FEDERAL DEPOSIT 

INSURANCE CORPORATION

ANNUAL REPORT

2017
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FEDERAL DEPOSIT 

INSURANCE CORPORATION

ANNUAL REPORT

2017
2

ANNUAL REPORT

FEDERAL DEPOSIT INSURANCE CORPORATION

550 17th Street NW, Washington, DC 20429 OFFICE OF THE CHAIRMAN

February 15, 2018

Dear Sir,

In accordance with:

♦ the provisions of Section 17(a) of the Federal Deposit Insurance Act,

♦ the Chief Financial Officers Act of 1990, Public Law 101-576, 

♦ the Government Performance and Results Act of 1993 (as amended) and the GPRA 

Modernization Act of 2010,

♦ the provisions of Section 5 (as amended) of the Inspector General Act of 1978, 

♦ the Reports Consolidation Act of 2000, and

♦ the provisions of the Fraud Reduction and Data Analytics Act of 2015,

the Federal Deposit Insurance Corporation (FDIC) is pleased to submit its 2017 Annual Report (also referred 

to as the Performance and Accountability Report), which includes the audited financial statements of the Deposit 

Insurance Fund and the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund. 

In accordance with the Reports Consolidation Act of 2000, the FDIC assessed the reliability of the performance 

data contained in this report. No material inadequacies were found, and the data are considered to be complete 

and reliable. 

Based on internal management evaluations, and in conjunction with the results of independent financial statement 

audits, the FDIC can provide reasonable assurance that the objectives of Section 2 (internal controls) and Section 

4 (financial management systems) of the Federal Managers’ Financial Integrity Act of 1982 have been achieved, 

and that the FDIC has no material weaknesses. We are committed to maintaining effective internal controls 

corporate-wide in 2018. 

Sincerely,

Martin J. Gruenberg

Chairman

The President of the United States

The President of the United States Senate

The Speaker of the United States House of Representatives

FEDERAL DEPOSIT INSURANCE CORPORATION
ANNUAL REPORT 2017 3

2017

TABLE OF CONTENTS

Message from the Chairman..............................................................................................................................5

Message from the Chief Financial Officer .......................................................................................................17

FDIC Senior Leaders.......................................................................................................................................19

I. Management’s Discussion and Analysis................................................................................................21

The Year in Review..................................................................................................................................23

Overview.........................................................................................................................................................23

Deposit Insurance............................................................................................................................................23

Supervision .....................................................................................................................................................24

Supervision Policy............................................................................................................................................30

Financial Technology .......................................................................................................................................32

Community Banking Initiatives.......................................................................................................................33

Activities Related to Systemically Important Financial Institutions ..................................................................39

Depositor and Consumer Protection................................................................................................................45

Receivership Management ...............................................................................................................................52

Enhancing the FDIC’s IT Security...................................................................................................................55

Minority and Women Inclusion.......................................................................................................................57

International Outreach ...................................................................................................................................59

Effective Management of Strategic Resources...................................................................................................60

II. Performance Results Summary..............................................................................................................63

Summary of 2017 Performance Results by Program.........................................................................................65

Performance Results by Program and Strategic Goal ........................................................................................67

Prior Years’ Performance Results ......................................................................................................................73

III. Financial Highlights ................................................................................................................................83

Deposit Insurance Fund Performance..............................................................................................................85

IV. Budget and Spending..............................................................................................................................89

FDIC Operating Budget..................................................................................................................................91

2017 Budget and Expenditures by Program ....................................................................................................92

Investment Spending .......................................................................................................................................93

V. Financial Section.....................................................................................................................................95

Deposit Insurance Fund (DIF) ........................................................................................................................96

FSLIC Resolution Fund (FRF)......................................................................................................................112

Government Accountability Office Auditor’s Report......................................................................................120

Management’s Report on Internal Control Over Financial Reporting ............................................................125

Management’s Response to the Auditor’s Report............................................................................................126

VI. Risk Management and Internal Controls..............................................................................................127

Fraud Reduction and Data Analytics Act of 2015 ..........................................................................................129

Management Report on Final Actions............................................................................................................130

VII. Appendices............................................................................................................................................133

A. Key Statistics ...........................................................................................................................................135

B. More About the FDIC ............................................................................................................................149

C. Implementation of Key Regulations ........................................................................................................158

D. Office of Inspector General’s Assessment of the Management and Performance 

Challenges Facing the FDIC....................................................................................................................161

E. Acronyms ................................................................................................................................................198
In its unique role as deposit insurer of banks and savings associations, and in 

cooperation with the other state and federal regulatory agencies, the FDIC 

promotes the safety and soundness of the U.S. financial system and insured 

depository institutions by identifying, monitoring, and addressing risks to the 

Deposit Insurance Fund.

The FDIC promotes public understanding and the development of sound 

public policy by providing timely and accurate financial and economic 

information and analyses. It minimizes disruptive effects from the failure of 

financial institutions and assures fairness in the sale of financial products and 

the provision of financial services.

The FDIC’s long and continuing tradition of excellence in public service 

is supported and sustained by a highly skilled and diverse workforce that 

continuously monitors and responds rapidly and successfully to changes in the 

financial environment. 

At the FDIC, we are working together to be the best.

INSURING DEPOSITS ♦ EXAMINING AND SUPERVISING INSTITUTIONS ♦

MAKING LARGE AND COMPLEX FINANCIAL INSTITUTIONS RESOLVABLE ♦

MANAGING RECEIVERSHIPS ♦ EDUCATING CONSUMERS
55

2017

MESSAGE FROM THE CHAIRMAN

MESSAGE FROM THE CHAIRMAN

For 84 years, the FDIC has carried out its mission 

of maintaining public confidence and stability in the 

U.S. financial 

system. The 

FDIC does this 

by insuring 

deposits; 

supervising 

and examining 

financial 

institutions 

for safety, 

soundness, 

and consumer 

protection; 

making large 

firms resolvable; 

and managing 

receiverships when banks fail.

At the end of September 2017, the FDIC insured 

deposits of $7.1 trillion in more than 580 million 

accounts at 5,738 institutions, supervised 3,669 

institutions, and managed 367 active receiverships 

with total assets of nearly $5 billion.

The year 2018 marks a full decade since the start 

of the financial crisis. Stemming the crisis required 

unprecedented actions by the U.S. government, 

including the FDIC, to restore confidence in financial 

markets and to address the problems of systemically 

important financial institutions. The FDIC recently 

published a history, Crisis and Response: An FDIC 

History 2008–2013, to document the lessons learned 

during that period. The study is intended to serve as a 

guidepost for future policymakers who will someday 

be called upon to respond to the next period of 

financial instability. 

One of the most important lessons the book 

conveys—for regulators and bankers alike—is that 

we must not become complacent when economic 

and banking conditions appear strong. It is precisely 

during these times that the seeds can be sown for the 

next financial crisis.

History shows that surprising and adverse 

developments in financial markets occur with some 

frequency. History also shows that the seeds of 

banking crises are sown by the decisions banks and 

bank policymakers make when they have maximum 

confidence that the horizon is clear. It is also worth 

keeping in mind that the evolution of the global 

financial system toward greater interconnectedness 

and complexity may tend to increase the frequency, 

severity, and speed with which financial crises occur. 

It would be a mistake to assume a severe downturn or 

crisis cannot happen again.

Over the past decade, the banking system has 

transitioned from a position of extreme vulnerability 

to a position of strength. Operating with the stronger 

cushions of capital and liquidity required by the 

post-crisis reforms, U.S. banking organizations are 

experiencing strong earnings growth and are providing 

support to the U.S. economy.

The challenge for the FDIC going forward will be 

to preserve the hard-earned improvements in the 

capital and liquidity of U.S. banking institutions 

and to sustain vigilant supervision of the banking 

industry, both to continue the strong performance of 

banks during this post-crisis period and to position 

the banking system to weather the next, inevitable 

downturn.

Following is an overview of the current economic 

and financial outlook, the FDIC’s important 

accomplishments over the past year, as well as the 

strategic challenges we face.

THE CURRENT OUTLOOK

After experiencing the most severe financial crisis and 

economic downturn since the 1930s in 2008–2009, 

the U.S. economy is now well into its ninth year 

of recovery. Growth in real gross domestic product 
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ANNUAL REPORT

(GDP) has averaged 2.2 percent in this expansion, 

and was right around 3 percent in the second and 

third quarters of 2017. The stock market has reached 

new highs and real estate prices have been rising. 

Global economic growth appears to be picking up, 

with the International Monetary Fund raising its 

growth forecasts for Japan, China, and Europe. 

This post-crisis economic expansion is the thirdlongest expansion in U.S. history. In June 2018 it 

would become the second-longest expansion in our 

history. Banks have been able to use this period to 

rebuild their balance sheets and strengthen capital 

and liquidity. They have achieved steady growth in 

net income and loan balances and improved credit 

quality.

In 2017 the industry saw a gradual slowdown in the 

annual rate of loan growth, which appears to be a 

function of the demand for credit rather than the 

supply. During the 12 months ended September 30, 

loan balances at banks increased by $322 billion, 

down from a $466 billion increase in 2016. Loan 

growth was strongest at community banks, which 

posted a 7.3 percent gain versus 3.5 percent for the 

industry overall. 

This improvement in the economic outlook is a 

positive development for banks and bank regulators. 

We know, however, that economic expansions 

eventually come to an end. We also know that 

financial shocks can come from unexpected sources at 

any time. 

Following the Savings & Loan crisis of the 1980s 

and the banking crisis of the late 1980s and early 

1990s, we entered a 10-year economic expansion—

the longest in U.S. history. Even that period was 

punctuated by a series of domestic and international 

crises that tested the effectiveness of risk managers. 

Banking and economic crises emerged during the 

1990s and into the early 2000s in Scandinavia, 

Mexico, east Asia, Russia, and Argentina. 

Domestically, severe disruptions were averted in 

1998 following the collapse of Long-Term Capital 

Management that resulted from its use of high-risk 

arbitrage trading strategies. The 2001 crash in dotcom equity prices was soon followed by the sudden 

bankruptcies of Enron and WorldCom. Finally, 

the development that would ultimately trigger the 

recent financial crisis was the decision by financial 

institutions in increasing numbers, and of increasing 

size, to enter the business of originating or securitizing 

subprime and alternative mortgages. 

Such experience is a reminder that, despite the 

good conditions we currently see, there are always 

challenges that could quickly change the outlook. 

Even though the current expansion appears more 

sustainable than the boom that occurred in the years 

leading up to the 2008 crisis, there are vulnerabilities 

in the system that merit our attention. 

One vulnerability relates to the uncertainties 

associated with the transition of monetary policies—

both here and abroad—from a highly expansionary to 

a more normal posture. Market responses to changes 

in monetary policy can be hard to predict. Recently, 

the Board of Governors of the Federal Reserve System 

has embarked on a gradual reduction in the size of its 

balance sheet. Thus far, there has been no apparent 

market reaction. Nonetheless, higher interest rates 

could pose problems for industry sectors that have 

become more indebted during this expansion. 

By many measures, stocks, bonds, and real estate are 

richly priced. Stock price-to-earnings ratios are at high 

levels, traditionally a cautionary sign to investors of 

a potential market correction. Bond maturities have 

lengthened, making their values more sensitive to a 

change in interest rates. As measured by capitalization 

rates, prices for commercial real estate are at high 

levels relative to the revenues the properties generate, 

again suggesting greater vulnerability to a correction. 

Taken together, these circumstances may represent 

a significant risk for financial market participants. 

While the banking system is much stronger now 

than it was entering the crisis, continued vigilance is 

warranted. 
MESSAGE FROM THE CHAIRMAN 7

2017

MESSAGE FROM THE CHAIRMAN

FOCUSING ON INTEREST-RATE RISK, 

CREDIT RISK, AND LIQUIDITY RISK

While the financial performance of the banking 

industry continues to improve, evidence of growing 

interest-rate risk, credit risk, and liquidity risk merit 

attention. A prolonged period of low interest rates 

has resulted in narrow net interest margins, and many 

banks have responded by investing in longer-term 

assets, which has increased the mismatch between 

asset and liability maturities. 

Examiners have also noted that lending in higherrisk loan categories has been increasing, and that 

institutions with concentrated portfolios have been 

growing more rapidly and placing greater reliance 

on potentially volatile funding sources than the rest 

of the industry. The FDIC will continue to monitor 

these trends, as well as the risk-management practices 

of supervised institutions associated with loan 

underwriting, credit administration, and portfolio 

management.

In 2016, the FDIC, Federal Reserve Board, and 

Office of the Comptroller of the Currency (OCC) 

increased the frequency of examinations of large banks 

that participate in the Shared National Credit (SNC) 

program. The most recent report, which reflects 

examinations conducted in the third quarter of 2016 

and first quarter of 2017, noted that credit risk in 

the portfolio remains elevated due to borrowers that 

exhibited excessive leverage, as well as distressed loans 

in the oil and gas sector.

During 2017, the FDIC observed instances of 

liquidity stress at a small number of insured financial 

institutions and broad trends of reduced balance 

sheet liquidity among smaller banks. In response, 

the FDIC co-hosted an interagency community bank 

teleconference to discuss trends in community bank 

liquidity and funds management and the importance 

of sound risk-management practices. The FDIC, 

Federal Reserve Board, OCC, and Conference of 

State Bank Supervisors reiterated the importance 

of a strong cushion of liquid assets and diversified 

funding, and discussed brokered deposit restrictions, 

cash flow scenario analysis and sensitivity testing, and 

contingency funding planning. 

Further, in conjunction with the Federal Reserve 

Board and OCC, we issued a series of frequently 

asked questions to address the applicability of the 

liquidity coverage ratio rule, which was adopted 

in 2014 to implement a quantitative liquidity 

requirement consistent with the standard established 

by the Basel Committee on Banking Supervision.

These examples of increasing risk are noteworthy 

because it is during this phase of the credit cycle that 

underwriting and investment decisions are made 

that may lead to losses in the future. Addressing 

these risks before losses materialize will benefit banks 

and contribute to the stability and resilience of the 

industry. We will continue to focus our supervisory 

attention on these risk areas going forward.

ADDRESSING CYBERSECURITY RISK

The rapidly evolving nature of cybersecurity 

risk reinforces the need for regulators, financial 

institutions, and critical technology service providers 

to have high-quality controls and clear and tested 

business continuity plans. The FDIC collaborates with 

other financial regulators, law enforcement, security 

agencies, and public-private partnerships to better 

understand the cybersecurity threats to the financial 

system, and to identify opportunities to adjust 

supervisory strategies to increase their effectiveness.

The FDIC, Federal Reserve Board, and OCC 

continue to collaborate to strengthen cybersecurity 

risk management among the entities we supervise. 

For example, in 2017, we updated the interagency 

Cybersecurity Assessment Tool that helps financial 

institutions determine their cyber risk profile, 

inherent risks, and level of cybersecurity preparedness. 

This update addressed feedback from entities that are 

using the tool.

The FDIC monitors cybersecurity issues on a regular 

basis through on-site bank examinations. In 2016, 

we introduced the Information Technology Risk 

Examination Program to enhance our ability to 
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ANNUAL REPORT

identify, assess, and validate information technology 

and operations risks in financial institutions. We are 

using information gathered through the program to 

provide more specific, targeted findings with respect 

to information technology, which can help financial 

institutions better prioritize their actions.

The FDIC, Federal Reserve Board, and OCC jointly 

examine the services multiple companies provide 

to the banking industry. We introduced a new 

cybersecurity examination work program in 2017 that 

has improved our risk focus on cybersecurity, among 

other information technology risks. Additionally, in 

December, we held a roundtable meeting with some 

of the most significant service providers to discuss key 

risk topics, including cybersecurity. 

In 2017, the FDIC also continued to strengthen its 

own cybersecurity posture. Our Insider Threat and 

Counterintelligence Program is in place to safeguard 

employees, information, operations, and facilities, and 

we continue to enhance our procedures and programs 

for securing sensitive information. The FDIC also 

requires employees to take annual security and privacy 

training so they are aware of our security standards. 

This is supplemented by periodic exercises to help 

ensure employees stay alert to possible outside threats.

Information security is a top priority at the FDIC. We 

will continue to enhance our security controls in light 

of the changing threat landscape.

RESOLUTION OF SYSTEMICALLY 

IMPORTANT FINANCIAL INSTITUTIONS

The FDIC continues to evaluate firm-developed 

resolutions plans, and to develop its own strategies 

to facilitate the orderly failure of large, complex, 

Systemically Important Financial Institutions (SIFIs) 

without taxpayer support or market breakdowns.

Living Wills

In 2017, the FDIC remained committed to carrying 

out the statutory mandate that SIFIs demonstrate 

a clear path to an orderly failure under bankruptcy 

at no cost to taxpayers. Under the Dodd-Frank 

Wall Street Reform and Consumer Protection Act, 

bankruptcy is the statutory first option for resolving 

a SIFI. To satisfy this requirement, the largest bank 

holding companies and certain non-bank financial 

companies are required to prepare resolution plans, 

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

must demonstrate that the firm could be resolved 

under bankruptcy in a rapid and orderly manner that 

substantially mitigates the risk that its failure would 

have serious adverse effects on financial stability in the 

United States.

The FDIC and the Federal Reserve Board are charged 

with jointly reviewing and assessing each firm’s 

resolution plan. The eight largest U.S. systemically 

important banking organizations submitted their 

plans by July 2017. In December, the FDIC and 

Federal Reserve Board completed their review. 

We identified no deficiencies, but did identify 

shortcomings in the plans of four firms. While the 

agencies agreed these weaknesses did not necessitate 

immediate plan resubmissions, they are important 

enough to highlight and have addressed in the firms’ 

next plan submissions, which are required by July 1, 

2019.  

These results represent the significant progress firms 

have made to modify their corporate structures so 

that losses can be borne by investors in an orderly 

way. However, inherent challenges and uncertainties 

associated with the resolution of a SIFI remain. 

Toward that end, the agencies identified four areas 

in which more work needs to be done by all firms to 

continue to improve their resolvability: intra-group 

liquidity; internal loss-absorbing capacity; derivatives; 

and payment, clearing, and settlement activities.

Moreover, the resolvability of firms will change as 

markets change and as firms’ activities, structures, and 

risk profiles change. We expect the firms to remain 

vigilant in considering the resolution consequences of 

their day-to-day management decisions. 

In addition to the eight U.S. firms, in March 2017 

the agencies issued guidance to four foreign banking 

organizations to help them improve their resolution 

plans and to reflect the significant restructuring that 
MESSAGE FROM THE CHAIRMAN 9

2017

MESSAGE FROM THE CHAIRMAN

they have undertaken to form intermediate holding 

companies within the United States. The feedback 

was organized around a number of key vulnerabilities, 

such as capital, liquidity, and corporate governance 

mechanisms. These four firms will file their next plans 

in 2018.

Overall, the living will process has proved to be an 

important means for identifying and implementing 

measures to enhance SIFIs’ resolvability. Firms have 

taken significant actions, including restructurings, 

operational continuity planning, and options for 

separating assets, business lines, and entities from 

a failing company. Firms also have improved their 

management information systems capabilities, 

financial resource measurement and processes, and 

resolution planning governance, all of which are key 

elements for enhancing resolvability.

The FDIC and Federal Reserve Board are exploring 

ways to further improve the resolution planning 

process. One measure we are considering is extending 

the cycle for living will submissions to every two 

years and focusing, on an alternating basis, on key 

topics and material changes from the prior full plan. 

In addition, there may be opportunities to reduce the 

submission requirements for a large number of firms 

due to their relatively small, simple, and domestically 

focused banking activities. 

Orderly Liquidation Authority

Given the challenges and uncertainty surrounding 

any particular failure, Title II of the Dodd-Frank 

Act provides the Orderly Liquidation Authority for 

circumstances when an orderly failure in bankruptcy 

might not be possible. This authority allows the FDIC 

to manage the orderly failure of a firm when failure in 

bankruptcy might threaten financial stability. 

Coupled with the Federal Reserve’s Total LossAbsorbing Capacity (TLAC) rule, which requires 

a minimum amount of long-term unsecured debt 

that can be converted to equity in resolution, these 

authorities work together to increase the likelihood 

that financial markets and the broader economy 

can weather the failure of a SIFI; that shareholders, 

creditors, and culpable management of the institution 

will be held accountable without cost to taxpayers; 

and that such an institution can be wound down and 

liquidated in an orderly way. 

As has occurred in the United States, the other leading 

jurisdictions of the world have enacted expanded 

authorities for the resolution of SIFIs. The FDIC has 

worked closely with all major financial jurisdictions, 

including the United Kingdom, the European 

Banking Union, Switzerland, and Japan, to facilitate 

cross-border resolution planning.

In the years since enactment of Dodd-Frank, the 

FDIC has made significant progress in developing 

the operational capabilities necessary to carry out a 

resolution under the Orderly Liquidation Authority 

if needed. The fact that the credit rating agencies have 

lowered the credit ratings of the eight U.S. Global 

Systemically Important Banks (G-SIBs) because of a 

reduced expectation of taxpayer support in the event 

of failure is a sign of that progress. 

Until we actually execute a resolution using these 

authorities we should be cautious about bold 

statements. However, we have a domestic and 

international framework in place today that would 

have been extremely helpful in 2008, and that should 

promote a better outcome in the future. 

REBUILDING THE DIF, 

RESOLVING FAILED BANKS

Under a restoration plan that reflects the statutory 

requirement to rebuild the Deposit Insurance Fund 

(DIF), the fund balance has increased every quarter 

since the end of 2009, when it reached an all-time 

low. As of December 31, 2017, the fund balance had 

increased to $92.7 billion. The DIF reserve ratio—

the ratio of the DIF balance to estimated insured 

deposits—was 1.28 percent at September 30, 2017, 

the highest reserve ratio since June 2005.

The Dodd-Frank Act raised the minimum reserve 

ratio for the DIF from 1.15 percent to 1.35 percent, 
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ANNUAL REPORT

and mandates that the reserve ratio reach 1.35 percent 

by September 30, 2020. Dodd-Frank also assigns the 

cost of that increase in the minimum reserve ratio to 

banks with $10 billion or more in total assets.

To meet these requirements, large banks have been 

paying temporary assessment surcharges. Surcharges 

began in the third quarter of 2016—the quarter 

after the reserve ratio surpassed 1.15 percent—and 

will continue through the quarter in which the 

reserve ratio first meets or exceeds 1.35 percent. The 

FDIC expects the reserve ratio to reach 1.35 percent 

in 2018, ahead of the September 2020 statutory 

deadline.

In the event that the reserve ratio does not reach 1.35 

percent by the end of 2018, FDIC regulations call 

for a shortfall assessment in early 2019 on banks with 

total assets of $10 billion or more to cover the gap.

In 2017, the numbers of failed banks and problem 

banks continued their trend toward pre-crisis levels. 

There were eight bank failures in 2017, down 

dramatically from a yearly peak of 157 in 2010, while 

the number of banks on the problem bank list (banks 

rated 4 or 5 on the CAMELS rating scale) fell to 104 

at the end of September 2017 from a high of 888 in 

March 2011. 

During 2017, the FDIC successfully used various 

resolution strategies to protect insured depositors of 

failed institutions at the least cost to the DIF. The 

FDIC actively marketed failing institutions and sold 

them to other financial institutions. These strategies 

protected insured depositors and preserved banking 

relationships in many communities, providing 

depositors and customers with uninterrupted access to 

essential banking services.

MANAGING FDIC RESOURCES

As the banking industry continues to recover, 

the FDIC requires fewer resources. The agency’s 

authorized workforce for 2017 was 6,363 full-time 

equivalent positions compared with 6,533 the year 

before. The 2017 FDIC Operating Budget was $2.16 

billion, a decrease of 2.4 percent from 2016.

The FDIC remains committed to fulfilling its mission 

while prudently managing costs. We reduced our 

budget for 2018 from the prior year by 3.0 percent 

to $2.09 billion and reduced authorized staffing by 

approximately 4.5 percent to 6,076 positions. This is 

the eighth consecutive reduction in the FDIC’s annual 

operating budget. However, contingent resources are 

included in the budget to ensure readiness should 

economic conditions unexpectedly deteriorate.

COMMUNITY BANKING INITIATIVE

The FDIC is the primary federal supervisor of the 

majority of community banks in the United States, 

and community banks account for 92 percent 

of FDIC-insured institutions. For these reasons, 

community banking is an important focus of FDIC 

supervision, technical assistance, and research. 

The FDIC maintains an extensive community 

bank research program, hosts community banking 

conferences, and convenes an Advisory Committee 

on Community Banking, through which the FDIC 

Board receives regular input from bankers. 

Community banks are critically important to our 

economy and the banking system. Community banks 

account for 13 percent of the banking assets in the 

United States, and 43 percent of the small loans to 

businesses and farms originated by all banks, making 

them key partners in supporting local economic 

development and job creation. The community 

banking sector continues to demonstrate resilience 

and innovation in meeting new challenges and 

competing in an evolving financial marketplace.

Helping community banks meet the challenges they 

face is an important part of the FDIC’s Community 

Banking Initiative. These include challenges in 

the areas of recruitment and succession planning. 

In response, the FDIC developed a directory of 

universities and colleges that have established 

academic programs dedicated to community 

banking, and is working with the American Bankers 

Association to explore the feasibility of establishing 

an online clearinghouse through which banks can 

connect with universities and colleges seeking to place 
MESSAGE FROM THE CHAIRMAN 11

2017

MESSAGE FROM THE CHAIRMAN

students who have an interest in banking internships 

and jobs.

Also in 2017, in response to feedback from our 

Advisory Committee on Community Banking, we 

prepared a virtual version of the Directors’ Colleges 

that we deliver throughout our regions. The virtual 

curriculum includes six video modules covering topics 

directors most often tell us they want to learn more 

about: interest-rate risk, troubled debt restructurings, 

the Bank Secrecy Act, and corporate governance.

The FDIC also hosted banker webinars focusing on 

financial education, accessing affordable mortgage 

credit, and changes to the Call Report. Additionally, 

we conducted 11 banker teleconferences to discuss 

changes to the Home Mortgage Disclosure Act, 

proposed changes to the capital rules, small business 

resources for community banks, liquidity and funds 

management, the Bank Secrecy Act, Community 

Development Lending, reasonably expected market 

areas, and new accounting proposals. 

In addition, we conducted three seminars on 

FDIC deposit insurance coverage for bank officers 

and employees, and released three videos covering 

Fundamentals of Deposit Insurance Coverage, 

Deposit Insurance Coverage for Revocable Trust 

Accounts, and Advanced Topics in Deposit Insurance 

Coverage. 

The FDIC also published a new guide to help 

community bankers learn more about the programs 

and products offered by the Federal Home Loan 

Banks (FHLBs) to facilitate mortgage lending. The 

first two parts of the Guide focus on Federal Agencies 

and Government-Sponsored Enterprises and State 

Housing Finance Agencies. The Affordable Mortgage 

Lending Guide, Part III: Federal Home Loan Banks

describes many of the products and services offered 

by FHLBs, including products that support singlefamily home purchases, and alternatives for selling 

mortgages on the secondary market. The three-part 

guide is available through the FDIC’s Affordable 

Mortgage Lending Center, an online resource to help 

community bankers understand and compare the 

mortgage-lending products and services offered by 

federal and state housing finance agencies, the FHLBs, 

and government-sponsored enterprises.

In 2016 the FDIC launched a new survey regarding 

banks’ small business lending practices. This survey 

was designed to solicit and report information on 

the general characteristics of banks’ small business 

borrowers, the types of credit offered to small 

businesses, and the relative importance of commercial 

lending for banks of different sizes and business 

models. This information increases the understanding 

of how banks of all sizes are lending to small 

businesses, which is crucial to job creation. The survey 

has generated valuable data about a previously underresearched area, and a full report of the survey results 

will be released in 2018.

Finally, the FDIC’s Advisory Committee on 

Community Banking is an ongoing forum for 

discussing current issues and receiving valuable 

feedback from the industry. The committee, which 

met three times during 2017, is composed of chief 

executives of 13 community banks located around 

the country. The committee provides valuable 

input on a wide variety of topics, including 

examination policies and procedures, capital and 

other supervisory issues, credit and lending practices, 

deposit insurance assessments and coverage, and 

regulatory compliance issues.

Supporting De Novo Banks

De novo institutions fill important gaps in local 

banking markets, provide credit and services to 

communities that may be overlooked by larger 

institutions, and help to preserve the vitality of the 

community banking sector. The FDIC is committed 

to working with, and providing support to, any 

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

welcomes applications for deposit insurance.

The current environment, with low interest rates 

and the resulting impact on net interest margins, 

is challenging for the formation of new banks. 

Nevertheless, we have seen tentative signs of an 

uptick in de novo formations, including increased 

interest from prospective organizing groups in filing 
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ANNUAL REPORT

applications for new insured depository institutions. 

During 2017, the FDIC approved six applications for 

deposit insurance for new community banks. 

To encourage interest and help organizing groups 

navigate the application process, the FDIC conducted 

a series of outreach meetings throughout the country. 

These meetings aimed to help organizing groups 

become fully informed about the FDIC’s application 

process and the tools and resources available to assist 

them. We also issued a publication entitled Applying 

for Deposit Insurance – A Handbook for Organizers 

of De Novo Institutions that is intended to help 

organizers become familiar with the deposit insurance 

application process and understand the path to 

obtaining insurance. 

SIMPLIFYING REGULATION

In March of 2017, the FDIC, OCC and Federal 

Reserve Board (FRB) in conjunction with the 

National Credit Union Administration (NCUA), 

all members of the Federal Financial Institutions 

Examination Council (FFIEC), issued a joint report 

to Congress detailing our extensive, two-year review 

of the rules affecting financial institutions. This review 

is required by the Economic Growth and Regulatory 

Paperwork Reduction Act of 1996 (EGRPRA), and 

its purpose is to identify and eliminate, as appropriate, 

outdated or otherwise unnecessary regulatory 

requirements on insured depository institutions, 

while, at the same time, ensuring that safety and 

soundness and consumer compliance standards are 

maintained.

The EGRPRA-mandated review is required at least 

once every 10 years, and this review cycle included, 

for the first time, the significant body of new rules 

and regulations introduced in response to the financial 

crisis.

The regulatory review process is one we take very 

seriously. Over the course of the review, the federal 

banking agencies and the NCUA hosted six public 

outreach meetings and reviewed more than 230 

comment letters submitted in response to four Federal 

Register notices. The agencies have reviewed these 

comments and considered appropriate changes to 

reduce regulatory burdens on institutions. We also 

explored opportunities to improve the transparency 

and clarity of our supervisory policies and procedures, 

especially as they apply to community banks.

Together with the other FFIEC agencies, we have 

taken certain steps and continue to take further 

measures to address the significant issues identified 

as burdensome by supervised institutions during the 

EGRPRA review process. For example: 

♦ We adopted a final rule that expanded the 

examination cycle for certain insured depository 

institutions with up to $1 billion in total 

assets. Approximately 4,790 insured depository 

institutions are now eligible for the expanded 

exam cycle.

♦ We streamlined the Call Report, removing 40 

percent of the data items previously required 

for institutions with domestic offices only and 

reducing the length of the Call Report for eligible 

small institutions from 85 pages to 61 pages. In 

June 2017, and again in November 2017, we 

proposed additional burden-reducing revisions to 

all three versions of the Call Report. 

♦ We issued an interagency proposal to simplify 

the generally applicable capital framework 

and to clarify the definition of high-volatility 

commercial real estate. The proposed 

simplifications include changes to the regulatory 

capital treatment of mortgage servicing assets, 

deferred tax assets, investments in the capital 

instruments of other financial institutions, and 

minority interest. 

♦ We finalized a rule regarding regulatory capital 

to pause the phase-in of certain regulatory capital 

adjustments and deductions that are part of the 

Basel III capital standard. 

♦ We issued an interagency proposal to increase 

the threshold for requiring an appraisal on 

commercial real estate loans, which we believe 

will reduce regulatory burden in a manner 

consistent with safety and soundness. Comments 
MESSAGE FROM THE CHAIRMAN 13

2017

MESSAGE FROM THE CHAIRMAN

on the proposal have been received and are 

being evaluated.

♦ We issued an interagency bulletin to make 

bankers and other stakeholders aware of the 

options available in areas where there is a 

shortage of appraisers. The advisory addresses 

concerns raised pursuant to the EGRPRA review 

process, as well as during six roundtables between 

federal banking regulators, state commissioners, 

and rural community bankers.

♦ We raised the threshold for loans included in 

the SNC program from $20 million to $100 

million. This action lowered the number of loans 

required to be reported by financial institutions, 

providing regulatory relief for 82 mid-sized 

financial institutions. 

The federal banking agencies also recognize that 

regulatory burden does not emanate solely from 

statutes and regulations, but often comes from 

processes and procedures related to examinations 

and supervisory oversight. Accordingly, the agencies 

are jointly reviewing the examination process, 

examination report format, and examination 

report preparation process. We are working to 

identify opportunities to minimize burden to bank 

management where possible, with a particular goal of 

determining whether technology can be used to make 

existing examination activities more efficient or allow 

for additional safety and soundness examination work 

to be conducted off-site.

