Management’s 

Discussion and 

Analysis

I.

The Year in Review

OVERVIEW

During 2014, the FDIC continued to fulfill its mission-critical 

responsibilities. The FDIC adopted and issued final rules on 

key regulations under the Dodd-Frank Wall Street Reform 

and Consumer Protection Act (Dodd-Frank Act). The FDIC 

also engaged in several community banking and community 

development initiatives over the past year. In addition, 

cybersecurity remained a high priority for the FDIC as it 

worked to strengthen cybersecurity oversight, help financial 

institutions mitigate this increasing risk, and respond to 

cyber threats. The sections below highlight some of our 

accomplishments during the year.

IMPLEMENTATION OF 

KEY REGULATIONS

Capital Rulemaking and Guidance

In April 2014, the FDIC adopted as final its 2013 interim 

final capital rule implementing the Basel III capital 

standards. The Basel III standards strengthen the quality 

and required level of regulatory capital and, for advanced 

approaches banks, introduce a new supplementary leverage 

requirement. The final rule is largely identical to the final 

capital rule adopted by the Office of the Comptroller of 

the Currency (OCC) and the Board of Governors of the 

Federal Reserve System (FRB) in September 2013. Also in 

April 2014, the FDIC and the other federal banking agencies 

issued a final rule that strengthens the supplementary 

leverage capital requirements for the eight largest U.S. 

bank holding companies (BHCs) and their insured banks. 

The enhanced leverage requirements in this rule, which 

are significantly higher than the 3 percent level agreed to 

by the Basel Committee, should contribute to the stability 

and resilience of these large institutions and the financial 

system. 

Basel III Final Capital Rule

At its April 2014 meeting, the FDIC Board of Directors 

(FDIC Board) approved the Basel III interim final rule as a 

final rule with no substantive changes. The FDIC had issued 

the July 2013 Basel III rule as an interim final rule in order 

to consider comments on the enhanced supplementary 

leverage standards. The Basel III rule became effective 

January 1, 2015, for banking organizations not subject to 

the advanced approaches risk-based capital rule. Banking 

organizations that are subject to the advanced approaches 

capital requirements have been operating under the 

new capital rule since January 1, 2014. For all banking 

organizations, the final rule provides a phase-in period for 

certain aspects of the rule including the new capital ratios, 

the capital conservation buffer, and adjustments to and 

deductions from regulatory capital.

The capital conservation buffer framework provides for 

gradually increasing limits on capital distributions as 

a bank’s risk-based capital ratios approach regulatory 

minimums. S-corporation banks have expressed concern 

that this framework could increase the frequency with 

which their shareholders face a tax liability without having 

MANAGEMENT’S DISCUSSION AND ANALYSIS 13
ANNUAL REPORT 2014

14 MANAGEMENT’S DISCUSSION AND ANALYSIS

received dividends. Under the final rule, banks may make 

a dividend exception request to their primary federal 

regulator (PFR), and the regulator can approve the request 

if warranted based on safety and soundness considerations. 

In July 2014, the FDIC released a Financial Institution Letter 

(FIL) describing the factors that will be considered for 

such requests from S-corporation banks. Absent significant 

safety and soundness concerns about the requesting bank, 

the FDIC generally would expect to approve exception 

requests by well-rated S-corporation banks that are limited 

to the payment of dividends to cover shareholders’ taxes on 

their portion of an S-corporation’s earnings.

Regulatory Capital–Proposed Revisions Applicable 

to Banking Organizations Subject to the Advanced 

Approaches Risk-Based Capital Rule

In November 2014, the federal banking agencies issued a 

notice of proposed rulemaking (NPR) regarding certain 

technical amendments to the advanced approaches 

risk-based capital rule, to enhance consistency of the U.S. 

capital rules with international standards for the use of the 

advanced approaches framework.

Enhanced Supplementary Leverage Ratio Standards 

for Certain Bank Holding Companies and their 

Subsidiary Insured Depository Institutions 

In April 2014, the federal banking agencies issued a final 

rule that increases the supplementary leverage requirements 

for the largest, most systemically important banking 

organizations and their subsidiary insured depository 

institutions (IDIs). The new requirements apply to banking 

organizations with at least $700 billion in total consolidated 

assets at the top-tier BHC or at least $10 trillion in assets 

under custody (covered BHCs) and any IDI subsidiary of 

these bank holding companies (covered IDIs). For covered 

IDIs, the rule establishes a supplementary leverage ratio 

of 6 percent as a “well-capitalized” threshold for prompt 

corrective action (PCA). For covered BHCs, the rule 

establishes a capital conservation buffer composed of tier 

1 capital of 2 percent of total leverage exposure; therefore, 

these BHCs need to maintain a supplementary leverage ratio 

of 5 percent to avoid restrictions on capital distributions. 

These levels are in excess of the Basel III requirement of a 

3 percent supplementary leverage ratio, which applies to all 

advanced approaches banking organizations.

Supplementary Leverage Ratio Final Rule

In September 2014, the FDIC approved an interagency 

final rule that implements changes to the supplementary 

leverage ratio calculation that were proposed in April 

2014. The supplementary leverage ratio applies to all 

banking organizations subject to the advanced approaches 

risk-based capital rules, including the eight entities subject 

to the enhanced supplementary leverage requirements. 

The rule aligns the agencies’ rules on the calculation of 

the denominator of the supplementary leverage ratio with 

international leverage ratio standards. Among other things, 

the new rule:

♦ Incorporates in the denominator of the ratio the effective 

notional amount of credit derivatives and other similar 

instruments under which credit protection is provided.

♦ Modifies the calculation of total leverage exposure for 

derivatives and repo-style transactions. 

♦ Revises the credit conversion factors applied to certain 

off-balance sheet exposures. 

The rule also establishes public disclosure requirements 

that are effective in March 2015. Supplementary leverage 

ratio capital requirements incorporating the revised 

denominator are effective January 1, 2018.

Regulatory Reporting Under the Final Capital Rule

In March 2014, the FDIC and the other federal banking 

agencies implemented the first stage of revisions to the 

Consolidated Reports of Condition and Income (Call 

Report) to align the regulatory capital components and 

ratios portion of the regulatory capital schedule with 

the Basel III revised regulatory capital definitions. The 

agencies also revised the Federal Financial Institutions 

Examination Council (FFIEC) 101 regulatory capital report 

for advanced approaches institutions to implement changes 

to the advanced approaches regulatory capital rules. These 

regulatory capital reporting changes took effect as of the 

March 31, 2014, report date for advanced approaches 

institutions. The Call Report revisions will be applicable to 

all other institutions as of the March 31, 2015, report date. 

In June 2014, the FDIC and the other federal banking 

agencies issued for comment the second stage of revisions 

to the Call Report regulatory capital schedule. These 
MANAGEMENT’S DISCUSSION AND ANALYSIS 15

revisions would update the risk-weighted assets portion 

of the schedule to reflect the standardized approach to 

risk weighting in the Basel III final rules and would take 

effect as of the March 31, 2015, report date. Following 

the publication of the proposal, the agencies conducted a 

banker teleconference to describe the proposed reporting 

changes and respond to questions. The agencies have 

modified the report form and instructions in response to 

comments and technical questions received on the proposal. 

Final drafts of the revised risk-weighted assets report form 

and instructions were made available to institutions in 

January 2015. Subsequently, the agencies also issued the 

final risk-weighted asset reporting changes for comment 

and submitted them to the U.S. Office of Management and 

Budget (OMB) for approval.

In September 2014, the FDIC and the other federal banking 

agencies issued for comment the proposed FFIEC 102 

market risk regulatory report. This new quarterly report 

would collect key information from the limited number 

of institutions subject to the Basel III market risk capital 

rules on how they measure and calculate market risk 

under these rules. The report would take effect as of the 

March 31, 2015, report date. After considering technical 

questions received on the proposal, the agencies finalized 

the market risk reporting requirements in January 2015, 

and subsequently issued a final request for comments and 

submitted the new report to OMB for approval.

Stress Testing Guidance

In March 2014, the FDIC, along with the other federal 

banking agencies, issued final guidance that outlines 

high-level principles for implementing Section 165(i)(2) 

of the Dodd-Frank Act, which requires stress tests 

for companies with $10 billion to $50 billion in 

consolidated assets.

The guidance discusses supervisory expectations for the 

Dodd-Frank Act stress test practices and offers additional 

details about methodologies that should be employed by 

these companies. It also underscores the importance of 

stress testing as an ongoing risk management practice that 

supports a company’s forward-looking assessment of its 

risks and better equips the company to address a range of 

macroeconomic and financial outcomes.

Since the publication of the Annual Stress Test rule in 

October 2012, the FDIC and other federal banking agencies 

have received feedback from the industry regarding 

the resource constraints that covered banks face at the 

beginning and end of the calendar year arising from 

competing regulatory and reporting deadlines. The FDIC 

and other banking agencies are aware that conducting 

stress testing during the last quarter of a calendar year may 

also make it difficult for covered banks to timely modify 

strategic and operational plans for the following year that 

address any issues identified in the company-run stress 

test results.

For these reasons, in November 2014, the FDIC, in 

coordination with the FRB and the OCC, issued a final 

rule that modifies the dates of the stress test cycle and the 

corresponding reporting and publication deadlines. The 

shift in testing, reporting, and disclosure dates will take 

place for the 2016 company-run stress test cycle and each 

annual cycle thereafter.

Other Rulemaking and Guidance 

under the Dodd-Frank Act 

The Dodd-Frank Act requires various agencies to 

publicize regulations in a number of areas. The 

following is a summary of significant activity relating to 

the Dodd-Frank Act.

Margin and Capital Requirements 

for Covered Swap Entities

In September 2014, the FDIC Board approved the 

interagency notice of proposed rulemaking (NPR) for 

Margin and Capital Requirements for Covered Swap 

Entities. This proposed rule would implement certain 

requirements contained in Sections 731 and 764 of the 

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

active participants in the over-the-counter derivatives 

market must collect initial margin and variation margin. 

The NPR is consistent with the international framework 

on margin requirements published by the Basel Committee 

on Banking Supervision (BCBS) and the International 

Organization of Securities Commissions in September 2013. 

The proposed rule applies to these large entities supervised 

by the agencies and designated by the U.S. Commodity 

Futures Trading Commission (CFTC) or the U.S. Securities 
ANNUAL REPORT 2014

16 MANAGEMENT’S DISCUSSION AND ANALYSIS

and Exchange Commission (SEC) as swap dealers, major 

swap participants, security-based swap dealers, or securitybased major swap participants. The NPR calls these 

registered firms “covered swap entities” (CSEs). As of 

December 15, 2014, 15 insured depository institutions had 

registered with the CFTC as swap dealers, and as of that 

date, no IDI had registered with the CFTC as a major swap 

participant. The SEC has not yet imposed a registration 

requirement for dealers or major participants in swaps that 

it regulates.

A CSE would be required to exchange initial margin for 

non-cleared swaps that it enters into with other swap 

entities and with financial entities that engage in swap 

activity above a certain threshold. A CSE would be required 

to exchange variation margin for uncleared swaps it enters 

into with another swap entity or with any financial entity. 

Most community bank swap activities are in amounts 

too small to be affected by the proposed rule. Also, the 

proposed rule does not require CSEs to collect margin from 

commercial end users.

The proposal was published in the Federal Register on 

September 24, 2014, and the comment period ended 

November 24, 2014. The agencies are reviewing the 

comments and plan to issue a final rule in early 2015.

Credit Risk Retention for Securitizations

In October 2014, the FDIC, jointly with the OCC, the FRB, 

the Department of Housing and Urban Development, the 

SEC, and the Federal Housing Finance Agency (FHFA), 

approved a final rule to implement the securitization credit 

risk retention provisions of Section 941 of the Dodd-Frank 

Act, which added Section 15G to the Securities Exchange 

Act of 1934. Section 15G generally requires securitizers 

of asset-backed securities (ABS) to retain not less than 

5 percent of the credit risk of assets collateralizing ABS 

issuances, and generally prohibits a securitizer from 

directly or indirectly hedging or otherwise transferring the 

credit risk the securitizer is required to retain. The final 

rule provides various exemptions from the risk retention 

requirements, some of which are required by statute. For 

example, as required by the Dodd-Frank Act, the final rule 

exempts ABS collateralized solely by “qualified residential 

mortgages” (QRM) from risk retention requirements. 

The final rule aligns the definition of QRM with the 

definition of “qualified mortgage” (QM) as prescribed by 

the Consumer Financial Protection Bureau (CFPB). This 

alignment is consistent with the statutory requirement that 

the QRM definition be no broader than the QM definition 

and take into consideration underwriting and product 

features that historical loan performance data indicate 

result in lower risk of default. In addition, the final rule 

reduces, in some situations to zero, the risk retention 

requirements for ABS collateralized by commercial 

mortgages, commercial real estate (CRE) loans, or 

automobile loans that meet certain underwriting standards. 

The final rule also provides various transaction-specific 

risk retention options for revolving pool securitizations, 

commercial mortgage-backed securities, open market 

collateralized loan obligations, government-sponsored 

enterprises, municipal bond repackagings (known as 

tender option bonds), and asset-backed commercial paper 

conduits. The final rule prohibits hedging, transferring, 

or pledging required risk retention until these restrictions 

lapse, which varies by asset type. 

The final rule was published in the Federal Register on 

December 24, 2014. Compliance with respect to residential 

mortgage-backed securities is required beginning one year 

after the date of publication in the Federal Register. For 

all other classes of ABS, compliance with the final rule is 

required beginning two years after the date of publication in 

the Federal Register. 

The Volcker Rule

On December 10, 2013, the FDIC, along with the other 

federal banking agencies, and the SEC, approved a joint 

final rule to implement the provisions of Section 619 of the 

Dodd-Frank Act, also known as the “Volcker Rule.” (On 

that same date, for procedural reasons, the CFTC adopted 

an identical final rule.) The Volcker Rule, which added 

Section 13 to the BHC Act, generally prohibits any banking 

entity from engaging in proprietary trading or acquiring 

or retaining an interest in, sponsoring, or having certain 

relationships with, a hedge fund or private equity fund, 

subject to certain exemptions. The final rule became 

effective April 1, 2014.
MANAGEMENT’S DISCUSSION AND ANALYSIS 17

In January 2014, the FDIC, together with the other federal 

banking agencies, the SEC, and the CFTC, adopted a joint 

interim final rule that permits banking entities subject to the 

Volcker Rule to retain investments in certain collateralized 

debt obligations backed primarily by trust preferred 

securities. 

To help ensure consistent implementation of the Volcker 

Rule, the agencies have established an interagency Volcker 

Rule working group that meets regularly to discuss issues 

and the application and enforcement of the rule. 

