum has reached more 

than 3 million consumers since 

its launch in 2001. During 2012, 

the FDIC reached approximately 

250,000 consumers. The existing 

suite of Money Smart products for 

consumers was enhanced with two 

new resources:

♦ Money Smart Computer-Based 

Instruction (CBI) offers key 

elements of the eight modules of 

the instructor-led Money Smart

for Young Adults curriculum and 

eleven modules of the instructor-led 

Money Smart for Adults curriculum. 

The CBI features an interactive 

game-based design. Approximately 

29,000 users accessed the CBI 

during the eight months from its 

release date through year-end.

♦ Money Smart for Elementary 

School Students is designed to 

introduce key personal finance 

concepts to children ages 5 to 

8. Since its release in May 2012, 

more than 35,000 copies have been 

downloaded.

Through training and technical 

assistance, the FDIC emphasizes 

the importance of pairing education 

with access to appropriate banking 

products and services. During 2012, 

more than 1,300 practitioners attended 

the 52 train-the-trainer sessions. 

Approximately 1,200 organizations 

are members of the Money Smart

Alliance, and the FDIC worked with 

many other organizations to promote 

financial education, such as the 

Corporate Adopt a School program, 

which has reached approximately 

2,492 students at underserved schools 

with financial education training.

Leading Community 

Development

In 2012, the FDIC undertook over 662 

community development, technical 

assistance, and outreach activities 

and events designed to facilitate 

understanding and connection 

between financial institutions and 

other community stakeholders. The 

FDIC collaborated with the OCC, 

Federal Reserve Banks, and other 

stakeholders to conduct 57 CRA 

roundtables to provide market-specific 

training for bankers on enhancing 

CRA performance, thereby building 

the capacity of financial institutions 

to more effectively meet community 

and small business development 

needs. The FDIC also conducted 21 

workshops for nonprofit stakeholders 

on effectively engaging with financial 

institutions to promote community 

development.

Community Banking Initiatives

As the lead federal regulator for the 

majority of community banks, the 

FDIC continues to make community 

banking a main priority. Though 

they tend to be small relative to the 

largest U.S. banks, community banks 

specialize in activities that are crucial 

to the functioning of the economy. 

Community banks make many of 

the loans to small businesses that, 

in turn, create new jobs. They also 

provide financial services to business 

and household customers that may 

not be well served by other financial 

providers. The FDIC’s community 

banking initiatives completed in 2012 

include the following:

♦ Future of Community Banking 

Conference – On February 16, 2012, 

the FDIC held a community banking 

conference that brought together 

community bankers, regulators, 

academics, and various community 

bank stakeholders to examine 

the unique role community banks 

perform in our nation’s economy 

and the challenges and opportunities 

they face. Then-Acting FDIC 

Chairman Gruenberg opened and 

closed the conference, which 

also featured keynote remarks 

by Shelley Moore Capito, U.S. 

Congresswoman for West Virginia’s 

2nd District; Ben S. Bernanke, 

Chairman, Board of Governors of 

26 Managme
the Federal Reserve System; and Thomas 

J. Curry, Director, FDIC. The conference 

explored the evolution and characteristics 

of community banks, current challenges 

and opportunities for community 

banks, perspectives of community bank 

customers, and lessons learned and 

successful strategies for the community 

bank of the future.

♦ Community Bank Roundtable 

Discussions – From March to October 

of 2012, the FDIC conducted roundtable 

discussions in each of the six FDIC 

regions with about 70 to 100 attendees, 

including community bankers, state 

banking commissioners, state bank trade 

association representatives, the FDIC’s 

senior executives for supervision, and two 

members of the FDIC’s Board of Directors 

(including the FDIC’s then-Acting 

Chairman). Each meeting addressed 

financial and operational challenges and 

opportunities facing community banks and 

the regulatory interaction process. The 

insights provided during the discussions 

added to other components of the 

community banking initiatives.

♦ Community Banking Study – On 

December 17, 2012, the FDIC released 

a study of community banking in the 

United States. The goal of this study 

was to analyze and document what has 

happened to community banks since 1985. 

The study set out to explore some basic 

research questions about community 

banks, including trends in consolidation, 

overall financial performance, geographic 

footprint, business model variations, 

efficiency and economies of scale, and 

access to capital. The FDIC assembled a 

comprehensive database using detailed 

financial data from bank Call Reports and 

Thrift Financial Reports, standardizing 

the data to conduct analysis across the 

industry beginning in 1984. Financial data 

have also been linked to the Summary 

of Deposits data (and Branch Office 

Survey data for thrifts) that provide a 

detailed record of banking office location 

and deposit gathering trends dating 

back to 1987. The result is an assembly 

of the most complete record of the 

history of the financial performance and 

structural change in the banking industry 

over the past two and a half decades. 

This data-driven approach results in 

a foundational study that provides a 

platform for future analysis by the FDIC 

and other researchers with an interest in 

community banking.

♦ Targeted Community Banking Research – 

The FDIC continues to conduct specialized 

studies and research to more deeply 

explore certain issues and questions about 

community banks. On December 18, 2012, 

the FDIC released two targeted research 

papers: “Community Bank Efficiency and

Economies of Scale” and “What Factors 

Explain Differences in Return on Assets 

Among Community Banks?” These papers 

delve deeper in explaining community 

bank performance, based on efficiency 

ratio trends and other bank-specific 

factors.

♦ Review of Examination and Rulemaking 

Processes – In 2012, the FDIC reviewed the 

FDIC thenActing Chairman 

Martin J. Gruenberg 

opens the Future of 

Community Banking 

Conference on 

February 16, in 

Arlington, Virginia.

Managmenis
ANNUAL REPORT 2012

processes for examining community banks 

and releasing rulemakings and guidance. 

The FDIC solicited input from community 

bankers and incorporated that feedback 

into various improvements. Also, the 

FDIC’s extensive communication and 

technical support efforts for community 

bankers included an educational outreach 

effort to explain key technical points of 

the proposed capital rules that included 

six regional banker meetings, a national 

teleconference call, educational material 

posted to the FDIC’s website, and an 

online tool to help bankers measure the 

potential impact of the proposed capital 

rules.