EGRPRA commenters recommended a number of 

legislative changes as well, and the FDIC is supportive 

of reforms that would:

♦ Raise the total assets threshold for conducting 

annual stress tests from $10 billion to $50 

billion;

♦ Increase the asset threshold for banks eligible for 

an 18-month examination cycle from $1 billion 

to $2 billion;

♦ Raise the asset threshold for the community 

bank Call Report to match a higher examination 

frequency threshold; 

♦ Create a new appraisal threshold exemption for 

insured depository institutions that originate a de 

minimis number (i.e., less than 25) of residential 

mortgage loans in a calendar year; and

♦ Deem banks with assets under $10 billion 

compliant with risk-based capital requirements 

if they maintain a leverage capital ratio of 10 

percent and do not engage in a short, specified 

list of activities.

Overall, the FDIC supports measures to ensure that 

financial regulations are simple and straightforward 

and that regulatory costs and burdens are minimized, 

particularly for smaller institutions. However, in 

considering ways to simplify or streamline regulations, 

it is important to preserve the gains that have been 

achieved in restoring confidence and stability since 

the financial crisis and maintaining the safety and 

soundness of the U.S. banking system. 

REGULATORY RELIEF 

IN DISASTER AREAS

In 2017, communities in Florida, Georgia, Texas, and, 

in particular, the U.S. Virgin Islands and Puerto Rico, 

were affected by severe storms and flooding related to 

hurricanes. The FDIC worked to provide flexibility to 

financial institutions in these areas relative to appraisal 

requirements, lending and credit policies, and efforts 

to meet customers’ cash and financial needs. As these 

areas continue to recover, the FDIC encourages 

depository institutions to consider all reasonable and 

prudent steps to assist their customers, consistent with 

safe-and-sound banking practices.

EXPANDING ACCESS 

TO BANKING SERVICES AND 

PROTECTING CONSUMERS

Expanding access to mainstream banking services 

helps strengthen confidence in the nation’s financial 

system, the FDIC’s core mission. Our most recent 

National Survey of Unbanked and Underbanked 

Households, published in October 2016, produced 
14 MESSAGE FROM THE CHAIRMAN

ANNUAL REPORT

encouraging results, showing that the proportion of 

unbanked households has fallen to 7 percent. But 

the survey provides ample evidence that much work 

remains to expand economic inclusion, particularly 

among households with incomes below $30,000 

per year, African American households, Hispanic 

households, and households headed by a working-age 

individual with a disability.

Building on the insights gained from the survey, 

the FDIC has undertaken a number of initiatives to 

expand economic inclusion. 

The FDIC introduced the Safe Accounts pilot in 

2011 in response to survey findings and with the 

encouragement of the Advisory Committee on 

Economic Inclusion. Safe Accounts have a low or 

no minimum balance requirement, are electronicbased, use debit cards, do not include overdraft or 

nonsufficient funds fees, and have low, transparent 

monthly fees. These accounts are designed to better 

enable unbanked and underbanked households to 

access the banking system and to sustain banking 

relationships over time. 

Since the pilot concluded, we have identified examples 

of banks across the spectrum of the industry—

money center, regional, and community banks— as 

offering accounts consistent with the features of the 

Safe Account. FDIC analysts estimate that nine in 

10 Americans live in a county with a branch of an 

institution that offers Safe Accounts. This represents a 

significant improvement since 2011, but many banks 

and consumers remain unaware of the benefits of 

these low-cost, card-based products. To ensure that 

consumers who would benefit from Safe Accounts 

are aware of their availability and to encourage 

bank engagement, the FDIC has partnered with 

the non-profit Cities for Financial Empowerment 

Fund, Bank On programs, and FDIC-supported 

Alliances for Economic Inclusion, and has worked 

with other community groups, banks, state and 

local governments, and philanthropic organizations. 

Through these forums, we provide outreach to 

representatives of hundreds of community-based 

organizations and bankers across the country. 

Bringing these groups together creates opportunities 

to identify strategies to reach unbanked populations 

by lowering the barriers to accessing banking services.

In addition to the Safe Account effort, the FDIC 

continues to study how mobile financial services 

may help banks address many of the core financial 

service needs of underserved consumers, including 

providing more timely information about balances 

and transactions and more control over customers’ 

financial lives.

We also continued our efforts to provide and promote 

effective financial education for young people. 

Offering financial education to school-age children 

opens the door to many opportunities and establishes 

the groundwork for a lifelong banking relationship. 

Through our Youth Savings Pilot program, we have 

studied the financial education programs offered by 

21 banks in partnership with local schools over a twoyear period. These programs tie financial education 

with the opportunity to open a safe, low-cost savings 

account at bank branches, some of which are located 

in the schools and run by students.

We gathered insights from the pilot into a report 

we published in March 2017. The many lessons we 

learned—about program design, the importance of 

partnerships, types of accounts offered, classroombased financial education, the role of parents 

and guardians, program costs, and measuring 

performance—provide a comprehensive roadmap 

for banks and schools that are teaming up to link 

financial education with opportunities to save. 

The FDIC also launched a Youth Banking Network, 

a platform to support banks as they work with 

school and nonprofit partners to create and expand 

youth savings programs. The FDIC offers periodic 

conference calls and resources on topics of interest 

to network members, which now total more than 

50 institutions, and receives ongoing feedback 

from network participants on ways to support 

collaborations. 

Our Money Smart program is another example of 

our ongoing efforts to develop and promote financial 
MESSAGE FROM THE CHAIRMAN 15

2017

MESSAGE FROM THE CHAIRMAN

education. For example, Money Smart for Older Adults, 

a resource developed jointly by the FDIC and the 

Consumer Financial Protection Bureau, was updated 

in 2017 to help older adults and their caregivers guard 

against financial exploitation and make informed 

financial decisions.

We also continue to collaborate with the U.S. Small 

Business Administration (SBA) on Money Smart 

for Small Business, a resource that provides practical 

guidance for starting and managing a business. The 

Strategic Alliance Memorandum between the FDIC 

and SBA ensures this collaboration will continue 

through 2018.

Money Smart for Young People, a curriculum that 

involves educators, parents/caregivers, and young 

people in the learning process, continues to be 

well received. There have been more than 145,000 

downloads of the curriculum, portions of which are 

available in Spanish, since its launch in 2015. These 

resources are at work in classrooms and also are used 

by workforce development organizations in providing 

financial education to young people in employment 

programs.

Many of these initiatives, as well as the future of 

economic inclusion efforts, were discussed at the 

Economic Inclusion Summit the FDIC hosted in 

April. The event brought together representatives from 

banks, trade associations, non-profit organizations, 

government agencies, and the public to explore 

strategies for increasing underserved consumers’ access 

to the mainstream financial system. In particular, 

panelists discussed strategies for 

♦ Establishing safe and sustainable banking 

relationships, 

♦ Leveraging partnerships for banking access and 

financial empowerment, and 

♦ Growing customer relationships and building 

long-term loyalty among diverse customers.

The FDIC’s Advisory Committee on Economic 

Inclusion also met twice in 2017 to discuss topics 

such as neighborhood access to bank branches, 

economic inclusion for persons with disabilities, and 

an FDIC survey of entry-level consumer checking 

and savings accounts, as well as collaborations with 

community-based organizations and resources for 

affordable mortgage lending.

Overall, the progress the FDIC and our collaborators 

have made in this area has been substantial—initiating 

the national survey, developing the model Safe 

Account and seeing it offered by financial institutions 

around the country, and exploring the potential of 

mobile financial services to expand access.

CONCLUSION

During 2017, the U.S. banking industry continued its 

recovery from the recent financial crisis. The industry 

benefited from stronger balance sheets, fewer problem 

banks and bank closings, increased lending activity, 

and a larger balance in the DIF. 

In 2018, the FDIC will continue to work to fulfill its 

mission of maintaining public confidence and stability 

in the nation’s financial system.

As I previously emphasized, bankers and supervisors 

should not allow the current strong economic and 

banking conditions to be a cause for complacency. 

The challenge for the FDIC going forward will be to 

preserve the hard-earned improvements in the capital 

and liquidity of U.S. banking institutions and sustain 

vigilant supervision of the banking industry, both to 

continue the strong performance of banks during this 

post-crisis period and to position the banking system 

to weather the next inevitable downturn.

The workforce of the FDIC remains committed to the 

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

professionals of the FDIC for their commitment to 

public service and for the high level at which they 

carry out their important responsibilities.

Sincerely,

Martin J. Gruenberg
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1717

2017

I am pleased to present 

the FDIC’s 2017 Annual 

Report (also referred to 

as the Performance and 

Accountability Report). 

The report covers financial 

and program performance 

information, and 

summarizes our successes 

for the year. The FDIC 

takes pride in providing timely, reliable, and 

meaningful information to its many stakeholders. 

For 26 consecutive years, the U.S. Government 

Accountability Office (GAO) has issued unmodified 

(unqualified) audit opinions for the two funds 

administered by the FDIC: the Deposit Insurance 

Fund (DIF) and the Federal Savings and Loan 

Insurance Corporation (FSLIC) Resolution Fund 

(FRF). We take pride in our responsibility and 

demonstrate discipline and accountability as stewards 

of these funds. We remain proactive in the execution 

of sound financial management and in providing 

reliable financial data.

FINANCIAL AND PROGRAM 

RESULTS FOR 2017

The DIF balance (the net worth of the Fund) rose 

to a record $92.7 billion as of December 31, 2017, 

compared to the year-end 2016 balance of $83.2 

billion.  The Fund balance increase was primarily due 

to assessment revenue. 

For 2017, DIF comprehensive income was 

$9.6 billion, or $975 million lower than 2016 

comprehensive income of $10.6 billion.  While 

assessment revenue in 2017 of $10.6 billion was $608 

million higher than 2016 assessment revenue of $10.0 

billion, the lower negative provision for insurance 

losses of $1.4 billion year-over-year (negative $183 

million in 2017 as compared to negative $1.6 billion 

in 2016) more than offset the effect of the revenue 

increase. 

The DIF U.S. Treasury securities investment portfolio 

balance was $83.3 billion as of December 31, 2017, 

an increase of $9.8 billion over the year-end 2016 

portfolio balance of $73.5 billion. Interest revenue on 

DIF investments was $1.1 billion for 2017, compared 

to $671 million for 2016. 

In 2017, the FDIC continued its efforts to reduce 

operating costs and prudently manage the funds 

that it administers. The FDIC Operating Budget 

for 2017 totaled approximately $2.16 billion, 

which represented a decrease of $53 million (2.4 

percent) from 2016. Actual 2017 spending totaled 

approximately $1.93 billion. On December 19, 

2017, the FDIC Board of Directors approved a 2018 

FDIC Operating Budget totaling $2.09 billion, down 

$66 million (3.0 percent) from the 2017 budget. 

Including 2018, the annual operating budget has 

declined for eight consecutive years, consistent with a 

steadily declining workload.

The FDIC continues to reduce staffing levels, as 

conditions in the banking industry improve and 

the FDIC requires fewer resources. The FDIC’s 

authorized full-time equivalent staffing dropped in 

2017 from 6,363 to 6,076, a 4.5 percent reduction. 

In 2018, we project further reductions in the overall 

workforce. However, we will maintain a workforce 

capable of handling our supervision, insurance, and 

bank failure functions.

MESSAGE FROM THE 

CHIEF FINANCIAL OFFICER

MESSAGE FROM THE CHIEF FINANCIAL OFFICER
18

ANNUAL REPORT

In 2017, eight banks failed, up from five in 2016. 

Even though the number of bank failures is relatively 

low, we will continue to prudently manage the risks 

to the DIF, including interest rate, fiscal, and global 

economic risks. We will remain focused on sound 

financial management techniques, and maintain 

our enterprise-wide risk management and internal 

control program.

Sincerely,

Steven O. App

MESSAGE FROM THE CHIEF FINANCIAL OFFICER
2017

FDIC SENIOR LEADERS 19

FDIC SENIOR LEADERS

Seated (left to right): Vice Chairman Thomas M. Hoenig and Chairman Martin J. Gruenberg.

Standing 1st Row (left to right): Jay N. Lerner, Barbara A. Ryan, Steven Primrose, Craig R. Jarvill, Arleas Upton Kea, Mark E. Pearce, 

Barbara Hagenbaugh, Doreen R. Eberley. 2nd Row (left to right): Howard G. Whyte, Suzannah L. Susser, Lawrence Gross, Jr., Charles Yi, 

Russell G. Pittman, Steven O. App, Bret D. Edwards, Lee Price, Arthur J. Murton, Kymberly K. Copa, and Diane Ellis.

Not pictured: Robert D. Harris, Noreen Padilla, C. Richard Miserendino, Saul Schwartz, Andy Jiminez, M. Anthony Lowe, and Ricardo Delfin. 
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21

MANAGEMENT’S 

DISCUSSION AND 

ANALYSIS

I.
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2323

2017

MANAGEMENT’S DISCUSSION AND ANALYSIS

THE YEAR IN REVIEW

OVERVIEW

The FDIC continued to fulfill its mission-critical 

responsibilities during 2017. Insuring deposits, 

examining and supervising financial institutions, 

making large financial firms resolvable, managing 

receiverships, and educating consumers are the core 

responsibilities of the FDIC. The agency adopted 

and issued proposed rules on key regulations under 

the Economic Growth and Regulatory Paperwork 

Reduction Act of 1996 (EGRPRA), and engaged 

in several community banking and community 

development initiatives. Cybersecurity remained 

a high priority for the FDIC in 2017; the agency 

worked to strengthen cybersecurity oversight, help 

financial institutions mitigate increasing risks, and 

respond to cyber threats. The sections below highlight 

these and other accomplishments during the year.

DEPOSIT INSURANCE

As insurer of bank and savings association deposits, 

the FDIC must continually evaluate and effectively 

manage how changes in the economy, financial 

markets, and 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 complements the Restoration Plan, 

originally adopted in 2008 and subsequently revised, 

which was designed to ensure that the reserve ratio 

(the ratio of the fund balance to estimated insured 

deposits) reaches 1.35 percent by September 30, 

2020, as required by the Dodd-Frank Act. Under the 

plan, a reduction in assessment rates took effect in the 

third quarter of 2016 as a result of the reserve ratio’s 

having surpassed 1.15 percent in the previous quarter. 

Under the long-term DIF management plan, to 

increase the probability that the fund reserve ratio will 

reach a level sufficient to withstand a future crisis, the 

FDIC Board set the Designated Reserve Ratio (DRR) 

of the DIF at 2.0 percent. In September 2017, the 

Board voted to maintain the 2.0 percent ratio for 

2018. 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. 

Additionally, as part of the long-term DIF 

management plan, the FDIC has suspended 

dividends indefinitely when the fund reserve ratio 

exceeds 1.5 percent. In lieu of dividends, the plan 

prescribes progressively lower assessment rates that 

will become effective when the reserve ratio exceeds 

2.0 percent and 2.5 percent. 

State of the Deposit Insurance Fund 

Estimated losses to the DIF from bank failures that 

occurred in 2017 totaled $1.1 billion. The fund 

balance continued to grow through 2017, as it has 

every quarter after the end of 2009. Assessment 

revenue was the primary contributor to the increase 

in the fund balance in 2017. The fund reserve ratio 

rose to 1.28 percent at September 30, 2017, from 

1.18 percent a year earlier. 

Minimum Reserve Ratio

Section 334 of the Dodd-Frank Act, which increased 

the minimum reserve ratio of the DIF from 1.15 

percent to 1.35 percent, requires that the reserve ratio 

reach that level by September 30, 2020. Section 334 

also mandates that the FDIC offset the effect of the 

increase in the minimum reserve ratio on IDIs with 

total consolidated assets of less than $10 billion. 

The final rule implementing these requirements 

took effect on July 1, 2016. It imposes surcharges 

on the quarterly assessments of insured depository 

institutions (IDIs) with total consolidated assets of 

$10 billion or more. The surcharges will continue 

through the quarter in which the reserve ratio first 
ANNUAL REPORT

24 MANAGEMENT’S DISCUSSION AND ANALYSIS

reaches or exceeds 1.35 percent. The surcharge 

equals an annual rate of 4.5 basis points applied to 

an institution’s regular quarterly deposit insurance 

assessment base after subtracting $10 billion, with 

additional adjustments for banks with affiliated 

IDIs. The FDIC expects the reserve ratio to reach 

1.35 percent in 2018. If, contrary to the FDIC’s 

expectations, the reserve ratio does not reach 1.35 

percent by December 31, 2018 (but is still at least 

1.15 percent), the final rule requires the FDIC 

to impose a shortfall assessment on IDIs with 

total consolidated assets of $10 billion or more on 

March 31, 2019. 

Because the Dodd-Frank Act requires that the FDIC 

offset the effect of the increase in the reserve ratio 

from 1.15 percent to 1.35 percent on IDIs with 

total consolidated assets of less than $10 billion, 

the final rule exempts these smaller banks from 

the surcharges and provides assessment credits to 

these institutions for the portion of their regular 

assessments that contributes to growth in the reserve 

ratio between 1.15 percent and 1.35 percent. Credits 

will be automatically applied to these small banks’ 

assessments when the reserve ratio is at or above 

1.38 percent.

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 financial 

institutions, 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, 

2017, the FDIC was the primary federal regulator 

for 3,636 FDIC-insured, state-chartered institutions 

that were not members of the Federal Reserve 

System (generally referred to as “state nonmember” 

institutions). Through risk management (safety 

and soundness), consumer compliance and the 

Community Reinvestment Act (CRA), and other 

specialty examinations, the FDIC assesses an 

institution’s operating condition, management 

practices and policies, and compliance with applicable 

laws and regulations. 

As of December 31, 2017, the FDIC conducted 

1,611 statutorily required risk management 

examinations, including a review of Bank Secrecy 

Act (BSA) compliance, and all required followup examinations for FDIC-supervised problem 

institutions, within prescribed time frames. The 

FDIC also conducted 1,168 statutorily required CRA/

compliance examinations (770 joint CRA/compliance 

examinations, 393 compliance-only examinations, 

and 5 CRA-only examinations). In addition, the 

FDIC performed 3,614 specialty examinations 

(which include reviews for BSA compliance) within 

prescribed time frames. 

The table on the following page compares the number 

of examinations by type, conducted from 2015 

through 2017.

Risk Management

All risk management examinations have been 

conducted in accordance with statutorily- established 

time frames. As of September 30, 2017, 104 insured 

institutions with total assets of $16.0 billion were 

designated as problem institutions for safety and 

soundness purposes (defined as those institutions 

having a composite CAMELS1

 rating of 4 or 5), 

compared to the 132 problem institutions with 

total assets of $24.9 billion on September 30, 

2016. This is a 21 percent decline in the number 

of problem institutions and a 36 percent decrease in 

problem institution assets. For the 12 months ended 

September 30, 2017, 47 institutions with aggregate 

assets of $15.3 billion were removed from the list of 

1

The CAMELS composite rating represents the adequacy of Capital, the quality of Assets, the capability of Management, the quality 

and level of Earnings, the adequacy of Liquidity, and the Sensitivity to market risk, and ranges from “1” (strongest) to “5” (weakest).
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 25

problem financial institutions, while 19 institutions 

with aggregate assets of $7.6 billion were added to 

the list. The FDIC is the primary federal regulator for 

72 of the 104 problem institutions, with total assets of 

$11.6 billion. 

In 2017, the FDIC’s Division of Risk Management 

Supervision (RMS) initiated 134 formal enforcement 

actions and 152 informal enforcement actions. 

Enforcement actions against institutions included, 

but were not limited to, 13 actions under Section 

8(b) of the Federal Deposit Insurance Act (FDI 

Act )(all of which were consent orders), and 103 

memoranda of understanding (MOUs). Of these 

enforcement actions against institutions, three consent 

orders, and 14 MOUs were based, in whole or in 

part, on apparent violations of BSA and anti-money 

laundering (AML) laws and regulations. In addition, 

enforcement actions were also initiated against 

individuals. These actions included, but were not 

limited to, 65 removal and prohibition actions under 

Section 8(e) of the FDI Act (58 consent orders and 

seven notices of intention to remove/prohibit), nine 

actions under Section 8(b) of the FDI Act 

(one order to pay restitution and 8 personal cease 

and desist orders and 25 civil money penalties (CMPs) 

(22 orders to pay and 3 notices of assessment).

The FDIC continues to focus on forward-looking 

supervision by assessing risk management practices 

during the examination process to ensure that risks are 

mitigated before they lead to financial deterioration. 

Compliance

As of December 31, 2017, 37 insured state 

nonmember institutions, about 1 percent of all 

supervised institutions, with total assets of $58 billion, 

were problem institutions for compliance, CRA, or 

FDIC EXAMINATIONS 2015-2017

2017 2016 2015

Risk Management (Safety and Soundness): 

State Nonmember Banks 1,440 1,563 1,665

Savings Banks 171 164 206

State Member Banks 0 0 0

Savings Associations 0 0 0

National Banks 0 0 0

Subtotal – Risk Management Examinations 1,611 1,727 1,871

CRA/Compliance Examinations:

Compliance/Community Reinvestment Act 770 709 859

Compliance-only 393 594 478

CRA-only 5 8 10

Subtotal – CRA/Compliance Examinations 1,168 1,311 1,347

Specialty Examinations:

Trust Departments 347 351 365

Information Technology and Operations 1,627 1,742 1,886

Bank Secrecy Act 1,640 1,761 1,906

Subtotal – Specialty Examinations 3,614 3,854 4,157

TOTAL 6,393 6,892 7,375
ANNUAL REPORT

26 MANAGEMENT’S DISCUSSION AND ANALYSIS

both. All of the problem institutions for compliance 

were rated “4” for compliance purposes, with none 

rated “5.” For CRA purposes, the majority were 

rated “Needs to Improve,” and only two were rated 

“Substantial Noncompliance.” As of December 

31, 2017, all follow-up examinations for problem 

institutions were performed on schedule.

As of December 31, 2017, the FDIC conducted all 

required compliance and CRA examinations and, 

when violations were identified, completed followup visits and implemented appropriate enforcement 

actions in 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 

2017 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 

product features and limitations, deceptive marketing 

and sales practices, and misrepresentations about the 

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

requiring the payment of CMPs.

As of December 31, 2017, the FDIC’s Division of 

Depositor and Consumer Protection (DCP) initiated 

26 formal enforcement actions and 22 informal 

enforcement actions to address compliance concerns. 

This included three restitution orders, one consent 

order, 20 CMPs, two Notices of Assessment, and 

22 MOUs. Restitution orders are formal actions 

that require institutions to pay restitution in the 

form of consumer refunds for different violations 

of law. In 2017, these orders required the payment 

of approximately $3 million to harmed consumers. 

As of December 31, 2017, the CMP orders totaled 

$619,884.

Large Bank Supervision Program 

The FDIC established the Large Bank Supervision 

Branch within RMS to address the growing 

complexity of large banking organizations with 

assets exceeding $10 billion and not assigned to the 

Complex Financial Institution Group (CFI). This 

branch is responsible for supervisory oversight, 

ongoing monitoring, and resolution planning, while 

supporting the insurance business line. For state 

nonmember banks with assets exceeding $10 billion, 

the FDIC generally applies a continuous examination 

program, whereby dedicated staff conducts ongoing 

on-site supervisory examinations and institution 

monitoring. At institutions where the FDIC is not 

the primary federal regulator, the FDIC has dedicated 

on-site examination staff at select banks, working 

closely with other financial institution regulatory 

authorities to identify emerging risks and assess the 

overall risk profile of large institutions.

The Large Insured Depository Institution (LIDI) 

Program remains the primary instrument for offsite monitoring of IDIs with $10 billion or more in 

total assets not assigned to CFI. 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 2017, the LIDI Program 

covered 101 institutions with total assets of $5.7 

trillion. The comprehensive LIDI Program supports 

effective large bank supervision by using individual 

institution information to best deploy resources to 

high-risk areas, determining the need for supervisory 

action, and supporting insurance assessments and 

resolution planning. 

The Shared National Credit (SNC) Program is an 

interagency initiative administered jointly by the 

FDIC, OCC, and FRB 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 2017, outstanding credit commitments 

identified in the SNC Program totaled $4.4 

trillion. The FDIC, OCC, and FRB issued a joint 
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 27

press release detailing the results of the review in 

August 2017. The latest review showed the level 

of adversely rated assets remained higher than in 

previous periods of economic expansion, raising 

the concern that future losses and problem loans 

could rise considerably in the next credit cycle. The 

high level of credit risk observed during the recent 

SNC examination stems from leveraged borrowers, 

as well as distressed borrowers in the oil and gas 

sector or other industry sector borrowers exhibiting 

excessive leverage. Notwithstanding the riskiness of 

the existing portfolio, the agencies noted improved 

underwriting and risk management practices related 

to the most recent leveraged loan originations, as 

underwriters continued to better align practices with 

regulatory expectations and as investor risk appetite 

moderated away from transactions at the lower end 

of the credit spectrum. The agencies still identified 

several common weaknesses in leveraged lending 

underwriting including ineffective covenants, liberal 

repayment terms, and incremental debt provisions.

Sales Practices Review

Significant resources were allocated in 2017 to assess 

the retail sales practices of the large institutions. 

Initiatives included coordination with the OCC, FRB 

and Consumer Financial Protection Bureau (CFPB), 

in reviewing practices at the largest institutions and 

conducting a horizontal review of sales practices at 17 

large FDIC-supervised institutions. The examinations 

did not find systemic problems in opening accounts 

without customer consent; however, institutions 

need to improve their risk management processes 

to better mitigate and identify potential sales 

practice weaknesses.

IT Examinations

The FDIC examines information technology 

(IT), including information security, at each risk 

management examination. Examiners assign an 

IT rating using the Federal Financial Institutions 

Examination Council’s (FFIEC) Uniform Rating 

System for Information Technology (URSIT), and 

the IT rating is incorporated into the management 

component of the CAMELS rating, in accordance 

with the FFIEC’s Uniform Financial Institution 

Rating System (UFIRS).

The FDIC continued to enhance its IT supervision in 

2017. For example, examiners used the Information 

Technology Risk Examination Program (InTREx) 

in examinations of FDIC-supervised financial 

institutions. InTREx is an examiner work program 

introduced in 2016 that provides more efficient 

and risk-focused examination procedures. InTREx 

includes a cybersecurity preparedness assessment 

and provides more detailed examination results to 

institutions to help ensure management promptly 

identifies and addresses IT and cybersecurity risks. 

The FDIC also conducted a July webinar with other 

FFIEC members to provide financial institutions 

information on updates to the FFIEC’s Cybersecurity 

Assessment Tool (CAT). These updates provide 

institutions the ability to account for compensating 

controls used to achieve certain cybersecurity 

control objectives. The webinar provided financial 

institutions the opportunity to share their comments 

and questions with senior FFIEC staff and also to 

hear about updates to the FFIEC IT Examination 

Handbook.

The FDIC, OCC, and FRB also examine IT and 

other operational components of service providers 

that support financial institutions. During 2017, 

the agencies implemented a new cybersecurity 

examination work program to identify and assess 

risk at service providers of all sizes, and conducted an 

interconnectivity risk horizontal review of the most 

significant service providers.

The FDIC continues to actively engage with both the 

public and private sectors to assess cybersecurity and 

other operational risk issues to protect the financial 

institutions that the FDIC supervises.  This work 

includes engaging with the Financial and Banking 

Information Infrastructure Committee (FBIIC), the 

Financial Services Sector Coordinating Council for 

Critical Infrastructure Protection, the Department 

of Homeland Security, the Financial Services 

Information Sharing and Analysis Center, other 
ANNUAL REPORT

28 MANAGEMENT’S DISCUSSION AND ANALYSIS

regulatory agencies, and law enforcement to share 

information regarding emerging issues and coordinate 

responses. 

The FDIC played a significant role in organizing 

FBIIC incident management communication related 

to the financial services sector in areas affected by 

hurricanes Harvey, Irma, and Maria. The FDIC also 

actively participated in FBIIC working groups to 

better understand the financial sector’s vulnerability 

to a cybersecurity incident and consider ways to 

harmonize cybersecurity supervisory efforts. 

Cyber Fraud and Financial Crimes

The FDIC has undertaken a number of initiatives in 

2017 to protect the banking industry from criminal 

financial activities. These efforts include improving 

and automating the FDIC’s background investigations 

for banking applications, leading financial crimesrelated training programs, and assisting financial 

institutions in identifying and shutting down 

“phishing” websites that attempt to fraudulently 

obtain an individual’s confidential personal or 

financial information. 

In support of these efforts an article entitled “10 

Scams Targeting Bank Customers: The Basics on 

How to Protect Yourself” (Summer 2017) was 

published in the FDIC’s Consumer News.

Bank Secrecy Act/Anti-Money Laundering 

In 2017, as a member of the Anti-Money Laundering 

and Countering the Financing of Terrorism (AML/

CFT) Expert Group, the FDIC contributed to the 

update of correspondent banking guidance issued 

by the Basel Committee on Bank Supervision. The 

FDIC also worked with domestic and international 

regulators and bankers to consider input regarding 

customer due diligence and beneficial ownership 

guidance and procedures that will coincide with the 

implementation of related regulations. In addition, 

the FDIC coordinated with the other FFIEC 

members to initiate revisions to the FFIEC BSA/AML 

Examination Manual by contacting various banking 

trade associations for their comments and suggestions 

to improve the manual’s content. 

The Summer 2017 issue of the Supervisory Insights 

Journal included an article focused on the FDIC’s 

BSA/AML supervision program. The article discussed 

trends in supervision and enforcement, and included 

examples of rare, but significant failures identified by 

FDIC examiners in BSA/AML compliance programs.  

The article provided examiners and bankers with 

perspective on BSA/AML examinations and risk.

Examiner Training and Development 

Examiner training continued to receive high priority 

and attention in 2017 on multiple fronts. The FDIC 

strives to deliver effective and efficient training that 

includes a variety of delivery methods including onthe-job, classroom, and computer-based instruction 

to all learners. A cadre of highly trained and highly 

skilled instructors facilitates classroom learning 

provided to regulatory partners from international 

and state agencies along with FDIC examination 

staff. Oversight of the training program is provided 

by senior and mid-level management to ensure that 

content and delivery are effective, appropriate, and 

current. Working in collaboration with partners 

across the organization and with the FFIEC, the 

FDIC strives to be agile so that emerging risks 

and topics are incorporated and conveyed timely. 

Examination staff at all levels benefit from targeted 

and tenure-appropriate content. No less relevant to 

the formal training program, peer-to-peer knowledge 

transfer is critical to ensure that institutional 

knowledge and experience is preserved.

The FDIC has undertaken a multi-year project to 

expand and strengthen its examiner development 

programs for specialty examinations, such as IT, BSA/

AML, trust, capital markets, and accounting. As 

banks become more specialized, enhancing examiner 

skills in these areas is key to ensuring an effective 

examination program. The goal of this project is 

to standardize the skills needed to examine banks 

of varying levels of risk and complexity in each 

specialty area, and then to develop on-the-job training 
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 29

programs to provide opportunities for examiners to 

acquire higher level competencies in these specialty 

areas. 

In 2017, the FDIC validated competency models in 

the accounting and IT areas, and made progress in 

developing specialty on-the-job training programs in 

BSA/AML, trust, and IT. 

Minority Depository Institution Activities 

The preservation of minority depository institutions 

(MDI) remains a high priority for the FDIC. In 

2017, the FDIC continued to support MDI and 

Community Development Financial Institution 

(CDFI) industry-led strategies for success. These 

strategies include increasing collaboration between 

MDI and CDFI bankers; partnering to share costs, 

raise capital, or pool loans; and making innovative 

use of federal programs. The FDIC supports this 

effort by providing technical assistance to MDI and 

CDFI bankers.

In December 2017, the FDIC published a Financial 

Institution Letter (FIL) to encourage collaboration 

among MDIs and between MDIs and other 

institutions. This publication describes some of the 

ways that financial institutions, including community 

banks, can partner with MDIs to the benefit of all 

institutions involved, as well as the communities they 

serve. Both community banks and larger insured 

financial institutions have valuable incentives under 

the CRA to undertake ventures with MDIs, including 

capital investment and loan participations.

In February 2017, the federal banking agencies cosponsored a two-day conference titled, “Expanding 

the Impact: Increasing Capacity and Influence,” for 

approximately 110 bankers from more than 70 MDIs 

around the country. Key topics discussed at the 

conference included strategic planning and succession 

management, banking and innovation, and enhancing 

capacity through collaboration. Bankers provided 

very positive feedback on the conference, which 

was held in Los Angeles, where there is a significant 

concentration of MDIs. The conference featured 

an interactive panel with FDIC Chairman Martin J. 

Gruenberg, Federal Reserve Board Governor Jerome 

H. Powell, and former Comptroller of the Currency 

Thomas J. Curry. 