During 2014, the agencies posted various joint Frequently 

Asked Questions (FAQs) on their websites to address 

certain implementation issues presented by banking entities 

subject to the Volcker Rule. These FAQs have addressed 

such matters as:

♦ Annual CEO Attestation

♦ Conformance Period

♦ Foreign Public Fund Seeding Vehicles

♦ Loan Securitization Servicing Assets

♦ Metrics Reporting and Confidentiality

♦ Metrics Reporting Date

♦ Metrics Reporting During the Conformance Period

♦ Mortgage-Backed Securities of Government-Sponsored 

Enterprises

♦ Name-sharing Prohibition

♦ Trading Desks 

Minimum Requirements for Appraisal 

Management Companies

In April 2014, the FDIC, jointly with the OCC, the FRB, 

the National Credit Union Administration (NCUA), the 

CFPB, and the FHFA, approved an NPR to implement the 

minimum requirements for registration and supervision 

of appraisal management companies (AMCs) in the 

Dodd-Frank Act. The proposed rule would establish the 

minimum requirements in Section 1473 of the Dodd-Frank 

Act (Section 1473) for registration and supervision of 

AMCs; establish the minimum requirements for AMCs that 

register with the State under Section 1473; require federally 

regulated AMCs to meet the minimum requirements of 

Section 1473 (other than registering with the State); and 

require the reporting of certain AMC information to the 

Appraisal Subcommittee of the FFIEC. The comment 

period closed in June 2014, and the agencies are reviewing 

and considering the comments received. The agencies 

expect to issue a final rule in 2015. 

Joint Standards for Assessing 

Diversity Policies and Practices 

The FDIC continued to implement the provisions of Section 

342 of the Dodd-Frank Act during 2014. Section 342(b)(2)

(C) of the Act requires the Office of Minority and Women 

Inclusion (OMWI) Director of each covered agency to 

develop standards for assessing the diversity policies 

and practices of entities regulated by such agency. To 

implement that requirement and develop those standards, 

the FDIC’s OMWI continued to work closely in 2014 with 

the OMWI Directors of the OCC, the NCUA, the FRB, the 

CFPB, and the SEC. In addition, the FDIC developed 

standards for increasing the participation of minorityand women-owned businesses (MWOBs) in the agency’s 

programs and contracts and standards to evaluate agency 

contractors’ good faith efforts to include minorities and 

women in their workforce.

In late 2013, proposed standards were published in 

the Federal Register as a Proposed Interagency Policy 

Statement Establishing Joint Standards for Assessing the 

Diversity Policies and Practices of Entities Regulated by 

the Agencies. The proposed standards describe leading 

diversity practices for the financial services industry in four 

key areas: (1) organizational commitment to diversity and 

inclusion; (2) workforce profile and employment practices; 

(3) procurement and business practices – supplier diversity; 

and (4) practices to promote transparency of organizational 

diversity and inclusion. 

The comment period was initially scheduled to end on 

December 24, 2013, but was extended to February 7, 2014, 

to facilitate public comment on the policy statement and 

questions posed by the agencies. The FDIC in coordination 

with the other agencies have reviewed the comments 

received and are in the final stages of preparing final joint 

standards, which will likely be issued in 2015.
ANNUAL REPORT 2014

18 MANAGEMENT’S DISCUSSION AND ANALYSIS

Liquidity and Funds Management Rulemaking 

Liquidity Coverage Ratio

In September 2014, the FDIC, together with the OCC and 

the FRB, issued a joint final rule to implement the Liquidity 

Coverage Ratio (LCR). The final rule requires certain 

banks to hold a minimum level of liquid assets to support 

contingent liquidity events that could arise within a 30-day 

liquidity stress horizon. It also provides a standard way of 

expressing a bank’s on-balance sheet liquidity position to 

stakeholders and supervisors. 

The requirement applies to large, internationally active 

banking organizations and their consolidated subsidiary 

depository institutions with $10 billion or more in total 

consolidated assets. Covered companies are required to 

notify their PFR when the LCR drops below 100 percent 

and develop a remediation plan if the shortfall persists. The 

rule establishes a shorter phase-in period than the Basel 

III standard, as it would require covered companies to 

fully meet the minimum LCR by January 1, 2017, two years 

earlier than the Basel III requirements. The FRB is also 

applying a less stringent LCR requirement to certain smaller 

depository institution holding companies with $50 billion to 

$250 billion in total assets. 

Net Stable Funding Ratio 

In October 2014, the BCBS published a final standard to 

implement the Net Stable Funding Ratio (NSFR). While the 

LCR focuses on having sufficient high-quality liquid asset 

buffers to weather a short-term severe stress, the NSFR 

considers funding over a longer horizon. The NSFR requires 

banks to maintain a stable funding profile in relation to their 

on- and off-balance sheet activities, comparing the amount 

of an entity’s required stable funding to meet asset and 

off-balance sheet obligations against the available stable 

funding sources. The FDIC expects that the federal banking 

agencies will complete an NSFR proposal by year-end 2015. 

INSURANCE

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 DIF 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. That plan is combined with 

the Restoration Plan, originally adopted in 2008 and 

subsequently revised, which is designed to ensure that the 

reserve ratio (the ratio of the fund balance to estimated 

insured deposits) will reach 1.35 percent by September 

30, 2020, as required by the Dodd-Frank Act.1 These plans 

include a reduction in assessment rates that the FDIC Board 

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—under the long-term DIF management 

plan—set the Designated Reserve Ratio (DRR) of the DIF 

at 2.0 percent. The FDIC views the 2.0 percent DRR as a 

long-term goal and the minimum level needed to withstand 

future crises of the magnitude of past crises. Under 

provisions of the Federal Deposit Insurance Act (FDI Act) 

that require the FDIC Board to set the DRR for the DIF 

annually, the FDIC Board voted in October 2014 to maintain 

the 2.0 percent DRR for 2015—the DRR that has been in 

effect every year since 2011.

As part of the long-term DIF management plan, the FDIC 

also suspended dividends indefinitely when the fund reserve 

ratio exceeds 1.5 percent. Instead, 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 much the 

same function as dividends, but provide more stable and 

predictable effective assessment rates over time.

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 publicize a rulemaking that implements this requirement at a later date 

to better take into account prevailing industry conditions at the time of the offset.
MANAGEMENT’S DISCUSSION AND ANALYSIS 19

State of the Deposit Insurance Fund 

Estimated losses to the DIF were $0.4 billion from failures 

occurring in 2014; these losses were lower than losses from 

failures in each of the previous six years. The fund balance 

continued to grow through 2014, as it has every quarter 

starting first quarter 2010, for a total of 20 consecutive 

quarters. Lower than estimated losses for past bank 

failures together with assessment revenue contributed to 

the increase in the fund balance in 2014. The fund reserve 

ratio rose to 1.01 percent at December 31, 2014, from 0.79 

percent at the previous year-end. 

Deposit Insurance Assessment System

In November 2014, the FDIC finalized a rule that revises 

the deposit insurance system to be consistent with changes 

in the regulatory capital rules that go into effect January 

1, 2015, and January 1, 2018. The rule conforms the 

capital ratios and ratio thresholds in the deposit insurance 

assessment system to the Basel III rule prompt corrective 

action capital ratios and thresholds. The rule also conforms 

the assessment base calculation for custodial banks 

to the new asset risk weights under the Basel III rule’s 

standardized approach. In addition, for highly complex 

institutions, the rule requires counterparty exposure for 

assessment purposes to be measured using the Basel III 

rule’s standardized approach, with a modification for certain 

cash collateral securing derivative exposures.

ACTIVITIES RELATED TO SYSTEMICALLY 

IMPORTANT FINANCIAL INSTITUTIONS

Complex Financial Institutions

The FDIC is committed to addressing the unique challenges 

associated with the supervision, insurance, and potential 

resolution of large and complex insured institutions. The 

FDIC’s ability to analyze and respond to risks in these 

institutions is particularly important, as they comprise a 

significant share of banking industry assets. The FDIC’s 

programs related to complex financial institutions provide 

for a consistent approach to large bank supervision 

nationwide, allows for the analysis of financial institution 

risks on an individual and comparative basis, and enables 

a quick response to risks identified at large institutions. 

Given the concentration of risk in these institutions, the 

FDIC has expanded its activities at the nation’s largest and 

most complex institutions through additional and enhanced 

on-site and off-site monitoring and supervision.

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 

BHCs and large, nonbank systemically important financial 

institutions (SIFIs) designated by the Financial Stability 

Oversight Council (FSOC) for supervision by the FRB. 

In 2014, the FDIC’s CFI activities included ongoing 

risk monitoring of the largest, most complex banking 

organizations and backup supervision of their IDIs, as well 

as ongoing risk monitoring of certain nonbank financial 

companies. The FDIC continues to work closely with 

other federal regulators to better understand the risk 

measurement and management practices of SIFIs and 

assess the potential risks they pose to financial stability.

The FDIC undertakes risk monitoring activities at the 

company level to understand each company’s: structure, 

business activities, and resolution/recovery capabilities 

to inform the FDIC’s resolution planning staff; business 

activities and risk profile to gauge both proximity to a 

resolution event and the speed at which a company’s 

condition could potentially deteriorate to a resolution event; 

recovery plans; early warning signals and triggers; and the 

range of remedial actions to be taken should a triggering 

event occur. 

In 2014, the FDIC’s off-site monitoring systems for SIFIs 

were expanded to enhance efforts to analyze structured and 

unstructured data. The FDIC developed and implemented 

the Systemic Monitoring System (SMS), which is an off-site 

monitoring tool for SIFIs that will be used to enhance risk 

scoping of various activities. This tool will be integrated 

into the FDIC’s SIFI on-site monitoring and resolution 

planning processes. The SMS synthesizes large amounts 

of quantitative data from numerous sources (i.e., data 

that pertain to both proximity-to-default and speed-todefault), evaluates the level and change in metrics that 

serve as important barometers of overall risk, produces 

a preliminary risk assessment and comprehensive risk 

profile report for individual SIFIs, and identifies areas 
ANNUAL REPORT 2014

20 MANAGEMENT’S DISCUSSION AND ANALYSIS

requiring further follow-up to determine the need for 

additional supervisory activities or accelerated resolution 

planning efforts. SMS risk assessments will help the FDIC 

to identify emerging risks in individual firms, prioritize 

supervisory activities, and inform the development of 

appropriate supervisory responses and resolution strategies 

in deteriorating situations. However, the SMS is not a 

predictive or a statistically based model; rather it is a 

dynamic tool that assists the FDIC in identifying risk in the 

largest firms.

Risk monitoring is enhanced by the FDIC’s backup 

supervision activities. In the FDIC’s back-up supervisory 

role, as outlined in Sections 8 and 10 of the FDI Act 

and Sections 23A and 23B of the Federal Reserve Act, 

the FDIC has expanded resources and developed and 

implemented policies and procedures to guide back-up 

supervisory activities. These activities include participating 

in supervisory activities with other regulatory agencies, 

performing analyses of industry conditions and trends, 

exercising examination authorities, and exercising 

enforcement authorities when necessary. At institutions 

where the FDIC is not the PFR, staff works closely with 

other financial institution regulatory authorities to identify 

emerging risk and assess the overall risk profile of large 

and complex institutions. The FDIC, the FRB, and the 

OCC operate under a Memorandum of Understanding 

(MOU) that establishes guidelines for coordination and 

cooperation to carry out their respective responsibilities, 

including the FDIC’s role as insurer and supervisor. Under 

this agreement, the FDIC has assigned dedicated staff to 

systemically important and large, complex regional banking 

organizations to enhance risk identification capabilities and 

facilitate the communication of supervisory information. 

These individuals work closely with PFR staff in the 

ongoing monitoring of risk at their assigned institutions.

Additionally, the FDIC allocates examination and analytical 

resources annually to the FRB’s Comprehensive Capital 

Analysis and Review and Comprehensive Liquidity Analysis 

and Review programs. Also, in 2014, the FDIC expanded 

participation with the FRB’s Supervisory Assessment of 

Recovery and Resolution Preparedness program in an effort 

to assess firms’ capabilities related to resolvability planning 

and preparedness. 

Title I Resolution Plans

Title I of the Dodd-Frank Act requires that each BHC with 

total consolidated assets of $50 billion or more and each 

nonbank financial company that the FSOC determines 

should be subject to supervision by the FRB, prepare a 

resolution plan, or “living will,” and periodically provide 

the plan to the FRB and the FDIC. Section 165(d) of the 

Dodd-Frank Act requires the company’s resolution plan to 

provide for its rapid and orderly resolution under the U.S. 

Bankruptcy Code in the event of the company’s material 

financial distress or failure. The FDIC and the FRB issued 

a joint rule, effective November 30, 2011, to implement the 

requirements for resolution plans filed under Section 165(d) 

[the 165(d) Rule]. 

The 165(d) Rule provides for staggered initial submission 

dates for the resolution plans of covered companies. 

Thereafter, unless otherwise agreed to by the FDIC and the 

FRB, each covered company must submit a plan annually, 

on or before the anniversary of its initial submission date. 

Under the 165(d) Rule, the initial submission date is based 

upon nonbank assets (or for a foreign-based covered 

company, U.S. nonbank assets) as of November 30, 2011, 

and is set by the rule as follows:

♦ July 1, 2012: “First Wave Companies” are covered 

companies with $250 billion or more in nonbank

assets (or U.S. nonbank assets for foreign-based 

covered companies). 

♦ July 1, 2013: “Second Wave Companies” are covered 

companies with $100 billion or more in nonbank 

assets (or U.S. nonbank assets for foreign-based 

covered companies). 

♦ December 31, 2013: “Third Wave Companies” are all 

other covered companies as of the effective date of the 

165(d) Rule.

♦ Any company that becomes subject to the 165(d) Rule 

after November 30, 2011, (including nonbank financial 

companies designated by the FSOC), must submit its 

initial resolution plan by the next July 1 that is at least 

270 days after the date it became subject to the rule (or 

following its designation by FSOC). 

In July 2012, 11 First Wave Companies submitted initial 

165(d) plans. Based upon review of the initial resolution 
MANAGEMENT’S DISCUSSION AND ANALYSIS 21

plans, the FDIC and the FRB developed guidance for 

the First Wave Companies to permit alternate resolution 

strategies and to clarify information that should be included 

in their 2013 resolution plan submissions.2 The agencies 

also extended the second submission filing date to October 

1, 2013, giving the First Wave Companies additional time to 

develop resolution plans complying with the guidance.

In August 2014, the agencies announced the completion of 

reviews of the October 2013 resolution plans submitted by 

the First Wave Companies. Based on the review of the 2013 

plans, the FDIC Board determined that the plans were not 

credible and did not facilitate an orderly resolution under 

the U.S. Bankruptcy Code as required by Section 165(d) of 

the Dodd-Frank Act. Although this determination was not 

made jointly by the FDIC and the FRB, the agencies jointly 

identified and communicated to the firms, certain firmspecific shortcomings with the 2013 resolution plans and 

agreed that the First Wave Companies must take immediate 

action to improve their resolvability and reflect those 

improvements in their 2015 plans. The agencies further 

agreed that in the event that the First Wave Companies have 

not, on or before July 1, 2015, submitted plans responsive 

to the identified shortcomings, the agencies expect to use 

their authority under Section 165(d) to determine that 

a resolution plan does not meet the requirements of the 

Dodd-Frank Act.

In August 2014, the agencies issued joint feedback letters to 

each of the First Wave Companies. The letters noted some 

improvements from the original plans submitted by the 

companies, but detailed specific shortcomings of each firm’s 

plan and the agencies expectations for the 2015 submission.