In addition, the FDIC’s Community Bank 

Advisory Committee continued to provide 

timely information and input to the FDIC 

on a variety of community bank policy and 

operational issues throughout 2012. The 

Committee held three meetings in 2012 

and provided input on a number of key 

issues and initiatives, including the FDIC’s 

community bank study and research project, 

proposed improvements to the FDIC’s 

regulatory and supervisory processes, the 

status of the Transaction Account Guarantee 

Program (TAG), the FDIC’s preliminary plan 

to review its regulations under the Economic 

Growth and Regulatory Paperwork 

Reduction Act, as well as the potential 

effects of various regulatory and legislative 

developments on community banks. 

Looking forward, the FDIC will continue 

to make the Community Banking Initiative 

a high priority by following up on the 

Community Banking Study, pursuing 

additional research relating to the continued 

viability of community banks, and continuing 

our review of examination and rulemaking 

processes with the goal of identifying 

additional ways to make the supervisory 

process more efficient, consistent, and 

transparent, consistent with safe and sound 

banking practices.

Center for Financial Research

The Center for Financial Research (CFR) 

was founded by the Corporation in 2004 to 

encourage and support innovative research 

on topics that are important to the 

FDIC’s role as deposit insurer and 

bank supervisor. During 2012, the CFR 

co-sponsored two major 

research conferences.

Members of the 

FDIC Advisory 

Committee on 

Community Banking.

28 Managme
The CFR organized and sponsored 

the 22nd 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 2012 at the Seidman Center 

and attracted over 100 researchers 

from around the world. Conference 

presentations included systemic risk, 

asset price dynamics, asset pricing, 

and credit spreads. 

The CFR also organized and 

sponsored the 12th Annual Bank 

Research Conference jointly with 

the Journal for Financial Services 

Research (JFSR), in September 2012. 

The conference theme, “Performance 

of Financial Services in the Current 

Environment,” focused on the financial 

services industry and included over 

20 presentations attended by over 

120 participants. Experts discussed 

a range of topics including systemic 

risk and bank lending, liquidity, and 

capital issues. 

In addition to conferences, workshops 

and symposia, three CFR working 

papers were completed and made 

public on topics including bank 

bailouts, executive compensation, and 

tightening loan contracts.

Information Technology, 

Cyber Fraud, and 

Financial Crimes 

In 2012, the FDIC, jointly with the U.S. 

Department of Justice, began planning 

a Financial Crimes Conference to be 

held in June 2013 that will focus on 

all types of financial fraud, and how 

the law enforcement community and 

regulators can respond effectively to 

fraud. Other major accomplishments 

during 2012 in promoting information 

technology (IT) security and 

combating cyber fraud and other 

financial crimes included the 

following: 

♦ Issued an updated FFIEC 

Technology Service Provider 

booklet. This booklet replaces the 

March 2003 version. 

♦ Published the Federal Regulatory 

Agencies’ Administrative Guidelines: 

Implementation of the Interagency 

Programs for the Supervision of 

Technology Service Providers.

♦ Published a Supervisory Insights 

Journal article on mobile payments.

♦ Issued revised guidance describing 

potential risks associated with 

relationships with third-party 

entities that process payments for 

telemarketers, online businesses, 

and other merchants.

♦ Hosted the FFIEC IT Conference 

that addressed technology and 

operational issues facing the 

financial federal regulatory agencies.

♦ Assisted financial institutions in 

identifying and shutting down 

“phishing” websites. The term 

“phishing”—as in “fishing” for 

confidential information—refers to 

scams to fraudulently obtain and use 

an individual’s personal or financial 

information. 

♦ Issued six Consumer Alerts 

pertaining to emails and telephone 

calls fraudulently claiming to be 

from the FDIC.

The FDIC conducts IT and operations 

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 an IT examination is a 

FFIEC Uniform Rating System for 

Information Technology rating. In 

2012, the FDIC conducted 2,642 IT and 

operations 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.

Consumer Complaints 

and Inquiries 

The FDIC investigates consumer 

complaints concerning FDICsupervised institutions and answers 

inquiries from the public about 

consumer protection laws and banking 

practices. As of December 31, 2012, 

the FDIC received 10,564 written 

complaints, of which 5,088 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 

14 days. The FDIC also responded to 

1,793 written inquiries, of which 403 

involved state nonmember institutions. 

In addition, the FDIC responded 

to 5,209 telephone calls from the 

public and members of the banking 

community, of which 2,721 concerned 

state nonmember institutions.

Coordination with the 

Consumer Financial 

Protection Bureau

In 2012 the prudential regulators and 

the Consumer Financial Protection 

Bureau (CFPB) signed an MOU to 

coordinate supervisory matters for 

Managmenis
ANNUAL REPORT 2012

institutions with assets over $10 billion 

and their affiliates. The CFPB was 

charged with developing regulations 

to implement the mortgage reforms 

and other aspects of regulatory reform 

in the Dodd-Frank Act. As required 

by the statute, the FDIC coordinated 

with the CFPB on the regulations for 

which it is solely responsible. The 

FDIC also worked with the CFPB and 

other banking agencies to develop and 

implement joint regulations.

As of December 31, 2012, the FDIC 

received 1,369 complaints involving 

FDIC-supervised banks under the 

jurisdiction of the CFPB. Under the 

agreement between the FDIC and the 

CFPB, the FDIC investigated 497 of 

the 1,369 complaints and referred the 

remaining 872 to the CFPB.

Public Awareness of Deposit 

Insurance Coverage

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 to 

both bankers and consumers. 

The FDIC continued its efforts to 

educate bankers and consumers about 

the rules and requirements for FDIC 

insurance coverage. During 2012, 

the FDIC conducted 15 telephone 

seminars for bankers on deposit 

insurance coverage, reaching an 

estimated 27,734 bankers participating 

at approximately 7,924 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). 

In 2012, the FDIC received and 

answered approximately 97,453 

telephone deposit insurance-related 

inquiries from consumers and bankers. 