Also, in 2017, the FDIC updated the information 

in its 2014 research study that captures the impact 

of structural changes on the assets controlled by 

MDIs. Between 2002 and 2016, the number of 

voluntary mergers (72) was nearly twice the number 

of failures (39). Among MDIs that voluntarily 

merged or consolidated during that same period, 54 

percent of the institutions and 76 percent of total 

assets were acquired by another MDI. Among MDIs 

that failed between 2002 and 2016, 38 percent of 

the institutions and 86 percent of total assets were 

acquired by another MDI. Although the rate of 

acquisition by another MDI was higher for voluntary 

mergers than for failures, the FDIC demonstrated 

its commitment to the statutory goal of preserving 

the minority character in mergers and acquisitions 

and providing technical assistance to help prevent 

insolvency. In the event of a potential MDI failure, 

the FDIC contacts all MDIs nationwide that qualify 

to bid on failing institutions. The FDIC solicits 

qualified MDIs’ interest in the failing institution, 

discusses the bidding process, and provides technical 

assistance regarding completion of bid forms.

The FDIC continuously pursued efforts to improve 

communication and interaction with MDIs and 

to respond to the concerns of minority bankers in 

2017. The FDIC maintains active outreach with 

MDI trade groups and offers to arrange annual 

meetings between FDIC regional management and 

each MDI’s board of directors to discuss issues of 

interest. The FDIC routinely contacts MDIs to 

offer return visits and technical assistance following 

the conclusion of FDIC safety and soundness, 

compliance, CRA, and specialty examinations to 

assist bank management in understanding and 

implementing examination recommendations. 

These return visits, normally conducted within 90 

to 120 days after the examination, are intended to 

provide useful recommendations or feedback for 

improving operations, not to identify new issues. 
ANNUAL REPORT

30 MANAGEMENT’S DISCUSSION AND ANALYSIS

The FDIC’s website also encourages and provides 

contact information for any MDI to request technical 

assistance at any time. 

In 2017, the FDIC provided 211 individual 

technical assistance sessions on approximately 60 risk 

management and compliance topics, including:

♦ accounting;

♦ Bank Secrecy Act and Anti-Money Laundering;

♦ brokered deposits/waivers;

♦ capital planning;

♦ Community Reinvestment Act;

♦ compliance management systems;

♦ funding and liquidity;

♦ information technology risk management 

and cybersecurity;

♦ loan underwriting and administration; 

♦ mortgage lending rules;

♦ troubled debt restructuring; and

♦ succession planning.

The FDIC also held outreach, training, and 

educational programs for MDIs through conference 

calls and regional banker roundtables. In 2017, topics 

of discussion for these sessions included many of 

those listed above, as well as MDI research, strategic 

planning, new products and services, BSA training, 

cybersecurity, and liquidity risk.

SUPERVISION POLICY

The goal of supervision policy is to provide clear, 

consistent, meaningful, and timely guidance to 

financial institutions. 

Interest-Rate Risk, Credit Risk, 

and Liquidity Risk

As the post-crisis economic expansion has progressed, 

there has been a resumption of loan growth in the 

banking industry. Institutions with concentrated 

portfolios are experiencing more rapid loan growth 

than the rest of the industry. At some banks, loan 

growth has been accompanied by a reduction in 

holdings of liquid assets and increased reliance on 

funding sources other than stable core deposits. These 

trends have the potential to give rise to heightened 

credit risk and liquidity risk. In addition, an extended 

period of historically low interest rates and tightening 

net interest margins has created incentives for IDIs 

to reach for yield in their lending and investment 

portfolios by extending portfolio durations, 

potentially increasing their vulnerability to interestrate risk.

Through regular on-site examinations and interim 

contacts with state nonmember institutions, FDIC 

staff regularly engages in dialogue with banks to 

ensure that their policies to manage credit risk, 

liquidity risk, and interest-rate risk are effective. 

Where appropriate, FDIC staff works with 

institutions that have significant exposure to these 

risks and encourages them to take appropriate riskmitigating steps. The FDIC uses off-site monitoring 

to help identify institutions that are potentially more 

exposed to these risks and follows up with individual 

institutions to better understand their risk profiles.

Outreach and technical assistance efforts on these risk 

issues during 2017 included articles in the FDIC’s 

Supervisory Insights publication on credit risk trends 

and on the management of liquidity risk. The FDIC 

joined with the other federal banking agencies to host 

an interagency teleconference on November 6, 2017, 

with banks from around the country, regarding the 

management of liquidity risk. Additionally, FDIC 

examiners now devote additional attention during 

the examination process to assessing how well banks 

are managing the risks associated with concentrated 

credit exposures and concentrated funding sources. 

The findings of these assessments are shared with bank 

management in the report of examination.

Other Guidance Issued

Model Risk Management

In June 2017, the FDIC adopted the Supervisory 

Guidance on Model Risk Management (MRM) 
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 31

previously issued by the FRB and OCC. In recent 

years, many FDIC-supervised institutions have 

increased their reliance on models. The FDIC 

adopted the MRM guidance to facilitate consistent 

understanding of model risk management principles 

across the banking agencies and industry. The 

MRM guidance indicates that an effective model risk 

management framework may include: disciplined 

and knowledgeable model development that is well 

documented and conceptually sound; controls and 

processes to ensure proper implementation and 

appropriate use; effective validation processes; and 

strong governance, policies, and controls. The FDIC 

does not expect that the MRM guidance will pertain 

to FDIC-supervised institutions with total assets 

under $1 billion unless the institution’s model use 

is significant, complex, or poses elevated risk to the 

institution.

Responses to Major Hurricanes

The FDIC took a number of steps to address the 

aftermath of hurricanes Harvey, Irma, and Maria, 

and their effects on banking services by issuing a 

series of press releases and FILs, waiving certain 

regulatory requirements, and releasing interagency 

supervisory guidance.

These included:

♦ Federal and State Banking Agencies Issue 

Statement on Supervisory Practices Regarding 

Financial Institutions and Borrowers Affected by 

Hurricane Harvey (PR-64-2017); 

♦ Meeting the Financial Needs of Customers 

Affected by Hurricane Harvey and its Aftermath 

(FIL-38-2017); 

♦ Federal and State Banking Agencies Issue 

Statement on Supervisory Practices Regarding 

Financial Institutions and Borrowers Affected by 

Hurricane Irma (PR-69-2017); 

♦ Meeting the Financial Needs of Customers 

Affected by Hurricane Irma and its Aftermath 

(FIL-43-2017); and

♦ Guidance to Help Financial Institutions 

and Facilitate Recovery in Areas Affected by 

Hurricane Maria (FIL-46-2017). 

Temporary Exceptions to Appraisal Requirements 

On October 24, 2017, the FDIC, together with the 

FRB, OCC and NCUA, published an order in the 

Federal Register pursuant to their authority under 

Section 1123 of the Financial Institutions Reform, 

Recovery, and Enforcement Act of 1989 (FIRREA) to 

make exceptions to FIRREA’s appraisal requirements 

for transactions involving real property located in a 

disaster area. The order exempts institutions from 

the appraisal requirements under FIRREA and 

its implementing regulations for any real estaterelated financial transaction requiring the services 

of an appraiser, provided that: (1) the transaction 

involves real property located in an area of a state or 

territory that has been declared a major disaster by 

the President as a result of severe storms and flooding 

related to Hurricanes Harvey, Irma, or Maria; (2) 

there is a binding commitment to fund a transaction 

that was entered into on or after the date of each such 

declaration; and (3) the value of the real property 

supports the institution’s decision to enter into the 

transaction. A financial institution that relies on the 

order should maintain sufficient information in the 

loan file estimating the collateral’s value to support the 

institution’s credit decision. 

The FDIC will monitor institutions that rely on the 

order to ensure real estate-related transactions are 

being originated in a manner consistent with safe 

and sound banking practices. The order expires three 

years after the date each state or territory was declared 

a major disaster.

Interagency Supervisory Examiner Guidance 

for Institutions Affected by a Major Disaster

The FDIC, in conjunction with the FRB, OCC, and 

NCUA, published supervisory examiner guidance 

for institutions affected by a disaster that results 

in a Presidential declaration of a major disaster, as 

defined by the Stafford Act. The guidance describes 
ANNUAL REPORT

32 MANAGEMENT’S DISCUSSION AND ANALYSIS

examination procedures for institutions directly 

affected by a major disaster, including institutions 

that may be located outside the area declared a major 

disaster, but have loans or investments to individuals 

or entities located in the area declared a major disaster. 

The guidance describes expectations that examiners 

should have regarding how management at affected 

institutions conduct initial risk assessments and refine 

such assessments as more complete information 

becomes available and recovery efforts proceed. 

Examiners should consider the extent to which 

weaknesses in an institution’s financial condition are 

caused by external problems related to the major 

disaster and its aftermath.

During 2017, the FDIC also issued seven FILs 

providing guidance to help financial institutions, and 

to facilitate recovery in areas affected by tornadoes, 

flooding, straight-line winds, landslides, mudslides, 

and other disasters. 

Risk Management Manual of Examination Policies

On July 26, 2017, the FDIC issued FIL-31-2017 to 

inform the industry that the FDIC Risk Management 

Manual of Examination Policies (Examination 

Manual) was updated to incorporate guidance from 

the FDIC Board to examiners regarding supervisory 

recommendations, including matters requiring board 

attention (MRBA). The updated Examination 

Manual is available on the FDIC’s website.

FINANCIAL TECHNOLOGY

The FDIC has established a steering committee 

to monitor Financial Technology (Fintech) 

developments, and to better understand and assess 

the various dimensions within the program. The 

Committee is comprised of the Directors of the 

Division of Risk Management Supervision, Division 

of Depositor and Consumer Protection, Division of 

Insurance and Research, Division of Resolutions and 

Receiverships, and the Office of Complex Financial 

Institutions, as well as the General Counsel, Chief 

Risk Officer, and Chief Information Officer (CIO).

In 2017, the Fintech Steering Committee established 

the following objectives:

♦ Comprehend, assess, and monitor the current 

Fintech activities, risks, and trends;

♦ Evaluate the projected impact to the banking 

system, the deposit insurance system, effective 

regulatory oversight, economic inclusion, and 

consumer protection;

♦ Oversee internal working groups monitoring 

particular aspects of Fintech;

♦ Recommend follow-up actions, as appropriate, 

and monitor implementation; and

♦ Help formulate strategies to respond to 

opportunities and challenges presented by 

Fintech, and to ensure developments align with 

regulatory goals.

The Fintech Steering Committee has established 

internal interdivisional working groups to focus 

on various Fintech topics, including marketplace 

lending, mobile and virtual deposit services, digital 

payments, artificial intelligence and machine learning, 

distributed ledger technology and smart contracts, 

and digital tokens.

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 roles as deposit 

insurer and bank supervisor. Research from CFR 

staff was accepted during the year for publication in 

leading banking, finance, and economics journals, 

and was presented at banking and finance seminars 

at major conferences, regulatory institutions, and 

universities. 

In 2017, the CFR and the Journal of Financial Services 

Research jointly sponsored the 17th Annual Bank 

Research Conference. The conference organizers 

received more than 450 submissions for the 20 

available presentation slots. CFR researchers also 

produced a number of new working papers in 2017. 

In addition, the CFR analyzed responses to the Small 

Business Lending Survey, and analysis and results 
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 33

were discussed at the Community Bank Advisory 

Committee meeting in late 2017. A report of the 

survey’s findings will be published in 2018.

COMMUNITY BANKING INITIATIVES

Community banks provide traditional, relationshipbased banking services in their local communities. 

As defined in FDIC research, community banks 

comprised 92 percent of all FDIC-insured institutions 

as of September 2017. While they hold just 13 

percent of banking industry assets, community banks 

are of critical importance to the U.S. economy and 

local communities across the nation. Community 

banks hold 43 percent of the industry’s small loans 

to farms and businesses, making them the lifeline to 

entrepreneurs and small enterprises of all types. They 

also hold the majority of bank deposits in U.S. rural 

counties and micropolitan counties with populations 

up to 50,000. In fact, as of June 2017, community 

banks held more than 75 percent of deposits in almost 

1,200 U.S. counties. In 625 of these counties, the 

only banking offices available to consumers were those 

operated by community banks.

The FDIC is the primary federal supervisor for the 

majority of community banks, in addition to being 

the insurer of deposits held by all U.S. banks and 

thrifts. Accordingly, the FDIC has a particular 

responsibility for the safety and soundness of 

community banks and for communicating the role 

they play in the banking system. In 2012, the FDIC 

launched a Community Banking Initiative focused on 

publishing new research on issues of importance to 

community banks and providing resources that will 

be useful to their efforts to manage risks, enhance the 

expertise of their staff, and better understand changes 

in the regulatory environment.

Community Banking Research

The FDIC continues to pursue an agenda of research 

and outreach focused on community banking issues. 

Since the 2012 publication of the FDIC Community 

Banking Study, FDIC researchers have published more 

than a dozen additional studies on topics ranging 

from small business financing to the factors that 

have driven industry consolidation over the past 30 

years. The Community Bank Performance Section 

of the FDIC Quarterly Banking Profile (QBP), first 

introduced in 2014, continues to provide a detailed 

statistical picture of the community banking sector 

that can be accessed by analysts, other regulators, and 

bankers themselves. The most recent report shows 

that net income at community banks continued to 

grow at a healthy annual rate through September 

2017, despite the headwinds associated with narrow 

net interest margins. 

The long-term trend of consolidation continues 

at both community and noncommunity banks. 

However, this trend has done little to diminish the 

role of community banks in the banking industry. 

More than two-thirds of the community banks 

that merged in 2017 were acquired by other 

community banks. On a merger-adjusted basis, 

loan growth at community banks exceeded growth 

at noncommunity banks in every year between 2012 

and 2016. (See Chart 1 on page 35.) 

On this same basis, the number of banking offices 

operated by community banks increased slightly in 

the year ending in June 2017, while offices operated 

by noncommunity banks declined. (See Chart 2 

on page 35.)

Community Bank Advisory Committee

The FDIC’s Advisory Committee on Community 

Banking is an ongoing forum for discussing current 

issues and receiving valuable feedback from the 

industry. The committee, which met three times 

during 2017, is composed of chief executive officers of 

13 community banks from around the country. It is a 

valuable resource for input on a wide variety of topics, 

including examination policies and procedures, capital 

and other supervisory issues, credit and lending 

practices, deposit insurance assessments and coverage, 

and regulatory compliance issues. At the June 2017 

meeting, the Division of Insurance and Research 
ANNUAL REPORT

34 MANAGEMENT’S DISCUSSION AND ANALYSIS

(DIR) presented a range of performance and growth 

comparisons between community and noncommunity 

banks dating back to 2006. These results showed that 

merger-adjusted total loan growth at community 

banks exceeded 8 percent in 2014, 2015, and 2016, 

outpacing nominal U.S. Gross Domestic Product 

growth in all three years.

De Novo Banks

The FDIC continued multiple initiatives in fulfilling 

its commitment to working with, and providing 

support to, any group with interest in starting a 

bank. In general, these initiatives focused on 

reviewing and, as appropriate, updating the processes, 

procedures, and management systems by which 

the FDIC receives, reviews, and acts on applications. 

Key elements of these initiatives with respect 

to deposit insurance applications included 

completing outreach meetings, issuing a handbook 

for organizers, and issuing updated procedures. 

Specifically, the FDIC has:

♦ Continued to hold industry outreach meetings, 

which began in 2016. The meetings were 

designed to ensure industry participants are well 

informed about the FDIC’s application process 

and are aware of the tools and resources available 

to assist organizing groups. Outreach meetings 

have been held in each FDIC Regional Office.

♦ Issued in final form a publication entitled, 

“Applying for Deposit Insurance – A Handbook 

for Organizers of De Novo Institutions.” The 

handbook was issued for public comment in 

December 2016 to help organizers become 

familiar with the deposit insurance application 

process and to describe the path to obtaining 

deposit insurance. This publication serves as a 

guide for organizing groups and incorporates 

lessons shared by organizing officials of de 

novo institutions during the FDIC’s outreach 

events. The publication also addresses the 

timeframes within which applicants may expect 

communication from the FDIC regarding the 

application review process.

Community Bank Advisory Committee.
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 35

CHART 2: PERCENT GROWTH IN TOTAL BANKING OFFICES

June 2015-June 2016

Source: FDIC. All calculations are merger adjusted.

Community Banks

+0.2%

-2.3%

Noncommunity Banks

1.0

0.5

0.0

-0.5

-1.0

-1.5

-2.0

-2.5

-3.0

CHART 1: COMMUNITY BANK LOAN GROWTH 

HAS EXCEEDED GROWTH AT NONCOMMUNITY BANKS 

FOR FIVE CONSECUTIVE YEARS

Merger Adjusted Annual Growth in Total Loans and Leases

Source: FDIC

-10

-5

0

5

10

15

-8.9%

2006 2016

11.2%

7.0%

9.5% 9.3%

-2.1%

-0.3%

-2.3%

2.1%

-0.9%

2.0%

3.4%2.9%

5.0%

2.1%

8.6%

4.7%

8.6%

6.0%

8.3%

4.8%

2007 2008 2009 2010 2011

Community Banks

Noncommunity Banks

2012 2014 2015 2013

10%

0%

-5%

5%

15%

-10%

9.0%
ANNUAL REPORT

36 MANAGEMENT’S DISCUSSION AND ANALYSIS

♦ Issued an updated deposit insurance procedures 

manual for public comment. The manual 

provides comprehensive guidance to staff 

regarding the deposit insurance application 

process and addresses topics such as pre-filing 

activities, application review and acceptance, 

application processing, pre-opening activities, 

and post-opening considerations, among other 

important items. 

Technical Assistance Program

As part of the Community Banking Initiative, the 

FDIC continued to provide a robust technical 

assistance program for bank directors, officers, and 

employees. The technical assistance program includes 

Directors’ College events held across the country, 

industry teleconferences and webinars, and a 

video program.

In 2017, the FDIC hosted Directors’ College 

events in each of its six regions. These events 

were typically conducted jointly with state trade 

associations and addressed issues such as corporate 

governance, regulatory capital, community banking, 

concentrations management, consumer protection, 

BSA, and interest-rate risk, among other topics. 

The FDIC offers a series of banker events, intended 

to maintain open lines of communication and to keep 

bank management and staff up-to-date on important 

banking regulatory and emerging issues of interest 

to community bankers. In 2017, the FDIC offered 

15 teleconferences or webinars focused on the 

following topics: 

♦ Home Mortgage Disclosure Act (HMDA) 

Implementation; 

♦ Understanding your Reasonably Expected 

Market Area (REMA) and CRA Assessment Area; 

♦ CRA Best Practices for Addressing Identified 

Weaknesses and Documenting Community 

Development Activities; 

♦ Small Business Resources for Community Banks;

♦ Financial Education and Financial Empowerment 

Resources that Support People with Disabilities; 

♦ Affordable Mortgage Lending;

♦ Liquidity and Funding Risk Management; 

♦ Proposed Simplifications to the Capital 

Rule Pursuant to the Economic Growth and 

Regulatory Paperwork Reduction Act of 1996;

♦ Revisions to the Consolidated Reports of 

Condition and Income (Call Report);

♦ Current Expected Credit Losses (CECL) 

Methodology; and

♦ An update on Risk Management – Bank 

Secrecy Act. 

In November 2017, the FDIC participated in an 

interagency webinar focused on fair lending hot 

topics. Additionally, the FDIC offered three deposit 

insurance coverage seminars for bank officers and 

employees in 2017. These free seminars, which were 

offered nationwide, particularly benefitted smaller 

institutions that have limited training resources. 

The FDIC also released three deposit insurance 

seminar training videos on the FDIC’s website and 

YouTube channel. 

Economic Growth and Regulatory 

Paperwork Reduction Act

In March 2017, the FFIEC submitted a report to 

Congress pursuant to the Economic Growth and 

Regulatory Paperwork Reduction Act (EGRPRA). 

The report was prepared by the federal banking 

agencies and NCUA. Under EGRPRA, the federal 

banking agencies and the FFIEC are directed to 

conduct a joint review of regulations every ten years 

to determine whether any of those regulations are 

outdated or unnecessary. 

Over the course of two years, the agencies published 

a series of Federal Register notices, 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 also held 

six public outreach meetings across the country to 

provide an opportunity for bankers, consumer and 

community groups, and other interested persons to 
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 37

present their views on any of the regulations subject 

to EGRPRA review. A total of 234 comment letters 

were received directly in response to the Federal 

Register notices, as well as additional oral and written 

comments from panelists and the public at the 

outreach meetings. These comments formed the 

basis of the report that was submitted to Congress in 

March 2017. 

The EGRPRA report described actions the agencies 

had already taken to address comments received 

during the EGRPRA process as well as actions the 

agencies planned to take in the future. During 2017, 

the FDIC along with the other FFIEC member 

agencies, worked together to reduce burden in 

the following significant areas raised during the 

EGRPRA reviews:

♦ Community Bank Call Report 

During 2017, the FDIC and the other members 

of the FFIEC continued their initiative, launched 

in December 2014, to identify potential 

opportunities to reduce the burden associated 

with Call Report requirements for community 

banks. Effective as of the March 31, 2017 

report date, a new streamlined FFIEC 051 

Call Report was implemented for eligible small 

institutions. In general, eligible small institutions 

are institutions with domestic offices only and 

total assets of less than $1 billion. This new 

report removed approximately 950, or about 40 

percent, of the nearly 2,400 data items that had 

been included in the FFIEC 041 Call Report 

applicable to all institutions with domestic offices 

only, and reduced the reporting frequency for 

approximately 100 additional data items. An 

eligible small institution is not required to file 

the FFIEC 051 report, but has the option to 

continue filing the FFIEC 041 report. Of the 

approximately 5,000 eligible small institutions, 

more than 70 percent have elected to submit the 

FFIEC 051 report. Certain burden-reducing 

changes also were made to the existing FFIEC 

031 Call Report for institutions with domestic 

and foreign offices and the FFIEC 041 report 

effective March 31, 2017. 

On June 27, 2017, and on November 8, 2017, 

the banking agencies proposed additional 

burden-reducing revisions to all three versions 

of the Call Report. On January 3, 2018, the 

FFIEC announced the finalization of the June 

2017 proposal. These proposals resulted from 

the FFIEC’s ongoing efforts to ease reporting 

requirements and lessen reporting burden that 

are focused on, but not limited to, small 

institutions. These revisions are scheduled to 

take effect June 30, 2018.

♦ Advisory on the Availability of Appraisers

The FDIC, FRB, OCC, and NCUA issued an 

advisory that discusses two existing methods 

that may address appraiser shortages, particularly 

in rural areas: temporary practice permits and 

temporary waivers. The advisory addresses 

concerns raised pursuant to the EGRPRA review 

process. 

The first method, temporary practice permits, 

may be granted by state appraiser regulatory 

agencies to allow credentialed appraisers to 

provide their services in states experiencing 

a shortage of appraisers, subject to state law. 

Reciprocity is a widely used practice in which 

one state recognizes the appraiser certification 

and licensing of another state, permitting statecertified and -licensed appraisers to perform 

appraisals across state lines. The second method, 

temporary waivers, sets aside requirements 

relating to the certification or licensing of 

individuals to perform appraisals under Title 

XI of FIRREA in states or geographic political 

subdivisions while there is a scarcity of certified 

or licensed appraisers that has caused significant 

delays in performing appraisals. Authority 

to grant temporary waiver requests rests with 

the Appraisal Subcommittee, and is subject 

to FFIEC approval. To further communicate 

about the availability of the waiver process and 

get a deeper understanding of rural appraisal 

issues, the Conference of State Bank Supervisors 

organization arranged six roundtables between 

federal banking regulators, state commissioners 
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38 MANAGEMENT’S DISCUSSION AND ANALYSIS

and rural community bankers. Roundtables were 

held in Michigan, Tennessee, Wyoming, North 

Dakota, South Dakota, and Montana.

♦ Commercial Real Estate Appraisal Threshold

The FDIC, FRB, and OCC jointly issued an 

Notice of Proposed Rulemaking (NPR) entitled 

Real Estate Appraisals that was published in the 

Federal Register for a 60-day comment period, 

which ended on September 29, 2017. The NPR 

creates a new definition of, and separate category 

for, commercial real estate (CRE) transactions 

and proposes to increase the current appraisal 

threshold for CRE transactions from $250,000 

to $400,000. For CRE transactions at or below 

the proposed threshold, the interagency appraisal 

regulations require financial institutions to obtain 

an appropriate evaluation of the real property 

collateral that is consistent with safe and sound 

banking practices, but such an evaluation does 

not need to be performed by a licensed or 

certified appraiser or meet the other Title XI 

appraisal standards. The agencies are in the 

process of reviewing the comments.

♦ Expanded Examination Cycle

The FDIC, FRB, and OCC jointly adopted 

as final – and without change – the interim 

final rules that expanded the examination cycle 

for certain small IDIs and U.S. branches and 

agencies of foreign banks. The final rules were 

published in the Federal Register on December 

16, 2016. Section 83001 of the Fixing America’s 

Surface Transportation Act raised the threshold 

for the 18-month examination cycle from less 

than $500 million to less than $1 billion for 

certain well-capitalized and well-managed IDIs 

with an “outstanding” composite condition, and 

gave the agencies discretion to similarly raise this 

threshold for certain IDIs with an “outstanding” 

or “good” composite condition. The agencies 

exercised this discretion and issued an interim 

final rule that, in general, makes qualifying IDIs 

with less than $1 billion in total assets eligible 

for an 18-month (rather than a 12-month) 

examination cycle. The rules allow IDIs with up 

to $1 billion in total assets, and that meet certain 

other criteria, to qualify for an 18-month on-site 

examination cycle. To qualify, IDIs must have a 

CAMELS composite rating of “1” or “2,” must 

be well-capitalized, well-managed, must not be 

subject to a formal enforcement proceeding, 

and must not have undergone any change in 

control during the previous 12-month period. 

The rule also applies to qualifying U.S. branches 

or agencies of a foreign bank. As a result of this 

new rule, the FDIC rescinded and removed a 

transferred Office of Thrift Supervision (OTS) 

Regulation, 12 CFR 390.351, Frequency of 

Safety and Soundness Examinations, because it 

was redundant.

Since BSA compliance programs are typically 

reviewed during safety and soundness 

examinations, institutions with assets between 

$500 million and $1 billion that are now eligible 

for a safety and soundness examination every 

18-months will also generally be subject to less 

frequent BSA reviews.

♦ Extension of Capital Rule Transitions

In August 2017, the FDIC, FRB, and OCC 

proposed revisions to the regulatory capital rules 

to pause the phase-in of certain regulatory capital 

adjustments and deductions that are part of 

the Basel III capital standard. Specifically, the 

agencies proposed to maintain on an ongoing 

basis the transition treatment effective for 

calendar year 2017 for items subject to the 10 

and 15 percent common equity tier one capital 

deduction thresholds, and surplus minority 

interest. The proposal applied to all nonadvanced approaches banking organizations that 

are subject to the risk-based capital rules. The 

federal banking agencies finalized the proposed 

rule in November 2017. 

♦ EGRPRA Capital Proposal

In September 2017, the FDIC issued an 

NPR addressing industry feedback regarding 
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 39

simplification of the capital rules for small banks 

generally, and to clarify the existing definition 

of high-volatility commercial real estate. In 

addition, the proposed simplifications include 

changes to the regulatory capital treatment of 

mortgage servicing assets, deferred tax assets, 

investments in the capital instruments of other 

financial institutions, and minority interest. 

Additionally, recognizing that regulatory burden does 

not emanate only from statutes and regulations, the 

FDIC, along with the FFIEC and its members, have 

initiated the FFIEC Examination Modernization 

project as a follow up to the review of regulations 

under EGRPRA. The Modernization project is 

focused on ways to improve the efficiency of processes, 

procedures, and tools related to examinations and 

supervisory oversight of the safety and soundness 

examination processes, while maintaining the quality 

of the process. There are three parts to the project:

1. Reviewing examination practices and processes 

with a particular goal of determining whether 

technology can be used to make existing 

examination activities more efficient or allow 

for additional safety and soundness examination 

work to be conducted off-site. 

2. Reviewing the format of the examination 

report itself and determining whether there 

are opportunities to improve the quality and 

usefulness of reports.

3. Reviewing the Uniform Bank Performance 

Report (UBPR) and related reports and data 

to determine if there are ways to make them 

more informative, useful, and user friendly. 

In particular, the agencies are working to 

provide the ability to generate graphs and 

charts of key ratios.

In 2017, the Examination Modernization Project’s 

staff met regularly to compare FFIEC agency 

practices and develop recommendations for the 

FFIEC’s consideration. 

ACTIVITIES RELATED TO SYSTEMICALLY 

IMPORTANT FINANCIAL INSTITUTIONS

The FDIC is committed to addressing the unique 

challenges associated with the supervision, insurance, 

and potential resolution of large and complex 

financial 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 and deposits. The 

FDIC’s programs related to complex financial 

institutions provide for a consistent approach to 

large bank supervision nationwide, allow for the 

identification and analysis of industry-wide and 

institution-specific risks and emerging issues, and 

enable a quick response to these risks. The FDIC 

has segregated these activities in two groups to both 

ensure that supervisory attention is risk-focused and 

tailored to the risk presented by the nation’s largest 

banks, and meet the FDIC’s responsibilities under the 

FDI Act and the Dodd-Frank Act.

Complex Financial Institutions Program

The Dodd-Frank Act expanded the FDIC’s 

responsibilities pertaining to SIFIs and nonbank 

financial companies designated by the Financial 

Stability Oversight Council (FSOC). The FDIC’s 

CFI Group and Large Bank Supervision Branch, 

both within RMS, perform ongoing risk monitoring 

of SIFIs and FSOC-designated nonbank financial 

companies, provide backup supervision of the 

firms’ related IDIs, and evaluate the firms’ required 

resolution plans. The CFI Group also performs 

certain analyses that support the FDIC’s role as an 

FSOC member.

Resolution Plans – Living Wills

Certain large banking organizations and nonbank 

financial companies designated by the FSOC for 

supervision by the FRB are periodically required to 

submit resolution plans to the FRB and the FDIC. 

Each resolution plan, commonly known as a living 

will, must describe the company’s strategy for rapid 
ANNUAL REPORT

40 MANAGEMENT’S DISCUSSION AND ANALYSIS

and orderly resolution under the U.S. Bankruptcy 

Code in the event of material financial distress or 

failure of the company. 

Large Bank Holding Companies 

with Substantial Nonbank Assets

Companies subject to the rule are divided into three 

groups: companies with $250 billion or more in 

nonbank assets, companies with nonbank assets 

between $100 billion and $250 billion, and all 

other companies with total consolidated assets of 

$50 billion or more. Companies in the first and 

second group were generally required to submit 

their resolution plans by July 1, 2015. These firms 

included Bank of America Corporation, Bank of New 

York Mellon Corporation, JPMorgan Chase & Co., 

State Street Corporation, Wells Fargo & Company, 

Goldman Sachs Group, Inc., Morgan Stanley, and 

Citigroup, Inc. (collectively referred to as the eight 

domestic banking organizations); and Barclays PLC, 

Credit Suisse Group AG, Deutsche Bank AG, and 

UBS AG, (collectively referred to as the four large 

foreign banking organizations, or FBOs). 

In April 2016, the FDIC and FRB jointly announced 

determinations and provided firm-specific feedback 

on the resolution plans submitted by the eight 

domestic banking organizations in July 2015. After 

reviewing the July 2015 submissions, the FDIC and 

FRB jointly determined that each of the resolution 

plans of Bank of America Corporation, Bank of 

New York Mellon Corporation, JPMorgan Chase & 

Co., State Street Corporation, and Wells Fargo & 

Company was not credible or would not facilitate an 

orderly resolution under the U.S. Bankruptcy Code, 

the statutory standard established in the Dodd-Frank 

Act. The agencies issued joint notices of deficiencies 

to these five firms detailing the deficiencies in their 

plans and the actions the firms must take to address 

them. The agencies also made public the Resolution 

Plan Assessment Framework, which explains the 

resolution plan requirement, provides further 

information on the determinations, and outlines 

the agencies’ processes for reviewing the plans. 

Additionally, the agencies released new guidance for 

the July 2017 submissions.

All of the domestic banking organizations that 

received feedback in April 2016 provided updates to 

their plans in October 2016. The FDIC and the FRB 

determined in December 2016 that Bank of America 

Corporation, Bank of New York Mellon Corporation, 

JP Morgan Chase & Co., and State Street 

Corporation adequately remediated the deficiencies 

cited in their 2015 resolution plans.

The agencies jointly determined that Wells Fargo 

& Company did not adequately remedy two of 

the firm’s three deficiencies. In light of the nature 

of the deficiencies and the resolvability risks posed 

by the firm’s failure to remedy them, the agencies 

imposed restrictions on the growth of international 

and nonbank activities of Wells Fargo & Company 

and its subsidiaries. In April 2017, the agencies 

jointly determined that Wells Fargo & Company had 

remedied the remaining two deficiencies. 

The eight domestic banking organizations submitted 

updated plans on or before July 1, 2017.  On 

December 19, 2017, the FDIC and the FRB issued 

letters to the eight firms providing the findings 

of their review of those plans and information 

about areas where additional work needs to be 

done to improve resolvability.  The agencies also 

jointly determined that the plans of four firms have 

“shortcomings,” which are less-severe weaknesses that 

require additional work in their next plan.