While the shortcomings of the plans varied across the First 

Wave Companies, the agencies identified several common 

features of the plans’ shortcomings. These common 

features included: (1) assumptions that the agencies 

regard as unrealistic or inadequately supported, such 

as assumptions about the likely behavior of customers, 

counterparties, investors, central clearing facilities, and 

regulators; and (2) the failure to make, or even to identify, 

the kinds of changes in firm structure and practices that 

would be necessary to enhance the prospects for orderly 

resolution. 

The agencies will require that the annual plans submitted 

by these firms in 2015 demonstrate that the firms are 

making significant progress to address all the shortcomings 

identified in the letters and are taking actions to improve 

their resolvability under the U.S. Bankruptcy Code. 

In July 2014, the First Wave Companies and two of the 

Second Wave Companies submitted revised resolution 

plans, and the three nonbank financial companies 

designated by the FSOC (referred to as Fourth Wave 

Companies) submitted their initial resolution plans. The 

FRB and the FDIC granted requests for extensions to two 

Second Wave Companies, which submitted their plans to 

the agencies by October 1, 2014. The FDIC and the FRB are 

reviewing the plans submitted by the various companies 

in July and October 2014, with the exception of one plan 

for which the review has been completed. In November 

2014, the FDIC and the FRB announced the completion of 

their review of this firm’s 2014 resolution plan and issued a 

joint letter to the firm. The agencies noted improvements 

from the original plan submitted in 2013. The guidance 

given to the firm for preparation of its 2015 plan submission 

stated that its 2014 plan provided a basis for a resolution 

strategy that could facilitate an orderly liquidation under 

bankruptcy. If fully developed in the future, the firm’s plan 

could reduce the risk that the company’s failure would 

pose to the stability of the U.S. financial system. The 

agencies also jointly identified specific shortcomings of the 

2014 resolution plan that need to be addressed in the 2015 

plan. The letter detailed the specific shortcomings and the 

expectations of the agencies for the 2015 submission. 

By December 31, 2013, 116 Third Wave Companies had 

submitted initial resolution plans. In August 2014, after 

reviewing the plans, the agencies provided each of the Third 

Wave Companies the following guidance for their second 

round submissions based on the relative size and scope of 

each firm’s U.S. operations:

♦ The more complex firms are required to file a full 

resolution plan that takes into account and discusses 

potential obstacles to resolvability identified by the 

agencies. The obstacles include global issues, financial 

market utility interconnections, and funding and liquidity. 

2 http://www.fdic.gov/regulations/reform/domesticguidance.pdf
ANNUAL REPORT 2014

22 MANAGEMENT’S DISCUSSION AND ANALYSIS

♦ Firms with less complex U.S. operations are permitted to 

file tailored plans and can use a model template issued by 

the agencies or follow the guidelines previously released 

by the agencies.

♦ Firms with limited U.S. operations may focus their plans 

on material changes to their initial plans as well as actions 

taken to strengthen the effectiveness of their initial plans.

♦ In August 2014, the agencies also released a tailored 

resolution plan template for the Third Wave Companies’ 

2014 plans. The optional template, which is intended 

to facilitate the preparation of tailored resolution plans, 

focuses on the nonbanking operations of the company 

and on the interconnections and interdependencies 

between its nonbanking and banking operations. 

♦ By December 31, 2014, 120 Third Wave Companies 

submitted plans to the agencies. The FDIC and the FRB 

are reviewing those plans.

Insured Depository Institution Resolution Plans

The FDIC has a separate rule that requires all IDIs with 

assets greater than $50 billion to submit resolution plans to 

the FDIC (IDI Rule). The IDI Rule requires each covered 

institution to provide a resolution plan that should allow 

the FDIC as receiver to resolve the institution in an orderly 

manner that enables prompt access of insured deposits, 

maximizes the return from the failed institution’s assets, and 

minimizes losses realized by creditors and the DIF. These 

plans complement those required under the 165(d) Rule. 

Based upon its review of IDI plans submitted prior to 

and during 2014, the FDIC issued guidance in December 

2014 for resolution plans required by the IDI Rule. Under 

the guidance, a covered institution must provide a fully 

developed discussion and analysis of a range of realistic 

resolution strategies. To assist institutions in writing 

their plans, the guidance includes direction regarding the 

elements that should be discussed in a fully developed 

resolution strategy and the cost analysis, clarification 

regarding assumptions made in the plan, and a list 

of significant obstacles to an orderly and least costly 

resolution that institutions should address. The guidance 

applies to the resolution plans of 36 institutions covered 

by the IDI Rule, as well as any new institution meeting 

the threshold, commencing with the 2015 resolution plan 

submissions.

Title II Resolution Strategy Development

Under the Dodd-Frank Act, failed or failing financial 

companies are expected to file for reorganization or 

liquidation under the U.S. Bankruptcy Code, just as any 

failed or failing nonfinancial company would. If resolution 

under the Bankruptcy Code would result in serious adverse 

effects to the U.S. financial stability, the Orderly Liquidation 

Authority (OLA) set out in Title II of the Dodd-Frank Act 

provides a back-up authority to the bankruptcy process. 

There are strict parameters on its use, however, and 

it can only be invoked under a statutorily prescribed 

recommendation and determination process, coupled with 

an expedited judicial review process.

Prior to the 2008 financial crisis, the FDIC’s receivership 

role was limited to IDIs. No regulator had the authority 

to resolve a failing financial company, (e.g., a BHC) or any 

of the company’s non-IDI affiliates or any other nonbank 

financial company through the FDIC’s receivership process, 

in order to avoid the systemic consequences that could arise 

from bankruptcy or other insolvency regime filing. The OLA 

addresses those limitations and gives the FDIC the back-up 

powers necessary to potentially resolve a failing BHC or 

other SIFI in an orderly manner that imposes accountability 

on shareholders, creditors, and management of the failed 

company while mitigating systemic risk and without cost to 

taxpayers.

The FDIC has largely completed the core rulemakings 

necessary to carry out its responsibilities under Title II 

of the Dodd-Frank Act. Additionally, the FDIC has been 

developing strategies including one approach, referred to 

as “Single Point of Entry (SPOE)”, to carry out its orderly 

liquidation authorities. In December 2013, the FDIC 

published a notice in the Federal Register that provides 

greater detail on the SPOE strategy and discusses the key 

issues that the FDIC could encounter in the resolution of a 

SIFI.3

 The notice requested public comment and views as to 

whether the SPOE approach can be effective in supporting 

3 Notice entitled, “Resolution of Systemically Important Financial Institutions: The Single Point of Entry Strategy,” 78 Fed. Reg. 

76614 (Dec. 18, 2013).
MANAGEMENT’S DISCUSSION AND ANALYSIS 23

the policy objectives of minimizing moral hazard and 

promoting market discipline while maintaining the stability 

of the U.S. financial system as set forth in Title II of the 

Dodd-Frank Act. In 2014, the FDIC reviewed all submitted 

comments. Firm-specific resolution strategies continue to 

be developed and refined. 

As part of the FDIC’s efforts to develop and refine strategies 

that could be implemented in a Title II resolution, the FDIC 

and the Bank of England, in conjunction with the financial 

institution regulators in the respective jurisdictions, have 

been developing contingency plans for the failure of a 

U.S.- or U.K.-based SIFI that has significant operations in 

the United Kingdom or the United States, respectively. Of 

the 28 global SIFIs (G-SIFIs) identified by the Financial 

Stability Board (FSB) of the Group of 20 (G-20) countries, 

four are headquartered in the United Kingdom and eight are 

headquartered in the United States. Moreover, more than 

80 percent of the reported foreign activities of the eight U.S. 

G-SIFIs emanates from the United Kingdom. In October 

2014, the FDIC was host to the Secretary of the Treasury, 

the Chair of the Federal Reserve Board of Governors, the 

Chancellor of the Exchequer, and the Governor of the Bank 

of England, as well as leading financial regulatory bodies 

in the United States and United Kingdom for an exercise 

designed to further promote a working relationship between 

U.S. and U.K. authorities in the event of the failure and 

resolution of a G-SIFI. The exercise’s high-level discussion 

furthered understanding among U.S. and U.K. principals 

regarding resolution strategies for G-SIFIs under the two 

countries’ resolution regimes. 

Cross-Border Efforts

Advance planning and cross-border coordination for 

the resolution of G-SIFIs will be essential to minimizing 

disruptions to global financial markets. Recognizing that 

G-SIFIs create complex international legal and operational 

concerns, the FDIC continues to reach out to foreign 

regulators to establish frameworks for effective crossborder cooperation. 

During 2014, the FDIC continued to coordinate with 

representatives from European authorities to discuss issues 

of mutual interest, including the resolution of European 

G-SIFIs and harmonization of receivership actions. The 

FDIC and the European Commission (E.C.) established a 

joint Working Group composed of FDIC and E.C. senior 

executives to focus on both resolution and deposit 

insurance issues. The Working Group meets twice a year 

with other interim interchanges, including the exchanging 

of staff members. Discussions were held concerning 

the FDIC’s experience with bank resolutions, systemic 

resolution strategies, the European Union (E.U.)-wide 

Credit Institution and Investment Firm Recovery and 

Resolution Directive, the E.C.’s amendment to harmonize 

deposit guarantee schemes across the E.U., and the E.C.’s 

Single Resolution Mechanism. In June 2014, the FDIC 

conducted a training seminar on resolutions for resolution 

authorities and E.C. staff.

The FDIC continues to foster its relationships with other 

jurisdictions that regulate G-SIFIs, including Switzerland, 

Germany, France, and Japan. In 2014, the FDIC had 

significant principal and staff-level engagements with these 

countries to discuss cross-border issues and potential 

impediments that would affect the resolution of a G-SIFI. 

This work will continue in 2015 with plans to host tabletop 

exercises with regulatory staff from these jurisdictions. 

Systemic Resolution Advisory Committee

In 2011, the FDIC Board approved the creation of the 

Systemic Resolution Advisory Committee (SRAC). The 

SRAC provides important advice to the FDIC regarding 

systemic resolutions, and advises the FDIC on a variety of 

issues including the following:

♦ 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.

♦ The tools needed to assist in cross-border relations with 

foreign regulators and governments when a systemic 

company has international operations. 

Members of the SRAC have a wide range of experience 

including managing complex firms; administering 

bankruptcies; and working in the legal system, accounting 
ANNUAL REPORT 2014

24 MANAGEMENT’S DISCUSSION AND ANALYSIS

field, and academia. A meeting of the SRAC was held in 

December 2014. The SRAC discussed, among other topics, 

living wills and bankruptcy, resolution plan transparency, 

international developments, ISDA protocol, and orderly 

liquidation updates.

Financial Stability Oversight Council 

The FSOC was created by the Dodd-Frank Act in July 2010 

to promote the financial stability of the United States. It is 

composed of ten voting members, including the Chairperson 

of the FDIC, and five non-voting members. 

The FSOC’s responsibilities include the following:

♦ Identifying risks to financial stability, responding to 

emerging threats in the system, and promoting market 

discipline.

♦ Identifying and assessing threats that institutions may 

pose to financial stability and, if appropriate, designating 

a nonbank financial company for supervision by the FRB 

subject to heightened prudential standards.

♦ Designating financial market utilities and payment, 

clearing, or settlement activities that are, or are likely to 

become, systemically important.

♦ Facilitating regulatory coordination and informationsharing regarding policy development, rulemaking, 

supervisory information, and reporting requirements.

♦ Monitoring domestic and international financial 

regulatory proposals and advising Congress and making 

recommendations to enhance the integrity, efficiency, 

competiveness, and stability of U.S. financial markets. 

♦ Producing annual reports describing, among other things, 

the Council’s activities and potential emerging threats to 

financial stability.

In 2014, the FSOC issued its fourth annual report. 

Generally, at each of its meetings, the FSOC discusses 

various risk issues. In 2014, the FSOC meetings addressed, 

among other topics, U.S. fiscal issues, market environment 

and developments in the Ukraine, an asset management 

industry conference hosted by the FSOC, short-term 

wholesale funding markets, money market mutual fund 

reforms, and nonbank financial company designations.

SUPERVISION 

Supervision and consumer protection are cornerstones 

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

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

supervision program promotes the safety and soundness 

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

promotes community investment initiatives. 

Examination Program 

The FDIC’s strong bank examination program is the core 

of its supervisory program. As of December 31, 2014, the 

FDIC was the PFR for 4,138 FDIC-insured, state-chartered 

institutions that were not members of the Federal Reserve 

System [generally referred to as “state nonmember” (SNM) 

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, 2014, the FDIC conducted 2,087 

statutorily required risk management examinations, 

including a review of Bank Secrecy Act (BSA) compliance, 

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

frames. The FDIC also conducted 1,406 statutorily required 

SRAC member and former Chairman of the 

Federal Reserve Board of Governors Paul Volcker 

(left) and FDIC Chairman Gruenberg discussing 

resolution strategy.
MANAGEMENT’S DISCUSSION AND ANALYSIS 25

CRA/compliance examinations (1,019 joint CRA/compliance 

examinations, 376 compliance-only examinations, and 11 

CRA-only examinations), and 4,667 specialty examinations.

The table above compares the number of examinations, by 

type, conducted from 2012 through 2014.

Risk Management

As of December 31, 2014, 291 insured institutions with 

total assets of $86.7 billion were designated as problem 

institutions for safety and soundness purposes (defined as 

those institutions having a composite CAMELS4 rating of 

“4” or “5”), compared to the 467 problem institutions with 

total assets of $152.7 billion on December 31, 2013. This 

constituted a 38 percent decline in the number of problem 

institutions and a 43 percent decrease in problem institution 

assets. In 2014, 202 institutions with aggregate assets 

of $64.4 billion were removed from the list of problem 

financial institutions, while 26 institutions with aggregate 

assets of $6.3 billion were added to the list. The National 

Republic Bank of Chicago, located in Chicago, Illinois, was 

the largest failure in 2014, with $843 million in assets. The 

FDIC is the PFR for 202 of the 291 problem institutions, 

with total assets of $58.7 billion.

During 2014, the FDIC issued the following formal and 

informal corrective actions to address safety and soundness 

concerns: 41 Consent Orders and 180 MOUs. Of these 

actions, 20 Consent Orders and 23 MOUs were issued, based 

in whole or in part, on apparent violations of the BSA.

All risk management exams were conducted in accordance 

with statutorily-established time frames, and related 

enforcement actions for newly-identified 4- and 5- rated 

institutions were issued in accordance with the time frames 

established by FDIC policy. The FDIC was slightly 

below its performance standard for timeliness in the 

issuance of enforcement actions for newly-identified 

3-rated institutions.

FDIC EXAMINATIONS 2012 – 2014

2014 2013 2012

Risk Management (Safety and Soundness): 

State Nonmember Banks 1,881 2,077 2,310

Savings Banks 206 203 249

Savings Associations 0 0 1

National Banks 0 0 1

State Member Banks 0 4 2

Subtotal–Risk Management Examinations 2,087 2,284 2,563

CRA/Compliance Examinations:

Compliance/Community Reinvestment Act 1,019 1,201 1,044

Compliance-only 376 371 611

CRA-only 11 4 10

Subtotal–CRA/Compliance Examinations 1,406 1,576 1,665

Specialty Examinations:

Trust Departments 428 406 446

Information Technology and Operations 2,113 2,323 2,642

Bank Secrecy Act 2,126 2,328 2,585

Subtotal–Specialty Examinations 4,667 5,057 5,673

Total 8,160 8,917 9,901

4 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).
ANNUAL REPORT 2014

26 MANAGEMENT’S DISCUSSION AND ANALYSIS

Compliance

As of December 31, 2014, 56 insured SNM institutions, about 

1 percent of all supervised institutions, with total assets 

of $61 billion, were problem institutions for compliance, 

CRA, or both. Most of the existing problem institutions 

for compliance were rated “4” for compliance purposes, 

with only one rated “5.” For CRA purposes, the majority 

are rated “Needs to Improve,” and only three are rated 

“Substantial Noncompliance.” As of December 31, 2014, 

all follow-up examinations for problem institutions were 

performed on schedule.