The FDIC Call Center addressed 

50,845 of these inquiries, and deposit 

insurance coverage subject-matter 

experts handled the other 46,608. In 

addition to telephone inquiries about 

deposit insurance coverage, the 

FDIC received 2,619 written inquiries 

from consumers and bankers. Of 

these inquiries, 99 percent received 

responses within two weeks, as 

required by corporate policy.

Resoluti

Receive

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 statechartered institutions, and the Office 

of the Comptroller of the Currency 

(OCC) for national banks and federal 

savings associations—the FDIC is 

appointed receiver, and the FDIC is 

responsible for resolving the failed 

institutions. 

The FDIC uses a variety of business 

practices to resolve a failed institution. 

These 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 methods 

to ensure the prompt and smooth 

payment of deposit insurance to 

insured depositors, to minimize the 

impact on the DIF, and to speed 

dividend payments to uninsured 

depositors and other creditors of the 

failed institution. 

The resolution process involves 

evaluating and marketing a failing 

institution, soliciting and accepting 

bids for the sale of the institution, 

determining which bid is least costly 

to the DIF, and working with the 

acquiring institution through the 

closing process.

To minimize disruption to the local 

community, the resolution process 

must be performed as quickly and 

smoothly as possible. There are three 

basic resolution methods used by 

the FDIC: 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. 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 

30 Managme
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, makes 

sure that the customers of the failed 

institution receive the full amount of 

their insured deposits. 

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 infrequently 

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 Failures 

During 2012, there were 51 institution 

failures, compared to 92 failures in 

2011. 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.

Asset Management and Sales

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 is 

marketed for sale within 90 days of an 

institution’s failure for cash sales and 

within 120 days for structured sales. 

Structured sales for 2012 totaled 

$456 million in unpaid principal 

balances from commercial real estate 

and residential loans acquired from 

various receiverships. Cash sales 

of assets for the year totaled 

$1.1 billion in book value. In addition 

to structured and cash sales, FDIC 

also uses securitizations to dispose of 

bank assets. In 2012, securitization 

sales totaled $449 million.

As a result of our marketing and 

collection efforts, the book value of 

assets in inventory decreased by $3.9 

billion (19 percent) in 2012. 

Assets in Inventory by As

Dollars in Million

Asset Type 12/31/12 12/31/1

Securities $1,179 $1,225

Consumer Loans 99 31

Commercial Loans 604 585

Real Estate Mortgages 1,265 2,208

Other Assets/Judgments 1,134 1,396

Owned Assets 417 1,007

Net Investments in Subsidiaries 179 290

Structured and Securitized Assets 12,120 14,171

Total $16,997 $20,913

Failure Activity 201

Dollars In Billion

2012 2011 2010

Total Institutions 51 92 157

Total Assets of Failed Institutions1 $11.6 $34.9 $92.1

Total Deposits of Failed Institutions1 $11.0 $31.1 $78.3

Estimated Loss to the DIF $2.7 $8.8 $20.8

1 Total assets and total deposits data are based on the last Call Report filed by the institution

 prior to failure.

Managmenis
ANNUAL REPORT 2012

Receivership Management 

Activities

The FDIC, as receiver, manages failed 

banks and their subsidiaries with the 

goal of expeditiously winding up their 

affairs. The oversight and prompt 

termination of receiverships help 

to preserve value for the uninsured 

depositors and other creditors by 

reducing overhead and other holding 

costs. Once the assets of a failed 

institution have been sold and the 

final distribution of any proceeds 

is made, the FDIC terminates the 

receivership. In 2012, the number 

of receiverships under management 

increased by 8 percent, as a result of 

new failures. The chart below shows 

overall receivership activity for the 

FDIC in 2012.

Minority and Women Outreach

The FDIC relies on contractors to help 

meet its mission. In 2012, the FDIC 

awarded 1,326 contracts. Of these, 388 

contracts (29 percent) were awarded 

to Minority- and Women-Owned 

Businesses (MWOBs). The total 

value of contracts awarded was 

$1.0 billion, of which $308 million 

(30 percent), were awarded to 

MWOBs, compared to 29 percent for 

all of 2011. In addition, engagements 

of Minority- and Women-Owned Law 

Firms (MWOLFs) were 18 percent of 

all engagements; total payments of 

$15.3 million to MWOLFs were 

14 percent of all payments to outside 

counsel, compared to 17 percent for 

all of 2011. 

In 2012, the FDIC exhibited at 23 

procurement-specific trade shows to 

provide participants with the FDIC’s 

general contracting procedures, prime 

contractors’ contact information, and 

possible upcoming solicitations.

Prime contractors were reminded 

of the FDIC’s emphasis on MWOB 

participation and were encouraged 

to subcontract or partner with 

MWOBs. The FDIC also exhibited 

at 12 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 co-counsel 

arrangements with majority firms.

FDIC personnel also met with MWOBs 

and MWOLFs in one-on-one meetings 

to discuss contracting opportunities 

at the FDIC. The FDIC continued 

to encourage MWOBs to register in 

the FDIC’s Contractor Resource List, 

which is used to develop source lists 

for solicitations. Any firm interested 

in doing business with the FDIC can 

register for the Contractor Resource 

List through the FDIC’s website. 

In 2012, the FDIC’s Office of 

Minority and Women Inclusion 

(OMWI) participated with the other 

Dodd-Frank Act agency OMWIs in 

seven roundtable meetings nationwide 

with financial services industry 

groups, trade associations, and other 

consumer advocacy groups, to obtain 

input, guidance, and recommendations 

about strategies to implement 

standards for assessing regulated 

entities under Section 342 of the 

Dodd-Frank Act.

In 2012, the FDIC successfully closed 

three structured transaction sales. 

These three auctions combined to 

attract 19 entities that placed bids. 