Guidance for the FBOs was also issued in March 

2017, and a workshop to review the guidance 

was held with FDIC staff on May 2, 2017. The 

FBO guidance was issued to help the FBOs 

improve their resolution plans and to reflect the 

significant restructuring that they have undertaken 

to form intermediate holding companies. The 

guidance is organized around a number of key 

vulnerabilities, such as capital, liquidity, and 

governance mechanisms. FAQs on the FBO 

guidance were issued in September 2017. 
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 41

Other Large Bank Holding Company Filers 

In March 2017, the FDIC and FRB jointly 

announced that the agencies had provided firmspecific feedback on the resolution plans submitted 

by 16 regional bank holding companies with total 

consolidated assets of $50 billion or more regarding 

resolution plans submitted in December 2015. In 

December 2016, an additional 86 firms subject to 

the rule submitted resolution plans to the agencies. 

These plans included four full or tailored plans and 

82 reduced content plans, which focus on material 

changes since their previous resolution plans, actions 

taken to strengthen the effectiveness of those plans, 

and where applicable, actions to ensure any subsidiary 

insured depository institution would be adequately 

protected from the risk arising from the activities 

of nonbank affiliates of the firm. In August 2017, 

the FDIC and FRB jointly announced that the two 

tailored plan filers in 2016 would be eligible to submit 

reduced content plans as their next submission. The 

FDIC and the FRB are jointly developing feedback 

to two domestic filers regarding their 2016 plan 

and to several FBOs regarding their 2015 plans. In 

August and September 2017, the FDIC and the FRB 

extended the due dates for these companies’ next 

plans to December 31, 2018.

Nonbank Firms 

Nonbank financial firms designated as systemically 

important by FSOC also are required to submit 

resolution plans for review by the FDIC and FRB. 

During December 2015, three nonbank firms—

American International Group, Inc. (AIG), General 

Electric Capital Corporation, Inc. (GECC), and 

Prudential, Inc. (PRU) — submitted their resolution 

plans for review. On June 28, 2016, FSOC rescinded 

GECC’s designation as a systemically important 

financial institution and joint agency review of 

GECC’s plan ceased. 

In August 2016, the FDIC and FRB jointly extended 

the next annual resolution plan submission date to 

December 31, 2017, for AIG and PRU. To allow 

the agencies an opportunity to consider potentially 

providing guidance and to provide the firms with 

sufficient time to develop responsive plans in July 

2017, the agencies extended the next resolution plan 

due date to December 31, 2018, and informed the 

firms that this plan would satisfy their 2016 and 2017 

annual resolution plan submission requirements. 

Subsequently, on September 29, 2017, as part of the 

annual review of AIG’s designation as systemically 

important, FSOC rescinded that designation.

MetLife, which was designated as systemically 

important on December 18, 2014, challenged its 

designation in federal court and won a ruling on 

March 30, 2016, that rescinded its designation. The 

Department of Justice on behalf of the FSOC has 

appealed that decision. In August 2017 the U.S. 

Court of Appeals ordered the appeal held in abeyance 

indefinitely. MetLife will not be required to submit a 

resolution plan unless its designation is reinstated.

Extended Deadline for Submissions 

for Certain Organizations’ Plans 

In March 2017, the agencies provided a one-year 

filing extension to the four large FBOs; their next 

resolution plans are now due on July 1, 2018. 

In September 2017, the agencies extended the next 

resolution plan filing deadline for the eight large 

domestic banks by one year to July 1, 2019. The 

extension will provide the time needed for firms to 

remediate any weaknesses identified in their July 

2017 submissions and to prepare and improve their 

next resolution plan submissions. The agencies are 

also extending by one year, to December 31, 2018, 

the next resolution plan submission deadline for 82 

foreign banks with limited U.S. operations.

Insured Depository Institution 

Resolution Plans

Section 360.10 of the FDIC Rules and Regulations 

requires an IDI with total assets of $50 billion or 

more to periodically submit to the FDIC a plan for its 

resolution in the event of its failure (IDI Rule). The 

IDI Rule requires each IDI meeting the criteria to 
ANNUAL REPORT

42 MANAGEMENT’S DISCUSSION AND ANALYSIS

submit a resolution plan that should allow the FDIC, 

as receiver, to resolve the IDI under Sections 11 and 

13 of the Federal Deposit Insurance Act (FDI Act) 

in an orderly manner that enables prompt access to 

insured deposits, maximizes the return from the sale 

or disposition of the failed IDI’s assets, and minimizes 

losses realized by creditors. The resolution plan must 

also describe how a proposed strategy will be least 

costly to the DIF. 

By September 1, 2015, the FDIC received 10 IDI 

resolution plans, from IDIs whose parent companies 

are among the group of largest SIFIs under the IDI 

Rule, and by December 31, 2015, 26 resolution plans 

were received from other IDIs with smaller parent 

companies. 

By December 31, 2016, the FDIC received initial 

IDI resolution plans from two additional insured 

banks. The FDIC reviewed these resolution plans in 

a manner consistent with the IDI Rule and guidance 

issued by the FDIC in December 2014. In June 

2017, the FDIC provided feedback letters to each 

covered IDI, addressing findings and establishing 

expectations for the next IDI resolution plan to better 

align the content of resolution plans with the FDIC’s 

actual resolution experience. The FDIC also extended 

the due date for the next IDI resolution plan for each 

of these 38 insured banks to July 1, 2018. 

Since the feedback letters were issued, the FDIC has 

established processes to improve transparency and 

responsiveness. The FDIC established a dedicated 

mailbox to receive questions, conducted two industry 

calls, met with one trade association, and conducted 

35 meetings with individual covered IDIs. 

Orderly Liquidation Authority 

– 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 file. 

If resolution under the Bankruptcy Code would result 

in serious adverse effects to U.S. financial stability, the 

Orderly Liquidation Authority (OLA) set out in Title 

II of the Dodd-Frank Act provides a backup authority 

for resolving a company for which the bankruptcy 

process is not viable. 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.

The FDIC has undertaken institution-specific 

strategic planning to carry out its orderly liquidation 

authorities with respect to the largest global 

systemically important banks (G-SIBs) and FBOs. 

The strategic plans and optionality being developed 

for these firms are informed by the Title I plan 

submissions. Further, the FDIC continues to build 

upon the systemic resolution framework, portions 

of which have been shared with other authorities, 

and is developing process documents to facilitate 

the implementation of the framework in a Title II 

resolution. In addition, preliminary work continues 

in the development of resolution strategies for the 

nonbank resolution plan filers and financial market 

utilities, particularly central counterparties (CCPs).

Monitoring and Measuring Systemic Risks 

The FDIC monitors risks related to SIFIs at 

both the firm level and industry wide to inform 

supervisory planning and response, policy and 

guidance considerations, and resolution planning 

efforts. As part of this monitoring, the FDIC 

analyzes each company’s risk profile, governance 

and risk management capabilities, structure and 

interdependencies, business operation and activities, 

management information system capabilities, and 

recovery and resolution capabilities. 

The FDIC continues to work closely with the other 

federal banking agencies to analyze institution-specific 

and industry-wide conditions and trends, emerging 

risks and outliers, risk management, and the potential 

risk posed to financial stability by SIFIs and non-bank 

financial companies. To support risk monitoring that 

informs supervisory and resolution planning efforts, 

the FDIC has developed systems and reports that 
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 43

make extensive use of structured and unstructured 

data. SIFI monitoring reports are prepared on a 

routine and ad-hoc basis and cover a variety of aspects 

that include risk components, business lines and 

activity, market trends, and product analysis. 

Additionally, the FDIC has implemented and 

continues to expand upon various monitoring 

systems, including the Systemic Monitoring System 

(SMS). The SMS provides an individual risk profile 

and assessment for each SIFI by evaluating the 

level and change in metrics that serve as important 

indicators of overall risk. The SMS supports the 

identification of emerging risks within individual 

firms and the prioritization of supervisory and 

monitoring activities. The SMS also serves as an early 

warning system of financial vulnerability by gauging 

a firm’s proximity and speed to resolution event. 

Information from FDIC-prepared reports and 

systems are used to prioritize activities relating to 

SIFIs and to coordinate and communicate with the 

FRB and OCC. 

The FDIC also has conducted semi-annual “Day 

of Risk” meetings to present, discuss, and prioritize 

the review of emerging risks. For each major risk, 

executive management discussed the nature of the 

risk, exposures of SIFIs, and planned supervisory 

efforts. In 2017, RMS CFI began piloting a new SIFI 

Risk Report (SRR) that identifies key vulnerabilities 

of systemically important firms, gauges the proximity 

of these firms to a resolution event, and independently 

assesses the appropriateness of supervisory ratings for 

the insured deposit institutions held by these firms. 

Implementation of this new report is targeted for 

early 2018.

Back-up Supervision Activities for IDIs of 

Systemically Important Financial Institutions

Risk monitoring is enhanced by the FDIC’s back-up 

supervision activities. In its back-up supervisory role, 

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

FDIC has expanded resources and has developed and 

implemented policies and procedures to guide backup supervisory activities. These activities include 

performing analyses of industry conditions and 

trends, supporting insurance pricing, participating 

in supervisory activities with other regulatory 

agencies, and exercising examination and enforcement 

authorities when necessary. At institutions where 

the FDIC is not the primary federal regulator, FDIC 

staff works closely with other regulatory authorities 

to identify emerging risk and assess the overall risk 

profile of large and complex institutions. The FDIC 

has assigned dedicated staff to IDIs of SIFIs to 

enhance risk-identification capabilities and facilitate 

the communication of supervisory information. 

These individuals work with the staff of the FRB and 

OCC in monitoring risk at their assigned institutions. 

Through December 2017, FDIC staff participated 

in 43 targeted examination activities with the FRB 

and 46 targeted examination activities with the 

OCC. The reviews included, but were not limited 

to, engagement in evaluation of risk governance, 

BSA/AML reviews, quantitative model reviews, 

and credit risk-related reviews. FDIC staff also 

participated in various interagency horizontal review 

activities, including the FRB’s Comprehensive Capital 

Assessment and Review, and reviews of compliance 

and conduct risk, model risk management, and 

sales practices. 

Cross-Border Efforts 

Advance planning and cross-border coordination 

for the resolution of Global-SIFIs (G-SIFIs) is 

essential to minimizing disruptions to global financial 

markets. Recognizing that the resolution of a G-SIFI 

creates complex international legal and operational 

concerns, the FDIC continues to work with foreign 

regulators to establish frameworks for effective crossborder cooperation, including information-sharing 

arrangements. 

In October 2016, the FDIC hosted the second in an 

ongoing series of planned exercises with international 

authorities to enhance coordination on cross-border 

bank resolution. Participants in the exercise included 

senior financial officials representing authorities in 
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44 MANAGEMENT’S DISCUSSION AND ANALYSIS

the United States, United Kingdom, and Europe, 

including the U.S. Department of Treasury, FRB, 

OCC, Securities and Exchange Commission 

(SEC), Commodity Futures Trading Commission 

(CFTC), Federal Reserve Bank of New York, 

HM Treasury, Bank of England, U.K. Prudential 

Regulation Authority, the Single Resolution Board 

(SRB), European Commission (EC), and European 

Central Bank. Staffs since have pursued a follow-on 

work plan endorsed by senior officials from these 

participating agencies.

The FDIC serves as a co-chair for all of the crossborder crisis management groups (CMGs) of 

supervisors and resolution authorities for U.S. 

G-SIFIs. In addition, the FDIC participates as a 

host authority in CMGs for foreign G-SIFIs. The 

FDIC and the European Commission continued 

their engagement through the joint Working Group, 

which is composed of senior executives at the FDIC 

and EC who meet to focus on both resolution and 

deposit insurance issues. In 2017, the Working 

Group discussed cross-border bank resolution and 

resolution of CCPs, among other topics. FDIC 

staff also participated in the Joint EU-US Financial 

Regulatory Forum with representatives of the EC 

and other participating European Union authorities, 

including the Single Resolution Board and the 

European Banking Authority, and staffs of the 

Treasury Department, FRB, SEC, CFTC, and other 

participating U.S. agencies.

The FDIC continued to advance its working 

relationships with authorities from other jurisdictions 

that regulate G-SIFIs, including those in Switzerland 

and Japan, and through international forums, such 

as the Financial Stability Board’s (FSB) Resolution 

Steering Group. In 2017, the FDIC had significant 

staff-level engagements with these authorities to 

discuss cross-border issues and potential impediments 

that could affect the resolution of a G-SIFI. 

Systemic Resolution Advisory Committee 

The FDIC created the Systemic Resolution Advisory 

Committee (SRAC) in 2011 to receive advice and 

recommendations on a broad range of issues regarding 

the resolution of systemically important financial 

companies pursuant to the Dodd-Frank Act. Over 

the years, the SRAC has provided important advice 

to the FDIC regarding systemic resolutions and 

advised 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 customers; 

♦ The tools available to the FDIC to wind down 

the operations of a failed organization; and

♦ The tools needed to assist in cross-border 

relations with foreign regulators and governments 

when a SIFI 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 field, and academia. The last 

meeting of the SRAC was held on April 14, 2016. 

The SRAC discussed among other topics, the status 

of Title I Living Wills, an update on Title II Orderly 

Liquidation Authority, and developments in the 

European Union. In 2017, the charter of the SRAC 

was renewed. The next meeting is anticipated to be 

held in 2018.

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 10 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 financial 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 
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 45

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 

information sharing 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, competitiveness, and stability 

of U.S. financial markets; and 

♦ Producing annual reports describing, among 

other things, the Council’s activities and potential 

emerging threats to financial stability.

The FSOC recently issued its 2017 annual report. 

Generally, at each of its meetings, the FSOC discusses 

various risk issues. In 2017, the FSOC meetings 

addressed, among other topics, U.S. fiscal issues, 

interest-rate risk, credit risk, the FRB and European 

bank stress tests, the United Kingdom’s 2016 vote to 

leave the European Union (i.e., Brexit), cybersecurity, 

nonbank financial company designations, and 

housing reform.

DEPOSITOR AND 

CONSUMER PROTECTION

A major component of the FDIC’s mission is to 

ensure that financial institutions treat consumers and 

depositors fairly, and operate in compliance with 

federal consumer protection, anti-discrimination, 

and community reinvestment laws. The FDIC 

also promotes economic inclusion to build and 

strengthen positive connections between insured 

financial institutions and consumers, depositors, small 

businesses, and communities.

Rulemaking and Guidance

Community Reinvestment Act

In May 2017, the FDIC released revised publicly 

available examination procedures to align with 

internal guidance for Full and Limited Scope CRA 

Assessment Areas. These examination procedures 

provide instructions for examiners to follow when 

determining which assessment areas(s) should receive 

a full scope review and provide guidance on how 

to address assessment areas not selected for full 

scope review within a CRA performance evaluation. 

Assessment areas that are not reviewed using the full 

examination procedures are referred to as limited 

scope assessment areas.

In November 2017, the FDIC, OCC, and FRB issued 

a final rule amending their respective Community 

Reinvestment Act (CRA) regulations primarily to 

conform to changes made by the CFPB to Regulation 

C, which implements the Home Mortgage Disclosure 

Act (HMDA). In particular, the final rule revises the 

definitions of “home mortgage loan” and “consumer 

loan” in the agencies’ CRA regulations, as well as the 

public file content requirements. These revisions will 

maintain consistency between the CRA regulations 

and the recent changes to Regulation C, which 

generally became effective on January 1, 2018. In 

addition, the final rule contains technical revisions 

and removes obsolete references to the Neighborhood 

Stabilization Program.

Home Mortgage Disclosure Act

In August 2017, the FDIC, with the other FFIEC 

members, issued HMDA Examiner Transaction 

Testing Guidelines. To support the evaluation of 

financial institutions’ compliance with HMDA’s 

requirements, the agencies’ examiners will use these 

guidelines in assessing the accuracy of the HMDA 

data that financial institutions record and report. 

Used in conjunction with HMDA examination 

procedures, the guidelines describe how examiners 

validate the accuracy of HMDA data and the 

circumstances in which examiners may direct 
ANNUAL REPORT

46 MANAGEMENT’S DISCUSSION AND ANALYSIS

institutions to correct and resubmit HMDA data in 

connection with HMDA rules.

In October 2017, the FDIC, FRB, and OCC 

issued a list of Designated Key HMDA Data Fields 

for examination staff to prioritize when validating 

HMDA data in accordance with the guidelines.  The 

agencies will focus examination-related testing of 

HMDA data on certain agency-designated “key fields” 

considered most important to ensuring the integrity 

of analyses of overall HMDA data.

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 populations;

♦ Engages in research and development on models 

of products meeting the needs of lower-income 

consumers;

♦ Supports partnerships to promote consumer 

access to and use of banking services;

♦ Advances financial education and literacy; and

♦ Facilitates partnerships to support community 

and small business development.

Advisory Committee on Economic Inclusion 

The Advisory Committee on Economic Inclusion 

(ComE-IN) provides the FDIC with advice and 

recommendations on important initiatives focused on 

expanding access to mainstream banking services to 

underserved populations. This may include reviewing 

basic retail financial services such as low-cost, safe 

transaction accounts; affordable small-dollar loans; 

savings accounts; and other services that promote 

individual asset accumulation and financial stability, 

and may also include exploring demand-side factors 

such as consumers’ perceptions of mainstream 

financial institutions. 

The ComE-IN met twice during 2017. The April 27, 

2017 meeting reviewed discussions from the FDIC’s 

Economic Inclusion Summit, explored methods for 

evaluating neighborhood access to bank branches, and 

ComE-IN Committee meeting on October 18, 2017.
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 47

assessed resources for affordable mortgage lending. 

The October 18, 2017 meeting featured panel 

discussions on Safe Accounts, the 2016 FDIC Bank 

Survey results, economic inclusion for persons with 

disabilities, and research on neighborhood access to 

bank branches. 

Economic Inclusion Summit

The FDIC held an Economic Inclusion Summit 

on April 26, 2017. The day-long event convened 

representatives from banks, community organizations, 

and researchers to discuss developments related to 

economic inclusion as well as next steps for the field.

FDIC National Survey of Unbanked and 

Underbanked Households and Related Research

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 mandates that 

the FDIC regularly report on underserved populations 

and bank efforts to bring individuals and families 

into the conventional banking system.  In response, 

the FDIC regularly conducts and reports on surveys 

of households and banks to inform the public and 

enhance the understanding of financial institutions, 

policymakers, regulators, researchers, academics, 

and others.

During 2017, the FDIC conducted survey research 

and analysis in partnership with the U.S. Census 

Bureau to understand the terms and conditions of 

basic, entry-level checking accounts from FDICinsured institutions, with the survey questions 

embedded in the FDIC Small Business Lending 

Survey. The survey asked about eligibility, costs, 

balance requirements, and other details about basic, 

entry-level checking and savings accounts, as well 

as prepaid debit card programs offered by banks. 

Findings from the analysis were made public on 

October 18, 2017, at a meeting of the ComE-IN. 

In 2017, the FDIC also conducted an analysis to 

better understand residential neighborhood access to 

full-service bank branches.  This work culminated on 

October 18, 2017, with a public presentation of an 

analysis of residential bank access in all metropolitan 

areas of the United States, at the same meeting 

of the ComE-IN. The presentation focused on 

identifying residential neighborhoods that had both 

relatively less convenient access to bank branches and 

concentrations of population segments that research 

has shown to disproportionately rely on branches to 

access their account. Examples of populations known 

through the 2015 FDIC National Survey of Unbanked 

and Underbanked Households to have a relatively high 

reliance on bank branches include older households, 

lower-income households, and households with lower 

educational attainment.

Community and Small Business Development 

and Affordable Mortgage Lending 

In 2017, the FDIC provided technical assistance 

to banks and community organizations through 

more than 125 outreach events designed to increase 

shared knowledge and support collaboration 

between financial institutions and other community, 

housing, and small business development resources 

and to improve knowledge about the Community 

Reinvestment Act.

The FDIC’s work emphasized sharing information 

to support bank efforts to provide prudent access to 

responsible, affordable mortgage credit. Late in 2016, 

the FDIC released the Affordable Mortgage Lending 

Guide, a three-part resource to help community banks 

identify affordable mortgage products. Part 1: Federal 

Agencies and Government Sponsored Enterprises and 

Part II: State Housing Finance Agencies were released 

in 2016. Part III: Federal Home Loan Banks was 

released in April 2017. Part II was updated in 

July 2017, and Part I is scheduled to be updated 

in early 2018.

As part of this effort, the FDIC also launched the 

Affordable Mortgage Lending Center, a website 

that houses these publications and other resources. 
ANNUAL REPORT

48 MANAGEMENT’S DISCUSSION AND ANALYSIS

Together these resources provide a comprehensive 

overview of the programs and products available to 

community banks to support affordable mortgage 

lending, particularly to low- and moderate-income 

borrowers. By year-end 2017, the Affordable 

Mortgage Lending Center:

♦ Had a 400 percent increase in subscribers from 

year-end 2016 to over 9,000; 

♦ Experienced more than 10,000 downloads since 

inception; and

♦ Received more than 50,000 page views since 

inception.

Also in 2017, the FDIC, other federal regulators, 

and federal and state housing agencies hosted 19 

affordable mortgage lending forums and conducted 

35 outreach activities and events to offer technical 

assistance to help expand access to mortgage credit for 

low- and moderate-income households. Community 

Affairs staff in every Region exhibited at a State 

Bankers Association Conference. The FDIC also 

offered information about the Affordable Mortgage 

Lending Guide and website through participation 

in national conferences, including the Independent 

Community Bankers Association Conference 

and the American Bankers Association’s National 

Conference for Community Bankers, and presented 

at the Council of Community Bankers Association 

Executives’ annual meeting in March 2017.

In addition, the FDIC sponsored sessions with 

interagency partners covering basic and advanced 

CRA training for banks. The agencies also offered 

CRA basics for community-based organizations, 

as well as seminars on establishing effective 

bank-community collaborations for community 

development in more than 45 communities. 

The FDIC focused on encouraging community 

development initiatives in rural communities. This 

work included workshops that highlighted housing 

needs and programs, economic development 

programs, and community development financial 

institution collaborations, including those serving 

Native American communities.

Advancing Financial Education 

Financial education helps consumers understand and 

use bank products effectively and sustain a banking 

relationship over time. The FDIC continued to be 

a leader in developing high-quality, free financial 

education resources and pursuing collaborations to 

use those tools to educate the public. In particular, 

the FDIC designed strategies to reach two particular 

segments of the population that the National Survey 

of Unbanked and Underbanked Consumers revealed 

are disproportionately unbanked and underbanked: 

low- and moderate-income young people and persons 

with disabilities. The FDIC’s work during 2017 

focusing on young people was also consistent with the 

Financial Literacy and Education Commission’s focus 

on Starting Early for Financial Success. 

Youth Financial Education

Recognizing the promise of hands-on learning 

approaches, the FDIC’s youth work centered on 

helping banks understand strategies to connect 

financial education to savings accounts. On March 

28, 2017, the FDIC released the Youth Savings Pilot 

report which examines the experiences of 21 diverse 

banks in designing and implementing youth savings 

programs. The report describes promising practices 

banks can use to develop or expand their own youth 

savings programs. The report is accessible through the 

FDIC’s new Youth Banking Resource Center website, 

which had more than 11,000 page views between its 

launch in late March and the end of December. The 

release of the report was followed by a webinar to 

communicate key learnings from the pilot to financial 

institutions.

The FDIC also launched the Youth Banking Network 

to support banks as they work with school and 

nonprofit partners to develop youth savings programs 

using the knowledge gained from the pilot. The 

FDIC convened three network conference calls that 

focused on topics of interest, including program 

design and financial education delivery. Bankers and 

other experts shared their experiences and promising 

practices. The FDIC provided periodic assistance to 

members in response to specific questions. 
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 49

The FDIC launched an updated version of the 

Teacher Online Resource Center. The site was 

redesigned to allow educators to more easily find 

Money Smart for Young People and other relevant 

resources. New videos provide a quick overview of 

the curriculum tools. Other enhancements to the 

site include links to relevant resources that can 

support the delivery of financial education in the 

classroom. The site had more than 35,000 page 

views during 2017.

The FDIC pursued strategies to improve financial 

education and access to mainstream financial services 

for youth participating in youth employment 

programs, including those funded through the 

Workforce Innovation and Opportunity Act 

(WIOA). For workforce providers and their partners 

teaching financial education, the FDIC developed 

a tool to map Money Smart to WIOA’s financial 

education element. The FDIC also released a 

supplement to Money Smart designed to help prepare 

youth to open their first savings or transactional 

accounts. As a member of the Financial Literacy and 

Education Commission, the FDIC helped develop 

two resource guides for financial institutions and 

youth employment program providers to discuss 

opportunities of mutual benefit.

The FDIC led three webinars in collaboration with 

the Department of Labor to increase awareness 

of Money Smart among organizations that receive 

federal funding for youth employment. In addition, 

the FDIC participated in three regional events in 

collaboration with the Department of Labor and 

Federal Reserve Banks to strengthen the capacity of 

workforce development organizations in working with 

financial institutions on financial capability initiatives. 

The FDIC was selected to hold a “quick shop” and 

a panel presentation at two national workforce 

association meetings.

The FDIC’s Money Smart Alliance is a network 

of diverse organizations that use Money Smart to 

provide financial education training to organizations, 

consumers, and small businesses. The FDIC hosted 

a national webinar on February 28, 2017, to discuss 

the Money Smart Alliance and opportunities to join. 

The FDIC website also now features a searchable 

database of the Alliance members to help facilitate 

collaborations among organizations to use Money 

Smart and to help consumers find training. FDIC 

Community Affairs staff also continued to provide 

technical assistance to the Alliance members to 

support their implementation of Money Smart. For 

example, on June 28, 2017, a peer-to-peer learning 

webinar for Alliance members featured representatives 

of a financial institution and a non-profit organization 

discussing how they use Money Smart. A total of 

350 organizations joined the Money Smart Alliance 

during 2017. A total of 614 organizations have 

renewed memberships or joined the Alliance since 

the inception of the new enrollment process in early 

2016. Money Smart for Small Business was used by 

297 of these Alliance members.

Financial Education for Persons with Disabilities

The FDIC emphasized strategies to promote 

economic inclusion for persons with disabilities, given 

this population is disproportionally unbanked and 

underbanked. As one element of these strategies, the 

FDIC expanded efforts with local partners through 15 

community events to bring banks and organizations 

representing persons with disabilities together at the 

state and local levels. 

Together with the CFPB, the FDIC hosted a 

meeting of organizations that support persons with 

disabilities at Gallaudet University in May 2017. 

The organizations are part of the CFPB’s Focus on 

Disabilities cohort and together they learned about 

the CFPB’s Your Money, Your Goals toolkit and the 

FDIC’s Money Smart financial education program. 

The meeting was followed by two in-person trainings 

and two webinars to further assist members of the 

cohort advance financial capability for persons with 

disabilities. 

The FDIC revised its Guide to Presenting Money 

Smart for Adults to include updated information 

to help instructors support participants with 

disabilities, including more tips about reasonable 
ANNUAL REPORT

50 MANAGEMENT’S DISCUSSION AND ANALYSIS

accommodations and sample language to include 

on registration forms. Also, the FDIC released 

an Instructor’s Guide Supplement including four 

scenarios that feature individuals with disabilities 

dealing with a financial situation in their lives that can 

be used with any financial education curriculum.

Money Smart for Adults

The FDIC began to revise and update the instructorled Money Smart for Adults curriculum to ensure 

accuracy and relevance. Five organizations, including 

two banks, tested three of the draft redeveloped 

modules, providing the FDIC with valuable 

information that helped inform the redevelopment 

of the remaining modules. All of the modules in the 

redeveloped curriculum will be tested and released 

in 2018. 

Money Smart for Small Business

The FDIC continues to highlight the Money 

Smart for Small Business curriculum with a focus 

on informational events for bankers, community 

organizations, and entrepreneurs, and on increasing 

partnerships at the state and local levels for small 

business access to credit resources. In collaboration 

with diverse partners, particularly the Small Business 

Administration (SBA) and its partner network 

– including the Small Business Development 

Centers, Women’s Business Centers, and SCORE 

Association chapters – the FDIC convened forums 

and roundtables featuring safe small business products 

and services and provided information and technical 

assistance to support initiatives geared to increase 

access to capital for small businesses. In 2017, 

Community Affairs staff completed 92 events and 

activities primarily focused on small business.

Partnerships for Access 

to Mainstream Banking 

The FDIC supported community development and 

economic inclusion partnerships at the local level 

by providing technical assistance and information 

resources throughout the country, with a focus on 

unbanked and underbanked households and low- and 

moderate-income communities. Community Affairs 

staff support economic inclusion through work with 

the Alliances for Economic Inclusion (AEI), Bank On

initiatives, and other coalitions originated by local and 

state governments, and in collaboration with federal 

partners and many local and national non-profit 

organizations. The FDIC also partners with other 

financial regulatory agencies to provide information 

and technical assistance on community development 

to banks and community leaders across the country.

In the 12 AEI communities and in other areas, 

the FDIC helped working groups of bankers and 

community leaders develop responses to the financial 

capability and services needs in their communities. 

To integrate financial capability into community 

services more effectively, the FDIC supported 

seminars and training sessions for community service 

providers and asset-building organizations, workshops 

for financial coaches and counselors, promotion of 

savings opportunities for low- and moderate-income 

people and communities, initiatives to expand access 

to savings accounts for all ages, outreach to bring 

larger numbers of people to expanded tax preparation 

assistance sites, and education for business owners to 

help them become bankable.

The FDIC worked in 10 Bank On communities to 

convene 18 forums and roundtables with almost 

900 participants that helped advance strategies 

to expand access to safe and affordable deposit 

accounts and engage unbanked and underbanked 

consumers. The FDIC provided technical assistance 

to bankers, coalition leaders, and others interested 

in understanding opportunities for banking services 

designed to meet the needs of the unbanked and 

underbanked. 

In total, the FDIC sponsored more than 165 events 

during 2017 that provided opportunities for partners 

to collaborate on increasing access to bank accounts 

and credit services, opportunities to build savings and 

improve credit histories, and initiatives to significantly 
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 51

strengthen the financial capability of community 

service providers who directly serve low- and 

moderate-income consumers and small businesses.

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 the agency 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 2017, the FDIC handled 

16,817 written and telephonic complaints and 

inquiries. Of this total, 9,460 related to FDICsupervised institutions. The FDIC responded to 

97 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 2017, the four most frequently identified consumer 

product complaints and inquiries about FDICsupervised institutions concerned consumer loans (19 

percent), checking accounts (15 percent), residential 

real estate (13 percent), and credit cards (13 percent). 

Consumer loan complaints and inquiries most 

frequently described issues with reporting erroneous 

information and collection practices, while the issues 

most commonly cited in correspondence about 

checking accounts were concerns with account 

discrepancies or transaction errors. Complaints 

and inquiries about residential real estate related to 

disclosures and repossession/foreclosure. Consumer 

correspondences about credit cards most often raised 

issues regarding billing disputes/error resolution 

and reporting erroneous information to the credit 

reporting agencies.

The FDIC also investigated 81 Fair Lending 

complaints alleging discrimination during 2017. The 

number of discrimination complaints investigated 

has fluctuated over the past several years but averaged 

approximately 80 complaints per year between 2012 

and 2017. Over this period, nearly 43 percent of 

the complaints investigated alleged discrimination 

based on the race, color, national origin, or ethnicity 

of the applicant or borrower; 18 percent related to 

discrimination allegations based on age; nearly 14 

percent involved the sex of the borrower or applicant; 

and roughly 7 percent concerned disability.

Consumer refunds generally involve the financial 

institution offering a voluntary credit to the 

consumer’s account, often as a direct result of 

complaint investigations and identification of a 

banking error or violation of law. In 2017, consumers 

received more than $669,000 in refunds from 

financial institutions as a result of the assistance 

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

52 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 2017. For example, 

as of December 31, 2017, the FDIC conducted 

four telephone seminars for bankers on deposit 

insurance coverage, reaching an estimated 5,513 

bankers participating at approximately 1,575 bank 

sites throughout the country. The FDIC also features 

deposit insurance training videos that are available on 

the FDIC’s website and YouTube channel.

As of December 31, 2017, the FDIC Call 

Center received 91,918 telephone calls, of which 

approximately 36,767 were identified as deposit 

insurance-related inquiries. The FDIC Call Center 

handled approximately 18,655 inquiries and Deposit 

Insurance subject matter experts (SME) handled 

18,112 complex telephone calls identifying a total 

of 49,277 deposit insurance issues. In addition 

to telephone inquiries about deposit insurance 

coverage, the FDIC received 781 written inquiries 

from consumers and bankers identifying a total of 

1,771 deposit insurance issues. Of these inquiries, 

100 percent received responses within two weeks, as 

required by corporate policy.

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 FDICinsured institution due to a failure. When an 

institution closes, its chartering authority—the state 

for state-chartered institutions and the OCC for 

national banks and federal savings associations— 

typically appoints the FDIC as receiver, responsible 

for resolving the failed institution.

The FDIC employs a variety of strategies and 

business practices to resolve a failed institution. 

These strategies and practices are typically associated 

with either the resolution process or the receivership 

process. Depending on the characteristics of 

the institution, the FDIC may utilize 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 (if any) 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 efficiently 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. 