During 2014, the FDIC conducted all required compliance 

and CRA examinations and, when violations were identified, 

completed follow-up visits and implemented appropriate 

enforcement actions in full accordance with FDIC policy.

In completing these activities, the FDIC substantially met 

its internally-established time standards for the issuance of 

final examination reports and enforcement actions.

Overall, banks demonstrated strong consumer compliance 

programs. The most significant consumer protection issue 

that emerged from the 2014 compliance examinations 

involved banks’ failure to adequately monitor third-party 

vendors. For example, the FDIC found violations involving 

unfair or deceptive acts or practices relating to issues 

such as failure to disclose material information about new 

product features being offered, deceptive marketing and 

sales practices, and misrepresentations about the costs 

of products. As a result, the FDIC issued orders requiring 

consumer restitution and civil money penalty (CMP) 

actions.

During 2014, the FDIC issued the following formal and 

informal corrective actions to address compliance 

concerns: 14 Consent Orders and 42 MOUs. In certain 

cases, the Consent Orders contain requirements for 

institutions to pay restitution in the form of consumer 

refunds for different violations of laws. During 2014, 

institutions subject to Consent Orders refunded over $105 

million to consumers. These refunds primarily related to 

unfair or deceptive practices by institutions, as discussed 

above. Additionally, in 2014, the FDIC issued 24 CMPs 

relating to consumer compliance, totaling just over $9.5 

million in CMPs.

Large and Complex Financial Institutions

The FDIC established the Complex Financial Institutions 

and Large Bank Supervision Groups (Groups) within its 

Division of Risk Management Supervision in response to 

the growing complexity of large banking organizations. 

These Groups are responsible for supervisory oversight 

and ongoing monitoring, and support the insurance and 

resolutions business lines. For SNM banks over $10 billion, 

the FDIC generally applies a continuous examination 

program whereby dedicated staff conduct ongoing onsite 

supervisory examinations and institution monitoring, as 

previously discussed. At institutions where the FDIC is not 

the PFR, staff works closely with other financial institution 

regulatory authorities to identify emerging risk and assess 

the overall risk profile of large and complex institutions. 

The Large Insured Depository Institution (LIDI) Program 

remains the primary instrument for off-site monitoring 

of IDIs with $10 billion or more in total assets. The LIDI 

Program provides a comprehensive process to standardize 

data capture and reporting through nationwide quantitative 

and qualitative risk analysis of large and complex 

institutions. In 2014, the LIDI Program encompassed 

106 institutions with total assets of $12.4 trillion. The 

comprehensive LIDI Program is essential to effective large 

bank supervision because it captures information on the 

risks and utilizes that information to best deploy resources 

to high-risk areas, determine the need for supervisory 

action, and support insurance assessments and resolution 

planning. 

The Shared National Credit (SNC) Program is an 

interagency initiative administered jointly by the FDIC, the 

FRB, and the OCC to ensure consistency in the regulatory 

review of large, syndicated credits, as well as identify 

risk in this market, which comprises a large volume of 

domestic commercial lending. In 2014, outstanding credit 

commitments identified in the SNC Program totaled $3.4 

trillion. The FDIC, the FRB, and the OCC issued a joint 

release detailing the results of the review in November 2014.

In 2014, the FDIC implemented various initiatives to expand 

knowledge and expertise related to large bank supervisory 

matters. For example, a long-term program was established 

to expand on-the-job training and provide mentoring of 
MANAGEMENT’S DISCUSSION AND ANALYSIS 27

select staff regarding examination processes and risk 

analysis at large banks. The FDIC is also focused on hiring 

and developing additional staff with quantitative skill sets 

to facilitate the evaluation of complex modeling used by the 

largest banks. Additionally, several training initiatives were 

developed and implemented in 2014 that focused on large 

bank supervisory risks, structures, vulnerabilities, 

and processes.

Bank Secrecy Act/Anti-Money Laundering 

The FDIC pursued a number of BSA, Anti-Money 

Laundering (AML), and Counter Financing of Terrorism 

(CFT) initiatives in 2014. 

In January and June 2014, the FDIC conducted International 

AML/CFT training sessions for 61 government officials from 

Afghanistan, Algeria, Azerbaijan, Kazakhstan, Mali, Nigeria, 

Pakistan, and Yemen. Additionally, in March 2014, the FDIC 

conducted an International AML and CFT training session in 

Kuala Lumpur, Malaysia, the first such training session held 

outside of the United States. The training was coordinated 

with Bank Negara Malaysia and included 59 participants 

representing financial regulatory agencies from Cambodia, 

Indonesia, Laos, Malaysia, Myanmar, the Philippines, 

Thailand, and Vietnam. These training sessions assisted 

participating jurisdictions in implementing AML/CFT 

standards and providing law enforcement with financial 

investigative and other skills necessary to combat money 

laundering, terrorist financing, and fraud. Specifically, each 

of the training sessions focused on AML/CFT controls, the 

AML examination process, customer due diligence, and 

suspicious activity monitoring. Additionally, in August 

2014, the FDIC hosted the Office of Foreign Assets Control 

(OFAC) for an interagency teleconference to discuss recent 

changes to existing U.S. economic sanctions programs, as 

well as OFAC compliance expectations and enforcement 

case studies.

In December 2014, the FFIEC released the 2014 

Bank Secrecy Act/Anti-Money Laundering (BSA/

AML) Examination Manual (BSA/AML Manual). The 

revised BSA/AML Manual provides current guidance on 

risk-based policies, procedures, and processes for banking 

organizations to comply with the BSA and safeguard 

operations from money laundering and terrorist financing. 

It also reflects regulatory changes and clarifies supervisory 

expectations that have occurred since the BSA/AML Manual 

was last updated. The 2014 revisions incorporate feedback 

from the banking industry and examination staff.

Information Technology, Cyber Fraud, 

and Financial Crimes 

To address the specialized nature of technology- and 

operations-related supervision, cyber risks, and controls 

in the banking industry, the FDIC routinely conducts 

information technology (IT) and operations examinations at 

FDIC-supervised institutions. The FDIC and other banking 

agencies also conduct IT and operations examinations 

of technology service providers (TSPs), which support 

financial institutions. The result of an IT and operations 

examination is a rating under the FFIEC Uniform Rating 

System for Information Technology, which is incorporated 

into the Management component of the Safety and 

Soundness rating and the Safety and Soundness Report of 

Examination.

In 2014, the FDIC conducted 2,113 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.

In addition to the FDIC’s operations and technology 

examination program, the FDIC regularly monitors 

cybersecurity issues in the banking industry through 

on-site examinations, regulatory reports, and intelligence 

reports. The FDIC works with groups, such as the Financial 

and Banking Information Infrastructure Committee, the 

Financial Services Sector Coordinating Council for Critical 

Infrastructure Protection and Homeland Security, the 

Financial Services Information Sharing and Analysis Center 

(FS-ISAC), other regulatory agencies, law enforcement, 

and others to share information regarding emerging issues 

and coordinate responses. Further, the FDIC actively 

participates in the FFIEC’s Cybersecurity and Critical 

Infrastructure Working Group (CCIWG). The CCIWG was 

formed in 2013 and serves as a forum to address policy 

related to cybersecurity and critical infrastructure. It 

enables members to communicate and collaborate on 
ANNUAL REPORT 2014

28 MANAGEMENT’S DISCUSSION AND ANALYSIS

activities to support and strengthen the resilience of the 

financial services sector and provides input to FFIEC 

principal members regarding cybersecurity matters.

In 2014, the FDIC continued a multi-year effort begun in 

2010 to strengthen IT and cyber-related educational and 

professional development programs for the examination 

workforce. As part of this effort, newly commissioned 

examiners must complete four IT-related courses – an 

IT examination course as well as courses on payment 

systems; risk assessment, IT audit and business continuity 

planning; and information security. Once this course work 

is completed, these examiners are able to conduct IT 

examinations at the FDIC’s least technologically complex 

supervised financial institutions and better understand the 

risks associated with the FDIC’s more complex financial 

institution IT examinations conducted by specialized IT 

examiners. The FDIC now has nearly 300 commissioned 

examiners who have completed all four post-commission 

IT schools and more than 500 who have completed at least 

one of these schools. An additional facet of this multi-year 

effort is an on-the-job training program to develop 

additional examiners with more advanced IT examination 

skills. In 2014, 18 examiners received advanced 

certifications in IT, bringing the total of examiners with 

advanced IT certifications to 116.

The FDIC’s major accomplishments during 2014 to 

promote IT security, assess risk management practices, 

and combat cyber fraud and other financial crimes included 

the following:

♦ Developed and distributed to all FDIC-supervised banks 

the FDIC’s Cyber Challenge simulation exercise to 

encourage community banks to discuss operational risk 

issues and the potential impact of information technology 

disruptions. The exercise contained four videos that 

depict various operational disruptions and materials to 

facilitate discussion about how the bank would respond 

to the disruptions. Lists of reference materials where 

banks could obtain additional information were also 

included.

♦ Published two FDIC Consumer News articles: “More 

About How to Protect Yourself From Data Breaches” and 

“When People Face Tough Time, Crooks Try to Profit.”

♦ Re-issued, as a FIL, three documents that contain 

practical ideas for community banks to consider when 

they engage in technology outsourcing.

♦ Hosted the FFIEC IT Examiners Conference that 

addressed technology and operational issues facing the 

federal financial regulatory agencies.

♦ Commenced planning a Financial Crimes Conference for 

staff that will focus on all types of financial fraud, and 

how the law enforcement community and regulators can 

effectively respond. The conference is co-sponsored by 

the U.S. Department of Justice (DOJ) and will be held in 

June 2015.

♦ Assisted financial institutions in identifying and shutting 

down “phishing” websites that attempt to fraudulently 

obtain and use an individual’s confidential personal or 

financial information.

Major interagency accomplishments as a member of the 

FFIEC included the following:

♦ Collaborated on the development of an FFIEC 

cybersecurity assessment pilot program conducted at 

more than 500 community banks and TSPs. The pilot 

program was designed to assess how well community 

financial institutions manage cybersecurity and their 

preparedness to mitigate cyber risks. The results of the 

assessment are instructive and will help FFIEC members 

make informed decisions about how they prioritize 

actions to enhance the effectiveness of cybersecurityrelated supervisory programs, guidance, and examiner 

training.

♦ Published FFIEC statements on Cyber Attacks on ATM 

and Card Authorization Systems, as well as Distributed 

Denial of Service (DDoS) Attacks. 

♦ Published an FFIEC Technology Alert on IT 

vulnerabilities.

♦ Co-sponsored and conducted an interagency webinar for 

community banks addressing senior management’s role in 

cybersecurity. Over 5,000 chief executive officers (CEOs) 

and senior managers participated in the webinar.

♦ Issued a press release and FFIEC statement providing 

financial institutions with information on available 

resources to mitigate potential cyber threats and 
MANAGEMENT’S DISCUSSION AND ANALYSIS 29

recommending that institutions of all sizes participate 

in cyber-related information sharing forums, such as the 

FS-ISAC.

Minority Depository Institution Activities

The preservation of minority depository institutions (MDIs) 

remains a high priority for the FDIC. In July 2014, the FDIC 

released a study specifically on MDIs entitled, Minority 

Depository Institutions: Structure, Performance, and 

Social Impact. The study explores the role of MDIs in the 

U.S. financial system: how the industry has changed over 

time, how MDIs have performed financially, and how they 

have served their communities. The report notes that MDIs 

underperform non-MDIs in terms of standard industry 

measures of financial performance, but it concludes that 

MDIs often promote the economic viability of minority and 

underserved communities. Compared with community 

banks, the markets served by MDI offices include a higher 

share of the population living in low- or moderate-income 

(LMI) census tracts, as well as a higher share of minority 

populations. In addition, among institutions that reported 

data under the Home Mortgage Disclosure Act, MDIs 

originated a larger share of their mortgages to borrowers 

who live in LMI census tracts and to minority borrowers 

than did non-MDI community banks. These findings 

demonstrate the essential role MDIs play in their local 

communities and their high level of commitment to the 

populations they serve.

In 2014, the FDIC continued to advocate for MDI and 

Community Development Financial Institution (CDFI) 

industry-led strategies for success, building on the results 

of the 2013 Interagency Minority Depository Institution 

and CDFI Bank Conference. These strategies include 

industry-led solutions; MDI and CDFI bankers working 

together to tell their story; collaborative approaches to 

partnerships to share costs, raise capital, or pool loans; 

technical assistance; and innovative use of federal 

programs. The FDIC has begun working with the OCC and 

the FRB to plan for the 2015 Interagency Conference for 

MDI and CDFI Banks and to build upon these strategies.

The FDIC continually pursued ways to improve 

communication and interaction with MDIs and to respond 

to the concerns of minority bankers. In addition to active 

outreach with MDI trade groups, the FDIC annually offers 

to arrange meetings between regional management and 

each MDI’s board of directors to discuss issues of interest. 

In addition, the FDIC routinely contacts FDIC-supervised 

MDIs to offer return visits and technical assistance 

following the conclusion of each safety and soundness, 

compliance, CRA, and specialty examination to assist 

bank management in understanding and implementing 

examination recommendations. These return visits, 

normally conducted 90 to 120 days after the examination, 

are to provide recommendations or feedback for improving 

operations, not to identify new problems or issues. MDIs 

also may initiate contact with the FDIC to request technical 

assistance at any time. In 2014, the FDIC provided 119 

individual technical assistance sessions on approximately 

80 risk management and compliance topics, including, but 

not limited to, the following:

♦ Bank Secrecy Act and Anti-Money Laundering.

♦ Basel III Capital Rules.

♦ Branch Opening and Closing Requirements.

♦ CRE Concentrations.

♦ Community Reinvestment Act.

♦ Information Technology.

♦ Interest Rate Risk.

♦ Loan Underwriting and Administration.

♦ New Mortgage Rules/Ability to Repay.

♦ Sensitivity to Market Risk.

♦ Third-Party Risk Management.

♦ Troubled Debt Restructurings.

The FDIC regional offices also held outreach, training, and 

educational programs for MDIs through conference calls 

and banker roundtables. In 2014, topics of discussion for 

these sessions included many of those listed above, as well 

as the FDIC’s Technical Assistance Video Program, Capital 

Raising, and PCA.