Eight bidders had an MWOB firm as a 

member. The winning bidder for one 

of the transactions included an MWOB 

firm in the investor group. The FDIC 

continued outreach efforts to small 

investors and minority-owned and 

women-owned investors, and held five 

nationwide workshops on FDIC’s loan 

and Owned Real Estate (ORE) sales 

programs, and the structured loan 

sales program. The workshops were 

held in Chicago, Dallas, Los Angeles, 

Nashville, and New York, with more 

than 450 participants.

In 2013, the FDIC will continue to 

encourage and foster diversity and 

inclusion of MWOBs in procurement 

activities and outside counsel 

engagements, as well as promote 

strong commitment to diversity 

inclusion within its workforce, and 

with all financial institutions and law 

firms that do business with the FDIC. 

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 

Receiversh

Active Receiverships as of 12/31/111 431

New Receiverships 51

Receiverships Terminated 16

Active Receiverships as of 12/31/121 466

1 Includes five FSLIC Resolution Fund receiverships at year-end 2011 and three at year-end 2012.

32 Managme
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 

2012, the FDIC paid dividends of $8 

million to depositors whose accounts 

exceeded the insurance limit. 

Professional Liability and 

Financial Crimes Recoveries

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 determined 

to be meritorious and cost-effective 

to pursue, the FDIC initiates legal 

action against the appropriate parties. 

During 2012, the FDIC recovered 

$337 million from professional liability 

claims and settlements. The FDIC also 

authorized lawsuits related to 48 failed 

institutions against 369 individuals 

for director and officer liability and 

authorized 21 other lawsuits for 

fidelity bond, liability insurance, 

attorney malpractice, appraiser 

malpractice, and securities law 

violations for residential mortgagebacked securities. There were 165 

residential mortgage malpractice 

and fraud lawsuits pending as of 

year-end 2012. Also, by year-end 

2012, the FDIC’s caseload included 88 

professional liability lawsuits (up from 

52 at year-end 2011) and 1,343 open 

investigations (down from 1,811 at 

year-end 2011).

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 

with the U.S. Department of Justice, 

collected $4.6 million from criminal 

restitution and forfeiture orders 

during 2012. As of year-end 2012, 

there were 4,860 active restitution and 

forfeiture orders (down from 5,192 

at year-end 2011). This includes 156 

orders held by the FSLIC Resolution 

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

financial institutions that were in 

receivership or conservatorship by the 

Federal Savings and Loan Insurance 

Corporation or the Resolution Trust 

Corporation.

Internation

Outre

Throughout 2012, the FDIC played 

a leading role among international 

standard-setting, regulatory, 

supervisory, and multi-lateral 

organizations by supporting the global 

development of effective deposit 

insurance and bank supervision 

systems, maintaining public 

confidence and financial stability, and 

promoting effective resolution regimes 

as integral components of the financial 

safety net. Among the key institutions 

the FDIC collaborated with were 

the Association of Supervisors of 

Banks of the Americas (ASBA), 

the Basel Committee on Banking 

Supervision (BCBS), the European 

Forum of Deposit Insurers, the 

Financial Stability Board (FSB), the 

Financial Stability Institute (FSI), the 

International Association of Deposit 

Insurers (IADI), the International 

Monetary Fund (IMF), the 

International Information Technology 

Supervisors Group, and the World 

Bank. 

Key to the international collaboration 

was the ongoing dialogue among 

then-Acting FDIC Chairman Martin J. 

Gruenberg, other senior FDIC leaders, 

and a number of senior financial 

regulators from the United Kingdom 

(U.K.) about the implementation 

of the Dodd-Frank Act, Basel III, 

and how changes in U.S., U.K., and 

European Union financial regulations 

affect global information sharing, 

crisis management, and recovery 

and resolution activities. In light of 

the large number of cross-border 

operations of large, complex financial 

institutions, the primary areas of 

discussion and collaboration were the 

FDIC’s Orderly Liquidation Authority 

under Title II of the Dodd-Frank Act, 

and the importance of cross-border 

coordination in the event a SIFI begins 

to experience financial distress. 

During 2012, the FDIC participated 

in both Governors and Heads of 

Supervision and BCBS meetings. The 

FDIC supported work streams, task 

forces, and policy development group 

meetings to address BCBS work on the 

implementation of Basel III. The FDIC 

also helped monitor new leverage ratio 

and liquidity standards, and determine 

surcharges on global systemically 

important banks. Additionally, the 

FDIC participated in BCBS initiatives 

related to standards implementation, 

operational risk, accounting, review 

of the trading book, and credit ratings 

and securitization. The major issues 

addressed by these work streams 

included the recalibration of risk 

weights for securitization exposures, 

the comprehensive review of capital 

charges for trading positions, and the 

review of BCBS members’ domestic 

rule-making processes surrounding 

Basel II, Basel II.5, and Basel III.

Managmenis
ANNUAL REPORT 2012

International Association 

of Deposit Insurers 

Under the leadership of then-Acting 

FDIC Chairman Gruenberg, IADI 

celebrated its tenth anniversary in 

October 2012. Chairman Gruenberg 

served as the President of IADI and 

the Chair of its Executive Council 

from November 2007 to October 2012. 

Worth noting is the remarkable impact 

IADI has made during its relatively 

short history, contributing not only to 

the security of individual depositors 

but also to global financial stability. 

Since its founding in 2002, IADI has 

grown from 26 founding members to 

84 participants, including 64 members, 

8 associates and 12 partners, and 

is strongly represented on every 

continent. IADI is now recognized as 

the standard-setting body for deposit 

insurance by all the major public 

international financial institutions, 

including the FSB, the Group of 20 

(G-20), the BCBS, the IMF, and the 

World Bank.

Under the FDIC’s leadership, IADI 

has made significant progress in 

advancing the 2009 IADI and BCBS 

Core Principles for Effective 

Deposit Insurance Systems (Core 

Principles). In February 2011, the 

FSB approved the Core Principles

and the Core Principles Assessment 

Methodology for inclusion in its 

Compendium of Key Standards for 

Sound Financial Systems. The Core 

Principles are officially recognized 

by both the IMF and World Bank and 

are now accepted for use in their 

Financial Sector Assessment Program 

(FSAP). This represents an important 

milestone in the acceptance of the 

role of effective systems of deposit 

insurance in maintaining financial 

stability. The FDIC has also worked 

with senior officials at the World 

Bank and IMF, and formalized IADI 

collaboration and support of the 

deposit insurance review portion of 

the FSAP reviews. Core Principles

working group meetings, regional 

workshops, and training sessions 

were held in Washington, DC; Kuala 

Lumpur, Malaysia; Bogota, Colombia; 

and Nairobi, Kenya, during 2012. 