Typically, in a P&A transaction, a healthy institution 

purchases certain assets and assumes certain liabilities 

of the failed institution. However, a variety of P&A 

transactions can be used. Because each failing bank 

situation is different, P&A transactions provide 

flexibility to structure deals that result in obtaining 

the highest value for the failed institution. For each 

possible P&A transaction, the acquirer may acquire 

either all of the failing institution’s deposits or only 

the insured portion of the deposits. 
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 53

From 2008 through 2013, loss sharing was offered by 

the FDIC in connection with P&A transactions. In 

a loss-share transaction, the FDIC, as receiver, agrees 

to share losses on certain assets with the acquirer, 

absorbing a significant portion (typically 80 percent) 

of future losses on assets that have been designated 

as “shared-loss assets” for a specific period of time 

(e.g., five to 10 years). The economic rationale 

for these transactions is that keeping assets in the 

banking sector and resolving them over an extended 

period of time can produce a better net recovery than 

the FDIC’s immediate liquidation of these assets. 

However, in recent years as the markets improved 

and functioned more normally with both capital and 

liquidity returning to the banking industry, acquirers 

become more comfortable with bidding on failing 

bank franchises without the loss-sharing protection. 

The FDIC continues to monitor compliance 

with shared-loss agreements by validating the 

appropriateness of loss-share claims; reviewing 

acquiring institutions’ efforts to maximize recoveries; 

ensuring consistent application of policies and 

procedures across both shared-loss and legacy 

portfolios; and confirming that the acquirers have 

sufficient internal controls, including adequate staff, 

reporting, and recordkeeping systems. At year-end 

2017, there were 104 receiverships with active sharedloss agreements and $13.9 billion in total shared-loss 

covered assets.

Financial Institution Failures

During 2017, there were eight institution failures, 

compared to five failures in 2016. 

In all eight transactions, the FDIC successfully 

contacted all known, qualified, and interested bidders 

to market these institutions, and 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 past three years. 

FAILURE ACTIVITY 2015–2017

Dollars in Billions

2017 2016 2015

Total Institutions 8 5 8

Total Assets of 

Failed Institutions* $5.1 $0.3 $6.7

Total Deposits of 

Failed Institutions* $4.7 $0.3 $4.9

Estimated Loss to the DIF $1.1 $0.05 $0.9

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

quarterly Call Report 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 

promptly valued and liquidated in order to maximize 

the return to the receivership estate. For 95 percent 

of 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 2017 totaled $1.8 billion in 

book value.

As a result of the FDIC’s marketing and collection 

efforts, the book value of assets in inventory decreased 

by $1.0 billion (32 percent) in 2017.

The following chart shows the beginning and ending 

balances of these assets by asset type.
ANNUAL REPORT

54 MANAGEMENT’S DISCUSSION AND ANALYSIS

ASSETS-IN-LIQUIDATION 

INVENTORY BY ASSET TYPE

Dollars in Millions

Asset Type 12/31/17 12/31/16 12/31/15

Securities $160 $183 $393

Consumer Loans 8 8 22

Commercial Loans 50 19 62

Real Estate Mortgages 139 85 173

Other Assets/

Judgments 260 268 398

Owned Assets 47 40 113

Net Investments 

in Subsidiaries 157 100 122

Structured and 

Securitized Assets 1,449 2,614 3,524

TOTAL $2,271 $3,317 $4,807

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 its liabilities 

extinguished, the final distribution of any proceeds is 

made, and the FDIC terminates the receivership. In 

2017, the number of receiverships under management 

decreased by 40 (11 percent) to 338. 

The following chart shows overall receivership activity 

for the FDIC in 2017.

RECEIVERSHIP ACTIVITY

Active Receiverships as of 12/31/16 378

New Receiverships 8

Receiverships Terminated 48

Active Receiverships as of 12/31/17 338

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 receivership creditors, including 

depositors whose accounts exceeded the insurance 

limit. During 2017, receiverships paid dividends of 

$953 thousand to depositors whose accounts exceeded 

the insurance limit. 

Professional Liability and 

Financial Crimes Recoveries 

The FDIC investigates bank failures to identify 

potential claims against directors, officers, securities 

underwriters and issuers, fidelity bond insurance 

carriers, appraisers, attorneys, accountants, mortgage 

loan brokers, title insurance companies, and other 

professionals who may have caused losses to insured 

depository institutions. The FDIC will pursue 

meritorious claims that are expected to be costeffective.

During 2017, the FDIC recovered $105 million from 

professional liability claims and settlements. The 

FDIC also authorized lawsuits related to one failed 

institution against three individuals for director and 

officer liability, and authorized another three lawsuits 

for fidelity bond accounting malpractice, and other 

claims. As of December 31, 2017, the FDIC’s 

caseload included 24 professional liability lawsuits 

(down from 28 at year-end 2016), 21 residential 

mortgage malpractice and fraud lawsuits (down from 

42), and 164 open investigations (down from 173). 

The FDIC seeks to complete professional liability 

investigations and make decisions expeditiously on 

whether to pursue potential professional liability 

claims. During 2017, it completed investigations and 

made decisions on 96 percent of the investigations 

related to failures that reached the 18-month point 
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 55

after the institution’s failure date, thereby exceeding its 

annual performance target.

As part of the sentencing process for those convicted 

of criminal wrongdoing against an insured institution 

that later failed, a court may order a defendant 

to pay restitution or to forfeit funds or property 

to the receivership. The FDIC, working with the 

U.S. Department of Justice, in connection with 

criminal restitution and forfeiture orders issued by 

federal courts and independently in connection 

with restitution orders issued by the state courts, 

collected $9.6 million in 2017. As of December 

31, 2017, there were 4,163 active restitution and 

forfeiture orders (increased from 3,991 at year-end 

2016). This includes 119 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).

ENHANCING THE FDIC’S IT SECURITY

FDIC Information Technology Strategic Plan

Information Technology (IT) is a key enabler in 

ensuring the success of FDIC’s core programs. 

Further, the FDIC must ensure that strong security 

and privacy controls protect the information used 

in the course of carrying out its responsibilities. In 

2017, representatives from the Chief Information 

Officer Organization (CIOO) and the FDIC’s 

business divisions contributed their insight and 

knowledge of IT challenges and opportunities with 

the four core principles that IT service delivery is 

secure, affordable, forward-thinking, and better 

prepares the FDIC to carry out its mission. As a 

result, the FDIC Information Technology Strategic Plan 

(ITSP) 2017-2020 was developed to address many of 

the foundational issues affecting the cost and quality 

of IT services. 

The ITSP goals are in the areas of information security 

and privacy, continuity of operations, enterprise 

mobility, information management and analytics, and 

IT service delivery. The ITSP identifies opportunities 

for the FDIC to improve internal operations in 

a world of ever changing technology. The plan 

identifies the five major goals with supporting 

objectives designed to improve business capabilities 

and systems:

♦ Improve information security and privacy 

protections against cyber threats and data 

breaches;

♦ Ensure that the IT systems supporting mission 

essential functions are continuously available and 

provide depositors confidence that their funds 

are readily available in the event of a crisis or 

bank failure;

♦ Develop mobile technologies that offer 

opportunities for authorized users of FDIC 

applications to conduct their work in new ways 

and from remote locations;

♦ Create new information management and 

analysis capabilities to assess risk in support of 

the FDIC’s supervisory responsibilities; and

♦ Improve service delivery and timely response to 

new business requirements. New capabilities 

serve both long-term institutional improvements, 

and the FDIC’s readiness in the event of 

unexpected challenges.

Achieving these goals will significantly improve FDIC 

operations and the value the FDIC provides to the 

nation’s financial system. During 2017, the FDIC 

advanced a variety of initiatives to begin fulfilling the 

goals set for in this plan. 

Addressing FDIC Cybersecurity Risk

The FDIC is committed to strengthening and 

managing effective and efficient cybersecurity 

practices. At the foundation of these practices is risk 

management, which serves to proactively identify, 

protect, detect, and respond to threats, as well as to 

rapidly recover from cybersecurity incidents. During 

2017, the FDIC has taken a number of actions to 

enhance and improve our risk management practices.
ANNUAL REPORT

56 MANAGEMENT’S DISCUSSION AND ANALYSIS

The FDIC addressed cybersecurity risk as a critical 

element of the ITSP. This strategic focus emphasizes 

the importance of cybersecurity to the mission and 

prompts tangible actions to sustain and improve 

our cybersecurity posture. To operationalize the 

strategy, the FDIC implemented a risk management 

function and assigned program- and executive-level 

officials to manage information risk. Ensuring 

that leaders are accountable for the effective 

planning, implementation, and monitoring of risk 

management enables the FDIC to identify, prioritize, 

communicate, and sustain the controls required to 

mitigate cybersecurity risks across the agency.

On May 11, 2017, the President issued an Executive 

Order entitled Strengthening the Cybersecurity of 

Federal Networks and Critical Infrastructure. The 

Executive Order builds on existing statutory 

requirements under the Federal Information 

Security Modernization Act of 2014 (FISMA), 

which establishes information security obligations 

for federal agencies (including the FDIC).

Subsequent to the issuance of the Executive 

Order, the Office of Management and Budget 

issued Reporting Guidance for Executive Order on 

Strengthening the Cybersecurity of Federal Networks 

and Critical Infrastructure, to provide agency heads 

with instructions for meeting the risk management 

reporting requirements in the Executive Order. To 

fulfill these requirements to strengthen cybersecurity, 

the FDIC:

♦ Designated, and reported on, the Senior 

Accountable Official (SAO) for cybersecurity 

risk;

♦ Developed and submitted the FY17 Annual Risk 

and FISMA Reports;

♦ Conducted a CIOO Cybersecurity Framework 

(CSF) self-assessment which assessed the current 

state of FDIC cybersecurity controls; and

♦ Used the identified risks from the CIOO CSF 

assessment and FDIC FISMA reports to develop 

and submit an action plan for implementing 

the CSF.

Furthermore, the FDIC is restructuring corporatewide information security guidance through the 

issuance of a new Information Security Policy 

Framework, which will align FDIC information 

security to industry-leading best practices, and will 

comply with recent cybersecurity requirements issued 

by the President and the U.S. Office of Management 

and Budget (OMB). Transitioning to the new 

framework will make it easier for FDIC personnel 

to identify applicable guidance and highlight policy 

areas needing improvement.  The reorganization of 

policy information is still underway with completion 

expected in mid-2018.

Mobility and Strengthening 

of Endpoint Devices  

The Enterprise Mobility objective is a comprehensive 

effort to deploy mobile technologies that enable 

FDIC authorized users to conduct their work in 

ways that improve efficiency and increase flexibility. 

This capability provides FDIC users with the ability 

to work securely, from any location at any time, 

on FDIC-owned equipment.  During 2017, FDIC 

completed a variety of projects to support this 

objective, including: 

♦ Laptop deployment — phased out desktops, 

eliminated use of personal computers, and issued 

identical and more secure government furnished 

equipment;

♦ Smartphone deployment — replaced FDICissued blackberry mobile devices with modern 

smartphones to expand mobile workforce 

capabilities while enhancing security; and

♦ Mobile Device Management (MDM) 

technology—- implemented a FedRAMP2

- 

compliant, cloud-based MDM solution to 

manage FDIC mobile devices.

2

The Federal Risk and Authorization Management Program (FedRAMP) is an assessment and authorization process which U.S. 

federal agencies have been directed by the Office of Management and Budget to use to ensure security is in place when accessing 

cloud computing products and services.
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 57

Insider Threat and 

Counterintelligence Program 

An insider threat is a concern or risk posed to the 

FDIC that involves an individual who misuses or 

betrays, wittingly or unwittingly, his or her authorized 

access to FDIC resources. This individual may 

have access to sensitive or personally identifiable 

information as well as privileged access to critical 

infrastructure or business sensitive information 

(e.g., bank data).

The FDIC established the Insider Threat and 

Counterintelligence Program (ITCIP) in September 

2016. ITCIP is a defensive program focused on 

preventing and mitigating internal and external 

threats and risks posed to FDIC personnel, facilities, 

assets, resources, and both national security and 

sensitive information by insider and foreign 

intelligence entities. These threats may involve 

inadvertent disclosures and intentional breaches 

of sensitive information by personnel who may be 

compromised by external sources, disgruntled, seeking 

personal gain, intending to damage the reputation of 

the FDIC, or acting for some other reason. ITCIP 

leverages both physical and logical safeguards to 

minimize the risk, likelihood, and impact of an 

executed insider threat. 

The National Insider Threat Task Force (NITTF) 

initiated its Federal Program Review in January 2017 

to ensure the FDIC’s implementation of the White 

House minimum standards. NITTF’s independent 

evaluation showed that ITCIP met all minimum 

standards and achieved full operating capability on 

August 24, 2017. NITTF noted that ITCIP leads the 

federal government in several best practices that affect 

the entire workforce and serves as a model program 

for other independent regulators and non-Title 50 

Departments and Agencies. 

MINORITY AND WOMEN INCLUSION

Consistent with the provisions of the Dodd-Frank 

Act, the FDIC continues to enhance its longstanding 

commitment to promote diversity and inclusion in 

employment opportunities and all business areas 

of the agency. The Office of Minority and Women 

Inclusion (OMWI) supports the FDIC’s mission 

through outreach efforts to ensure the fair inclusion 

and utilization of minority- and women-owned 

businesses, law firms, and investors in contracting and 

investment opportunities.

The FDIC relies on contractors to help meet its 

mission. In 2017, the FDIC awarded 210 (28 

percent) contracts to minority- and women-owned 

businesses (MWOBs) out of a total of 737 issued. 

The FDIC awarded contracts with a combined value 

of $524 million in 2017, of which 19 percent ($97 

million) were awarded to MWOBs, compared to 

18 percent for all of 2016. The FDIC paid $110 

million of its total contract payments (27 percent) to 

MWOBs, under 354 MWOB contracts. The FDIC 

made 67 referrals to minority- and women-owned 

law firms (MWOLFs), which accounted for 18 

percent of all legal referrals in 2017. Total payments 

to MWOLFs were $6.5 million in 2017, which is 11 

percent of all payments to outside counsel, compared 

to 14 percent for all of 2016. 

In 2017, the FDIC Legal Division participated in 

six minority bar association conferences and three 

stakeholder events in support of maximizing the 

participation of MWOLFs in FDIC legal contracting. 

This participation included serving on several panels 

and committees, such as the National Association 

of Minority and Women Owned Law Firms 

(NAMWOLF) Advisory Council, the NAMWOLF 

Events Committee, the NAMWOLF Diversity and 

Inclusion Initiative, and “How to Pitch Law Firm 

Services to Prospective Clients.” In addition, the 

Legal Division conducted an MWOLF workshop 

at the Dallas Regional Office to encourage FDIC 

in-house counsel to contract with MWOLFs. In 

recognition of its diversity and inclusion efforts, the 

FDIC received the NAMWOLF 2017 Diversity 

Initiative Achievement Award. Also, in 2017, the 

Legal Division staff worked closely with several 

MWOLFs on partnering with large non-minority 

owned firms to compete for FDIC legal referrals.
ANNUAL REPORT

58 MANAGEMENT’S DISCUSSION AND ANALYSIS

Pursuant to Section 342 of the Dodd-Frank Act, 

which requires an assessment of legal contractors’ 

internal workforce diversity practices, the Legal 

Division conducted 12 compliance reviews of the 

top-billing law firms (both non-minority-owned and 

MWOLFs). The reviews included discussions relating 

to the recruitment, mentoring, and promotion of 

diverse attorneys working on FDIC legal matters.

In 2017, the FDIC participated in a total of 35 

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 

and MWOLFs, these efforts also targeted veteranowned and small disadvantaged businesses. Vendors 

were provided with the FDIC’s general contracting 

procedures, prime contractors’ contact information, 

and forecasts of possible upcoming solicitations. 

Also, vendors were encouraged to register through 

the FDIC’s Contractor Resource List (the principal 

database for vendors interested in doing business with 

the FDIC).

The FDIC co-sponsored two technical assistance 

events. The FDIC, NCUA, and OCC hosted the 

Cybersecurity Awareness and Preparedness for Your 

Business event where presenters discussed cybersecurity 

intrusions in small businesses and what to do when a 

business is compromised. Cybersecurity requirements 

for financial institutions were discussed, as well as 

vendors’ expectations and requirements. 

The FDIC, NCUA, and OCC, in collaboration 

with the Virginia Procurement Technical Assistance 

Program, hosted the Proposal to Pricing – Developing 

a Winning Strategy technical assistance event. The 

presenters shared information on developing winning 

proposals and pricing strategies. The sponsoring 

agencies and various procurement trade organizations 

exhibited at the event. 

During 2017, OMWI and the Division of Resolutions 

and Receiverships (DRR) collaborated to present two 

FDIC-sponsored asset purchaser workshops that were 

marketed extensively to minority- and women-owned 

investors and companies interested in learning about 

DRR’s sales processes. DRR speakers with strong 

backgrounds in their respective programs provided 

details on the various tools used by DRR to market 

assets and presented information to attendees on how 

to participate in the transactions and bid on assets 

offered for sale.

Two outreach events were held in 2017 in New 

Orleans, LA, to support asset sales resulting from 

the failure of First NBC Bank. The first event was 

an investor workshop which included discussions of 

cash loan sales, structured transactions, real estate 

liquidations, and other forms of FDIC dispositions. 

The investor workshop attracted 104 attendees.

The second event was conducted by Owned Real 

Estate (ORE) staff and was targeted to first-time 

homebuyers, tenants occupying non-owner occupied 

ORE, and other prospective purchasers of ORE in the 

New Orleans area. Housing counselors and lenders 

specialized in lower-priced home loans were available 

to help the 79 people who attended the event. 

Information regarding the Minority and Women 

Outreach Program can be found on the FDIC’s 

website at www.fdic.gov/mwop.

The FDIC’s Homeownership Outreach Workshop 

focused on attendees receiving information on how 

and why the FDIC acquires properties, the types of 

properties, and where the properties are listed. At 

the conclusion of the workshop, the agency hosted 

a housing fair session where attendees met with 

representatives of financial institutions and non-profit 

organizations.

In addition, FDIC worked closely with the OMWIs 

of the OCC, FRB, CFPB, NCUA, and the SEC 

to further implement Section 342(b)(2)(C) of the 

Dodd-Frank Act, which requires the agencies to 

develop standards to assess the diversity policies and 

practices of the entities they regulate. After finalizing 

the Interagency Policy Statement Establishing Joint 
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 59

Standards for Assessing the Diversity Policies and 

Practices of Entities Regulated by the Agencies in 

2015, the agency OMWIs received approval from 

the Office of Management and Budget in 2016 as 

required by the Paperwork Reduction Act of 1995, 

to collect information from regulated entities. To 

facilitate the collection of information from its 

regulated entities, the FDIC developed an electronic 

diversity self-assessment instrument to assist FDICregulated financial institutions in assessing their 

diversity programs. 

In October 2016, the Acting Director of OMWI 

distributed a letter to the presidents and Chief 

Executive Officers (CEOs) of 805 FDIC-regulated 

financial institutions identified as having 100 or 

more employees. The letter informed these large 

institutions about the process for conducting and 

voluntarily submitting their diversity information to 

the FDIC. In March 2017, a second reminder letter 

from the Acting Director of OMWI was distributed 

to financial institutions to encourage participation. 

The FDIC received diversity self-assessments from 

95 (12 percent) of its regulated financial institutions. 

The FDIC will use diversity self-assessment 

information provided by its regulated entities to 

track progress and trends in the financial services 

industry, and to identify exemplary diversity policies 

and practices. 

Although OMWI is pleased with the participation of 

financial institutions that conducted and submitted 

a diversity self-assessment in its first year, it is 

taking steps to increase voluntary participation by 

augmenting outreach and participation at banking 

conferences, developing financial institution diversity 

marketing materials, and making improvements 

to the program website. OMWI will continue to 

raise awareness amongst FDIC-regulated financial 

institutions by identifying leading trends and 

establishing benchmarks designed to build a strong 

culture in diversity and inclusion practices. 

In November 2017, the Acting Director of OMWI 

distributed a letter to presidents and CEOs of 

regulated financial institutions encouraging them 

to voluntarily submit their 2017 diversity selfassessments by March 31, 2018.

INTERNATIONAL OUTREACH 

FDIC played a leading role during the year in 

supporting the global development of deposit 

insurance, bank supervision, and bank resolution 

systems. This included working closely with 

regulatory and supervisory authorities from around 

the world, as well as international standard-setting 

bodies and multilateral organizations, such as the 

International Association of Deposit Insurers (IADI), 

the Association of Supervisors of Banks of the 

Americas (ASBA), the Basel Committee on Banking 

Supervision (BCBS), the Financial Stability Board 

(FSB), the International Monetary Fund (IMF), and 

the World Bank. The FDIC engaged with foreign 

regulatory counterparts by hosting visiting officials, 

conducting training seminars, delivering technical 

assistance abroad, and fulfilling the commitments of 

FDIC membership in international organizations.

International Association of Deposit Insurers 

FDIC officials and subject matter experts provided 

continuing support for IADI programs in 2017. 

This included developing and facilitating technical 

assistance workshops for the Middle Eastern, 

African, European, Caribbean, North American, 

Eurasian, and Latin American regions of IADI; 

participating in reviews of IADI members’ selfassessment of compliance with the Core Principles; 

and participating in the IADI Biennial Research 

Conference in June. Led and supported by FDIC 

executives and senior staff, IADI technical assistance 

and training activities reached more than 250 

participants during 2017.

Association of Supervisors of Banks of the Americas

Senior FDIC staff chaired the ASBA Training and 

Technical Committee in 2017, which designs and 

implements ASBA’s training strategy, promoting the 

adoption of sound banking supervision policies and 
ANNUAL REPORT

60 MANAGEMENT’S DISCUSSION AND ANALYSIS

practices among its members. The training program 

reached more than 500 member participants in 2017.

Basel Committee on Banking Supervision

The FDIC supports and contributes to the 

development of international standards, guidelines, 

and sound practices for prudential regulation and 

supervision of banks through its longstanding 

membership in BCBS. This includes actively 

participating in many of the committee groups, 

working groups, and task forces established by BCBS 

to carry out its work, which is focused on policy 

development, supervision and implementation, 

macroprudential supervision, accounting, and 

consultation.

International Capacity Building 

The FDIC provided technical assistance and training 

missions to foreign counterparts in 2017 to promote 

effective deposit insurance, bank supervision, and 

bank resolution systems. These missions included 

assisting the Bank of Greece and providing training 

for Canadian deposit insurers. These efforts also 

included programs for more than 200 visiting 

regulators and other government officials from 20 

countries during the year. Structured classroom 

training included two presentations of FDIC 101: An 

Introduction to Deposit Insurance, Bank Supervision, 

and Resolutions, attended by 65 students from nearly 

40 organizations.

Other International Dialogues

The FDIC advanced policy objectives with key 

jurisdictions worldwide by participating in highlevel interagency dialogues. Counterparties included 

China, India, Mexico and Canada.

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. Following are the FDIC’s 

major accomplishments in improving operational 

efficiency and effectiveness during 2017. 

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 resultsoriented workforce. In 2017, the FDIC workforce 

planning initiatives emphasized the need to plan for 

employees to fulfill current and future capabilities 

and leadership needs. This focus ensures that the 

FDIC has a workforce positioned to meet today’s core 

responsibilities and prepared to fulfill its mission in 

the years ahead. 

Strategic Workforce Planning and Readiness 

During 2017, the FDIC continued to develop and 

implement the Workforce Development Initiative, 

an integrated strategy to address workforce challenges 

and opportunities. The effort 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 support these efforts. 

In 2017, the FDIC continued to develop the 

infrastructure, governance, programs, and processes 

to help meet its long-term workforce and leadership 

needs. The FDIC is committed to building and 

expanding its talent pipeline to ensure succession 
2017

MANAGEMENT’S DISCUSSION AND ANALYSIS 61

challenges are met. To that end, the agency expanded 

its succession planning review process in 2017 to 

include all managers and an assessment of their 

leadership attributes. The effort began with a survey 

to assess the level of aspiration among current 

managers. More than two-thirds of current managers 

reported that they were interested in seeking higherlevel positions at the FDIC, demonstrating their 

ongoing interest in leadership development. Senior 

FDIC leaders from across the agency then convened 

to discuss leadership needs and strategies to address 

them, including efforts to develop the pipeline of the 

FDIC’s aspiring leadership pool. 

As a result of the succession planning review process, 

FDIC managers received recommendations to 

participate in diverse programs to enhance their 

leadership capabilities, including the Leadership 

Mentoring Program, external educational 

opportunities through Harvard’s Kennedy School 

of Government and Georgetown’s Government 

Affairs Institute, executive coaching, and enriched 

management training. 

The FDIC also continued to focus on ensuring the 

availability of a workforce equipped to meet today’s 

responsibilities, while simultaneously preparing 

for future capability needs. The FDIC furthered 

development of a Career Paths initiative, targeted 

at non-supervisory employees at all levels, to 

promote the acquisition of cross-organizational skills 

and knowledge. Additional support is provided 

to employees seeking professional development 

opportunities through expanded career management 

services. 

The FDIC’s strategic workforce planning initiatives 

require a long-term and sustained focus to identify 

future workforce and leadership needs, assess current 

capabilities, support aspiration to management and 

leadership roles, and develop and source the talent 

to meet emerging workforce needs. 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 (FIS) in entry-level positions. 

The CEP encompasses major FDIC divisions where 

FIS are trained to become part of a highly effective 

workforce. During the first-year rotation within 

the program, FIS gain experience and knowledge 

in the core business of the FDIC, including DCP, 

RMS, DRR, and DIR. At the conclusion of the 

rotation period, FIS are placed within RMS or DCP, 

where they continue their career path to become 

commissioned examiners.

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

provide highly-trained staff for its core occupational 

series, and ultimately for its future senior technical 

and leadership positions. Since the CEP’s inception 

in 2005, nearly 500 individuals are active in this 

multi-discipline program, and 875 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 in college. The program serves as an additional 

avenue to recruit talent.

Employee Learning and Development 

The FDIC is committed to training and developing 

its employees throughout their careers to enhance 

technical proficiency and leadership capacity, 

supporting career progression and succession 

management. The FDIC is focused on developing 

and implementing comprehensive curricula for its 

business lines to 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.
ANNUAL REPORT

62

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 executives, the FDIC provides employees 

with targeted leadership development opportunities 

that align with key leadership competencies. 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 

In September 2017, the FDIC Board of Directors 

approved the integration of the functions of the 

Office of Corporate Risk Management (OCRM) 

into a newly-constituted Risk Management and 

Internal Controls Branch (RMIC) within the 

Division of Finance (DOF). This change enhances 

the effectiveness of the FDIC’s enterprise riskmanagement function, integrates those functions 

with the FDIC’s internal control processes, and better 

aligns the risk-management process with existing 

annual corporate planning and budget processes. The 

existing operations of OCRM and DOF’s Corporate 

Management Control Branch were consolidated into 

RMIC. This branch will be led by a new Deputy 

Director, who will also carry the title of Chief 

Risk Officer. 

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. The FDIC 

continues to rank at or near the top in all categories of 

the Partnership for Public Service Best Places to Work 

in the Federal Government® list for mid-size federal 

agencies.  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.

FDIC Workplace Excellence Steering Committee and Division and Office Councils.

MANAGEMENT’S DISCUSSION AND ANALYSIS
63

PERFORMANCE 

RESULTS 

SUMMARY

II.
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6565

2017

SUMMARY OF 2017 PERFORMANCE RESULTS BY PROGRAM

The FDIC successfully achieved 35 of the 36 annual 

performance targets established in its 2017 Annual 

Performance Plan. One target was not achieved: 

Issue a final rule implementing the Basel III Net 

Stable Funding Ratio. The rulemaking is subject 

to interagency negotiations and a final rule has not 

yet been issued. There were no instances in which 

2017 performance had a material adverse effect on 

the successful achievement of the FDIC’s mission or 

its strategic goals and objectives regarding its major 

program responsibilities.

Additional key accomplishments are noted below.

Program Area Performance Results

Insurance ♦ Updated the FDIC Board of Directors on loss, income, and reserve ratio 

projections for the Deposit Insurance Fund (DIF) at the March and 

September meetings. 

♦ Briefed the FDIC Board of Directors in March and September on 

progress in meeting the goals of the Restoration Plan. 

♦ Completed reviews of the recent accuracy of the contingent loss reserve. 

♦ Researched and analyzed emerging risks and trends in the banking sector, 

financial markets, and the overall economy to identify issues affecting the 

banking industry and the DIF. 

♦ Provided policy research and analysis to FDIC leadership in support of 

the implementation of financial industry regulation, as well as support for 

testimony and speeches. 

♦ Published economic and banking information and analyses through the 

FDIC Quarterly, FDIC Quarterly Banking Profile (QBP), FDIC State 

Profiles, and the Center for Financial Research Working Papers.

♦ Operated the Electronic Deposit Insurance Estimator (EDIE), which had 

687,913 user sessions in 2017. 

PERFORMANCE RESULTS SUMMARY
ANNUAL REPORT

66 PERFORMANCE RESULTS SUMMARY

Program Area Performance Results

Supervision ♦ A total of 396 institutions were assigned a composite CAMELS rating 

of 2 and had Matters Requiring Board Attention (MRBAs) identified in 

the examination reports. To ensure that MRBAs are being appropriately 

addressed at these institutions, the FDIC timely reviews progress reports 

and follows up with bank management as needed. More specifically, 

within six months of issuing the examination reports, the FDIC 

conducted appropriate follow up and review of these MRBAs at 375 (95 

percent) of these institutions. Follow up and review of the MRBAs at 

the remaining 21 institutions (5 percent) occurred more than six months 

after issuing the examination reports primarily due to delayed responses 

from some banks as well as the need for additional information in order to 

complete a full review. 

♦ Participated on the examinations of selected financial institutions, for 

which the FDIC is not the primary federal regulator, to assess risk to 

the DIF. 

♦ Implemented the strategy outlined in the work plan approved by the 

Advisory Committee on Economic Inclusion to support the expanded 

availability of Safe Accounts and the responsible use of technology, to 

expand banking services to the underbanked.

♦ Published an edition of Supervisory Insights in the summer of 2017 that 

included two articles – one that discusses the importance of liquidity risk 

management as many institutions continue to reduce holdings of liquid 

assets, and a second that describes the purpose, development, and changes 

to the Bank Secrecy Act (BSA) over the years as well as an overview of 

the BSA examination process. The Winter 2016 publication included 

an article that identifies trends in credit risk in commercial real estate, 

agriculture, and oil and gas-related lending.

Receivership Management ♦ Terminated at least 75 percent of new receiverships that are not subject to 

loss-share agreements, structured sales, or other legal impediments, within 

three years of the date of failure.

♦ Continued to enhance the FDIC’s ability to administer deposit insurance 

claims at large insured deposit institutions.

♦ Evaluated within 120 days all termination offers from Limited Liability 

Corporation (LLC) managing members to determine whether to pursue 

dissolution of those LLCs that are determined to be in the best overall 

economic interest of the participating receiverships.
2017

PERFORMANCE RESULTS SUMMARY 67

2017 INSURANCE PROGRAM RESULTS

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

1 Respond promptly to all 

insured financial institution 

closings and related 

emerging issues.

Number of business 

days after an institution 

failure that depositors 

have access to insured 

funds.

Insured depositor 

losses resulting from 

a financial institution 

failure.

Depositors have access to insured 

funds within one business day if the 

failure occurs on a Friday.

Depositors have access to insured 

funds within two business days if 

the failure occurs on any other day of 

the week.

Depositors do not incur any losses on 

insured deposits.

No appropriated funds are required to 

pay insured depositors.

ACHIEVED.

SEE PG. 53. 

ACHIEVED.

SEE PG. 53.

ACHIEVED.

SEE PG. 53.

ACHIEVED.

SEE PG. 53.

2 Disseminate data and 

analyses on issues and 

risks affecting the financial 

services industry to bankers, 

supervisors, the public, and 

other stakeholders on an 

ongoing basis.

Scope and timeliness 

of information 

dissemination on 

identified or potential 

issues and risks.

Disseminate results of research and 

analyses in a timely manner through 

regular publications, ad hoc reports, 

and other means.

Undertake industry outreach 

activities to inform bankers and 

other stakeholders about current 

trends, concerns, and other available 

FDIC resources.

ACHIEVED. 

SEE PG. 65.

ACHIEVED.

SEE PG. 65.

3 Adjust assessment rates, as 

necessary, to achieve a DIF 

reserve ratio of at least 1.35 

percent of estimated insured 

deposits by September 30, 

2020.

Updated fund balance 

projections and 

recommended changes 

to assessment rates.

Demonstrated progress 

in achieving the goals of 

the Restoration Plan.

Provide updated fund balance 

projections to the FDIC Board of 

Directors by June 30, 2017, and 

December 31, 2017.

Recommend changes to deposit 

insurance assessment rates to the 

FDIC Board of Directors as necessary.

Provide progress reports to the FDIC 

Board of Directors by June 30, 2017, 

and December 31, 2017.

ACHIEVED.

SEE PG. 65.

ACHIEVED.

SEE PG. 65.