Other Rulemaking and Guidance Issued

During 2014, the FDIC issued and participated in the 

issuance of other rulemaking and guidance in several areas 

as described below.
ANNUAL REPORT 2014

30 MANAGEMENT’S DISCUSSION AND ANALYSIS

Registration of Municipal Advisors 

In January 2014, the FDIC issued a FIL to advise FDICsupervised financial institutions on the registration 

requirements for those institutions that meet the definition 

of “municipal advisor.” Section 975 of the Dodd-Frank Act 

amended Section 15B(a) of the Securities Exchange Act 

of 1934 to make it unlawful for “municipal advisors,” as 

defined in the Dodd-Frank Act, to provide certain advice 

to or solicit municipal entities or certain other persons 

without registering with the SEC. In September 2013, the 

SEC issued a final rule establishing a permanent registration 

system for municipal advisors.

Paying Agent Notification Requirements

In February 2014, the FDIC issued a FIL to alert bankers to 

the SEC’s amendment to the Exchange Act Rule 17Ad-17 

to implement the requirements of Section 929W of the 

Dodd-Frank Act. The amendments add a requirement 

that “paying agents” send a one-time notification to 

“unresponsive payees” stating that the agent has sent a 

security holder a check that has not yet been negotiated.

Income Tax Allocation in a Holding 

Company Structure

In June 2014, the FDIC and the other federal banking 

agencies issued an addendum to the 1998 Interagency 

Policy Statement on Income Tax Allocation in a Holding 

Company Structure. Since the beginning of the 2008 

financial crisis, many disputes have occurred between 

holding companies in bankruptcy and failed IDIs regarding 

the ownership of tax refunds generated by the IDIs. Certain 

court decisions have found that holding companies in 

bankruptcy own tax refunds created by failed IDIs based 

on language in their tax-sharing agreements that the courts 

interpreted as creating a debtor-creditor relationship as 

opposed to acknowledging an agency relationship. The 

addendum seeks to remedy this problem by requiring IDIs 

to clarify that their tax-sharing agreements acknowledge 

that an agency relationship exists between the holding 

company and its subsidiary IDI with respect to tax refunds 

attributable to income earned, taxes paid, and losses 

incurred by the IDI, and provides a sample paragraph to 

accomplish this goal. The addendum also clarifies how 

certain requirements of Sections 23A and 23B of the Federal 

Reserve Act apply to tax allocation agreements between 

IDIs and their affiliates. Those IDIs and their holding 

companies subject to the 1998 Interagency Policy Statement 

were expected to implement the addendum no later than 

October 31, 2014. The FDIC will review compliance with 

the guidance in upcoming examinations of affected IDIs.

Economic Growth and Regulatory 

Paperwork Reduction Act

The FDIC, along with the other banking regulatory agencies, 

launched a cooperative, three-year effort to review all 

of their regulations. The purpose of the review, which 

is mandated by the Economic Growth and Regulatory 

Paperwork Reduction Act of 1996 (EGRPRA), is to identify 

and eliminate any regulatory requirements that are outdated 

or otherwise unnecessary.

For the purpose of this review, the agencies categorized 

their regulations into 12 separate groups. Over the next two 

years, groups of regulations will be published for comment, 

providing industry participants, consumer and community 

groups, and other interested parties an opportunity to 

identify regulatory requirements they believe are no longer 

needed or should be modified. The agencies will then 

analyze the comments and propose amendments to their 

regulations where appropriate.

In June 2014, the agencies issued the first three groups 

of regulations for comment: Applications and Reporting, 

Powers and Activities, and International Operations. 

During the 90-day comment period, which ended September 

2, 2014, 40 letters were received. Staff is reviewing and 

analyzing the comments.

One such comment letter resulted in the FDIC’s issuance 

of a FIL in November 2014, which eliminates application 

requirements for state-chartered banks engaging in 

activities or investments permissible for a national bank if 

the bank maintains certain documentation, including that 

the activity is permissible under relevant state law. The 

FIL clarifies that this change applies to unincorporated 

subsidiaries of state-chartered banks operating as a 

limited liability company (LLC), a limited partnership, or 

a similar entity wishing to engage in activities permissible 

for a national bank. In addition, in November 2014, the 

FDIC issued guidance through a FIL to aid applicants in 

developing proposals for deposit insurance and to provide 

transparency to the application process. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 31

As a part of the regulatory burden reduction effort, the 

agencies hosted a banker outreach meeting in December 

2014, in Los Angeles, California, to facilitate awareness of 

the EGRPRA project and to listen to stakeholder comments 

and suggestions. FDIC Chairman Martin J. Gruenberg, 

FRB Governor Lael Brainard, and Comptroller Thomas J. 

Curry were featured speakers at the meeting. Staff from 

each of the federal banking agencies, as well as regional 

representatives of the major industry trade groups and 

community advocates, attended the meeting. The agencies 

plan to hold additional roundtable discussions with bankers 

and interested parties and will publish details about these 

sessions at http://www.fdic.gov/EGRPRA/index.html and 

http://egrpra.ffiec.gov as they are finalized.

FDIC Clarifying Supervisory Approach to 

Institutions Establishing Account Relationships 

with Third-Party Payment Processors

In July 2014, the FDIC issued guidance clarifying its 

supervisory approach to institutions establishing account 

relationships with third-party payment processors (TPPPs). 

The focus of the FDIC’s supervisory approach to institutions 

establishing account relationships with TPPPs is to ensure 

that institutions have adequate procedures for conducting 

due diligence, underwriting, and ongoing monitoring of 

these relationships. The guidance stressed that insured 

institutions that properly manage customer relationships 

are neither prohibited nor discouraged from providing 

services to any customer operating in compliance with 

applicable law. 

Interagency Guidance on Home Equity Lines of 

Credit Nearing Their End-of-Draw Period

In July 2014, the FDIC, jointly with the OCC, the FRB, the 

NCUA, and the Conference of State Bank Supervisors, 

issued home equity lines of credit (HELOC) guidance, 

which recognizes that some institutions and borrowers 

may face challenges as HELOCs near their end-of-draw 

period. Many borrowers will have the financial capacity to 

meet their contractual obligations as HELOCs transition 

from the draw period to an amortizing or balloon payment. 

However, some borrowers may have difficulty meeting 

higher payments resulting from principal amortization or 

an interest rate reset, while others may encounter problems 

refinancing an existing loan due to changes in financial 

circumstances, or declines in property values since the 

HELOC’s origination date. The HELOC guidance provides a 

framework for managing HELOCs nearing their end-of draw 

period and communicating and prudently working with 

HELOC borrowers experiencing financial difficulties. 

Prudent Management of Agricultural 

Credits through Economic Cycles

In July 2014, the FDIC issued a FIL reminding institutions 

engaged in agricultural lending to maintain sound 

underwriting standards, strong credit administration 

practices, and effective risk management strategies. The 

FIL encourages financial institutions to work constructively 

with borrowers to strengthen the credit and mitigate 

loss when agricultural borrowers experience financial 

difficulties.

Regulatory Relief

During 2014, the FDIC issued six FILs that provide guidance 

to help financial institutions and to facilitate recovery in 

areas affected by tornadoes, flooding, and other severe 

storms. 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.

Frequently Asked Questions for Implementing the 

Interagency Guidance on Leveraged Lending 

In November 2014, the FDIC, jointly with the FRB and the 

OCC, issued Frequently Asked Questions (FAQs) through 

a FIL to provide clarification on the implementation and 

interpretation of the leveraged lending guidance issued in 

March 2013. The guidance is intended to help institutions 

strengthen risk management frameworks to ensure that 

leveraged lending activities do not heighten risk in the 

banking system through the origination and distribution of 

poorly underwritten and low-quality loans. The responses 

contained in the FAQs foster industry and examiner 

understanding and promote consistent application and 

implementation of the guidance.
ANNUAL REPORT 2014

32 MANAGEMENT’S DISCUSSION AND ANALYSIS

Depositor and Consumer Protection 

Rulemaking and Guidance

Guidance on Increased Maximum Flood Insurance 

Coverage for “Other Residential Buildings”

The FDIC, the OCC, the FRB, the NCUA, and the Farm 

Credit Administration (collectively, the agencies) issued 

an interagency statement in May 2014 regarding the new 

National Flood Insurance Program (NFIP) maximum 

limit of flood insurance coverage for non-condominium 

residential buildings designed for use for five or more 

families (classified by the NFIP as “Other Residential 

Buildings”). The guidance discusses agency’ expectations 

and financial institution responsibilities when, as a result 

of the increase in the maximum limit of building coverage 

for such properties, a financial institution determines that 

a building securing a designated loan is covered by flood 

insurance in an amount less than the amount required under 

federal flood insurance law.

Guidance on Unfair or Deceptive Credit Practices

In August 2014, the FDIC, the FRB, the CFPB, the NCUA, 

and the OCC issued guidance regarding certain consumer 

credit practices. This guidance was prompted by the 

Dodd-Frank Act’s repeal of the authority to issue credit 

practices rules for banks, savings associations, and federal 

credit unions. The guidance cautioned institutions not 

to construe the repeal of rulemaking authority under the 

Federal Trade Commission Act (FTC Act) to indicate 

that the unfair or deceptive practices described in these 

former regulations are permissible. The guidance made 

clear that the credit practices described in these former 

regulations remain subject to Section 5 of the FTC Act. As 

such, depending on the facts and circumstances, if banks 

engage in the unfair or deceptive practices described in 

the former credit practices rules, such conduct may violate 

the prohibition against unfair or deceptive practices in 

Section 5 of the FTC Act, and Sections 1031 and 1036 of the 

Dodd-Frank Act.

Proposed Revisions to Interagency Question and 

Answers on Community Reinvestment

In September 2014, the FRB, the FDIC, and the OCC 

requested public comments on proposed revisions to 

the “Interagency Questions and Answers Regarding 

Community Reinvestment.” The Questions and Answers 

provide additional guidance to financial institutions and 

the public on agency regulations that implement the 

CRA. The proposed new and revised guidance address 

questions raised by bankers, community organizations, 

and others regarding agency CRA regulations, including 

access to banking service, innovative or flexible lending 

practices, qualitative assessment factors, and community 

development. The new round of CRA Questions and 

Answers is a follow-up to final revisions to earlier 

Questions and Answers published in the Federal Register

in November 2013.

Proposed Rulemaking on Flood Insurance Rule

In October 2014, the FDIC, the FRB, the NCUA, the OCC, 

and the Farm Credit Administration issued a proposed 

rule to amend regulations pertaining to loans secured 

by property located in special flood hazard areas. The 

proposed rule would implement provisions of the 

Homeowner Flood Insurance Affordability Act of 2014 

(HFIAA) relating to escrowing flood insurance payments 

and the exemption of certain detached structures from the 

mandatory flood insurance purchase requirement. HFIAA 

amends the escrow provisions of the Biggert-Waters Flood 

Insurance Reform Act of 2012 (the Biggert-Waters Act).

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.

♦ Facilitates partnerships to support community and small 

business development.
MANAGEMENT’S DISCUSSION AND ANALYSIS 33

Advisory Committee on Economic Inclusion 

The Advisory Committee on Economic Inclusion (ComE-IN) 

provides the FDIC with advice and recommendations 

on important initiatives focused on expanding access to 

banking services to underserved populations. This may 

include reviewing basic retail financial services such as 

check cashing, money orders, remittances, stored value 

cards, small-dollar loans, savings accounts, and other 

services that promote individual asset accumulation and 

financial stability. During 2014, the ComE-IN met in April 

and October to discuss safe banking products, mobile 

financial services, financial education opportunities for 

young people, consumer demand for small dollar credit, 

Bank On programs, and the results from the FDIC National 

Survey of Unbanked and Underbanked Households.

FDIC National Survey of Unbanked and 

Underbanked Households and Survey of Banks’ 

Efforts to Serve the Unbanked and Underbanked

As part of its ongoing commitment to expanding economic 

inclusion in the United States, the FDIC works to fill the 

research and data gap regarding household participation 

in mainstream banking and the use of nonbank financial 

services. In addition, Section 7 of the Federal Deposit 

Insurance Reform Conforming Amendments Act of 2005 

(Reform Act) mandates that the FDIC regularly report 

on bank efforts to bring individuals and families into 

the conventional finance system. In response, the FDIC 

regularly conducts and reports on surveys of households 

and banks to inform the efforts of financial institutions, 

policymakers, regulators, researchers, academics, and 

others.

During 2014, the FDIC published a report on the 2013 

FDIC National Survey of Unbanked and Underbanked 

Households, based on data collected in partnership with the 

U.S. Census Bureau. The survey focuses on basic checking 

and savings account ownership, but it also explores 

households’ use of alternative financial services to better 

understand the extent to which families are meeting their 

financial needs outside of mainstream financial institutions. 

In addition, the report identified opportunities to better 

include or retain consumers as bank customers, including 

opportunities associated with economic transitions such 

as gaining or losing a job. The report was presented to 

the ComE-IN members in October. Also, to enhance 

transparency and utility of the data, the FDIC developed a 

web-based resource to allow bankers and other members of 

the public to specify and generate reports that reflect their 

particular interests.

The FDIC continued planning for new research to learn 

about bank efforts to serve unbanked and underbanked 

customers. During 2014, the FDIC advanced work to 

develop new survey questions and established relationships 

with external vendors that may be called upon to assist with 

qualitative research efforts, such as in-depth interviews with 

a limited number of bankers.

Partnerships to Promote Consumer Access 

The FDIC, through work with Alliances for Economic 

Inclusion, Bank On initiatives, and in collaboration 

with many local and national organizations, supports 

consumer financial education and access. 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 and owners 

of small businesses into the financial mainstream.

During 2014, the FDIC supported 16 AEI programs across 

the nation. Many AEIs formed committees and working 

groups to address specific challenges and financial services 

needs in their communities. These included retail financial 

services for underserved populations, savings initiatives, 

affordable remittance products, small-dollar loan programs, 

targeted financial education programs, and other credit and 

asset-building programs.

The FDIC continued to work with a wide range of banks 

and nonprofit organizations in all of the AEI markets. For 

example, in March 2014, the FDIC, with the Small Business 

Administration’s support, conducted a Small Business 

Resource Summit and Entrepreneurial Cafe in Fairmont, 

West Virginia. This event brought together an array of 

banks, training providers, nonprofit organizations, and 

state and federal agencies to connect small businesses 

with the resources they need. In January and June 2014, 

the Northeast Oklahoma AEI (NEOK AEI) membership 

conducted credit building events in Tahlequah and Tulsa. 

At these events, consumers reviewed their credit reports 
ANNUAL REPORT 2014

34 MANAGEMENT’S DISCUSSION AND ANALYSIS

in one-on-one sessions with credit counselors, lenders, and 

underwriters who assisted them in interpreting, correcting 

and improving their credit histories. Other events in 2014 

that were co-sponsored by the FDIC in four AEI markets 

included training sessions on the importance of credit 

scores and the potential for enhancing credit profiles. 

AEI members collaborated with the Credit Builders 

Alliance, a nonprofit organization that works to facilitate 

credit reporting for community development lenders, 

to train more than 200 representatives of social service 

organizations, local governments and banks, in greater Los 

Angeles, California; Milwaukee, Wisconsin; and Wilmington, 

Delaware, on the role of credit building for low- and 

moderate-income consumers.