Financial Stability Board 

In February 2012, the FSB issued 

its Thematic Review on Deposit 

Insurance Systems Peer Review 

Report. The recommendations 

included a request for IADI to 

update its guidance that pre-dated 

the financial crisis and to develop 

additional guidance to address areas 

where the Core Principles may need 

more precision to achieve effective 

compliance, or to better reflect 

leading practices. The FDIC, in 

partnership with the Canadian Deposit 

Insurance Corporation, has taken a 

leadership role in responding to these 

recommendations with a set of six 

focused papers. Prepared under the 

auspices of the IADI Research and 

Guidance Committee Guidance Group, 

two of these papers were presented 

during the October 2012 IADI 

Executive Council meeting in London, 

England; the remaining four papers 

will be presented to the Executive 

Council in 2013. IADI and the BCBS 

will use the papers to enhance 

the guidance supporting the Core 

Principles and the accompanying Core 

Principles Assessment Methodology.

In November 2011, the G-20 endorsed 

the FSB’s Key Attributes of Effective 

Resolution Regimes for Financial 

Institutions (Key Attributes). The 

Key Attributes set out the core 

elements that the FSB considers 

necessary for an effective resolution 

regime and includes the ability to 

manage the failure of large, complex, 

and internationally active financial 

institutions in a way that minimizes 

systemic disruption and avoids the 

exposure of taxpayers to the risk 

of loss. During 2012, a number of 

initiatives were launched by the FSB 

related to operationalizing the Key 

Attributes. In January 2012, a special 

working group under the auspices 

of the Resolutions Steering Group 

was formed to draft an assessment 

methodology for the Key Attributes. 

The FDIC is actively participating in 

this effort alongside IADI, a number 

of FSB member jurisdictions, and 

international organizations such as 

the World Bank and the European 

Commission, and has participated 

extensively in drafting team meetings 

in Basel, Switzerland. In the second 

half of 2012, the FDIC participated 

in the drafting of a consultative 

document, entitled “Recovery and 

Resolution Planning: Making the Key 

Attributes Requirements Operational.” 

The document was released for public 

comment. The FDIC also hosted 

meetings for the Legal Entity Identifier 

Working Group, and co-hosted a series 

of Crisis Management Group meetings 

for the five U.S.-based G-SIFIs at the 

Seidman Center in Arlington, Virginia, 

and the Federal Reserve Bank of 

New York. FDIC representatives also 

participated in Crisis Management 

Group meetings hosted by foreign 

regulatory authorities in a number of 

jurisdictions.

In mid-2012, then-acting Chairman 

Gruenberg was appointed to chair a 

Thematic Peer Review on Resolution 

Regimes under the auspices of 

the FSB’s Standing Committee on 

Standards Implementation (SCSI). 

This Peer Review was tasked with 

34 Managme
conducting a survey of the existing 

regulatory and legislative landscape; 

identifying gaps in implementation 

of the Key Attributes; and providing 

guidance to the Key Attributes

assessment methodology drafting 

team. A questionnaire was developed 

and sent to FSB member jurisdictions 

over the summer, with jurisdictions 

providing responses to the Peer 

Review Team in the fall. The Peer 

Review Team, comprising 20 members 

from multiple G-20 jurisdictions and 

multinational bodies, will develop a 

report for the SCSI in early 2013 on its 

findings.

Association of Supervisors 

of Banks of the Americas 

With the goal of contributing to sound 

banking supervision and resilient 

financial systems in the Americas, 

the FDIC has been a member of 

ASBA since its founding in 1999. In 

recognition of the FDIC’s leadership 

in ASBA, the General Assembly 

elected the FDIC’s Director of Risk 

Management Supervision, Sandra 

Thompson, to serve a two-year term 

as Vice Chairman. Director Thompson 

was named Acting Chairman of 

ASBA until November 2012, upon the 

resignation of ASBA’s Chairman. In 

these capacities, Director Thompson 

presided over meetings of the 

technical committee, the assembly, 

and the board. 

The FDIC led three ASBA technical 

assistance training missions in 2012, 

including a Financial Institution 

Analysis training program in Quito, 

Ecuador; a Credit Risk Management 

training program in Asuncion, 

Paraguay; and a Supervision of 

Operational Risk training program in 

Miami, Florida. The FDIC continued 

to provide subject-matter experts as 

instructors and speakers to support 

ASBA-sponsored training programs, 

seminars, and conferences. In 

addition, the FDIC participated in 

the ASBA working group on the 

Liquidity Coverage Ratio and Net 

Stable Funding Ratio Overview 

and established the FDIC-ASBA 

secondment program. Two ASBA 

members from the Central Bank of 

Barbados and the Superintendencia de 

Bancos de Guatemala were hosted by 

the FDIC under the inaugural program 

for eight weeks during the fall of 2012.

Supporting best practices through 

ASBA, the FDIC chaired the Basel 

III Liquidity Working Group and 

participated in several ASBA Working 

Groups concerning enterprise risk 

management, effective consumer 

protection frameworks, and corporate 

governance. The FDIC also led an 

internal review of ASBA’s Secretary 

General’s office in Mexico City Mexico, 

led the development of the 2013–2018 

ASBA Strategic and Business Plans, 

developed the first handbook for the 

Board of Directors, and approved the 

external audit program. 