ACHIEVED.

SEE PG. 65.

PERFORMANCE RESULTS BY PROGRAM AND STRATEGIC GOAL
ANNUAL REPORT

68 PERFORMANCE RESULTS SUMMARY

2017 INSURANCE PROGRAM RESULTS (continued)

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

4 Expand and strengthen the 

FDIC’s participation and 

leadership role in supporting 

robust and effective deposit 

insurance programs, 

resolution strategies, and 

banking systems worldwide. 

Activities to expand 

and strengthen 

engagement with 

foreign jurisdictions 

and advance the FDIC’s 

global leadership and 

participation.

Provision of technical 

assistance to foreign 

counterparts.

Foster strong relationships with 

international banking regulators, 

deposit insurers, other relevant 

authorities by engaging with 

strategically important jurisdictions 

and organizations on international 

financial safety net issues.

Provide leadership and expertise to 

key international organizations and 

associations that promote sound 

deposit insurance and effective bank 

supervision and resolution practices.

Promote international standards 

and expertise in financial regulatory 

practices and stability through the 

provision of technical assistance and 

training to global financial system 

authorities. 

ACHIEVED.

SEE PGS. 59-60.

ACHIEVED.

SEE PGS. 59-60.

ACHIEVED. 

SEE PGS. 59-60.

5 Market failing institutions 

to all known qualified and 

interested potential bidders.

Scope of qualified 

and interested bidders 

solicited.

Contact all known qualified and 

interested bidders. 

ACHIEVED.

SEE PG. 53.

6 Provide educational 

information to insured 

depository institutions and 

their customers to help 

them understand the rules 

for determining the amount 

of insurance coverage on 

deposit accounts.

Timeliness of responses 

to deposit insurance 

coverage inquiries.

Initiatives to increase 

public awareness of 

deposit insurance 

coverage changes.

Respond within two weeks to 95 

percent of written inquiries from 

consumers and bankers about FDIC 

deposit insurance coverage.

Conduct at least four telephone or 

in-person seminars for bankers on 

deposit insurance coverage.

ACHIEVED.

 SEE PG. 52.

ACHIEVED.

SEE PG. 52.
2017

PERFORMANCE RESULTS SUMMARY 69

2017 SUPERVISION PROGRAM RESULTS

Strategic Goal: FDIC-insured institutions are safe and sound. 

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

1 Conduct on-site risk 

management examinations 

to assess the overall financial 

condition, management 

practices and policies, and 

compliance with applicable 

laws and regulations of 

FDIC-supervised depository 

institutions. When problems 

are identified, promptly 

implement appropriate 

corrective programs, and 

follow up to ensure that 

identified problems are 

corrected.

Percentage of required 

examinations conducted 

in accordance with 

statutory requirements 

and FDIC policy.

Follow-up actions on 

identified problems.

Conduct all required risk 

management examinations within the 

time frames prescribed by statute and 

FDIC policy.

For at least 90 percent of institutions 

that are assigned a composite 

CAMELS rating of 2 and for which 

the examination report identifies 

“Matters Requiring Board Attention” 

(MRBAs), review progress reports and 

follow up with the institution within 

six months of the issuance of the 

examination report to ensure that all 

MRBAs are being addressed.

ACHIEVED.

SEE PG. 24.

ACHIEVED.

SEE PG. 66. 

2 Assist in protecting the 

infrastructure of the U.S. 

banking system against 

terrorist financing, money 

laundering, and other 

financial crimes. 

Percentage of required 

examinations conducted 

in accordance with 

statutory requirements 

and FDIC policy. 

Conduct all Bank Secrecy Act 

examinations within the time frames 

prescribed by statute and FDIC 

policy.

ACHIEVED.

SEE PG. 24.

3 More closely align regulatory 

capital standards with risk 

and ensure that capital is 

maintained at prudential 

levels.

Simplification of 

capital standards for 

community banks.

U.S. implementation of 

internationally agreed 

regulatory standards.

Issue a Notice of Proposed 

Rulemaking (NPR) for a simplified 

capital framework for community 

banks.

Issue a final rule implementing the 

Basel III Net Stable Funding Ratio.

ACHIEVED.

SEE PGS. 38-39.

NOT

ACHIEVED.

SEE PGS. 159-160

4 Implement strategies 

to promote enhanced 

information security, 

cybersecurity, and business 

continuity within the 

banking industry.

Enhance the 

cybersecurity awareness 

and preparedness of the 

banking industry.

Continue implementation of a 

horizontal review program that 

focuses on the IT risks in large and 

complex supervised institutions and 

Technology Service Providers (TSPs).

Revise and implement by December 

31, 2017, the Cybersecurity 

Examination Tool for TSPs.

ACHIEVED. 

SEE PG. 27.

ACHIEVED.

SEE PGS. 27-28. 
ANNUAL REPORT

70 PERFORMANCE RESULTS SUMMARY

2017 SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: Consumers’ rights are protected, and FDIC-supervised institutions invest in their communities.

# ANNUAL 

PERFORMANCE GOAL

INDICATOR TARGET RESULTS

1 Conduct on-site CRA 

and consumer compliance 

examinations to assess 

compliance with applicable 

laws and regulations by 

FDIC-supervised depository 

institutions. When 

violations are identified, 

promptly implement 

appropriate corrective 

programs and follow up 

to ensure that identified 

problems are corrected.

Percentage of 

examinations conducted 

in accordance with the 

time frames prescribed 

by FDIC policy.

Implementation of 

corrective programs.

Conduct all required examinations 

within the time frames established by 

FDIC policy.

Conduct visits and/or follow-up 

examinations in accordance with 

established FDIC policies to ensure 

that the requirements of any required 

corrective program have been 

implemented and are effectively 

addressing identified violations.

ACHIEVED.

SEE PG. 26. 

ACHIEVED.

SEE PG. 26.

2 Effectively investigate and 

respond to written consumer 

complaints and inquiries 

about FDIC-supervised 

financial institutions.

Timely responses to 

written consumer 

complaints and 

inquiries.

Respond to 95 percent of written 

consumer complaints and inquiries 

within time frames established by 

policy, with all complaints and 

inquiries receiving at least an initial 

acknowledgement within two weeks.

ACHIEVED.

SEE PG. 51.

3 Promote economic inclusion 

and access to responsible 

financial services through 

supervisory, research, policy, 

and consumer/community 

affairs initiatives.

Completion of planned 

initiatives.

Revise and administer the 2017 FDIC 

National Survey of Unbanked and 

Underbanked Households. 

Continue and expand efforts to 

promote broader awareness of the 

availability of low-cost transaction 

accounts consistent with the FDIC’s 

Model SAFE transaction account 

template. 

Complete and pilot a revised, 

instructor-led Money Smart for Adults

product.

ACHIEVED.

SEE PG. 47.

ACHIEVED. 

SEE PGS. 46-47.

ACHIEVED.

SEE PG. 50.
2017

PERFORMANCE RESULTS SUMMARY 71

2017 SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: Large and complex financial institutions are resolvable in an orderly manner under bankruptcy.

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

1 Identify and address risks 

in large, complex financial 

institutions, including those 

designated as systemically 

important.

Compliance with the 

statutory and regulatory 

requirements under 

Title I of the DFA 

and Section 360.10 of 

the FDIC Rules and 

Regulations.

Risk monitoring of 

large, complex financial 

institutions, bank 

holding companies and 

designated nonbanking 

firms.

In collaboration with the FRB 

continue to review all resolution plans 

subject to the requirements of Section 

165 (d) of the DFA to ensure their 

conformance to statutory and other 

regulatory requirements. Identify 

potential impediments in those plans 

to resolution under the Bankruptcy 

Code.

Continue to review all resolution 

plans subject to the requirements of 

Section 360.10 of the IDI rule to 

ensure their conformance to statutory 

and other regulatory time frames. 

Identify potential impediments 

to resolvability under the Federal 

Deposit Insurance (FDI) Act.

Conduct ongoing risk analysis and 

monitoring of large, complex financial 

institutions to understand and assess 

their structure, business activities, risk 

profiles, and resolution and recovery 

plans.

ACHIEVED.

SEE PG. 40.

ACHIEVED.

SEE PGS. 41-42.

ACHIEVED

SEE PGS. 42-43.
ANNUAL REPORT

72 PERFORMANCE RESULTS SUMMARY

2017 RECEIVERSHIP MANAGEMENT PROGRAM RESULTS

Strategic Goal: Resolutions are orderly and receiverships are managed effectively.

# ANNUAL 

PERFORMANCE GOAL INDICATOR TARGET RESULTS

1 Value, manage, and market 

assets of failed institutions 

and their subsidiaries in a 

timely manner to maximize 

net return.

Percentage of the assets 

marketed for each failed 

institution.

For at least 95 percent of insured 

institution failures, market at least 

90 percent of the book value of the 

institution’s marketable assets within 

90 days of the failure date (for cash 

sales) or 120 days of failure date (for 

structured sales).

ACHIEVED.

SEE PG. 53.

2 Manage the receivership 

estate and its subsidiaries 

toward an orderly 

termination. 

Timely termination of 

new receiverships.

Terminate at least 75 percent of new 

receiverships that are not subject to 

loss-share agreements, structured sales, 

or other legal impediments, within 

three years of the date of failure.

ACHIEVED.

SEE PG. 66.

3 Conduct investigations into 

all potential professional 

liability claim areas for all 

failed insured depository 

institutions, and decide as 

promptly as possible, to 

close or pursue each claim, 

considering the size and 

complexity of the institution.

Percentage of 

investigated claim areas 

for which a decision has 

been made to close or 

pursue the claim.

For 80 percent of all claim areas, 

make a decision to close or pursue 

professional liability claims within 18 

months of the failure of an insured 

depository institution.

ACHIEVED.

SEE PGS. 54-55.

4 Ensure the FDIC’s 

operational readiness to 

administer the resolution of 

large financial institutions, 

including those designated as 

systemically important.

Refinement of 

resolution plans and 

strategies.

Enhanced crossborder coordination 

and cooperation in 

resolution planning.

Continue to refine plans to ensure 

the FDIC’s operational readiness to 

administer the resolution of large 

financial institutions under Title II of 

the DFA, including those nonbank 

financial companies designated as 

systemically important.

Continue to deepen and strengthen 

bilateral working relationships with 

key foreign jurisdictions. 

ACHIEVED.

SEE PGS. 41-42.

ACHIEVED. 

SEE PGS. 43-44.
2017

PERFORMANCE RESULTS SUMMARY 73

PRIOR YEARS’ PERFORMANCE RESULTS

Refer to the respective full Annual Report of prior years, located on the FDIC’s website for more information on 

performance results for those years. Shaded areas indicate no such target existed for that respective year.

INSURANCE PROGRAM RESULTS

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

Annual Performance Goals and Targets 2016 2015 2014

1. Respond promptly to all financial institution closings and related 

emerging issues.

♦ Depositors have access to insured funds within one business day if 

the failure occurs on a Friday. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Depositors have access to insured funds within two business days if 

the failure occurs on any other day of the week. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Depositors do not incur any losses on insured deposits. ACHIEVED. ACHIEVED. ACHIEVED.

♦ No appropriated funds are required to pay insured depositors. ACHIEVED. ACHIEVED. ACHIEVED.

2. Disseminate data and analyses on issues and risks affecting the 

financial services industry to bankers, supervisors, the public, 

and other stakeholders on an ongoing basis.

♦ Disseminate results of research and analyses in a timely manner 

through regular publications, ad hoc reports, and other means. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Undertake industry outreach activities to inform bankers and other 

stakeholders about current trends, concerns, and other available 

FDIC resources.

ACHIEVED. ACHIEVED. ACHIEVED.

3. Adjust assessment rates, as necessary, to achieve a DIF reserve 

ratio of at least 1.35 percent of estimated insured deposits by 

September 30, 2020.

♦ Provide updated fund balance projections to the FDIC Board of 

Directors by June 30, 2016, and December 31, 2016. ACHIEVED.

♦ Provide updated fund balance projections to the FDIC Board of 

Directors by June 30, 2015, and December 31, 2015. ACHIEVED.

♦ Provide updated fund balance projections to the FDIC Board of 

Directors by June 30, 2014, and December 31, 2014. ACHIEVED.

♦ Provide progress reports to the FDIC Board of Directors by 

June 30, 2016, and December 31, 2016. ACHIEVED. .

♦ Provide progress reports to the FDIC Board of Directors by 

June 30, 2015, and December 31, 2015. ACHIEVED.

♦ Provide progress reports to the FDIC Board of Directors by 

June 30, 2014, and December 31, 2014. ACHIEVED.

♦ Recommend changes to deposit insurance assessment rates to the 

FDIC Board of Directors as necessary. ACHIEVED. ACHIEVED. ACHIEVED.
ANNUAL REPORT

74 PERFORMANCE RESULTS SUMMARY

INSURANCE PROGRAM RESULTS (continued)

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

Annual Performance Goals and Targets 2016 2015 2014

4. Expand and strengthen the FDIC’s participation and leadership role in 

supporting robust and effective deposit insurance programs, resolution 

strategies, and banking systems worldwide.

♦ Foster strong relationships with international banking regulators, 

deposit insurers, and other relevant authorities by engaging with 

strategically important jurisdictions and organizations on key 

international financial safety net issues. 

ACHIEVED.

♦ Continue to play leadership roles within key international 

organizations and associations and promote sound deposit insurance, 

bank supervision, and resolution practices. 

ACHIEVED.

♦ Promote continued enhancement of international standards and 

expertise in financial regulatory practices and stability through the 

provision of technical assistance and training to global financial 

system authorities. 

ACHIEVED.

♦ Develop and foster closer relationships with bank supervisors in the 

reviews through the provision of technical assistance and by leading 

governance efforts in the Association of Supervisors of Banks of the 

Americas (ASBA). 

ACHIEVED.

♦ Maintain open dialogue with counterparts in strategically important 

jurisdictions, international financial organizations and institutions, 

and partner U.S. agencies; and actively participate in bilateral 

interagency regulatory dialogues.

ACHIEVED.

♦ Maintain a leadership position in the International Association of 

Deposit Insurers (IADI) by conducting workshops and performing 

assessments of deposit insurance systems based on the methodology 

for assessment of compliance with the IADI Core Principles for 

Effective Deposit Insurance Systems (Core Principles), developing and 

conducting training on priority topics identified by IADI members, 

and actively participating in IADI’s Executive Council and Standing 

Committees.

ACHIEVED. ACHIEVED.

♦ Maintain open dialogue with the Association of Supervisors of Banks 

of the Americas (ASBA) to develop and foster relationships with bank 

supervisors in the region by providing assistance when necessary. 

ACHIEVED.

♦ Engage with authorities responsible for resolutions and resolutions 

planning in priority foreign jurisdictions and contribute to the 

resolution-related agenda of the Financial Stability Board (FSB) 

through active participation in the FSB’s Resolution Steering 

Group (ReSG).

ACHIEVED.
2017

PERFORMANCE RESULTS SUMMARY 75

INSURANCE PROGRAM RESULTS (continued)

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

Annual Performance Goals and Targets 2016 2015 2014

♦ Support visits, study tours, secondments, and longer-term technical 

assistance and training programs for representatives for foreign 

jurisdictions to strengthen their deposit insurance organizations, 

central banks, bank supervisors, and resolution authorities.

ACHIEVED.

♦ Maintain open dialogue with counterparts in strategically important 

countries as well as international financial institutions and partner 

U.S. agencies.

ACHIEVED.

♦ Engage with authorities responsible for resolutions and resolutions 

planning in priority foreign jurisdictions. ACHIEVED. 

♦ Contribute to the resolution-related agenda of the Financial Stability 

Board (FSB) through active participation in the FSB’s Resolution 

Steering Group and its working groups. 

ACHIEVED. 

♦ Actively participate in bilateral interagency regulatory dialogues. ACHIEVED. 

♦ Support visits, study tours, and longer-term technical assistance 

and training programs for foreign jurisdictions to strengthen their 

deposit insurance organizations, central banks, bank supervisors, and 

resolution authorities. 

ACHIEVED.

5. Provide educational information to insured depository institutions and 

their customers to help them understand the rules for determining the 

amount of insurance coverage on deposit accounts.

♦ Respond within two weeks to 95 percent of written inquiries from 

consumers and bankers about FDIC deposit insurance coverage. ACHIEVED. ACHIEVED. ACHIEVED.

♦ Conduct at least 4 telephone or in-person seminars for bankers on 

deposit insurance coverage. ACHIEVED. ACHIEVED.

♦ Complete and post on the FDIC website videos for bankers and 

consumers on deposit insurance coverage. ACHIEVED.

♦ Conduct at least 12 telephone or in-person seminars for bankers on 

deposit insurance coverage. ACHIEVED.
ANNUAL REPORT

76 PERFORMANCE RESULTS SUMMARY

SUPERVISION PROGRAM RESULTS

Strategic Goal: FDIC-insured institutions are safe and sound.

Annual Performance Goals and Targets 2016 2015 2014

1. Conduct on-site risk management examinations to assess the 

overall financial condition, management practices and policies, and 

compliance with applicable laws and regulations of FDIC-supervised 

depository institutions. When problems are identified, promptly 

implement appropriate corrective programs, and follow up to ensure 

that identified problems are corrected. 

♦ Conduct all required risk management examinations within the time 

frames prescribed by statute and FDIC policy. ACHIEVED. ACHIEVED. ACHIEVED. 

♦ For at least 90 percent of institutions that are assigned a composite 

CAMELS rating of 2 and for which the examination report identifies 

“Matters Requiring Board Attention” (MRBAs), review progress 

reports and follow up with the institution within six months of the 

issuance of the examination report to ensure that all MRBAs are 

being addressed.

ACHIEVED. ACHIEVED.

♦ Implement formal or informal enforcement actions within 60 days 

for at least 90 percent of all institutions that are newly downgraded 

to a composite Uniform Financial Institutions Rating of 3, 4, or 5.

SUBSTANTIALLY 

ACHIEVED. 

2. Assist in protecting the infrastructure of the U.S. banking 

system against terrorist financing, money laundering, and other 

financial crimes.

♦ Conduct all Bank Secrecy Act examinations within the time frames 

prescribed by statute and FDIC policy. ACHIEVED. ACHIEVED. ACHIEVED.

3. More closely align regulatory capital standards with risk and ensure 

that capital is maintained at prudential levels. 

♦ Publish in 2016, a Notice of (proposed) Rulemaking on the Basel III 

Net Stable Funding Ratio. ACHIEVED.

♦ Publish by December 31, 2015, an interagency Notice of 

Proposed Rulemaking on implementation of the Basel III Net 

Stable Funding Ratio. 

NOT

ACHIEVED.

♦ Finalize Basel III reporting instructions in time to ensure that 

institutions that are using the advanced approaches can implement 

Basel III in the first quarter of 2014 and that all IDIs can implement 

the standardized approach in the first quarter of 2015. 

ACHIEVED.

♦ Publish a final Basel Liquidity Coverage Rule, in collaboration with 

other regulators by December 31, 2014. ACHIEVED. 

♦ Publish a final rule implementing the Basel III capital accord in 

collaboration with other regulators, by December 31, 2014. ACHIEVED. 

♦ Finalize, in collaboration with other regulators, an enhanced U.S. 

supplementary leverage ratio standard by December 31, 2014. ACHIEVED. 
2017

PERFORMANCE RESULTS SUMMARY 77

SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: FDIC-insured institutions are safe and sound.

Annual Performance Goals and Targets 2016 2015 2014

4. Implement strategies to promote enhanced information security, 

cybersecurity, and business continuity within the banking industry.

♦ Establish a horizontal review program that focuses on the IT risks 

in large and complex supervised institutions and Technology Service 

providers (TSPs).

ACHIEVED.

♦ Complete by June 30, 2016 examiner training and implement 

by September 30, 2016, the new IT examination work program 

to enhance focus on information security, cybersecurity, and 

business continuity. 

ACHIEVED.

♦ Enhance the technical expertise of the IT supervisory workforce. ACHIEVED.

♦ Working with FFIEC counterparts, update and strengthen IT 

guidance to the industry on cybersecurity preparedness. ACHIEVED.

♦ Working with the FFIEC counterparts, update and strengthen 

IT examination work programs for institutions and technology 

service providers (TSPs) to evaluate cybersecurity preparedness and 

cyber resiliency.

ACHIEVED.

♦ Improve information sharing on identified technology risks among 

the IT examination workforces of FFIEC member agencies. ACHIEVED.

5. Identify and address risks in financial institutions designated as 

systemically important.

♦ Conduct ongoing risk analysis and monitoring of SIFIs to 

understand their structure, business activities and risk profiles, and 

their resolution and recovery capabilities. 

ACHIEVED.

♦ Complete, in collaboration with the Federal Reserve Board and in 

accordance with statutory and regulatory time frames, all required 

actions associated with the review of resolution plans submitted by 

financial companies subject to the requirements of Section 165(d) 

of the Dodd-Frank Act.

ACHIEVED. 

♦ Hold at least one meeting of the Systemic Resolution Advisory 

Committee to obtain feedback on resolving SIFIs. ACHIEVED. 

6. Implement strategies to promote enhanced cybersecurity within the 

banking industry. 

♦ In coordination with the FFIEC, implement recommendations to 

enhance the FDIC’s supervision of the IT risks at insured depository 

institutions and their technology service providers. 

ACHIEVED.
ANNUAL REPORT

78 PERFORMANCE RESULTS SUMMARY

SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in their communities.

Annual Performance Goals and Targets 2016 2015 2014

1. Conduct on-site CRA and consumer compliance examinations to assess 

compliance with applicable laws and regulations by FDIC-supervised 

depository institutions. When violations are identified, promptly 

implement appropriate corrective programs and follow up to ensure 

that identified problems are corrected. 

♦ Conduct all required examinations within the time frames established 

by FDIC policy. ACHIEVED. ACHIEVED.

♦ Conduct 100 percent of required examinations within the time 

frames established by FDIC policy.

SUBSTANTIALLY 

ACHIEVED. 

♦ Conduct visits and/or follow-up examinations in accordance 

with established FDIC policies to ensure that the requirements of 

any required corrective program have been implemented and are 

effectively addressing identified violations. 

ACHIEVED. ACHIEVED.

♦ Conduct visits and/or follow-up examinations in accordance with 

established FDIC policies and ensure that the requirements of 

any required corrective program have been implemented and are 

effectively addressing identified violations.

ACHIEVED.

2. Effectively investigate and respond to written consumer complaints and 

inquiries about FDIC-supervised financial institutions.

♦ Respond to 95 percent of written consumer complaints and inquiries 

within time frames established by policy, with all complaints and 

inquiries receiving at least an initial acknowledgment within 

two weeks.

ACHIEVED. ACHIEVED. ACHIEVED.

3. Promote economic inclusion and access to responsible financial 

services through supervisory, research, policy, and consumer/

community affairs initiatives.

♦ Publish the results of the 2015 FDIC National Survey of Unbanked 

and Underbanked Household. ACHIEVED.

♦ Complete and present to the Advisory Committee on Economic 

Inclusions (ComE-IN) a report on the pilot Youth Savings Program 

(YSP) conducted jointly with the CFPB.

ACHIEVED.

♦ Revise, test, and administer the 2015 FDIC National Survey of 

Unbanked and Underbanked Household. ACHIEVED.

♦ Promote broader awareness of the availability of low-cost transaction 

accounts consistent with the FDIC’s Model SAFE transaction 

account template. 

ACHIEVED.
2017

PERFORMANCE RESULTS SUMMARY 79

SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in their communities.

Annual Performance Goals and Targets 2016 2015 2014

♦ Support the Advisory Committee on Economic Inclusion in 

expanding the availability and awareness of low-cost transaction 

accounts, consistent with the FDIC’s SAFE account template

ACHIEVED.

♦ In partnership with the Consumer Financial Protection Bureau, 

enhance financial capability among school-age children through (1) 

development and delivery of tailored financial education materials; 

(2) resources and outreach targeted to youth, parents, and teachers; 

and (3) implementation of a pilot youth savings program.

ACHIEVED.

♦ Publish the results of the 2013 FDIC National Survey of Unbanked 

and Underbanked Households (conducted jointly with the U.S. 

Census Bureau). 

ACHIEVED.

♦ Implement the strategy outlined in the work plan approved by 

the Advisory Committee on Economic Inclusion to support the 

expanded availability of Safe accounts and the responsible use of 

technology, to expand banking services to the underbanked.

ACHIEVED.

♦ Facilitate opportunities for banks and community stakeholders to 

address issues concerning access to financial services, community 

development, and financial education. 

ACHIEVED. 
ANNUAL REPORT

80 PERFORMANCE RESULTS SUMMARY

SUPERVISION PROGRAM RESULTS (continued)

Strategic Goal: Large and complex financial institutions are resolvable in an orderly manner under bankruptcy.

Annual Performance Goals and Targets 2016 2015 2014

1. Identify and address risks in large and complex financial institutions 

designated as systemically important.

♦ In collaboration with the FRB continue to review all resolution plans 

subject to the requirements of Section 165(d) of the DFA to ensure 

their conformance to statutory and other regulatory requirements. 

Identify potential impediments in those plans to resolution under the 

Bankruptcy Code. 

ACHIEVED.

♦ Continue to review all resolution plans subject to the requirements 

of Section 360.10 of the IDI rule to ensure their conformance 

to statutory and other regulatory time frames. Identify potential 

impediments to resolvability under the Federal Deposit Insurance 

(FDI) Act. 

ACHIEVED.

♦ Conduct ongoing risk analysis and monitoring of large, complex 

financial institutions to understand and assess their structure, 

business activities, risk profiles, and resolution and recovery plans. 

ACHIEVED.

♦ Conduct ongoing risk analysis and monitoring of large, complex 

financial institutions to understand and assess their structure, 

business activities, risk profiles, and resolution and recovery plans.

ACHIEVED. 

♦ Complete, in collaboration with the FRB and in accordance 

with statutory and regulatory time frames, a review of resolution 

plans submitted by individual financial companies subject to the 

requirements of section 165 (d) of DFA and Part 360.10 of the 

FDIC Rules and Regulations.

ACHIEVED.
2017

PERFORMANCE RESULTS SUMMARY 81

RECEIVERSHIP MANAGEMENT PROGRAM RESULTS

Strategic Goal: Resolutions are orderly and receiverships are managed effectively.

Annual Performance Goals and Targets 2016 2015 2014

1. Market failing institutions to all known qualified and interested 

potential bidders.

♦ Contact all known qualified and interested bidders. ACHIEVED. ACHIEVED. ACHIEVED.

2. Value, manage, and market assets of failed institutions and their 

subsidiaries in a timely manner to maximize net return.

♦ For at least 95 percent of insured institution failures, market at least 

90 percent of the book value of the institution’s marketable assets 

within 90 days of the failure date (for cash sales) or 120 days of the 

failure date (for structured sales).

ACHIEVED. ACHIEVED. ACHIEVED.

3. Manage the receivership estate and its subsidiaries toward an 

orderly termination.

♦ Terminate at least 75 percent of new receiverships that are not subject 

to loss-share agreements, structured sales, or other legal impediments, 

within three years of the date of failure. 

ACHIEVED. ACHIEVED. ACHIEVED.

4. Conduct investigations into all potential professional liability claim 

areas for all failed insured depository institutions, and decide as 

promptly as possible to close or pursue each claim, considering the size 

and complexity of the institution.

♦ For 80 percent of all claim areas, make a decision to close or pursue 

professional liability claims within 18 months of the failure date of an 

insured depository institution.

ACHIEVED. ACHIEVED. ACHIEVED.

5. Ensure the FDIC’s operational readiness to resolve a large, 

complex financial institution using the orderly liquidation authority in 

Title II of the DFA

♦ Update and refine firm-specific resolutions plans and strategies 

and develop operational procedures for the administration of a 

Title II receivership.

ACHIEVED. 

♦ Prepare for an early 2016 meeting of the Systemic Resolution 

Advisory Committee to obtain feedback on resolving SIFIs. ACHIEVED. 

♦ Continue to deepen and strengthen bilateral working relationships 

with key foreign jurisdictions. ACHIEVED. ACHIEVED. 
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83

FINANCIAL 

HIGHLIGHTS

III.
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8585

2017

FINANCIAL HIGHLIGHTS

In its role as deposit insurer of financial institutions, 

the FDIC promotes the safety and soundness of 

insured depository institutions (IDIs). The following 

financial highlights address the performance of the 

Deposit Insurance Fund.

DEPOSIT INSURANCE FUND 

PERFORMANCE

The DIF balance was $92.7 billion at December 31, 

2017, compared to $83.2 billion at year-end 2016. 

Assessment revenue, including assessment surcharges 

on large banks, drove the growth in the DIF. 

Comprehensive income totaled $9.6 billion for 2017, 

compared to comprehensive income of $10.6 billion 

during 2016, a $975 million year-over-year decrease.

Assessment revenue was $10.6 billion for 2017, 

compared to $10.0 billion for 2016. The 

combination of a higher assessment base, assessment 

surcharges on larger institutions, and lower regular 

assessment rates for all IDIs resulted in the net 

increase in assessment revenue of $608 million.

The DIF’s interest revenue on U.S. Treasury securities 

for 2017 was $1.1 billion, compared to interest 

revenue of $671 million in 2016. The $386 million 

year-over-year increase resulted from a combination 

of factors: (1) the Federal Reserve increased the 

federal funds target rate, resulting in an increase in the 

average overnight investment interest rate; (2) higher 

yields on new long-term investments purchased as 

older long-term investments matured; and (3) steady 

growth in the investment portfolio balance. 

The provision for insurance losses was negative 

$183 million for 2017, compared to negative $1.6 

billion for 2016. The negative provision for 2017 

primarily resulted from a $969 million decrease to 

the estimated losses for prior year failures offset by 

a $718 million increase for higher-than-anticipated 

estimated losses for current year failures, as compared 

to the contingent liability at year-end 2016. The 

2016 negative provision was almost fully attributable 

to reductions in estimated losses for prior year failures. 

The $969 million decrease in the estimated losses 

for prior year failures was primarily attributable to 

(1) a decrease in receivership shared-loss liability 

cost estimates of $420 million primarily due to 

lower-than-anticipated losses on covered assets, 

reductions in shared-loss cost estimates from the early 

termination of shared-loss agreements (SLAs) during 

the year, and unanticipated recoveries from SLAs 

where the commercial loss coverage has expired but 

the recovery period remains active; (2) $383 million 

of unanticipated recoveries received, or expected to be 

received, by receiverships from tax refunds, litigation 

settlements, and professional liability claims; and (3) a 

$124 million decrease in receivership contingent legal 

and representation and warranty liabilities, as well as 

projected future receivership expenses. 

During 2017, the DIF recognized an unrealized loss 

on U.S. Treasury securities of $500 million, while in 

2016 there was an unrealized gain of $29 million. 

The unrealized loss in 2017 was the result of yields 

rising dramatically across all maturity sectors of the 

Treasury yield curve, resulting in declines in the 

securities’ market values relative to their book values. 

The DIF’s cash, cash equivalents, and U.S. Treasury 

investment portfolio balance was $85.1 billion at 

year-end 2017, an increase of $10.3 billion from the 

year-end 2016 balance of $74.8 billion. This increase 

was primarily due to assessment collections of $10.6 

billion and recoveries from resolutions of $4.0 billion, 

less operating expenses paid of $1.8 billion and 

resolution disbursements of $3.0 billion. 
ANNUAL REPORT

86 FINANCIAL HIGHLIGHTS

ESTIMATED DIF INSURED DEPOSITS

SOURCE: Call Reports

Note: Beginning in fourth quarter 2010 through fourth quarter 2012, estimated insured deposits include the entire balance of noninterestbearing transaction accounts.

DEPOSIT INSURANCE FUND RESERVE RATIOS

Dollars in Billions

3-11 6-11 9-11 12-11 3-12 6-12 9-12 12-12 3-13 6-13 9-13 12-13 3-14 6-14 9-14 12-14 3-15 6-15 9-15 12-15 3-16 6-16 9-16 12-16 3-17 6-17 9-17

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

3-11 6-11 9-11 12-11 3-12 6-12 9-12 12-12 6-133-13 9-13 12-13 6-143-14 12-149-14 6-153-15 9-15 12-15 9-166-163-16 9-176-173-1712-16

Fund Balance as a Percent of Estimated Insured Deposits 0.4

0.6

0.8

1.2

1.4

1.0

0.2

0.0

-0.2
2017

FINANCIAL HIGHLIGHTS 87

DEPOSIT INSURANCE FUND SELECTED STATISTICS

Dollars in Millions

For the years ended December 31

2017 2016 2015

Financial Results

Revenue $11,664 $10,674 $9,304 

Operating Expenses 1,739 1,715 1,687 

Insurance and Other Expenses (includes provision for losses) (181) (1,564) (2,240)

Net Income 10,105 10,524 9,857 

Comprehensive Income 9,586 10,561 9,820 

Insurance Fund Balance $92,747 $83,162 $72,600 

Fund as a Percentage of Insured Deposits (reserve ratio) 1.28%3 1.20% 1.11%

Selected Statistics

Total DIF-Member Institutions1 5,7383 5,913 6,182 

Problem Institutions 1043 123 183 

Total Assets of Problem Institutions $16,0443 $27,624 $46,780 

Institution Failures 8 5 8 

Total Assets of Failed Institutions in Year2 $5,082 $277 $6,706

Number of Active Failed Institution Receiverships 338 378 446 

1

 Commercial banks and savings institutions. Does not include U.S. insured branches of foreign banks.