The FDIC also provided information and technical 

assistance in the development of safe and affordable 

transaction and savings accounts and other products and 

services designed to meet the needs of low- and moderateincome consumers. In over 50 markets, the FDIC provided 

technical assistance to local Bank On initiatives and to 

asset building coalition activities designed to reduce 

barriers to banking and increase access to the financial 

mainstream. The FDIC also supported efforts to link 

consumers to financial education and savings through 

engagement in activities organized around designated 

“Money Smart” or “Financial Fitness” weeks or months that 

involved hundreds of consumer outreach events. Moreover, 

working with the national, local, state, and targeted (youth, 

military, and minority consumer-focused) America Saves

campaigns, FDIC community affairs teams continued to link 

banking companies to active efforts for engaging consumers 

with setting savings goals at tax time and year round. 

Banker Teleconferences

In 2014, the FDIC hosted a series of banker teleconferences 

to maintain open lines of communication and update 

supervised institutions about related rulemakings, 

guidance, and emerging issues in compliance and 

consumer protection. Teleconference participants 

included bank directors, officers, staff, and other banking 

industry professionals.

Three teleconferences were held in 2014. The topics 

discussed included (1) revisions to the “Interagency 

Questions and Answers Regarding Community 

Reinvestment, (2) Common Questions and Answers 

Pertaining to Implementation of the CFPB’s Ability-to-Repay 

and Loan Originator Compensation Final Rules, and (3) an 

update on flood insurance matters.

Advancing Financial Education 

The FDIC expanded its financial education efforts during 

2014 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. In particular, the FDIC took steps to 

more closely align its financial education activities with the 

Starting Early for Financial Success focus of the Financial 

Literacy and Education Commission. 

The FDIC signed a multi-year MOU with the CFPB in 

April 2014, which leverages each agency’s strengths to 

improve financial education and decision-making skills 

among American youth from pre-kindergarten through age 

20. Early results of the new partnership include tailored 

financial education resources for teachers, youth, and 

parents/caregivers. 

As part of the new partnership, the FDIC began to develop 

a new instructor-led Money Smart curriculum series 

for young people, to be used as a resource for teachers. 

Bankers can also use these tools as they work with schools, 

non-profit organizations, and other youth-based audiences. 

The age-appropriate series, targeted for release in early 

2015, will consist of four free standard-aligned curriculums 

that empower teachers with engaging activities to integrate 

financial education instruction into subjects such as math, 

English, and social studies. Each curriculum includes a 

new parent resource guide with information about the 

topics being covered in class, as well as at-home activities. 

The curriculum will be made available through the new 

Teacher Online Resource Center (TORC) website. (https://

www.fdic.gov/consumers/education/teachers.html) that 

was launched in September 2014. The TORC is a central 

location for teachers to access resources from across 

the FDIC and CFPB that can support financial literacy 

instruction.

Also, as part of the new partnership, in August 2014, the 

FDIC and CFPB launched a campaign to encourage parents 

and caregivers to help their children build knowledge 
MANAGEMENT’S DISCUSSION AND ANALYSIS 35

on financial matters. More than 13,000 visitors accessed 

the website which provides resources that parents and 

caregivers can use to talk about money with young people. 

In August 2014, the FDIC launched a Youth Savings 

Pilot Program (Pilot) to identify and highlight promising 

approaches to offering financial education tied to the 

opening of safe, low-cost savings accounts for K-12 

school-aged children. The FDIC selected nine institutions 

from a pool of bank applicants. The Pilot’s first phase 

covers existing partnerships between institutions and 

schools that are in place during the 2014–15 school year. In 

2015, the FDIC plans to solicit banks that intend to carry 

out new programs and partnerships during the 2015–16 

school year to participate in the second phase of the Pilot. 

The Pilot will culminate in a report later in 2015 that will 

communicate lessons learned about ways banks may work 

with schools or other organizations to effectively combine 

financial education with access to a savings account. 

The existing suite of Money Smart products for consumers 

was also enhanced with the release of a Spanish language 

translation of Money Smart for Older Adults, in partnership 

with the CFPB. This stand-alone training module developed 

by both agencies was initially released in English in 2013 to 

raise awareness among older adults (age 62 and older) and 

their caregivers on how to prevent, identify, and respond 

to elder financial exploitation, plan for a secure financial 

future, and make informed financial decisions. 

Through training and technical assistance, the FDIC 

emphasizes the importance of pairing education with access 

to appropriate banking products and services. The FDIC 

conducted more than 150 outreach events to promote the 

Money Smart program. More than 38,000 copies of the 

Money Smart instructor-led curriculum were distributed 

or downloaded, and more than 49,000 people used the 

computer-based or podcast curriculum, exemplifying 

effective results from the outreach sessions. 

An example of FDIC outreach with leading organizations to 

achieve shared objectives is the FDIC’s participation in the 

2014 America Saves Week, which took place from February 

24 to March 1. The FDIC hosted six webinars that reached 

more than 300 financial institutions to discuss opportunities 

to participate in America Saves Week. In addition, the 

FDIC supported local America Saves coalitions in many 

communities around the country by conducting financial 

education workshops and providing resources. 

Community Development

In 2014, the FDIC provided professional guidance and 

technical assistance to banks and community organizations 

through outreach activities and events designed to foster 

understanding and practical relationships between financial 

institutions and other community development and 

economic inclusion stakeholders. As part of this effort, the 

FDIC conducted over 135 community development events 

linking bank and community partners with opportunities 

to address community credit and development needs. A 

particular emphasis was on low- and moderate-income 

consumers and small businesses.

The FDIC provided support to strategic partnering 

between community banks and Community Development 

Financial Institutions (CDFIs). In May 2014, the FDIC 

released a guide entitled “Strategies for Community Banks 

to Develop Partnerships with Community Development 

Financial Institutions” in an effort to strengthen outreach 

to encourage partnerships with CDFIs to meet community 

credit needs. 

The FDIC also co-sponsored the 2014 National Interagency 

Community Reinvestment Conference in Chicago, Illinois.

FDIC Chairman Gruenberg, as a plenary speaker, addressed 

the importance of economic inclusion and community 

development in his remarks. FDIC staff moderated a 

number of the sessions covering small business lending, 

CRA 101 for Community Based Organizations, financial 

capability, affordable housing, and economic inclusion. 

More than 900 bankers and community development 

practitioners attended the biennial conference.

Community Banking Initiatives

Community banks are those institutions that provide 

traditional, relationship-based banking services in their 

local communities. They account for about 13.3 percent 

of the banking assets in the United States but provide 

nearly 45.1 percent of the small loans that FDIC- IDIs make 

to businesses and farms. The FDIC is the lead federal 

supervisor for the majority of community banks, and the 
ANNUAL REPORT 2014

36 MANAGEMENT’S DISCUSSION AND ANALYSIS

insurer of all. The FDIC has a particular responsibility for 

the safety and soundness of community banks, and for 

understanding and communicating the role they play in the 

banking system. 

Efforts under the Community Banking Initiative continued 

on a number of fronts in 2014. The FDIC continued to

conduct targeted research on key community banking 

issues, and published or presented findings related to the 

resilience of community banks amid banking industry 

consolidation, de novo institutions and their performance 

over time, the effects of long-term rural depopulation on 

community banks, the performance and social impact of 

Minority Depository Institutions (MDIs), and long-term 

trends in the physical banking offices operated by FDICinsured institutions

Another important development during the year was 

the introduction of a new section in the FDIC Quarterly 

Banking Profile (QBP) that focuses specifically on 

community banks. This new section of the FDIC’s flagship 

statistical report highlights the structure, activities, and 

performance of community banks as distinct from the 

results for larger institutions, and should provide a useful 

barometer by which smaller institutions can compare their 

own results. Combined with the FDIC’s special reports on 

community banking topics, this enhancement to the QBP 

represents an ongoing commitment to an active program of 

research and analysis on community banking.

In response to concerns about pre- and post-examination 

processes, the FDIC developed a web-based tool in 2013 

that generates a pre-examination document and information 

request tailored to a specific institution’s operations and 

business lines. In 2014, the regional and Washington offices 

continued to monitor banker feedback on the enhanced 

pre-examination process and adjusted the tool based on 

banker and examiner feedback. 

The Directors’ Resource Center, a special section of the 

FDIC’s website, is dedicated to providing useful information 

to bank directors, officers, and employees on areas of 

supervisory focus and regulatory changes. One key 

element of this resource center is a Technical Assistance 

Video Program that provides in-depth, technical training 

for bankers to view at their convenience. A new video 

released during 2014 focused on the new mortgage rules 

that became effective in 2013. The video is targeted to bank 

compliance officers to facilitate bank implementation of 

and compliance with the CFPB’s ability-to-repay/qualified 

mortgage regulations. In addition, the FDIC’s Cyber 

Challenge: A Community Bank Cyber Exercise was added 

to the Technical Assistance Video Program in 2014.

Throughout 2014, the FDIC continued to offer additional 

technical training opportunities on subjects of interest 

to community bankers. As part of this ongoing effort, 

the FDIC hosted Director Colleges in each region. These 

Colleges are typically conducted jointly with state trade 

associations and address topics of interest to community 

bankers. The FDIC hosted a banker call-in on new 

mortgage rules and participated in an FFIEC call-in 

regarding Call Report changes. The FDIC also offered a 

series of Deposit Insurance Coverage seminars for bank 

officers and employees. These free seminars, which 

were offered nationwide, particularly benefited smaller 

institutions that have limited training resources. Further, the 

FDIC conducted a series of roundtables with community 

bankers in each of its six regions. Community bank 

outreach and training initiatives will continue in 2015.

Additionally, in June 2014, the FDIC mailed an information 

packet to the chief executive officers (CEOs) of all FDICsupervised banks. In addition to an introductory letter to 

the CEOs, the packet contained brochures highlighting the 

content of key resources and programs; a copy of the Cyber 

Challenge, a technical assistance product designed to assist 

with the assessment of operational readiness capabilities; 

and other information of interest to community bankers. 

The FDIC’s Advisory Committee on Community Banking 

is an ongoing forum for discussing critical issues and 

receiving valuable feedback and input from the industry. 

The advisory committee met three times during 2014. The 

Committee, which is composed of 15 senior leaders of 

community banks from around the country, is a valuable 

resource for input on a wide variety of topics, including 

examination policies and procedures, capital and other 

supervisory issues, credit and lending practices, deposit 

insurance assessments and coverage, and regulatory 

compliance issues.
MANAGEMENT’S DISCUSSION AND ANALYSIS 37

Finally, the FDIC and the OCC co-hosted a Joint Agency 

Mutual Forum (Forum) on July 24, 2014, which was the first 

conference conducted for all mutual banking institutions, 

regardless of charter type. Mutually-related institutions 

represent about 9 percent of all FDIC-insured institutions 

and are among the oldest form of depository institution. 

Attended by approximately 125 mutual bankers, the Forum 

provided an opportunity for the participants to learn about 

current trends and engage in a dialogue on the opportunities 

and challenges facing mutual institutions. In June 2014, 

the FDIC created a new website dedicated to mutual 

institutions, with helpful resources, guidance, and the first 

ever published comprehensive listing of mutual banks and 

institutions owned by mutual holding companies.

Consumer Complaints and Inquiries

The FDIC helps consumers by receiving, investigating, and 

responding to consumer complaints about FDIC-supervised 

institutions and answering inquiries about banking laws 

and regulations, FDIC operations, and other related topics. 

In addition, the FDIC provides analytical reports and 

information on complaint data for internal and external use, 

and conducts outreach activities to educate consumers. 

The FDIC recognizes that consumer complaints and 

inquiries play an important role in the development of 

strong public and supervisory policy. Assessing and 

resolving these matters helps to identify trends or problems 

affecting consumer rights, understand the public perception 

of consumer protection issues, formulate policy that aids 

consumers, and foster confidence in the banking system 

by educating consumers about the protection they receive 

under certain consumer protection laws and regulations.

Consumer Complaints by Product and Issue

The FDIC receives complaints and inquiries by telephone, 

fax, U.S. Mail, email, and online through the FDIC’s website. 

In 2014, the FDIC handled 17,559 written and telephone 

complaints and inquiries. Of this total, 9,358 related to 

FDIC-supervised institutions. The FDIC responded to 

nearly 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. As part of the complaint and inquiry handling 

process, the FDIC works with the other federal financial 

regulatory agencies to ensure that complaints and inquiries 

are forwarded to the appropriate agencies for response.

The FDIC carefully analyzes the products and issues 

involved in complaints about FDIC-supervised institutions. 

The number of complaints received about a specific bank 

product and issue can serve as a red flag to prompt further 

review of practices that may raise consumer protection or 

supervisory concerns. 

In 2014, the five most frequently identified consumer 

product complaints and inquiries about FDIC-supervised 

institutions concerned credit cards (18 percent), checking 

accounts (14 percent), residential real estate loans (12 

percent), consumer loans (13 percent), and prepaid cards 

(8 percent). Credit card complaints and inquiries most 

frequently described issues with collection practices, 

while the issues most commonly cited in correspondence 

about checking accounts related to bank overdraft fees 

and service charges. The largest share of complaints and 

inquiries about residential real estate loans related to loan 

modifications and foreclosures. Consumers most often 

identified concerns with collection practices regarding 

consumer loans, and a large number of complaints also 

involved issues related to prepaid cards.

The FDIC also investigated 76 complaints alleging 

discrimination during 2014. The number of discrimination 

complaints investigated has fluctuated over the past several 

years but averaged approximately 121 complaints per year 

between 2008 and 2014. Over this period, 36 percent of the 

complaints investigated alleged discrimination based on the 

race, color, national origin, or ethnicity of the applicant or 

borrower; 23 percent related to discrimination allegations 

based on age; 8 percent involved the sex of the borrower or 

applicant; and 3 percent concerned a handicap or disability.

Consumer refunds generally involve the financial institution 

offering a voluntary credit to the consumer’s account that 

is often a direct result of complaint investigations and 

identification of a banking error or violation of law. In 2014, 

consumers received more than $801,000 in refunds from 

financial institutions as a result of the assistance provided 

by the FDIC’s Consumer Affairs Program.
ANNUAL REPORT 2014

38 MANAGEMENT’S DISCUSSION AND ANALYSIS

Public Awareness of Deposit 

Insurance Coverage

An important part of the FDIC’s deposit insurance mission 

is to ensure that bankers and consumers have access to 

accurate information about 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 2014. For example, the FDIC 

conducted 12 telephone seminars for bankers on deposit 

insurance coverage, reaching an estimated 20,108 bankers 

participating at approximately 5,745 bank locations 

throughout the country. In 2014, the FDIC also completed 

a comprehensive update of its deposit insurance coverage 

publications and educational tools for consumers and 

bankers. This included a complete revision of the FDIC’s 

website including brochures, resource guides, and videos. 

In addition, new outreach materials were developed to 

assist depositors, including infographic diagrams for 

revocable and irrevocable trust deposits.

As of December 31, 2014, the FDIC received and answered 

approximately 88,315 telephone deposit insurance-related 

inquiries from consumers and bankers. The FDIC Call 

Center addressed 40,522 of these inquiries, and deposit 

insurance coverage subject-matter experts handled the 

other 47,793. In addition to telephone inquiries about 

deposit insurance coverage, the FDIC received 1,879 written 

inquiries from consumers and bankers. Of these inquiries, 

99 percent received responses within two weeks, as 

required by corporate policy.