Foreign Visitors Program

The FDIC continued its global role 

in supporting the development 

of effective deposit insurance 

and banking supervision systems 

through the provision of training, 

consultations, and briefings to foreign 

bank supervisors, deposit insurance 

authorities, international financial 

institutions, partner U.S. agencies, 

and other governmental officials. In 

2012, the FDIC hosted 80 visits with 

over 565 visitors from approximately 

42 jurisdictions. Many of these visits 

were multi-day study tours, enabling 

delegations to receive in-depth 

consultations on a wide range of 

deposit insurance issues. Officials 

from the Polish Bank Working Group, 

the Deposit Insurance of Vietnam, the 

National Bank of Ethiopia, the Deposit 

Protection Agency of the Kyrgyz 

Republic, and the Central Bank of 

Kenya benefited from these extended 

visits.

During 2012, the FDIC provided 

subject-matter experts to participate 

in seven FSI seminars around the 

world. The topics included riskfocused supervision, financial stability 

and stress testing, liquidity risk, Basel 

III, risk management, and regulating 

and supervising systemic banks. 

Additionally, 199 students from 13 

countries attended FDIC examiner 

training classes through the FDIC’s 

Corporate University. 

The FDIC continued its strong 

relationship with Chinese public 

institutions in 2012. The FDIC 

participated in the Fourth U.S.-China 

Strategic and Economic Dialogue 

on May 3, 2012, in Beijing, China, 

along with counterparts from all of 

the U.S. financial sector regulatory 

agencies, in a delegation led by the 

U.S. Treasury Secretary. The U.S. 

delegation met with counterparts 

from the Chinese regulatory agencies 

to discuss regulatory reforms and 

progress towards rebalancing their 

respective economies. The FDIC 

met separately with the People’s 

Bank of China (PBoC) concerning 

revisions to the current FDIC-PBoC 

Technical Assistance Memorandum 

of Understanding, and also about 

progress toward implementing 

a deposit insurance scheme in 

China. The FDIC held meetings 

with the China Banking Regulatory 

Commission (CBRC) to discuss 

further cooperation on SIFI-related 

matters. The U.S.-CBRC Bank 

Supervisors Bilateral Meeting, hosted 

by the FDIC, was held on October 

Managmenis
ANNUAL REPORT 2012

15, 2012. This meeting involved the 

three U.S. banking agencies and the 

CBRC in discussions on a wide range 

of supervisory issues. In addition, 

the China delegation met with 

representatives from the FDIC’s Legal 

Division and Division of Resolutions 

and Receiverships to obtain guidance 

on drafting rules for bank resolution in 

China. The FDIC subsequently hosted 

a delegation from the CBRC, providing 

an overview of information technology 

(IT) examination, supervision and 

resolution processes, and the roles 

and responsibilities of the FDIC in the 

U.S. bank regulatory system. 

Financial Services 

Volunteer Corps 

June 1, 2012, marked the five-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 the FSVC’s 

Washington, DC, office on an annual 

basis. The FDIC provided support 

to several FSVC projects including 

participation in the U.S. Agency for 

International Development’s Partners 

for Financial Stability project in the 

Balkan region. The purpose of this 

consultation was to develop strategies 

for resolving problem loans in 

response to the Eurozone crisis. 

FSVC support also included multiple 

FDIC-led training sessions with the 

Bank of Albania (the central bank). 

Follow-up consultations with the 

Albanian Deposit Insurance Agency, 

Bank of Albania, and the Ministry of 

Finance regarding bank liquidation 

processes, training sessions for 

examiners, an assessment of the 

legal framework, operational 

capabilities to manage a failure, 

and the implementation of an 

automated bank reporting and pay-out 

system were also completed. FDIC 

subject-matter experts also advised 

Albanian Financial Supervisory 

Authority leadership on the effective 

use of communications to foster 

relationships with foreign regulators 

and Albanian institutions, and 

public outreach and media relations 

strategies. 

FDIC secondees also provided a study 

tour in New York for members of the 

Egyptian Banking Institute; traveled 

to Cairo to support the Egyptian 

Financial Supervisory Authority’s 

Institute for Financial Services in its 

assessment and development of a 

strategic plan for financial inclusion; 

and conducted a one-week training 

program on IT risk supervision 

for the National Bank of Serbia in 

partnership with the World Bank. In 

Tunisia, FDIC secondees advised an 

association of banking and financial 

experts on techniques used by U.S. 

regulators for collecting data and best 

practices of financial institutions for 

improving the quality and timeliness 

of data. Finally, the FDIC continued 

to lead the research and development 

of a strategy for targeting technical 

assistance for low-income countries in 

Sub-Saharan Africa. 

Effective Ma

of Strategic

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 

2012 follow. 

Human Capital Managemen

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 

2012, the FDIC stepped up workforce 

planning and development initiatives 

that emphasized hiring the additional 

skill sets needed to address 

requirements of the Dodd-Frank Act, 

especially as it related to the oversight 

of SIFIs. 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 at-risk 

categories. The FDIC also deployed 

a number of strategies to more fully 

engage all employees in advancing 

its mission.

Succession Management

The FDIC provides its employees 

with comprehensive learning and 

development opportunities, including 

technical and general skills training, 

and leadership development. In 

addition to extensive internally 

developed and administered courses, 

the FDIC also offers its employees 

with funds and/or time to participate 

in external offerings in support of 

their career development. Through 

training and educational programs, 

the FDIC provides its employees 

with the knowledge and skills to 

successfully accomplish their work 

and to grow professionally. In 2012, 

the FDIC kicked-off several initiatives 

related to advanced or specialized 

training for mission critical areas. 

Such training is a critical part of 

workforce and succession planning as 

36 Managme
more experienced employees become 

eligible for retirement.

The FDIC also continues to expand 

leadership development opportunities 

to all employees. Its curriculum 

takes a holistic approach, aligning 

its core and elective curriculum with 

key leadership competencies. By 

developing employees across the 

span of their careers, the FDIC builds 

a culture of leadership and further 

promotes a leadership succession 

strategy. In 2012, the FDIC delivered 

19 sessions of core leadership courses 

and 22 sessions of electives. It also 

supported participation in four 

external leadership development 

programs.

Strategic Workforce Planning 

and Readiness

The FDIC used various employment 

strategies in 2012 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 recruited 

complex financial institution 

specialists who had developed their 

skills in other public and private 

sector 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. 