2

 Total Assets data are based upon the last Call Report filed by the institution prior to failure.

3 As of September 30, 2017.
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89

BUDGET AND 

SPENDING

IV.
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9191

2017

FDIC OPERATING BUDGET

The FDIC segregates its corporate operating budget 

and expenses into three discrete components: ongoing 

operations, receivership funding, and the Office of 

Inspector General (OIG). The receivership funding 

component represents expenses resulting from 

financial institution failures and is, therefore, largely 

driven by external forces and is less controllable and 

estimable. FDIC operating expenditures totaled $1.9 

billion in 2017, including $1.7 billion in ongoing 

operations, $221 million in receivership funding, 

and $35 million for the OIG. This represented 

approximately 92 percent of the approved budget 

for ongoing operations, 74 percent of the approved 

budget for receivership funding, and 95 percent of the 

approved budget for the OIG for the year.

The approved 2018 FDIC Operating Budget of 

approximately $2.1 billion consists of $1.8 billion 

for ongoing operations, $225 million for receivership 

funding, and $40 million for the OIG. The level 

of approved ongoing operations budget for 2018 

is approximately $6 million (0.3 percent) higher 

than the 2017 ongoing operations budget, while the 

approved receivership funding budget is $75 million 

(25 percent) lower than the 2017 receivership funding 

budget. The 2018 OIG budget is $3 million (9 

percent) higher than the 2017 OIG budget.

As in prior years, the 2018 budget was formulated 

primarily on the basis of an analysis of projected 

workload for each of the Corporation’s three major 

business lines and its program support functions. The 

most significant factor contributing to the decrease in 

the FDIC Operating Budget is the improving health 

of the industry and the resultant reduction in failure 

related workload. Although savings in this area are 

being realized, the 2018 receivership funding budget 

provides resources for contractor support as well as 

non-permanent staffing for DRR, the Legal Division, 

and other organizations should workload in these 

areas require an immediate response.

FDIC EXPENDITURES 2008–2017

Dollars in Millions

2008 2010 2011 2009 2012 2013 2014 2015 2016 2017

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$0

BUDGET AND SPENDING
ANNUAL REPORT

92 BUDGET AND SPENDING

The FDIC’s Strategic Plan and Annual Performance 

Plan provide the basis for annual planning and 

budgeting for needed resources. The 2017 aggregate 

budget (for ongoing operations, receivership 

funding, OIG, and investment spending) was 

$2.2 billion, while actual expenditures for the year 

were $1.9 billion, about $18 million less than 

2016 expenditures.

Over the past decade the FDIC’s expenditures have 

varied in response to workload. During the last 

several years, expenditures have fallen, largely due to 

decreasing resolution and receivership activity. To a 

lesser extent decreased expenses have resulted from 

supervision-related costs associated with the oversight 

of fewer troubled institutions. 

2017 BUDGET AND EXPENDITURES BY PROGRAM

(including Allocated Support)

Dollars in Millions

Receivership

Management

Program

Insurance

Program

Supervision

and Consumer

Protection 

Program

General and

Administrative

$1,200

Budget

$900

$600

$300

$0

Expenditures

2017 BUDGET AND 

EXPENDITURES BY PROGRAM 

(Excluding Investments) 

The FDIC budget for 2017 totaled approximately 

$2.2 billion. Budget amounts were allocated 

as follows: $1.06 billion or 49 percent, to the 

Supervision and Consumer Protection program; 

$529 million or 24 percent, to the Receivership 

Management program; $317 million, or 15 percent, 

to the Insurance program; and $252 million, or 

12 percent, to Corporate General and Administrative 

expenditures.

Actual expenditures for the year totaled $1.9 

billion. Actual expenditures amounts were allocated 

as follows: $1.0 billion, or 52 percent, to the 

Supervision and Consumer Protection program; 

$430 million, or 22 percent, to the Receivership 

Management program; $291 million, or 15 percent, 

to the Insurance program; and $201 million, or 10 

percent, to Corporate General and Administrative 

expenditures. 
2017

BUDGET AND SPENDING 93

INVESTMENT SPENDING 2008 - 2017

Dollars in Millions

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

$25

$15

$5

$10

$20

$30

$0

INVESTMENT SPENDING

The FDIC instituted a separate Investment Budget in 

2003 to provide enhanced governance of major multiyear development efforts. It has a disciplined process 

for reviewing proposed new investment projects and 

managing the construction and implementation 

of approved projects. Proposed IT projects are 

carefully reviewed to ensure that they are consistent 

with the Corporation’s enterprise architecture. The 

project approval and monitoring processes also 

enable the FDIC to be aware of risks to the major 

capital investment projects and facilitate appropriate, 

timely intervention to address these risks throughout 

the development process. An investment portfolio 

performance review is provided to the FDIC’s Board 

of Directors on a quarterly basis. From 2008-2017 

investment spending totaled $124 million, and is 

estimated at $8 million for 2018.
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95

FINANCIAL 

SECTION

V.
ANNUAL REPORT

96 FINANCIAL SECTION

Federal Deposit Insurance Corporation

Deposit Insurance Fund Balance Sheet 

As of December 31

(Dollars in Thousands) 2017 2016

ASSETS

 Cash and cash equivalents $ 1,829,198 $ 1,332,966

 Investment in U.S. Treasury securities (Note 3) 83,302,963 73,511,953

 Assessments receivable, net (Note 9) 2,634,386 2,666,267

 Interest receivable on investments and other assets, net 505,766 526,195

 Receivables from resolutions, net (Note 4) 5,972,971 7,790,403

 Property and equipment, net (Note 5) 334,050 357,575

Total Assets $ 94,579,334 $ 86,185,359

LIABILITIES

 Accounts payable and other liabilities $ 236,971 $ 238,322

 Liabilities due to resolutions (Note 6) 1,203,260 2,073,375

 Postretirement benefit liability (Note 12) 259,316 232,201

 Contingent liabilities:

 Anticipated failure of insured institutions (Note 7) 97,777 477,357

 Guarantee payments and litigation losses (Notes 7 and 8) 34,515 2,589

Total Liabilities 1,831,839 3,023,844

 Commitments and off-balance-sheet exposure (Note 13)

FUND BALANCE

 Accumulated Net Income 93,272,447 83,166,991

ACCUMULATED OTHER COMPREHENSIVE INCOME

 Unrealized (loss) gain on U.S. Treasury securities, net (Note 3) (479,362) 20,271

 Unrealized postretirement benefit loss (Note 12) (45,590) (25,747)

Total Accumulated Other Comprehensive (Loss) (524,952) (5,476)

Total Fund Balance 92,747,495 83,161,515

Total Liabilities and Fund Balance $ 94,579,334 $ 86,185,359

The accompanying notes are an integral part of these financial statements.

DEPOSIT INSURANCE FUND (DIF)
2017

FINANCIAL SECTION 97

DEPOSIT INSURANCE FUND (DIF)

Federal Deposit Insurance Corporation

Deposit Insurance Fund Statement of Income and Fund Balance 

For the Years Ended December 31

(Dollars in Thousands) 2017 2016

REVENUE

 Assessments (Note 9) $ 10,594,838 $ 9,986,615

 Interest on U.S. Treasury securities 1,056,989 671,377

 Other revenue 11,947 16,095

Total Revenue 11,663,774 10,674,087

EXPENSES AND LOSSES

 Operating expenses (Note 10) 1,739,395 1,715,011

 Provision for insurance losses (Note 11) (183,149) (1,567,950)

 Insurance and other expenses 2,072 3,509

Total Expenses and Losses 1,558,318 150,570

Net Income 10,105,456 10,523,517

OTHER COMPREHENSIVE INCOME

 Unrealized (loss) gain on U.S. Treasury securities, net (499,633) 29,462

 Unrealized postretirement benefit (loss) gain (Note 12) (19,843) 8,301

Total Other Comprehensive (Loss) Income (519,476) 37,763

Comprehensive Income 9,585,980 10,561,280

Fund Balance - Beginning 83,161,515 72,600,235

Fund Balance - Ending $ 92,747,495 $ 83,161,515

The accompanying notes are an integral part of these financial statements.
ANNUAL REPORT

98 FINANCIAL SECTION

DEPOSIT INSURANCE FUND (DIF)

Federal Deposit Insurance Corporation

Deposit Insurance Fund Statement of Cash Flows

For the Years Ended December 31

(Dollars in Thousands) 2017 2016

OPERATING ACTIVITIES

Provided by:

 Assessments $ 10,609,959 $ 9,488,215

 Interest on U.S. Treasury securities 1,622,583 1,523,215

 Recoveries from financial institution resolutions 3,952,375 3,601,149

 Miscellaneous receipts 16,853 16,057

Used by:

 Operating expenses (1,838,673) (1,671,768)

 Disbursements for financial institution resolutions (3,010,042) (502,716)

 Miscellaneous disbursements (799) (8,998)

Net Cash Provided by Operating Activities 11,352,256 12,445,154

INVESTING ACTIVITIES

Provided by:

 Maturity of U.S. Treasury securities 29,931,209 26,517,122

Used by:

 Purchase of U.S. Treasury securities (40,756,734) (38,474,320)

 Purchase of property and equipment (30,499) (31,334)

Net Cash (Used) by Investing Activities (10,856,024) (11,988,532)

Net Increase in Cash and Cash Equivalents 496,232 456,622

Cash and Cash Equivalents - Beginning 1,332,966 876,344

Cash and Cash Equivalents - Ending $ 1,829,198 $ 1,332,966

The accompanying notes are an integral part of these financial statements.
2017

FINANCIAL SECTION 99

DEPOSIT INSURANCE FUND

NOTES TO THE FINANCIAL STATEMENTS

December 31, 2017 and 2016 

1

1. Operations of the Deposit Insurance Fund

OVERVIEW

The Federal Deposit Insurance Corporation (FDIC) is the 

independent deposit insurance agency created by Congress 

in 1933 to maintain stability and public confidence in the 

nation’s banking system. Provisions that govern the FDIC’s 

operations are generally found in the Federal Deposit 

Insurance (FDI) Act, as amended (12 U.S.C. 1811, et seq). In 

accordance with the FDI Act, the FDIC, as administrator of 

the Deposit Insurance Fund (DIF), insures the deposits of 

banks and savings associations (insured depository 

institutions). In cooperation with other federal and state 

agencies, the FDIC promotes the safety and soundness of 

insured depository institutions (IDIs) by identifying, 

monitoring, and addressing risks to the DIF. Commercial 

banks, savings banks and savings associations (known as 

“thrifts”) are supervised by either the FDIC, the Office of the 

Comptroller of the Currency, or the Federal Reserve Board. 

In addition to being the administrator of the DIF, the FDIC is 

the administrator of the FSLIC Resolution Fund (FRF). The 

FRF is a resolution fund responsible for the sale of the 

remaining assets and the satisfaction of the liabilities 

associated with the former Federal Savings and Loan 

Insurance Corporation (FSLIC) and the former Resolution 

Trust Corporation. The FDIC maintains the DIF and the FRF 

separately to support their respective functions. 

Pursuant to the Dodd-Frank Wall Street Reform and 

Consumer Protection Act of 2010 (Dodd-Frank Act), the FDIC 

also manages the Orderly Liquidation Fund (OLF). 

Established as a separate fund in the U.S. Treasury (Treasury), 

the OLF is inactive and unfunded until the FDIC is appointed 

as receiver for a covered financial company. A covered 

financial company is a failing financial company (for 

example, a bank holding company or nonbank financial 

company) for which a systemic risk determination has been 

made as set forth in section 203 of the Dodd-Frank Act. 

The Dodd-Frank Act (Public Law 111-203) granted the FDIC 

authority to establish a widely available program to 

guarantee obligations of solvent IDIs or solvent depository 

institution holding companies (including affiliates) upon the 

systemic risk determination of a liquidity event during times 

of severe economic distress. The program would not be 

funded by the DIF but rather by fees and assessments paid 

by all participants in the program. If fees are insufficient to 

cover losses or expenses, the FDIC must impose a special 

assessment on participants as necessary to cover the 

shortfall. Any excess funds at the end of the liquidity event 

program would be deposited in the General Fund of the 

Treasury. 

The Dodd-Frank Act also created the Financial Stability 

Oversight Council (FSOC) of which the Chairman of the FDIC 

is a member and expanded the FDIC’s responsibilities to 

include supervisory review of resolution plans (known as 

living wills) and backup examination authority for 

systemically important bank holding companies and 

nonbank financial companies. The living wills provide for an 

entity’s rapid and orderly resolution in the event of material 

financial distress or failure.

OPERATIONS OF THE DIF

The primary purposes of the DIF are to (1) insure the 

deposits and protect the depositors of IDIs and (2) resolve 

failed IDIs upon appointment of the FDIC as receiver in a 

manner that will result in the least possible cost to the DIF. 

The DIF is primarily funded from deposit insurance 

assessments. Other available funding sources, if necessary, 

are borrowings from the Treasury, the Federal Financing 

Bank (FFB), Federal Home Loan Banks, and IDIs. The FDIC 

has borrowing authority of $100 billion from the Treasury 

and a Note Purchase Agreement with the FFB, not to exceed 

$100 billion, to enhance the DIF’s ability to fund deposit 

insurance. 

A statutory formula, known as the Maximum Obligation 

Limitation (MOL), limits the amount of obligations the DIF 

can incur to the sum of its cash, 90 percent of the fair market 

value of other assets, and the amount authorized to be 

borrowed from the Treasury. The MOL for the DIF was 

$191.5 billion and $182.1 billion as of December 31, 2017 

and 2016, respectively. 

OPERATIONS OF RESOLUTION ENTITIES

The FDIC, as receiver, is responsible for managing and 

disposing of the assets of failed institutions in an orderly and 

efficient manner. The assets held by receiverships, passthrough conservatorships, and bridge institutions 

(collectively, resolution entities), and the claims against 

them, are accounted for separately from the DIF assets and 

liabilities to ensure that proceeds from these entities are 

distributed according to applicable laws and regulations. 

Therefore, income and expenses attributable to resolution 

entities are accounted for as transactions of those entities. 
ANNUAL REPORT

100 FINANCIAL SECTION

DEPOSIT INSURANCE FUND

2

The FDIC, as administrator of the DIF, bills resolution entities 

for services provided on their behalf.

2. Summary of Significant Accounting Policies

GENERAL

The financial statements include the financial position, 

results of operations, and cash flows of the DIF and are 

presented in accordance with U.S. generally accepted 

accounting principles (GAAP). These statements do not 

include reporting for assets and liabilities of resolution 

entities because these entities are legally separate and 

distinct, and the DIF does not have any ownership or 

beneficial interests in them. Periodic and final accounting 

reports of resolution entities are furnished to courts, 

supervisory authorities, and others upon request. 

USE OF ESTIMATES

The preparation of the financial statements in conformity 

with GAAP requires management to make estimates and 

assumptions that affect the reported amounts of assets and 

liabilities, revenue and expenses, and disclosure of 

contingent liabilities. Actual results could differ from these 

estimates. Where it is reasonably possible that changes in 

estimates will cause a material change in the financial 

statements in the near term, the nature and extent of such 

potential changes in estimates have been disclosed. The 

more significant estimates include the assessments 

receivable and associated revenue; the allowance for loss on

receivables from resolutions (which considers the impact of 

shared-loss agreements); the guarantee obligations for 

structured transactions; the postretirement benefit 

obligation; and the estimated losses for anticipated failures 

and representations and indemnifications. 

CASH EQUIVALENTS

Cash equivalents are short-term, highly liquid investments 

consisting primarily of U.S. Treasury Overnight Certificates.

INVESTMENT IN U.S. TREASURY SECURITIES

The FDI Act requires that the DIF funds be invested in 

obligations of the United States or in obligations guaranteed 

as to principal and interest by the United States. The

Secretary of the Treasury must approve all such investments 

in excess of $100,000 and has granted the FDIC approval to 

invest the DIF funds only in U.S. Treasury obligations that are 

purchased or sold exclusively through the Treasury’s Bureau 

of the Fiscal Service’s Government Account Series program.

The DIF’s investments in U.S. Treasury securities are classified 

as available-for-sale (AFS). Securities designated as AFS are 

shown at fair value. Unrealized gains and losses are

reported as other comprehensive income. Any realized 

gains and losses are included in the Statement of Income 

and Fund Balance as components of net income. Income on 

securities is calculated and recorded daily using the effective 

interest or straight-line method depending on the maturity 

of the security (see Note 3). 

REVENUE RECOGNITION FOR ASSESSMENTS

Assessment revenue is recognized for the quarterly period of 

insurance coverage based on an estimate. The estimate is 

derived from an institution’s regular risk-based assessment 

rate and assessment base for the prior quarter adjusted for 

the current quarter’s available assessment credits, certain

changes in supervisory examination ratings for larger 

institutions, as well as modest assessment base growth and 

average assessment rate adjustment factors. Beginning July 

1, 2016, the estimate includes a surcharge for institutions 

with $10 billion or more in total consolidated assets (see 

Note 9). At the subsequent quarter-end, the estimated 

revenue amounts are adjusted when actual assessments for 

the covered period are determined for each institution. 

CAPITAL ASSETS AND DEPRECIATION

The FDIC buildings are depreciated on a straight-line basis 

over a 35- to 50-year estimated life. Building improvements 

are capitalized and depreciated over the estimated useful life 

of the improvements. Leasehold improvements are 

capitalized and depreciated over the lesser of the remaining 

life of the lease or the estimated useful life of the 

improvements, if determined to be material. Capital assets 

depreciated on a straight-line basis over a five-year 

estimated useful life include mainframe equipment; 

furniture, fixtures, and general equipment; and internal-use 

software. Computer equipment is depreciated on a straightline basis over a three-year estimated useful life (see Note 5). 

PROVISION FOR INSURANCE LOSSES 

The provision for insurance losses primarily represents 

changes in the allowance for losses on receivables from 

closed banks and the contingent liability for anticipated 

failures of insured institutions (see Note 11).

REPORTING ON VARIABLE INTEREST ENTITIES

The receiverships engaged in structured transactions, some 

of which resulted in the issuance of note obligations that 

were guaranteed by the FDIC, in its corporate capacity. As 

the guarantor of note obligations for several structured 

transactions, the FDIC, in its corporate capacity, holds an 

interest in many variable interest entities (VIEs). The FDIC 

conducts a qualitative assessment of its relationship with 

each VIE as required by the Financial Accounting Standards 

Board (FASB) Accounting Standards Codification (ASC) Topic 

810, Consolidation. These assessments are conducted to 
2017

FINANCIAL SECTION 101

NOTES TO THE FINANCIAL STATEMENTS

3

determine if the FDIC, in its corporate capacity, has (1) power 

to direct the activities that most significantly affect the 

economic performance of the VIE and (2) an obligation to 

absorb losses of the VIE or the right to receive benefits from 

the VIE that could potentially be significant to the VIE. When 

a variable interest holder has met both of these 

characteristics, the enterprise is considered the primary 

beneficiary and must consolidate the VIE. In accordance 

with the provisions of FASB ASC Topic 810, an assessment of 

the terms of the legal agreement for each VIE was 

conducted to determine whether any of the terms had been 

activated or modified in a manner that would cause the 

FDIC, in its corporate capacity, to be characterized as a 

primary beneficiary. In making that determination, 

consideration was given to which, if any, activities were 

significant to each VIE. Often, the right to service collateral, 

to liquidate collateral, or to unilaterally dissolve the VIE was 

determined to be the most significant activity. In other 

cases, it was determined that the structured transactions did 

not include such significant activities and that the design of 

the entity was the best indicator of which party was the 

primary beneficiary. 

The conclusion of these analyses was that the FDIC, in its 

corporate capacity, has not engaged in any activity that 

would cause the FDIC to be characterized as a primary 

beneficiary to any VIE with which it was involved as of 

December 31, 2017 and 2016. Therefore, consolidation is 

not required for the 2017 and 2016 DIF financial statements. 

In the future, the FDIC, in its corporate capacity, may become 

the primary beneficiary upon the activation of provisional 

contract rights that extend to the FDIC if payments are made 

on guarantee claims. Ongoing analyses will be required to 

monitor consolidation implications under FASB ASC Topic

810. 

The FDIC’s involvement with VIEs is fully described in Note 8 

under FDIC Guaranteed Debt of Structured Transactions. 

RELATED PARTIES

The nature of related parties and a description of related 

party transactions are discussed in Note 1 and disclosed 

throughout the financial statements and footnotes. 

APPLICATION OF RECENT ACCOUNTING STANDARDS

In May 2014, the FASB issued Accounting Standards Update 

(ASU) 2014-09, Revenue from Contracts with Customers 

(Topic 606). The ASU, and its related amendments, requires 

an entity to recognize revenue based on the amount it 

expects to be entitled for the transfer of promised goods or 

services to customers. The FDIC’s implementation efforts 

have included identifying revenue within the scope of the 

new guidance. The new guidance is not expected to require 

a material change in the timing and measurement of 

revenue related to deposit insurance assessments. The FDIC 

does not expect the ASU to have a material impact on the 

DIF’s financial position or its results of operations. The new 

standard is effective on January 1, 2019, with early adoption 

permitted. The FDIC continues to evaluate the full effect of 

this guidance on the DIF, including changes related to 

disclosure requirements and alternative adoption methods.

In January 2016, the FASB issued ASU 2016-01, Financial 

Instruments—Overall (Subtopic 825-10): Recognition and 

Measurement of Financial Assets and Financial Liabilities. The 

ASU addresses certain aspects of recognition, measurement, 

presentation, and disclosure of financial instruments through 

targeted changes to existing guidance. The ASU permits 

nonpublic entities to exclude disclosures related to the fair 

value of financial instruments measured at amortized cost. 

The FDIC has early adopted this provision and Note 14 was 

revised accordingly. The FDIC has determined that the other 

provisions of the ASU, which are effective for the DIF 

beginning on January 1, 2019, will not have a material effect 

on the financial position of the DIF or its results of 

operations. 

In February 2016, the FASB issued ASU 2016-02, Leases 

(Topic 842). The new guidance requires that substantially all 

leases will be reported on the balance sheet through the 

recognition of a right-of-use asset and a corresponding 

lease liability. The ASU also requires lessees and lessors to 

expand qualitative and quantitative disclosures and key 

information regarding their leasing arrangements. The 

FDIC’s implementation efforts are on-going and include a 

review of the entire portfolio of leases currently classified as 

operating leases. The standard is effective for the DIF on 

January 1, 2020, with early adoption allowed. The FDIC 

estimates an increase of approximately $157 million in assets 

and liabilities based on the amount disclosed as lease 

commitments for future years in Note 13. The FDIC does not 

expect the ASU to have a material effect on the DIF’s 

financial position or its results of operations. 

In June 2016, the FASB issued ASU 2016-13, Financial 

Instruments—Credit Losses (Topic 326): Measurement of 

Credit Losses on Financial Instruments. The ASU will replace 

the incurred loss impairment model with a new expected 

credit loss model for financial assets measured at amortized 

cost and for off-balance-sheet credit exposures. The 

guidance also amends the AFS debt securities impairment 

model by requiring the use of an allowance to record 

estimated credit losses (and subsequent recoveries) related 

to AFS debt securities. The ASU is effective for the DIF on 

January 1, 2021 and requires the cumulative effect of the 

change on the DIF’s beginning fund balance when it is 

adopted. The FDIC continues to assess the effect the ASU 
ANNUAL REPORT

102 FINANCIAL SECTION

DEPOSIT INSURANCE FUND

4

will have on the DIF’s financial position and results of 

operations.

Other recent accounting pronouncements have been 

deemed not applicable or material to the financial 

statements as presented.

3. Investment in U.S. Treasury Securities

The “Investment in U.S. Treasury securities” line item on the 

Balance Sheet consisted of the following components by 

maturity (dollars in millions). 

December 31, 2017 Net Unrealized Unrealized

Yield at Face Carrying Holding Holding Fair

Maturity Purchasea Value Amount Gains Losses Value

Within 1 year 1.25% $ 26,525 b $ 26,661 $ 0 $ (53) $ 26,608

After 1 year 

through 5 years 1.67% 56,500 56,694 3 (428) 56,269

Subtotal $ 83,025 $ 83,355 $ 3 $ (481) $ 82,877

After 1 year 

through 5 years -0.14% $ 400 $ 427 $ 0 $ (1) $ 426

Subtotal $ 400 $ 427 $ 0 $ (1) $ 426

Total $ 83,425 $ 83,782 $ 3 $ (482) c $ 83,303

U.S. Treasury notes and bonds

U.S. Treasury Inflation-Protected Securities

(a) The Treasury Inflation-Protected Securities (TIPS) are indexed to increases or decreases 

in the Consumer Price Index for All Urban Consumers (CPI-U). For TIPS, the yields in the 

above table are stated at their real yields at purchase, not their effective yields. Effective 

yields on TIPS include a long-term annual inflation assumption as measured by the CPI-U. 

The long-term CPI-U consensus forecast is 2.0 percent, based on figures issued by the 

Congressional Budget Office and Blue Chip Economic Indicators in early 2017. 

(b) Includes two Treasury notes totaling $2.1 billion which matured on Sunday, December 

31, 2017. Settlements occurred the next business day, January 2, 2018. 

(c) These unrealized losses occurred over a period of less than a year as a result of 

temporary changes in market interest rates. The FDIC does not intend to sell the securities 

and is not likely to be required to sell them before their maturity date, thus, the FDIC does 

not consider these securities to be other than temporarily impaired at December 31, 2017. 

The aggregate related fair value of securities with unrealized losses was $75.5 billion as of 

December 31, 2017. 

December 31, 2016 Net Unrealized Unrealized

Yield at Face Carrying Holding Holding Fair

Maturity Purchasea Value Amount Gains Losses Value

Within 1 year 0.87% $ 32,031 b $ 32,365 $ 25 $ (5) $ 32,385

After 1 year 

through 5 years 1.38% 40,525 40,707 92 (94) 40,705

Subtotal $ 72,556 $ 73,072 $ 117 $ (99) $ 73,090

After 1 year 

through 5 years -0.14% $ 400 $ 420 $ 2 $ 0 $ 422

Subtotal $ 400 $ 420 $ 2 $ 0 $ 422

Total $ 72,956 $ 73,492 $ 119 $ (99) c $ 73,512

U.S. Treasury Inflation-Protected Securities

U.S. Treasury notes and bonds

(a) The Treasury Inflation-Protected Securities (TIPS) are indexed to increases or decreases 

in the Consumer Price Index for All Urban Consumers (CPI-U). For TIPS, the yields in the 

above table are stated at their real yields at purchase, not their effective yields. Effective 

yields on TIPS include a long-term annual inflation assumption as measured by the CPI-U. 

The long-term CPI-U consensus forecast is 2.0 percent, based on figures issued by the 

Congressional Budget Office and Blue Chip Economic Indicators in early 2016. 

(b) Includes two Treasury notes totaling $3.4 billion which matured on Saturday, December 

31, 2016. Settlements occurred the next business day, January 3, 2017. 

(c) These unrealized losses occurred over a period of less than a year as a result of 

temporary changes in market interest rates. The FDIC does not intend to sell the securities 

and is not likely to be required to sell them before their maturity date, thus, the FDIC does 

not consider these securities to be other than temporarily impaired at December 31, 2016. 

The aggregate related fair value of securities with unrealized losses was $31.4 billion as of 

December 31, 2016. 

4. Receivables from Resolutions, Net

The receivables from resolutions result from DIF payments to 

cover obligations to insured depositors (subrogated claims), 

advances to resolution entities for working capital, and 

administrative expenses paid on behalf of resolution entities. 

Any related allowance for loss represents the difference 

between the funds advanced and/or obligations incurred 

and the expected repayment. Estimated future payments on 

losses incurred on assets sold to an acquiring institution 

under a shared-loss agreement (SLA) are factored into the 

computation of the expected repayment. Assets held by 

resolution entities (including structured transaction-related 

assets; see Note 8) are the main source of repayment of the 

DIF’s receivables from resolutions. The “Receivables from 

resolutions, net” line item on the Balance Sheet consisted of 

the following components (dollars in thousands). 

December 31 December 31

2017 2016

Receivables from closed banks $ 76,725,761 $ 80,314,038

Allowance for losses (70,752,790) (72,523,635)

Total $ 5,972,971 $ 7,790,403

As of December 31, 2017, the FDIC, as receiver, managed 

338 active receiverships, including eight established in 2017. 

The resolution entities held assets with a book value of $8.8

billion as of December 31, 2017, and $14.9 billion as of 

December 31, 2016 (including $6.5 billion and $11.6 billion, 

respectively, of cash, investments, receivables due from the 

DIF, and other receivables).

Estimated cash recoveries from the management and 

disposition of assets that are used to determine the 

allowance for losses are based on asset recovery rates from 

several sources, including actual or pending institutionspecific asset disposition data, failed institution-specific asset 

valuation data, aggregate asset valuation data on several 

recently failed or troubled institutions, sampled asset 
2017

FINANCIAL SECTION 103

NOTES TO THE FINANCIAL STATEMENTS

5

valuation data, and empirical asset recovery data based on 

failures since 1990. Methodologies for determining the 

asset recovery rates incorporate estimating future cash 

recoveries, net of applicable liquidation cost estimates, and 

discounting based on market-based risk factors applicable to 

a given asset’s type and quality. The resulting estimated 

cash recoveries are then used to derive the allowance for 

loss on the receivables from these resolutions. 

For failed institutions resolved using a whole bank purchase 

and assumption transaction with an accompanying SLA, the 

projected future shared-loss payments on the covered 

residential and commercial loan assets sold to the acquiring 

institution under the agreement are considered in 

determining the allowance for loss on the receivables from 

these resolutions. The shared-loss cost projections are 

based on the covered assets’ intrinsic value, which is 

determined using financial models that consider the quality, 

condition and type of covered assets, current and future 

market conditions, risk factors, and estimated asset holding 

periods. 

For year-end 2017, the shared-loss cost estimates were 

updated for all 104 receiverships with active SLAs. The 

updated shared-loss cost projections for the larger 

residential shared-loss agreements were primarily based on 

third-party valuations estimating the cumulative loss of 

covered assets. The updated shared-loss cost projections on 

the remaining residential shared-loss agreements were 

based on a stratified random sample of institutions selected 

for third-party loss estimations, and valuation results from 

the sampled institutions were aggregated and extrapolated 

to the non-sampled institutions by asset type and 

performance status. For the remaining commercial covered 

assets, shared-loss cost projections were based on the FDIC’s 

historical loss experience that also factors in the time period 

based on the life of the agreement. 

Also reflected in the allowance for loss calculation are endof-agreement SLA “true-up” recoveries. True-up recoveries 

are projected to be received at expiration in accordance with 

the terms of the SLA, if actual losses at expiration are lower 

than originally estimated. 

Note that estimated asset recoveries are regularly evaluated

during the year, but remain subject to uncertainties because 

of potential changes in economic and market conditions, 

which may cause the DIF’s actual recoveries to vary 

significantly from current estimates. 

As of December 31, 2017, 14 percent or $1.9 billion of 

remaining shared-loss covered assets (consisting primarily of 

single-family loans) are located in Puerto Rico, which 

sustained significant damage from the September 2017 

hurricanes. The FDIC continues to assess and monitor the 

circumstances and conditions that may cause an increase in 

losses to the DIF from these shared-loss covered assets. The 

extent to which the acquiring institutions may incur elevated 

loan losses (after consideration of borrower insurance and 

other financial assistance) resulting in related shared-loss 

claims, if any, is not yet determinable. Consequently, no 

additional losses have been reflected in the DIF. 

WHOLE BANK PURCHASE AND ASSUMPTION 

TRANSACTIONS WITH SHARED-LOSS AGREEMENTS 

Since the beginning of 2008 through 2013, the FDIC resolved 

304 failures using whole bank purchase and assumption 

resolution transactions with accompanying SLAs on total 

assets of $215.7 billion purchased by the financial institution 

acquirers. The acquirer typically assumed all of the deposits 

and purchased essentially all of the assets of a failed 

institution. The majority of the commercial and residential 

loan assets were purchased under an SLA, where the FDIC 

agreed to share in future losses and recoveries experienced 

by the acquirer on those assets covered under the 

agreement.

Losses on the covered assets of failed institutions are shared 

between the acquirer and the FDIC, in its receivership 

capacity, when losses occur through the sale, foreclosure, 

loan modification, or charge-off of loans under the terms of 

the SLA. The majority of the agreements cover commercial 

and single-family loans over a five- to ten-year shared-loss 

period, respectively, with the receiver covering 80 percent of 

the losses incurred by the acquirer and the acquiring 

institution covering 20 percent. Prior to March 26, 2010, 

most SLAs included a threshold amount, above which the 

receiver covered 95 percent of the losses incurred by the 

acquirer. Recoveries by the acquirer on covered commercial 

and single-family SLA losses are also shared over an eightto ten-year period, respectively. Note that future recoveries 

on SLA losses are not factored into the DIF allowance for loss 

calculation because the amount and timing of such receipts 

are not determinable. 