Center for Financial Research

The FDIC’s Center for Financial Research (CFR) 

encourages and supports innovative research on topics 

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

and bank supervisor. During 2014, the FDIC’s CFR 

co-sponsored two major conferences. Approximately 60 

regulatory staff attended an Interagency Risk Quantification 

Forum, co-sponsored by the FDIC, the OCC, and the 

Federal Reserve Bank of Philadelphia, which addressed 

topics including securitization and creditor recovery, loss 

given default, and the identification of systemic risk in the 

banking industry. 

The CFR also organized and sponsored the 14th Annual 

Bank Research Conference jointly with the Journal for 

Financial Services Research (JFSR), in October 2014. More 

than 120 participants attended the conference that included 

more than 20 presentations on topics related to global 

banking, financial stability, and the financial crisis.

RECEIVERSHIP MANAGEMENT

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 deposits in an FDIC-insured institution due to a failure. 

Upon closure of an institution, typically by its chartering 

authority—the state for state-chartered institutions and the 

OCC for national banks and federal savings associations—

the FDIC is appointed receiver and is responsible for 

resolving the failed institution.

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. The FDIC uses two basic resolution 

methods: purchase and assumption transactions and 

deposit payoffs.

The purchase and assumption (P&A) transaction is the most 

commonly used resolution method. In a P&A transaction, 

a healthy institution purchases certain assets and assumes 

certain liabilities of the failed institution. A variety of 
MANAGEMENT’S DISCUSSION AND ANALYSIS 39

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 FDIC 

in connection with a P&A transaction. In a loss-share 

transaction, the FDIC as receiver agrees to share losses 

on certain assets with the acquirer, absorbing 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 assets in the banking sector can produce a better 

net recovery than the FDIC’s immediate liquidation of

these assets.

The FDIC monitors compliance with shared-loss 

agreements by validating the appropriateness of loss-share 

claims; reviewing efforts to maximize recoveries; ensuring 

consistent application of policies and procedures across 

both shared-loss and legacy portfolios; and confirming 

that the acquirer has sufficient internal controls, including 

adequate staff, reporting, and recordkeeping systems. At 

year-end 2014, there were 281 shared-loss agreements with 

$54.6 billion in total covered assets.

Deposit payoffs are only executed if all bids received for a 

P&A transaction are more costly to the DIF than liquidation 

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. A variation of the deposit payoff is the 

establishment of a New Depository Institution (NDI), as 

authorized by the FDI Act. An NDI is a new national bank 

or federal savings association with limited life and powers 

that assumes the insured deposits of a failed bank or 

savings association, allowing customers of the failed bank 

or savings association a brief period of time to move their 

deposit account(s) to other insured institutions. Though 

infrequently used, an NDI allows for a failed bank or 

savings association 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, uninsured depositors, 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, and 

structured transactions.

Financial Institution Failures

During 2014, there were 18 institution failures, compared to 

24 failures in 2013. 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. There were no losses on insured 

deposits, and no appropriated funds were required to pay 

insured deposits.

The following chart provides a comparison of failure 

activity over the last three years. 

FAILURE ACTIVITY 2012–2014

Dollars in Billions

2014 2013 2012

Total Institutions 18 24 51

Total Assets of Failed Institutions1 $2.9 $6.0 $11.6

Total Deposits of Failed Institutions1 $2.7 $5.1 $11.0

Estimated Loss to the DIF $0.4 $1.3 $2.7

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

or Thrift Financial Report (TFR) filed by the institution prior to failure.

Asset Management and Sales

As part of its resolution process, the FDIC tries 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.

Cash sales of assets for the year totaled $772 million in book 

value. In addition to structured and cash sales, the FDIC 

also uses securitizations to dispose of bank assets. 
ANNUAL REPORT 2014

40 MANAGEMENT’S DISCUSSION AND ANALYSIS

As a result of the FDIC’s marketing and collection efforts, 

the book value of assets in inventory decreased by $3.6 

billion (32 percent) in 2014. The following chart shows the 

beginning and ending balances of these assets by asset type.

ASSETS IN INVENTORY BY ASSET TYPE

Dollars in Millions

Asset Type 12/31/14 12/31/13

Securities $470 $893

Consumer Loans 36 69

Commercial Loans 123 274

Real Estate Mortgages 697 954

Other Assets/Judgments 957 1,145

Owned Assets 120 365

Net Investments in Subsidiaries 123 117

Structured and Securitized Assets 5,150 7,487

Total $7,676 $11,304

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 2014, the 

number of receiverships under management increased by 

.2 percent, as a result of new failures. The following chart 

shows overall receivership activity for the FDIC in 2014.

RECEIVERSHIP ACTIVITY

Active Receiverships as of 12/31/131 480

New Receiverships 18

Receiverships Terminated 17

Active Receiverships as of 12/31/14 481

1 Includes one FSLIC Resolution Fund receivership at year-end 2013.

Protecting Insured Depositors 

The FDIC’s ability to attract healthy institutions to assume 

deposits and purchase assets of failed banks and savings 

associations at the time of failure minimizes the disruption 

to customers and allows assets to be returned to the private 

sector immediately. Assets remaining after resolution 

are liquidated by the FDIC in an orderly manner, and the 

proceeds are used to pay creditors, including depositors 

whose accounts exceeded the insurance limit. During 2014, 

the FDIC paid dividends of $6 million to depositors whose 

accounts exceeded the insurance limit.

Professional Liability and 

Financial Crimes Recoveries

The 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 is expected to be costeffective to pursue, the FDIC initiates legal action against 

the appropriate parties. During 2014, the FDIC recovered 

more than $1.1 billion from professional liability claims and 

settlements. The FDIC also authorized lawsuits related to 

17 failed institutions against 123 individuals for director 

and officer liability, and authorized five other lawsuits for 

fidelity bond, liability insurance, attorney malpractice, 

appraiser malpractice, and securities law violations for 

residential mortgage-backed securities. As of the end 

of 2014, 75 residential mortgage malpractice and fraud 

lawsuits were pending. Also, the FDIC’s caseload included 

102 professional liability lawsuits (down from 119 at 

year-end 2013) and 511 open investigations (down from 796 

at year-end 2013).

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 DOJ, collected $6.4 million from criminal 

restitution and forfeiture orders through the end of 2014. At 

that time, there were 3,954 active restitution and forfeiture 

orders (down from 4,073 at year-end 2013). This includes 

130 orders held by the Federal Savings and Loan Insurance 

Corporation (FSLIC) Resolution Fund, (i.e., orders arising 

out of failed financial institutions that were in receivership 

or conservatorship by the FSLIC or the Resolution Trust 

Corporation).
MANAGEMENT’S DISCUSSION AND ANALYSIS 41

INTERNATIONAL OUTREACH 

In 2014, the FDIC continued to play a leading role in 

supporting and promoting the global development of 

effective deposit insurance, bank supervision, and effective 

resolution regimes as integral components of the financial 

safety net. The FDIC worked with several standard-setting, 

regulatory, supervisory, and multi-lateral organizations such 

as the Association of Supervisors of Banks of the Americas 

(ASBA), the Basel Committee on Banking Supervision 

(BCBS), the Financial Services Volunteer Corps (FSVC), the 

International Association of Deposit Insurers (IADI), the 

International Monetary Fund (IMF), and the World Bank. 

FDIC staff also facilitated the training of several hundred 

bank supervisors and regulators, technical assistance 

missions around the world, and secondment programs to 

further the international community’s understanding 

and implementation of best practices in bank supervision 

and regulation.

International Association of Deposit Insurers 

The International Association of Deposit Insurers (IADI) 

contributes to global financial stability by promoting 

international cooperation in the field of deposit insurance 

and providing guidance for establishing new, and enhancing 

existing, deposit insurance systems, and by encouraging 

wide international contact among deposit insurers and 

other interested parties. It is recognized as the standardsetting body for deposit insurance by major international 

financial institutions, including the FSB, the G-20, the BCBS, 

the E.C., the IMF, and the World Bank. Since its founding 

in 2002, IADI has grown from 26 founding members to 79 

deposit insurers from 76 jurisdictions. FDIC Chairman 

Gruenberg served as the President of IADI and Chair of its 

Executive Council from November 2007 to October 2012. 

FDIC Vice Chairman Thomas Hoenig currently serves on 

IADI’s Executive Council. 

In 2009, IADI and the BCBS jointly issued the Core 

Principles for Effective Deposit Insurance Systems and 

completed the accompanying Compliance Assessment 

Methodology for the Core Principles in 2010 (together, the 

Core Principles). The FSB included the Core Principles

in its Compendium of Key Standards for Sound Financial 

Systems. The IMF and World Bank use the Core Principles

in the context of the Financial Sector Assessment Program 

(FSAP) reviews, to assess the effectiveness of jurisdictions’ 

deposit insurance systems and practices. This represents 

an important milestone in the growing global acceptance 

of the role of effective deposit insurance systems in 

maintaining financial stability. To-date, IADI has trained 

more than 280 staff members from over 70 jurisdictions 

in conducting self-assessments for compliance with the 

Core Principles. 

In 2014, a Joint Working Group, comprising key 

representatives from the FDIC, the Canada Deposit 

Insurance Corporation, the BCBS, the European Forum of 

Deposit Insurers, the IMF, the World Bank, the E.C., and the 

FSB, revised the Core Principles and presented the revision 

to the IADI Executive Council, which approved it in October 

2014. Subsequently, IADI submitted the updated Core 

Principles to the FSB for inclusion in its Periodic Report 

to the Plenary, and acceptance by the IMF and World Bank 

is expected in the near term. Complementing FDIC efforts 

with IADI and the Core Principles, the FDIC in partnership 

with the Financial Stability Institute (FSI), developed an 

online tutorial to assist jurisdictions in completing selfassessments of compliance with the Core Principles in 

preparation for the IMF/World Bank FSAP review.

FDIC executives and subject-matter experts partnered with 

IADI to make significant contributions to the development 

and delivery of several key international programs in 2014. 

Vice Chairman Hoenig and division executives joined 

global bank resolution and deposit insurance leaders 

in exploring key issues related to the use of bail-in as a 

resolution tool in Warsaw, Poland. The FDIC partnered 

with FSI to develop a seminar on bank resolution and 

crisis management hosted by the Bank for International 

Settlements in Basel, Switzerland. In collaboration with 

the Kenya School of Monetary Studies, the FDIC led a 

workshop in Nairobi, Kenya, in May 2014 for jurisdictions 

interested in establishing new deposit insurance systems. 

The FDIC helped modernize IADI’s information technology 

infrastructure and its research capabilities and supported 

IADI in many leadership capacities. In addition to the 

Vice Chairman’s role on the Executive Council, an FDIC 

executive chairs the IADI Training and Conference 

Committee (TCC), which is responsible for setting IADI’s 

training strategy, advancing the Core Principles capacity 

building programs, and forging effective partnerships with 
ANNUAL REPORT 2014

42 MANAGEMENT’S DISCUSSION AND ANALYSIS

multilateral agencies that contribute to IADI’s training 

capabilities. One of the TCC’s marquee programs is its 

Executive Training Seminars. In July 2014, the FDIC led a 

seminar on Deposit Insurance Funding for 70 participants 

from 35 jurisdictions. 

Association of Supervisors of Banks of the Americas 

The FDIC has been a member of ASBA since its founding 

in 1999 and supports ASBA’s mission of promoting sound 

bank supervision and regulation throughout the Western 

Hemisphere. ASBA represents bank supervisors from 36 

jurisdictions. The FDIC strives to lead the development 

of strong supervisory policies in this hemisphere through 

active engagement with the Association’s Board, chairing 

the ASBA’s Training and Technical Committee, and by 

providing leadership in many of the Association’s research 

and guidance working groups. 

Senior FDIC staff chair the ASBA Training and Technical 

Committee, which is responsible for designing and 

implementing ASBA’s training strategy that advances the 

adoption of sound bank supervision policies and practices 

among members. In support of ASBA’s Continental Training 

Program, the FDIC led two technical assistance training 

missions in 2014, including Supervision of Operational 

Risk in San Salvador, El Salvador, and Financial Institution 

Analysis in Tegucigalpa, Honduras. The FDIC continued to 

provide subject-matter experts as instructors and speakers 

to support ASBA-sponsored training programs, seminars, 

and conferences.

Basel Committee on Banking Supervision

The FDIC supported the development of sound regulatory 

policy through effective participation in the BCBS and its 

relevant subgroups. FDIC senior managers represented 

the FDIC in quarterly meetings of the BCBS and its Policy 

Development Group. Throughout the year, the FDIC was 

active in a number of BCBS subgroups that developed 

proposals for international minimum standards for capital 

adequacy, resolution regimes, liquidity and funding, 

and trading and derivatives activities for internationally 

active banks. These groups include the Task Force on 

Simplicity and Comparability, the Leverage Ratio Group, 

the Accounting Experts Group, the Working Group on 

Liquidity, the Working Group on Margining Requirements, 

the Cross-Border Bank Resolution Group, and the 

Standards Implementation Group, among others. FDIC staff 

contributed to active work streams and quantitative impact 

studies for BCBS subgroups, providing substantial support 

and in some instances leading the work.

International Capacity Building

The FDIC’s international efforts supporting the 

development of effective deposit insurance systems, 

bank supervisory practices, and bank resolution regimes 

continued to grow in 2014. FDIC staff contributed 

to international capacity building by providing study 

tours, secondments, and technical assistance to foreign 

counterparts. These engagements resulted in an enhanced 

dialogue between the FDIC and foreign bank supervisors, 

deposit insurers, and lawmakers on significant areas such 

as bank supervision and regulatory development post crisis, 

depositor preference and resolution functions of the deposit 

insurance system, and optimal funding strategies for deposit 

insurers. 

FDIC management and staff hosted study tours for 288 

individuals, representing 26 jurisdictions during the year. 

Additionally, the FDIC’s Corporate University provided 

training in bank supervision and information technology to 

294 foreign delegates from 20 jurisdictions. In support of 

the FDIC’s long-term partnership with the U.S. Department 

of State, the FDIC hosted training sessions for 111 

individuals from 15 jurisdictions on Anti-Money Laundering/

Combating the Financing of Terrorism (AML/CFT) in 2014. 

These training sessions assisted participating jurisdictions 

in implementing AML/CFT standards, and in providing law 

enforcement with financial investigative skills, as well as 

a suite of skills necessary to combat money laundering, 

terrorist financing, and fraud. 

The FDIC contributes to global and domestic initiatives 

by providing staff to support long-term projects and 

technical assistance missions led by the IMF, U.S. Treasury 

Department, the FSVC, and the World Bank. In 2014, 

senior FDIC staff served on long-term assignments at 

the U.S. Treasury Department’s Office of International 

Bank and Securities Markets. The FDIC led six technical 

assistance missions sponsored by the U.S. Treasury and 

the FSVC. In collaboration with the U.S. Treasury Office of 

Technical Assistance, the FDIC advised the Banque de la 

République du Burundi on the development of a risk-based 
MANAGEMENT’S DISCUSSION AND ANALYSIS 43

supervision program. In partnership with the FSVC, the 

FDIC participated in several technical assistance missions 

including assisting the Albania Deposit Insurance Agency 

in developing an automated system to verify deposit 

insurance premiums and payouts, providing expertise on 

the topic of savings mobilization in the financial sector to 

the East African Community Financial Services Providers’ 

Council in Tanzania, and providing senior Bank of Uganda 

examiners with an opportunity to strengthen its supervision 

framework by observing an FDIC risk-management 

examination. The FDIC partnered with the World Bank 

to provide technical assistance to the Nigerian Deposit 

Insurance Corporation on developing a targeted fund ratio 

for their deposit insurance fund. The FDIC also provided 

technical assistance and consultation to the Central Bank 

of Curaçao on the disposition of larger troubled banks and 

strengthening its bank supervision framework.