When the Office of Thrift Supervision 

(OTS) closed on July 21, 2011, the 

FDIC received 95 of its employees, 

all of whom were integrated into 

the FDIC with full FDIC benefits as 

of the one-year anniversary of the 

Dodd-Frank Act. Thirty-eight of 

the 95 employees were under the 

OTS’s Schedule A hiring authority, 

and therefore not in the competitive 

service. The FDIC determined that 

the equitable treatment provisions 

of the Dodd-Frank Act required that 

these employees be transferred to the 

competitive service; these transfers 

were effective May 9, 2012. 

During 2012, the orderly closing of 

the FDIC’s temporary satellite offices 

began based on projections of a 

drop in the number of bank failures 

expected in 2013 and beyond. These 

offices had been established to 

bring resources to bear in especially 

hard-hit areas in 2009 and 2010, 

as the number of failed financial 

institutions increased. 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 several 

years, beginning in 2009. The use of 

nonpermanent appointments allows 

the FDIC staff to return to a normal 

size once the crisis is over without 

the disruptions that reductions in 

permanent staff would cause.

The West Coast Temporary Satellite 

Office, which opened in Irvine, 

California, in early spring of 2009, 

closed on January 13, 2012, with 

265 employees. The East Coast 

Temporary Satellite Office, which 

opened in Jacksonville, Florida, in the 

fall of 2009, is slated to close in 2014. 

As of December 31, 2012, that office 

had 391 employees. The third satellite 

office, which opened for the Midwest 

in 2010 in Schaumburg, Illinois, 

closed on September 28, 2012, with 

130 employees. During the financial 

crisis, the FDIC also increased 

resolutions and receiverships staff 

in the Dallas Regional Office. For all 

offices that closed, the FDIC provided 

transition services to the separated 

nonpermanent FDIC employees. In 

addition, a number of these employees 

were hired as permanent staff to 

complete the FDIC’s core staffing 

requirements. 

The FDIC continued to build 

workforce flexibility and readiness 

by hiring through the Corporate 

Employee Program (CEP). The CEP 

is a multi-year development program 

designed to cross-train new employees 

in the FDIC’s major business lines. In 

2012, 121 new business line employees 

entered this multi-discipline program 

(1,133 hired since program inception 

in 2005). 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 to meet the 

FDIC’s human capital needs. As in 

years past, the program continued 

to provide the 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 362 commissioned 

participants by the end of 2012. These 

individuals are well-prepared to lead 

examination and resolutions and 

receiverships activities on behalf of 

the FDIC.

In 2011, the FDIC piloted the 

Financial Management Scholars 

(FMS) Program, a ten week summer 

internship program for college 

students between their junior and 

Managmenis
ANNUAL REPORT 2012

senior years of college. The FMS was 

implemented in 2012 and is another 

recruiting strategy to bring talent 

into the FDIC and the CEP. The FMS 

participants completed a one-week 

orientation session, worked in the field 

in one of the three key business lines 

(Depositor and Consumer Protection, 

Resolutions and Receiverships, and 

Risk Management Supervision), 

completed a capstone program, and 

participated in mini-recruiting event 

assessments. In 2012, there were 50 

FMS participants participating in 34 

locations. The FDIC extended 36 job 

offers and received acceptances from 

35 FMS participants. These successful 

FMS participants will join CEP 

classes in 2013 as Financial Institution 

Specialists.

Corporate Risk Management

In 2011, the FDIC Board authorized 

the creation of an Office of Corporate 

Risk Management (OCRM) and 

recruited a Chief Risk Officer (CRO) 

for the agency. During 2012, the CRO 

recruited a Deputy Director and a 

small staff made up of Senior Risk 

Officers to 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; 

♦ Systemically important financial 

institution risks associated with 

large complex institutions where 

the FDIC is not the primary 

federal regulator but would have 

responsibility in the event of failure;

♦ Economic and financial risks 

created for the FDIC and its insured 

institutions created by changes in 

the macroeconomic and financial 

environment; 

♦ Policy and regulatory risks arising 

through legislative activities 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; and 

♦ Reputational risks associated with 

all of the activities of the FDIC as 

they are perceived by a range of 

external factors.

In addition to completing an initial risk 

inventory for the FDIC, OCRM worked 

with the newly created Enterprise 

Risk Committee and Risk Analysis 

Committee to discuss external and 

internal risks facing the FDIC. These 

efforts supported the preparation of 

quarterly reports to the Board on the 

risk profile of the institution.

Employee Engagement

The FDIC continually evaluates its 

human capital programs and strategies 

to ensure that it remains an employer 

of choice and that all of its employees 

are fully engaged and aligned with 

the mission. The FDIC uses the 

Federal Employee Viewpoint Survey 

mandated by Congress to solicit 

information from employees and takes 

an agency-wide approach to address 

key issues identified in the survey. On 

December 13, 2012, the FDIC received 

an award from the Partnership for 

Public Service for being ranked 

number one among the mid-sized 

federal agencies on the Best Places to 

Work in the Federal Government® 

list. Effective leadership was the 

primary factor driving employee 

satisfaction and commitment in the 

federal workplace, according to a 

report by the Partnership for Public 

Service.

The Culture Change Initiative, 

2008–2012, played an important role in 

helping the FDIC achieve this ranking. 

The new Workplace Excellence (WE) 

Program builds upon the success 

of the Culture Change Initiative by 

institutionalizing a National WE 

Steering Committee and separate 

Division/Office WE Councils. In 

addition to the WE Program, the 

new FDIC-NTEU Labor-Management 

Forum serves as a mechanism for 

the union and employees to have 

pre-decisional input on workplace 

matters. The WE Program and 

Labor Management Forum enhances 

communication, provides additional 

opportunities for employee input, and 

improves employee empowerment.

Employee Learning and 

Development 

The FDIC has a strong commitment 

to the learning and development of 

all employees. Through its learning 

and development programs, the 

FDIC creates opportunity, enriches 

career development, and cultivates 

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 delivered just-intime training to quickly address 

new business needs and completed 

38 Managme
comprehensive needs assessments to inform 

its long-term strategy.

In support of business requirements, 

the FDIC delivered various sessions 

of resolution-related training based on 

new responsibilities acquired under the 

Dodd-Frank Act. To prepare for the 

resolution of the most complex financial 

institutions, the FDIC also used facilitated 

discussions, table top exercises, and 

simulations with other federal agencies to 

share information, identify challenges, and 

build interagency relationships. 

In addition to conducting just-in-time 

training and events to meet immediate 

needs, the FDIC is focused on assessing 

long-term needs and developing 

comprehensive curricula accordingly. 

Based on the results of needs assessments 

for the Office of Complex Financial 

Institutions, the Division of Resolutions 

and Receiverships, and the Division 

of Risk Management Supervision, the 

FDIC developed multi-year frameworks 

to supplement existing learning and 

development. The FDIC will implement the 

priority components of the business line 

curricula next year.

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.

In 2012, the FDIC provided its employees 

with approximately 160 instructor-led 

courses and 1,800 web-based courses to 

support various mission requirements. 

There were approximately 9,292 completions 

of instructor-led courses and 36,570 

completions of web-based courses.

In 2012, the FDIC was recognized as 

a LearningElite organization by Chief 

Learning Officer magazine. The 

LearningElite program is a robust peerreviewed ranking and benchmarking 

program that recognizes those organizations 

that employ exemplary workforce 

development strategies to deliver significant 

business results. 

Information Technology Management

The FDIC understands that information 

technology (IT) is a critical, transformative 

resource for the successful accomplishment 

of agency business objectives. The FDIC 

relies on the strategic capabilities that IT 

provides to ensure and enhance mission 

achievement. This year, introduction of 

new technologies coupled with changes 

to maintenance contracts have allowed 

the FDIC to identify $15 million in budget 

reductions in IT equipment and services 

areas from 2012 to 2013.

Chairman Martin 

J. Gruenberg and 

Arleas Upton Kea, 

Director of 

the Division of 

Administration, 

accepting the award 

for the number one 

ranking among 

mid-sized federal 

agencies for Best 

Places to Work 

in the Federal 

Government.

Managmenis
ANNUAL REPORT 2012

IT Governance 

The FDIC has strengthened agency 

governance of IT investments 

and projects by adopting new 

guidelines for project scope, cost, 

schedule, and reporting. The FDIC 

also implemented the Office of 

Management and Budget’s Federal 

Chief Information Officer’s Tech Stat 

concept, a face-to-face, evidencebased review by agency executives of 

IT projects, identify issues affecting 

progress, and take the necessary 

corrective actions. The FDIC has also 

improved the risk management and 

cost estimation project disciplines, 

training project management staff 

across the organization. Also, in 2012, 

the FDIC worked on an update to the 

Business Technology Strategic Plan 

that highlights strategic initiatives for 

document management, research and 

analytics, and mobility. 

Support for Regulatory Reform

Business application development 

and enhancement continued in 2012 

to support implementation of the 

requirements of the Dodd-Frank 

Act. The FDIC implemented 

new applications to deliver full 

functionality required to comply with 

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

While not mandated by the statute, 

the FDIC has also implemented 

an enhanced tool to facilitate the 

electronic review of a bank’s loan 

portfolio and streamline the loan 

review process. The Examination Tool 

Suite-Automated Loan Examination 

Reporting Tool (ETS-ALERT), will be 

used by the FDIC, all 50 states banking 

supervision organizations, and the 

Federal Reserve. 

Cyber Security

The FDIC recognizes that cyber 

threats are one of the most serious 

security challenges facing the 

nation, and that collaboration with 

other federal agencies is vital to 

strengthening the FDIC’s security 

position. In 2012, the FDIC was 

actively involved with the Federal 

Chief Information Officer Council’s 

Privacy Committee, including 

serving as co-chair of the interagency Best Practices Subcommittee 

and as a member of three other 

subcommittees: Innovation and 

Technology, Development and 

Education, and International. In 

addition, the FDIC initiated the first 

Interagency Data Loss Prevention 

(DLP) Working Group, composed of 

representatives from 15 agencies, as 

a forum for discussions of DLP best 

practices, federal requirements, and 

lessons learned, as well as a platform 

for industry presentations on DLP 

techniques and tools. 

The FDIC has undertaken several 

initiatives to augment external 

cyber resources. In 2012, the FDIC 

participated with the Office of the 

National Director of Intelligence in 

initiating the new Federal Senior 

Intelligence Coordinator Advisory 

Board and associated workgroups to 

gather additional counter-intelligence 

on new threats. The FDIC has 

established informal informationsharing relationships with the 

Federal Bureau of Investigation’s 

(FBI) cybercrime squads in the FBI’s 

Washington, DC office, where real-time 

cybercrime information is exchanged. 

The FDIC also serves as an active 

participant in industry informationsharing organizations, including the 

Financial Services - Information 

Sharing and Analysis Center, a 

financial services-focused association 

that gathers reliable and timely 

information from financial services 

providers; commercial security firms; 

federal, state, and local government 

agencies; law enforcement; and 

other trusted resources; to quickly 

disseminate physical and cyber threat 

alerts and other critical information to 

participating organizations.

Internally, the FDIC continued to 

focus on enhancing its security 

posture to combat the increased 

number and sophistication of cyberattacks. The FDIC established a 

Security Operations Center that 

provides continuous event-monitoring 

and risk analysis to prevent and detect 

intrusion through use of an array 

of tools.

Privacy Program

The FDIC has a well-established 

privacy program that works to 

maintain privacy awareness and 

promote transparency and public 

trust. During the last year, the FDIC 

conducted unannounced privacy 

assessments of various regional and 

field offices to ensure that confidential 

and proprietary documents and media 

are properly safeguarded, and that 

individual and agency privacy data 

are protected. These assessments 

provide the FDIC with its own internal 

mechanism to identify weaknesses and 

potential mitigating circumstances, 

and to track progress in correcting 

vulnerabilities.

40 Managme