The FDIC expands and strengthens international 

engagement by providing secondment opportunities to 

foreign officials to engage in long-term consultation with 

FDIC subject-matter experts in areas related to bank 

supervision, deposit insurance, and resolutions. In 2014, 

two officials from the Deposit Insurance Corporation 

of Japan and the Korea Deposit Insurance Corporation 

concluded their secondments to the FDIC, and two new 

secondees from these agencies joined the FDIC, each for 

one-year assignments.

Key International Engagements

In 2014, the FDIC took important steps to strengthen 

its relationships with key jurisdictions worldwide. In 

February, FDIC executives attended the U.S.-India Financial 

Regulatory Dialogue, hosted by the Securities and Exchange 

Bureau of India (SEBI) in Mumbai. U.S. representatives 

from the Treasury Department, FRB, SEC, Commodity 

Futures Exchange Commission, and the Federal Insurance 

Office met with the Indian Ministry of Finance, Reserve 

Bank of India, the Forward Markets Commission, and the 

Insurance Regulatory and Development Authority to discuss 

banking sector developments, commodity market and 

capital market issues, insurance and pension regulation, 

and financial regulatory reform in each country. The 

FDIC discussed the U.S. bank resolution regime and new 

resolution powers for nonbank resolutions. The Reserve 

Bank of India, in turn, explained its proposed banking 

reform legislation that would dissolve the current Deposit 

Insurance and Credit Guarantee Corporation and create a 

new resolution corporation responsible for the resolution of 

bank and nonbank financial institutions in India. 

In July 2014, Secretary of the Treasury Jacob Lew and 

Secretary of State John Kerry led a delegation of senior U.S. 

officials to Beijing, China, to participate in the 6th U.S.-China 

Strategic and Economic Dialogue. Secretary Lew and Vice 

Premier Wang Yang led the Economic Track discussion. 

The FDIC was represented at the meetings, alongside a 

high-level delegation of Cabinet members, ministers, agency 

heads, and senior officials from both countries. Among key 

outcomes, such as commitments by China to liberalize its 

exchange rate regime, reduce barriers to trade, and further 

open its markets, China also committed to accelerate the 

establishment of a deposit insurance system and improve 

the resolution mechanism for financial institutions through 

issuing regulations on bank resolution.

MINORITY AND WOMEN INCLUSION

The FDIC relies on contractors to help meet its mission. 

In 2014, the FDIC awarded 288 (26.9 percent) contracts 

to minority- and women-owned businesses (MWOBs) out 

of a total of 1,072 issued. The FDIC awarded contracts 

with a combined value of $686.8 million in 2014, of which, 

$239.9 million, or 34.9 percent, were awarded to MWOBs, 

compared to 34.7 percent for all of 2013. The FDIC paid 

$128.2 million of its total contract payments (26.1 percent) 

to MWOBs, under 1,934 active contracts. Referrals 

to minority- and women-owned law firms (MWOLFs) 

accounted for 16 percent of all legal referrals in 2014, 

with total payments of $15.3 million going to MWOLFs, 

(13 percent of all payments to outside counsel) compared 

to 13 percent for all of 2013.

In 2014, the FDIC participated in a combined total of 21 

business expos, one-on-one matchmaking sessions, and 

panel presentations. At these events, FDIC staff provided 

information and responded to inquiries regarding FDIC 

business opportunities for minorities and women. In 

addition to targeting MWOBs, these efforts also targeted 

veteran-owned and small disadvantaged businesses. 

Vendors were provided with the FDIC’s general contracting 
ANNUAL REPORT 2014

44 MANAGEMENT’S DISCUSSION AND ANALYSIS

procedures, prime contractors’ contact information, and 

forecasts of possible upcoming solicitations. Also, vendors 

were encouraged to register through the FDIC’s Contractor 

Resource List (a principal database for vendors interested 

in doing business with the FDIC). In 2014, a total of 332 

MWOBs were added to the FDIC Contractor Resource List. 

On December 2, 2014, the FDIC hosted a Technical 

Assistance Day. This event provided a venue for various 

business owners, including MWOBs and MWOLFs, to 

become better acquainted with the FDIC’s contracting 

process, receive technical assistance on effective proposal 

writing, and learn about the types of technical assistance 

offered by the Procurement Technical Assistance Center 

and Minority Business Development Agency. The event 

also included a panel composed of Office of Minority and 

Women Inclusion (OMWI) Directors from the U.S. Treasury 

Department, the OCC, the SEC, the FHFA, the CFPB, and 

the FDIC, who addressed their respective programs and 

opportunities. Eighty-six business representatives attended.

In addition, the FDIC conducted a series of outreach events 

to raise awareness and provide information on how to 

purchase other real estate (ORE) through the FDIC’s Owned 

Assets Marketplace and Auctions Program. The events also 

facilitated interaction between smaller investors and asset 

managers, which includes minority- and women-owned 

(MWO) firms. 

Additionally, the FDIC conducted outreach targeting 

prospective asset purchasers and investors, including MWO 

investors, in Chicago and New York City in advance of an 

auction that occurred later in 2014. Information regarding 

the Owned Assets Marketplace and Auctions Program can 

be found on the FDIC’s website at www.fdic.gov/mwop. 

EFFECTIVE MANAGEMENT OF 

STRATEGIC RESOURCES

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 2014 follow. 

Human Capital Management

The FDIC’s human capital management programs are 

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

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

In 2014, FDIC workforce planning initiatives emphasized 

the need to plan for employees to fulfill current and future 

requirements and leadership needs. This focus ensures that 

the FDIC has a workforce positioned to meet today’s core 

responsibilities while preparing to fulfill its mission in the 

years ahead. 

Strategic Workforce Planning and Readiness

During 2014, the FDIC continued to develop and began 

implementation of the Workforce Development initiative. 

This effort began with an assessment of the current 

talent pipeline for senior leadership positions. Based 

on the findings, the FDIC elected to broaden the scope 

of the initiative beyond succession planning to include 

the development of strategies designed to address 

comprehensive workforce development challenges and 

opportunities. The initiative is focused on four broad 

objectives: attract and develop talented employees 

across the agency, enhance the capabilities of employees 

through training and diverse work experiences, encourage 

employees to engage in active career development planning 

and seek leadership roles in the FDIC, and build on 

and strengthen the FDIC’s operations to best support 

these efforts. 

In 2014, the FDIC embarked on planning and developing 

the infrastructure, governance, programs, and processes 

to help meet its long-term workforce needs. The FDIC is 

committed to building and maintaining its talent pipeline 

to ensure succession challenges are fully addressed. It 

will take several cycles of identifying future workforce and 

leadership needs; assessing current workforce capabilities; 

supporting aspiration to leadership and management 

roles; and developing and sourcing the talent to meet 

emerging workforce needs. As such, the FDIC’s Workforce 

Development initiative is a dynamic process rather than a 

one-time, static event. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 45

Simultaneously, the FDIC continued to focus on ensuring 

the availability of a workforce prepared to address today’s 

responsibilities, especially related to the oversight of SIFIs 

required under the Dodd-Frank Act. As an outgrowth of 

strategic workforce planning, the FDIC established a new 

employee development program to expand the number 

of FDIC employees who have broad, cross-divisional 

experience with the largest and most complex FDIC-insured 

banks and BHCs. The program provides experience in 

supervision, risk analysis and monitoring, risk-based pricing 

and deposit insurance fund management, and resolution 

planning and resolvability. Twelve employees were selected 

for this rotational program in 2014. 

Workforce planning efforts also addressed the need to 

continue winding down bank closure activities, based on 

the decrease in the number of financial institution failures 

and institutions in at-risk categories. In 2014, the FDIC 

continued to evaluate its staffing needs in a post-crisis 

environment and released some of the temporary staff as 

their term appointments expired. The FDIC has extended 

appointments only for the most critical temporary positions, 

where workload continues to exist, to address post-closure 

activity, which typically extends for five to seven years after 

a bank fails. The bank resolution workload is expected to 

slow considerably over the next few years. 

The quality and commitment of FDIC employees have 

allowed the agency to respond effectively in times of 

crisis, while continuing to deliver on its core mission 

responsibilities. Through further development of its 

human capital strategies, the FDIC will work to ensure that 

the future FDIC workforce is as prepared, capable, and 

dedicated as the one it has today.

Corporate Employee Program

The FDIC’s Corporate Employee Program (CEP) sponsors 

the development of newly hired financial institution 

specialists (FISs) in entry-level positions. The CEP 

encompasses major FDIC divisions where FISs are trained 

to become part of a highly effective workforce. During the 

first-year rotation within the program, FISs gain experience 

and knowledge in the core business of the FDIC, including 

the Division of Depositor and Consumer Protection (DCP), 

Division of Risk Management Supervision (RMS), the 

Division of Resolutions and Receiverships (DRR), and 

the Division of Insurance (DIR). At the conclusion of the 

rotation period, FISs are placed within RMS, DCP, 

or DRR, where they continue their career path to 

become commissioned examiners or resolutions and 

receiverships specialists.

The CEP is an essential part of the FDIC’s ability to provide 

continual cross-divisional staff mobility. As a result, 

the FDIC is capable of responding rapidly to shifting 

priorities and changes in workload while achieving its 

corporate mission. Since the CEP’s inception in 2005, 

1,391 individuals have joined the FDIC through this multidiscipline program and approximately 628 have become 

commissioned examiners after successfully completing the 

program’s requirements.

The FDIC continues to sponsor the Financial Management 

Scholars Program (FMSP), an additional hiring source for 

the CEP. Participants in the FMSP complete an internship 

with the FDIC the summer following the conclusion of their 

junior year. As a result, the FDIC is able to recruit and hire 

highly talented and well-qualified students into the CEP 

ahead of other prospective employers. The program serves 

as an additional venue to recruit talent. For 2015, the FDIC 

will continue to augment its workforce by fully utilizing the 

capacity of the CEP, including the FMSP.

Employee Learning and Development

The FDIC is committed to the learning and development 

of its employees throughout their career to enrich 

technical proficiency and leadership capacity, supporting 

career progression and succession management. In 

2014, the FDIC focused on developing and implementing 

comprehensive curricula for its business lines to 

incorporate lessons learned from the financial crises and 

prepare employees to meet new challenges. Such training, 

which includes both classroom and online instruction 

for maximum flexibility, is a critical part of workforce 

and succession planning as more experienced employees 

become eligible for retirement.

The FDIC also offers a comprehensive leadership 

development program that combines core courses, 

electives, and other enrichment opportunities to develop 

employees at all levels. From new employees to new 
ANNUAL REPORT 2014

46 MANAGEMENT’S DISCUSSION AND ANALYSIS

managers, the FDIC provides employees with targeted 

leadership development opportunities that align with key 

leadership competencies. The FDIC is expanding the use 

of strategic simulations to support corporate readiness and 

preparedness. In addition to a broad array of internally 

developed and administered courses, the FDIC also 

provides its employees with funds and/or time to participate 

in external training to support their career development. 

Corporate Risk Management

During 2014, the Office of Corporate Risk Management 

(OCRM) worked with divisions and offices to advance 

common agency-wide processes for identifying, managing, 

and mitigating risks to the FDIC. OCRM assisted the 

Enterprise Risk Committee, Executive Management 

Committee, External Risk Forum, and Management Risk 

Roundtable in reviewing risks across the agency. OCRM 

monitors material risks and mitigation activities, including 

the following:

♦ Risks to the agency’s ability to conduct its mission 

essential functions under all threats and conditions, 

as described in its Continuity of Operations Plan and 

Business Continuity Plan.

♦ Risks to the financial system posed by the extended 

current low level of interest rates.

♦ Risks to the deposit insurance system arising from new 

products and services with characteristics very different 

from traditional loan and deposit products.

♦ Risks posed by the analytical models used by the FDIC in 

identifying and managing risk.

♦ Risks associated with governance and development of 

large-scale IT projects.

♦ Risks posed to the agency and to the financial services 

industry by concerted attempts to penetrate, compromise, 

and disrupt the information systems that are essential to 

their effective operation. 

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. In December 2014, the FDIC received an 

award from the Partnership for Public Service for being 

ranked number one among mid-sized federal agencies on 

the Best Places to Work in the Federal Government® list.

Effective leadership is the primary factor driving employee 

satisfaction and commitment in the federal workplace, 

according to a report by the Partnership for Public Service.

The FDIC’s Workplace Excellence (WE) program plays an 

important role in helping the FDIC engage employees. The 

WE program is composed of a national-level WE Steering 

Committee and Division/Office WE Councils that are 

focused on maintaining, enhancing, and institutionalizing 

a positive workplace environment throughout the agency. 

In addition to the WE program, the FDIC-National 

Treasury Employees Union 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 engagement, and improves employee 

empowerment.

Director of the Division of Administration Arleas 

Upton Kea and Deputy to the Chairman and Chief 

Operating Officer Barbara A. Ryan accept the award 

from Max Stier, President and CEO of Partnership for 

Public Service. 

Photo credit: Sam Kittner/Kittner.com
MANAGEMENT’S DISCUSSION AND ANALYSIS 47

INFORMATION TECHNOLOGY 

MANAGEMENT

The FDIC recognizes secure information technology (IT) 

solutions are a critical and transformative resource for 

the successful accomplishment of the agency’s business 

objectives. The FDIC relies on the efficient, innovative, and 

secure business capabilities that IT provides to ensure and 

enhance mission achievement. 

Cybersecurity (internal)

Information resources are subject to serious threats that 

can have wide-ranging adverse impacts on the FDIC’s 

operations, reputation, and ultimately the ability to 

accomplish its mission. The continually changing landscape 

of threats poses significant security challenges for the FDIC, 

the public, and the nation. Several serious widespread 

vulnerabilities, including the Heartbleed, Shellshock, and 

POODLE vulnerabilities, were of specific concern for the 

FDIC in 2014. The FDIC recognizes that protections 

against today’s numerous and sophisticated array of cyber 

threats requires constant vigilance and rapidly evolving 

security solutions. 

As threats continued to intensify from cyber criminals, 

hacktivists, and foreign governments, multiple defenses 

were necessary to address each of the different motivations, 

intents, and capabilities of attacks. The increasing threat 

of cyber-attacks required the FDIC to implement improved 

strategies for ensuring the security of the FDIC’s data 

(including private, personal data) and IT infrastructure. 

In addition, the FDIC developed new cybersecurity 

capabilities for detecting incidents earlier and incorporated 

the capabilities together in a comprehensive framework 

to minimize the impact on operations and critical 

infrastructure, resulting in reduced risk.

The Information Security and Privacy Staff protects the FDIC’s networks and systems from threats and attacks.