The estimated shared-loss liability is accounted for by the 

receiver and is included in the calculation of the DIF’s 

allowance for loss against the corporate receivable from the 

resolution. As shared-loss claims are asserted and proven, 

receiverships satisfy these shared-loss payments using 

available liquidation funds and/or by drawing on amounts 

due from the DIF for funding the deposits assumed by the 

acquirer (see Note 6). 
ANNUAL REPORT

104 FINANCIAL SECTION

DEPOSIT INSURANCE FUND

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Receivership shared-loss transactions are summarized as 

follows (dollars in thousands). 

December 31 December 31

2017 2016

Shared-loss payments made to date, net of recoveries $ 29,014,957 $ 28,988,624

Projected shared-loss payments, net of "true-up" recoveries $ 428,971 $ 966,063

Total remaining shared-loss covered assets $ 13,896,921 $ 20,807,196

The $6.9 billion reduction in the remaining shared-loss 

covered assets from 2016 to 2017 is primarily due to the 

liquidation of covered assets from active SLAs, expiration of 

loss coverage for 14 commercial loan SLAs, and early 

termination of SLAs impacting 43 receiverships during 2017. 

CONCENTRATION OF CREDIT RISK 

Financial instruments that potentially subject the DIF to 

concentrations of credit risk are receivables from resolutions. 

The repayment of these receivables is primarily influenced by 

recoveries on assets held by receiverships and payments on 

the covered assets under SLAs. The majority of the 

remaining assets in liquidation ($2.3 billion) and current 

shared-loss covered assets ($13.9 billion), which together 

total $16.2 billion, are concentrated in commercial loans 

($264 million), residential loans ($13.8 billion), and structured 

transaction-related assets ($1.4 billion) as described in Note 

8. Most of the assets originated from failed institutions 

located in California ($9.6 billion), Puerto Rico ($1.9 billion), 

and Florida ($1.7 billion). 

5. Property and Equipment, Net

Depreciation expense was $54 million and $50 million for

2017 and 2016, respectively. The “Property and equipment, 

net” line item on the Balance Sheet consisted of the 

following components (dollars in thousands). 

December 31 December 31

2017 2016

Land $ 37,352 $ 37,352

Buildings (including building and leasehold improvements) 325,322 348,008

Application software (includes work-in-process) 112,727 127,113

Furniture, fixtures, and equipment 72,384 69,624

Accumulated depreciation (213,735) (224,522)

Total $ 334,050 $ 357,575

6. Liabilities Due to Resolutions 

As of December 31, 2017 and 2016, the DIF recorded 

liabilities totaling $1.2 billion and $2.1 billion, respectively, to 

resolution entities representing the agreed-upon value of 

assets transferred from the receiverships, at the time of 

failure, to the acquirers/bridge institutions for use in funding 

the deposits assumed by the acquirers/bridge institutions. 

Ninety-one percent of these liabilities are due to failures 

resolved under whole-bank purchase and assumption 

transactions, most with an accompanying SLA. The DIF 

satisfies these liabilities either by sending cash directly to a 

receivership to fund shared-loss and other expenses or by 

offsetting receivables from resolutions when a receivership 

declares a dividend. 

7. Contingent Liabilities 

ANTICIPATED FAILURE OF INSURED INSTITUTIONS

The DIF records a contingent liability and a loss provision for 

DIF-insured institutions that are likely to fail when the 

liability is probable and reasonably estimable, absent some 

favorable event such as obtaining additional capital or 

merging. The contingent liability is derived by applying 

expected failure rates and loss rates to the institutions based 

on supervisory ratings, balance sheet characteristics, and 

projected capital levels.

The banking industry’s financial condition and performance

were generally positive in 2017. According to the most 

recent quarterly financial data submitted by DIF-insured 

institutions, the industry’s capital levels continued to 

improve, and the percentage of total loans that were 

noncurrent at September 30 fell to its lowest level since third 

quarter 2007. The industry reported total net income of 

$139.6 billion for the first nine months of 2017, an increase 

of 9.2 percent over the comparable period one year ago.

Losses to the DIF from failures that occurred in 2017 were 

higher than the contingent liability at the end of 2016, as the 

deterioration in the financial condition of certain troubled 

institutions and the resulting cost of institution failures was 

more than anticipated. However, the reversal of the liability 

for institutions that failed in 2017, as well as favorable trends 

in bank supervisory downgrade rates, contributed to a 

decline in the contingent liability from $477 million at 

December 31, 2016 to $98 million at December 31, 2017. 

In addition to the recorded contingent liabilities, the FDIC 

has identified risks in the financial services industry that 

could result in additional losses to the DIF, should potentially 

vulnerable insured institutions ultimately fail. As a result of 
2017

FINANCIAL SECTION 105

NOTES TO THE FINANCIAL STATEMENTS

7

these risks, the FDIC believes that it is reasonably possible 

that the DIF could incur additional estimated losses of 

approximately $373 million as of December 31, 2017, as 

compared to $919 million as of year-end 2016. The actual 

losses, if any, will largely depend on future economic and 

market conditions and could differ materially from this 

estimate.

During 2017, eight institutions failed with combined assets 

of $5.2 billion at the date of failure. Recent trends in 

supervisory ratings and market data suggest that the 

financial performance and condition of the banking industry 

should continue to improve over the coming year. However, 

the operating environment remains challenging for banks. 

Interest rates have been exceptionally low for an extended 

period, and there are signs of growing credit and liquidity 

risk. Revenue growth has been modest and margins remain

narrow despite recent interest rate hikes. Economic 

conditions that challenge the banking sector include the 

potential effect of increases in interest rates on liquidity and

economic activity; the impact of the 2017 hurricanes and 

wildfires on credit quality; the impact of continued weak 

energy and commodity prices on local markets; and the risk 

of market volatility from geopolitical developments. The 

FDIC continues to evaluate ongoing risks to affected 

institutions in light of existing economic and financial 

conditions, and the extent to which such risks may put stress 

on the resources of the insurance fund.

LITIGATION LOSSES

The DIF records an estimated loss for unresolved legal cases 

to the extent that those losses are considered probable and 

reasonably estimable. The FDIC recorded probable litigation 

losses of $200 thousand for the DIF as of December 31, 2017 

and 2016. In addition, the FDIC has identified $1 million of 

reasonably possible losses from unresolved cases as of 

December 31, 2017 and 2016. 

8. Other Contingencies

INDYMAC FEDERAL BANK REPRESENTATION AND 

INDEMNIFICATION CONTINGENT LIABILITY

On March 19, 2009, the FDIC, as receiver, for IndyMac 

Federal Bank (IMFB) and certain subsidiaries (collectively, 

Sellers) sold substantially all of the assets, which included 

mortgage loans and servicing rights, to OneWest Bank (now

known as CIT Bank) and its affiliates (collectively, Acquirers). 

Under the sale agreements, the Acquirers have 

indemnification rights to recover losses incurred as a result 

of third-party claims and breaches of the Sellers’ 

representations. The FDIC, in its corporate capacity, 

guaranteed the Sellers’ indemnification obligations under 

the sale agreements. Until all indemnification claims are 

asserted, quantified and paid, losses could continue to be 

incurred by the receivership and indirectly by the DIF. 

The unpaid principal balances of loans in the servicing 

portfolios sold subject to the Sellers’ indemnification 

obligations totaled $171.6 billion at the time of sale. The 

IndyMac receivership has paid cumulative claims totaling 

$110 million and $30 million through December 31, 2017 

and 2016, respectively. No claims have been asserted or 

accrued as of December 31, 2017. Claims under review in 

the amount of $18 million that were accrued for as of 

December 31, 2016, have been resolved. 

The Sellers have settled their obligations to the Acquirers 

and Fannie Mae with respect to the Fannie Mae mortgage 

loan portfolios (including claims relating to Fannie Mae’s 

inability to recover interest as a result of the servicer’s failure 

to pursue foreclosure within prescribed timelines). At the 

time of the sale to CIT, the loans serviced for Fannie Mae 

constituted approximately 70 percent of the reverse 

mortgage servicing portfolio. The receivership’s payment for 

this settlement is reflected in the “Receivables from 

resolutions, net” line item on the Balance Sheet. Given the 

passage of time and other factors, the FDIC believes that the 

likelihood of incurring losses directly to other investors is 

remote.

The Acquirers’ rights to submit breach notices as well as 

their right to submit claims for reimbursement with respect 

to certain third party claims have passed. However, the 

Acquirers retain the right to assert indemnification claims for 

losses over the life of those loans for which breach notices or 

third party claim notices were timely submitted. While many 

loans are subject to notices of alleged breaches, not all 

breach allegations or third party claims will result in an 

indemnifiable loss. In addition, the Acquirers retain the right 

to seek reimbursement for losses incurred as a result of 

claims alleging breaches of loan seller representations 

asserted by Ginnie Mae on or before March 19, 2019 for its

reverse mortgage servicing portfolios. At the time of the 

sale to CIT the reverse loans serviced for Ginnie Mae 

constituted approximately 2 percent of the reverse mortgage 

servicing portfolio. Quantifying the contingent liability is 

subject to a number of uncertainties, including market 

conditions, the occurrence of borrower defaults and 

resulting foreclosures and losses, and the possible allocation 

of certain losses to the Acquirers. Therefore, because of 

these uncertainties the FDIC has determined that, while 

additional losses are probable, the amount is not currently 

estimable.
ANNUAL REPORT

106 FINANCIAL SECTION

DEPOSIT INSURANCE FUND

8 

PURCHASE AND ASSUMPTION INDEMNIFICATION

In connection with purchase and assumption agreements for 

resolutions, the FDIC, in its receivership capacity, generally 

indemnifies the purchaser of a failed institution’s assets and

liabilities in the event a third party asserts a claim against the 

purchaser unrelated to the explicit assets purchased or 

liabilities assumed at the time of failure. The FDIC, in its 

corporate capacity, is a secondary guarantor if a receivership

is unable to pay. These indemnifications generally extend 

for a term of six years after the date of institution failure. 

The FDIC is unable to estimate the maximum potential 

liability for these types of guarantees as the agreements do 

not specify a maximum amount and any payments are 

dependent upon the outcome of future contingent events, 

the nature and likelihood of which cannot be determined at 

this time. During 2017 and 2016, the FDIC, in its corporate 

capacity, made no indemnification payments under such 

agreements, and no amount has been accrued in the 

accompanying financial statements with respect to these 

indemnification guarantees.

FDIC GUARANTEED DEBT OF STRUCTURED 

TRANSACTIONS

The FDIC, as receiver, used structured transactions

(securitizations and structured sales of guaranteed notes 

(SSGNs) or collectively, “trusts”) to dispose of residential 

mortgage loans, commercial loans, and mortgage-backed 

securities held by the receiverships. 

For these transactions, certain loans or securities from failed 

institutions were pooled and transferred into a trust 

structure. The trusts issued senior and/or subordinated debt 

instruments and owner trust or residual certificates 

collateralized by the underlying mortgage-backed securities 

or loans.

From March 2010 through March 2013, the receiverships 

transferred a portfolio of loans with an unpaid principal

balance of $2.4 billion and mortgage-backed securities with 

a book value of $6.4 billion to the trusts. Private investors 

purchased the senior notes issued by the trusts for $6.2

billion in cash and the receiverships held the subordinated 

debt instruments and owner trust or residual certificates. In

exchange for a fee, the FDIC, in its corporate capacity, 

guarantees the timely payment of principal and interest due 

on the senior notes, the latest maturity of which is 2050. If 

the FDIC is required to perform under its guarantees, it 

acquires an interest in the cash flows of the trust equal to 

the amount of guarantee payments made plus accrued 

interest. The subordinated note holders and owner trust or 

residual certificate holders receive cash flows from the trust

only after all expenses have been paid, the guaranteed notes 

have been satisfied, and the FDIC has been reimbursed for 

any guarantee payments. 

The following table provides the maximum loss exposure to 

the FDIC, as guarantor, total guarantee fees collected, 

guarantee fees receivable, and other information related to 

the FDIC guaranteed debt for the trusts as of December 31, 

2017 and 2016 (dollars in millions).

December 31 December 31

2017 2016

Number of trusts 11 11

Trust collateral balances

Initial $ 8,780 $ 8,780

Current $ 2,169 $ 2,707

Guaranteed note balances

Initial $ 6,196 $ 6,196

Current (maximum loss exposure) $ 672 $ 1,073

Guarantee fees collected to date $ 159 $ 152a

Amounts recognized in Interest 

receivable on investments and other 

assets, net

Receivable for guarantee fees $ 8 $ 14

Receivable for guarantee payments, 

net $ 20 $ 2

Amounts recognized in Contingent 

liabilities: Guarantee payments and 

litigation losses

Contingent liability for guarantee 

payments $ 34 $ 2

Amounts recognized in Accounts 

payable and other liabilities

Deferred revenue for guarantee feesb $ 8 $ 14

(a) The guarantee fees reported previously in 2016 were $275 million and included fees

from another type of structured transaction for which the guarantees have expired.

(b) All guarantee fees are recorded as deferred revenue and recognized as revenue

primarily on a straight-line basis over the term of the notes.

Except as presented above, the DIF records no other 

structured transaction-related assets or liabilities on its 

balance sheet.

ESTIMATED LOSS FROM GUARANTEE PAYMENTS

Any estimated loss to the DIF from the guarantees is based 

on an analysis of the expected guarantee payments by the 

FDIC, net of reimbursements to the FDIC for such guarantee 

payments. The DIF recorded a contingent liability of $34

million as of December 31, 2017, for estimated payments 
2017

FINANCIAL SECTION 107

NOTES TO THE FINANCIAL STATEMENTS

9 

under the guarantee for one SSGN transaction, up from $2 

million recorded at December 31, 2016. As guarantor, the 

FDIC, in its corporate capacity, is entitled to reimbursement 

from the trust for any guarantee payments; therefore a $34

million corresponding receivable has been recorded. The 

related allowance for loss on this receivable is $14 million, 

reflecting the expected shortfall of proceeds available for 

reimbursement after liquidation of the SSGN’s underlying 

collateral at note maturity. Guarantee payments are 

expected to begin in February 2020 and continue through 

note maturity in December 2020. For the same SSGN 

transaction, at December 31, 2016, it was reasonably 

possible that the DIF would have been required to make a 

final guarantee payment of $28 million at note maturity. 

For all of the remaining transactions, the estimated cash 

flows from the trust assets provide sufficient coverage to 

fully pay the debts. To date, the FDIC, in its corporate 

capacity, has not provided, and does not intend to provide, 

any form of financial or other type of support for structured 

transactions that it was not previously contractually required 

to provide.

9. Assessments

The FDIC deposit insurance assessment system is mandated 

by section 7 of the FDI Act and governed by part 327 of title 

12 of the Code of Federal Regulations (12 CFR Part 327). 

The risk-based system requires the payment of quarterly

assessments by all IDIs.

In response to the Dodd-Frank Act, the FDIC implemented 

several changes to the assessment system, amended its 

Restoration Plan (which is required when the ratio of the DIF 

balance to estimated insured deposits (reserve ratio) is 

below the statutorily mandated minimum), and developed a 

comprehensive, long-term fund management plan. The plan 

is designed to restore and maintain a positive fund balance 

for the DIF even during a banking crisis and achieve 

moderate, steady assessment rates throughout any 

economic cycle. Summarized below are actions taken to 

implement requirements of the Dodd-Frank Act and 

provisions of the comprehensive, long-term fund 

management plan.

• The FDIC amended the Restoration Plan, which is

intended to ensure that the reserve ratio reaches 1.35

percent by September 30, 2020, as required by the

Dodd-Frank Act, in lieu of the previous statutory

minimum of 1.15 percent by the end of 2016. The

FDIC updates, at least semiannually, its loss and

income projections for the fund and, if needed,

increases or decreases assessment rates, following 

notice-and-comment rulemaking, if required.

• The FDIC Board of Directors designates a reserve ratio

for the DIF and publishes the designated reserve ratio

(DRR) before the beginning of each calendar year, as

required by the FDI Act. Accordingly, in September

2017, the FDIC adopted a final rule maintaining the

DRR at 2 percent for 2018. The DRR is an integral

part of the FDIC’s comprehensive, long-term

management plan for the DIF and is viewed as a longrange, minimum target for the reserve ratio.

• The FDIC adopted a final rule that suspends dividends

indefinitely, and, in lieu of dividends, adopts lower

assessment rate schedules when the reserve ratio

reaches 1.15 percent, 2 percent, and 2.5 percent.

As of June 30, 2016, the reserve ratio of the DIF reached 1.17 

percent. As a result of the ratio exceeding 1.15 percent, 

assessment rates were modified as follows, beginning with 

the quarter ending September 30, 2016. 

• Lower regular assessment rates became effective for

all IDIs pursuant to final rules published in February

2011 and May 2016.

• A new risk-based method for calculating assessment

rates became effective for institutions with less than

$10 billion in total assets (small banks) pursuant to

the final rule published in May 2016. The revised

method is designed to be revenue-neutral, but helps

ensure that banks that take on greater risks pay more

for deposit insurance.

Additionally, the Dodd-Frank Act requires that the FDIC 

offset the effect of increasing the minimum reserve ratio 

from 1.15 percent to 1.35 percent on small banks. To 

implement this requirement, the FDIC imposed a surcharge 

to the regular quarterly assessments of IDIs with $10 billion 

or more in total consolidated assets (larger institutions), 

beginning with the quarter ending September 30, 2016. 

Pursuant to a final rule published in March 2016:

• The surcharge generally equals an annual rate of 4.5

basis points applied to a larger institution’s regular

quarterly assessment base (with certain adjustments).

• The FDIC will impose a shortfall assessment on larger

institutions to achieve the minimum reserve ratio of

1.35 percent by the September 30, 2020 statutory

deadline, if the reserve ratio has not reached 1.35

percent by the end of 2018.
ANNUAL REPORT

108 FINANCIAL SECTION

DEPOSIT INSURANCE FUND

10

• The FDIC will provide assessment credits to small

banks for the portion of their assessments that

contribute to the growth in the reserve ratio between

1.15 percent and 1.35 percent to ensure that the

effect of reaching 1.35 percent is fully borne by the

larger institutions. The assessment credits will be

determined and allocated as soon as practicable after

the reserve ratio reaches 1.35 percent. In each

quarter that the reserve ratio is at least 1.38 percent,

the credits will be used to fully offset a small

institution’s quarterly insurance assessment, until

credits are exhausted.

ASSESSMENT REVENUE

Through December 31, 2017, annual assessment rates 

averaged approximately 7.2 cents per $100 of the 

assessment base for 2017, approximately 7.4 cents per $100 

for the second half of 2016, and approximately 6.6 cents per 

$100 during the first half of 2016. The assessment base is 

generally defined as average consolidated total assets minus 

average tangible equity (measured as Tier 1 capital) of an IDI 

during the assessment period. Effective July 1, 2016, the 

change in the annual assessment rates primarily resulted 

from the net effect of the surcharges on large institutions, 

offset by lower regular assessment rates for all IDIs. 

The “Assessments receivable, net” line item on the Balance 

Sheet of $2.6 billion and $2.7 billion represents the 

estimated premiums due from IDIs for the fourth quarter of 

2017 and 2016, respectively. The actual deposit insurance 

assessments for the fourth quarter of 2017 will be billed and 

collected at the end of the first quarter of 2018. During 2017

and 2016, $10.6 billion and $10.0 billion, respectively, were 

recognized as assessment revenue from institutions, 

including $4.9 billion and $2.4 billion in surcharges from

large IDIs in 2017 and 2016, respectively. 

PENDING LITIGATION FOR UNDERPAID ASSESSMENTS 

On January 9, 2017, the FDIC filed suit in the United States 

District Court for the District of Columbia (and amended this 

complaint on April 7, 2017), alleging that Bank of America, 

N.A. (BoA) underpaid its insurance assessments for multiple 

quarters based on the underreporting of counterparty 

exposures. In total, the FDIC alleges that BoA underpaid 

insurance assessments by $1.12 billion, including interest for 

the quarters ending March 2012 through December 2014. 

The FDIC invoiced BoA for $542 million and $583 million 

representing claims in the initial suit and the amended 

complaint, respectively. BoA has failed to pay these past due 

amounts. Pending resolution of this matter, BoA has fully 

pledged security with a third-party custodian pursuant to a 

security agreement with the FDIC. As of December 31, 2017, 

the total amount of unpaid assessments (including accrued 

interest) was $1.13 billion. For the years ending December 

31, 2017 and 2016, the impact of this litigation is not 

reflected in the financial statements of the DIF. 

RESERVE RATIO

As of September 30, 2017 and December 31, 2016, the DIF 

reserve ratio was 1.28 percent and 1.20 percent, respectively. 

ASSESSMENTS RELATED TO FICO

Assessments are levied on institutions for payments of the 

interest on bond obligations issued by the Financing 

Corporation (FICO) and will continue until the final bond 

matures in September 2019. The FICO was established as a 

mixed-ownership government corporation to function solely 

as a financing vehicle for the former FSLIC. The FICO 

assessment has no financial impact on the DIF and is 

separate from deposit insurance assessments. The FDIC, as 

administrator of the DIF, acts solely as a collection agent for 

the FICO. Interest obligations collected and remitted to the 

FICO as of December 31, 2017 and 2016, were $760 million 

and $794 million, respectively. 

10. Operating Expenses

The “Operating expenses” line item on the Statement of 

Income and Fund Balance consisted of the following 

components (dollars in thousands). 

December 31 December 31

2017 2016

Salaries and benefits $ 1,222,793 $ 1,235,244

Outside services 265,514 265,492

Travel 88,786 92,126

Buildings and leased space 88,465 93,518

Software/Hardware maintenance 77,911 64,757

Depreciation of property and equipment 53,639 50,403

Other 26,362 26,191

Subtotal 1,823,470 1,827,731

Less: Expenses billed to resolution entities and others (84,075) (112,720)

Total $ 1,739,395 $ 1,715,011

11. Provision for Insurance Losses

The provision for insurance losses was a negative $183

million for 2017, compared to negative $1.6 billion for 2016.

The negative provision for 2017 primarily resulted from a

$969 million decrease to the estimated losses for prior year

failures offset by a $718 million increase for higher-thananticipated estimated losses for current year failures, as
2017

FINANCIAL SECTION 109

NOTES TO THE FINANCIAL STATEMENTS

11

compared to the contingent liability at year-end 2016. The 

2016 negative provision was almost fully attributable to 

reductions in estimated losses for prior year failures.

As described in Note 4, the estimated recoveries from assets 

held by receiverships and estimated payments related to 

assets sold by receiverships to acquiring institutions under 

shared-loss agreements (SLAs) are used to derive the loss 

allowance on the receivables from resolutions. Summarized 

below are the three primary components that comprise the 

$969 million decrease in estimated losses for prior year 

failures. 

• Receivership shared-loss liability cost estimates

decreased $420 million primarily due to lowerthan-anticipated losses on covered assets,

reductions in shared-loss cost estimates from the

early termination of SLAs during the year, and

unanticipated recoveries from SLAs where the

commercial loss coverage has expired but the

recovery period remains active.

• Receiverships received, or are expected to receive,

$383 million of unanticipated recoveries from tax

refunds, litigation settlements, and professional

liability claims. These recoveries are typically not

recognized in the allowance for loss estimate until

the cash is received by receiverships, or

collectability is assured, since significant

uncertainties surround their recovery.

• Reductions in receivership contingent legal and

representation and warranty liabilities, as well as

projected future receivership expenses, resulted in a

loss estimate decrease of $124 million.

12. Employee Benefits

PENSION BENEFITS AND SAVINGS PLANS

Eligible FDIC employees (permanent and term employees 

with appointments exceeding one year) are covered by the 

federal government retirement plans, either the Civil Service 

Retirement System (CSRS) or the Federal Employees 

Retirement System (FERS). Although the DIF contributes a 

portion of pension benefits for eligible employees, it does 

not account for the assets of either retirement system. The 

DIF also does not have actuarial data for accumulated plan 

benefits or the unfunded liability relative to eligible 

employees. These amounts are reported on and accounted 

for by the U.S. Office of Personnel Management (OPM). 

Under the Federal Thrift Savings Plan (TSP), the FDIC 

provides FERS employees with an automatic contribution of 

1 percent of pay and an additional matching contribution up 

to 4 percent of pay. CSRS employees also can contribute to 

the TSP, but they do not receive agency matching 

contributions. Eligible FDIC employees may also participate 

in an FDIC-sponsored tax-deferred 401(k) savings plan with

an automatic contribution of 1 percent of pay and an 

additional matching contribution up to 4 percent of pay. 

The expenses for these plans are presented in the table 

below (dollars in thousands). 

December 31 December 31

2017 2016

Civil Service Retirement System $ 2,644 $ 3,230

Federal Employees Retirement System (Basic Benefit) 111,228 111,368

Federal Thrift Savings Plan 35,180 34,966

FDIC Savings Plan 39,004 37,499

Total $ 188,056 $ 187,063

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The DIF has no postretirement health insurance liability since 

all eligible retirees are covered by the Federal Employees 

Health Benefits (FEHB) program. The FEHB is administered 

and accounted for by the OPM. In addition, OPM pays the 

employer share of the retiree’s health insurance premiums. 

The FDIC provides certain life and dental insurance coverage 

for its eligible retirees, the retirees’ beneficiaries, and 

covered dependents. Retirees eligible for life and dental 

insurance coverage are those who have qualified due to (1) 

immediate enrollment upon appointment or five years of 

participation in the plan and (2) eligibility for an immediate 

annuity. The life insurance program provides basic coverage 

at no cost to retirees and allows converting optional 

coverage to direct-pay plans. For the dental coverage, 

retirees are responsible for a portion of the premium.

The FDIC has elected not to fund the postretirement life and 

dental benefit liabilities. As a result, the DIF recognized the 

underfunded status (the difference between the 

accumulated postretirement benefit obligation and the plan 

assets at fair value) as a liability. Since there are no plan 

assets, the plan’s benefit liability is equal to the accumulated 

postretirement benefit obligation. 

Postretirement benefit obligation, gain and loss, and 

expense information included in the Balance Sheet and 

Statement of Income and Fund Balance are summarized as 

follows (dollars in thousands). 
ANNUAL REPORT

110 FINANCIAL SECTION

DEPOSIT INSURANCE FUND

12

December 31 December 31

2017 2016

Accumulated postretirement benefit obligation 

recognized in Postretirement benefit liability $ 259,316 $ 232,201

Amounts recognized in accumulated other 

comprehensive income: Unrealized postretirement 

benefit loss

Cumulative net actuarial loss $ (44,630) $ (24,212)

Prior service cost (960) (1,535)

 Total $ (45,590) $ (25,747)

Amounts recognized in other comprehensive income: 

Unrealized postretirement benefit (loss) gain

Actuarial (loss) gain $ (20,418) $ 7,726

Prior service credit 575 575

 Total $ (19,843) $ 8,301

Net periodic benefit costs recognized in Operating 

expenses

 Service cost $ 4,098 $ 3,882

 Interest cost 9,241 8,440

 Net amortization out of other comprehensive

 income 654 1,567

 Total $ 13,993 $ 13,889

Expected amortization of accumulated other comprehensive 

income into net periodic benefit cost over the next year is 

shown in the table below (dollars in thousands). 

December 31, 2018

Prior service costs $ 575

Net actuarial loss 1,491

Total $ 2,066

The annual postretirement contributions and benefits paid 

are included in the table below (dollars in thousands). 

December 31 December 31

2017 2016

Employer contributions $ 6,720 $ 6,388

Plan participants' contributions $ 788 $ 739

Benefits paid $ (7,508) $ (7,126)

The expected contributions, for the year ending December 

31, 2018, are $8.1 million. Expected future benefit payments 

for each of the next 10 years are presented in the following 

table (dollars in thousands). 

2018 2019 2020 2021 2022 2023-2027

$7,354 $7,809 $8,323 $8,846 $9,388 $55,733

Assumptions used to determine the amount of the 

accumulated postretirement benefit obligation and the net 

periodic benefit costs are summarized as follows. 

December 31 December 31

2017 2016

Discount rate for future benefits (benefit obligation) 4.03% 4.67%

Rate of compensation increase 3.44% 3.90%

Discount rate (benefit cost) 4.67% 4.29%

Dental health care cost-trend rate

 Assumed for next year 4.00% 4.50%

 Ultimate 4.00% 4.50%

 Year rate will reach ultimate 2018 2017

13. Commitments and Off-Balance-Sheet Exposure

COMMITMENTS:

Leased Space

The DIF leased space expense totaled $44 million and $48

million for 2017 and 2016, respectively. The FDIC’s lease 

commitments total $157 million for future years. The lease 

agreements contain escalation clauses resulting in 

adjustments, usually on an annual basis. Future minimum 

lease commitments are as follows (dollars in thousands). 

2018 2019 2020 2021 2022 2023/Thereafter

$45,337 $41,069 $25,914 $18,325 $9,443 $17,289

OFF-BALANCE-SHEET EXPOSURE:

Deposit Insurance

Estimates of insured deposits are derived primarily from 

quarterly financial data submitted by IDIs to the FDIC and 

represent the accounting loss that would be realized if all 

IDIs were to fail and the acquired assets provided no 

recoveries. As of September 30, 2017 and December 31, 

2016, estimated insured deposits for the DIF were $7.1

trillion and $6.9 trillion, respectively.
2017

FINANCIAL SECTION 111

NOTES TO THE FINANCIAL STATEMENTS

13

14. Fair Value of Financial Instruments

Financial assets recognized and measured at fair value on a 

recurring basis at each reporting date include cash 

equivalents (see Note 2) and the investment in U.S. Treasury 

securities (see Note 3). The DIF’s financial assets measured 

at fair value consisted of the following components (dollars 

in millions). 

December 31, 2017 Quoted Prices in

Active Markets for Significant Other Significant

Identical Assets Observable Inputs Unobservable Inputs Total Assets

(Level 1) (Level 2) (Level 3) at Fair Value

Assets

 Cash equivalents1 $ 1,820 $ 1,820

Available-for-Sale Debt Securities

 Investment in U.S. Treasury securities2 83,303 83,303

Total Assets $ 85,123 $ 0 $ 0 $ 85,123

(1) Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued

at prevailing interest rates established by the Treasury’s Bureau of the Fiscal Service.

(2) The investment in U.S. Treasury securities is measured based on prevailing market yields

for federal government entities.

December 31, 2016 Quoted Prices in

Active Markets for Significant Other Significant

Identical Assets Observable Inputs Unobservable Inputs Total Assets

(Level 1) (Level 2) (Level 3) at Fair Value

Assets

 Cash equivalents1 $ 1,326 $ 1,326

Available-for-Sale Debt Securities

 Investment in U.S. Treasury securities2 73,512 73,512

Total Assets $ 74,838 $ 0 $ 0 $ 74,838

(1) Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued

at prevailing interest rates established by the Treasury’s Bureau of the Fiscal Service.

(2) The investment in U.S. Treasury securities is measured based on prevailing market yields

for federal government entities.

15. Information Relating to the Statement of Cash Flows

The following table presents a reconciliation of net income 

to net cash from operating activities (dollars in thousands).

December 31 December 31

2017 2016

Operating Activities

Net Income: $ 10,105,456 $ 10,523,517

Adjustments to reconcile net income to net cash provided

 by operating activities:

Amortization of U.S. Treasury securities 543,445 977,245

Treasury Inflation-Protected Securities inflation adjustment (8,564) (5,578)

Depreciation on property and equipment 53,639 50,403

Loss on retirement of property and equipment 386 1,607

Provision for insurance losses (183,149) (1,567,950)

Unrealized (loss) gain on postretirement benefits (19,843) 8,301

Change in Assets and Liabilities:

 Decrease (Increase) in assessments receivable, net 31,881 (493,795)

 Decrease (Increase) in interest receivable and other assets 21,171 (107,749)

 Decrease in receivables from resolutions 1,620,258 5,437,632

 (Decrease) in accounts payable and other liabilities (1,352) (34,249)

 Increase (Decrease) in postretirement benefit liability 27,116 (799)

 Increase in contingent liabilities - guarantee payments and litigation losses 31,927 2,389

 (Decrease) in liabilities due to resolutions (870,115) (2,345,820)

Net Cash Provided by Operating Activities $ 11,352,256 $ 12,445,154

16. Subsequent Events

Subsequent events have been evaluated through February 8, 

2018, the date the financial statements are available to be 

issued. Based on management’s evaluation, there were no 

subsequent events requiring disclosure.
ANNUAL REPORT

112 FINANCIAL SECTION

FSLIC RESOLUTION FUND (FRF)

Federal Deposit Insurance Corporation

FSLIC Resolution Fund Balance Sheet 

As of December 31

(Dollars in Thousands) 2017 2016

ASSETS

 Cash and cash equivalents $ 885,380 $ 874,174

 Other assets, net 497 4,391

Total Assets $ 885,877 $ 878,565

LIABILITIES

 Accounts payable and other liabilities $ 92 $ 26

Total Liabilities 92 26

RESOLUTION EQUITY (NOTE 5)

 Contributed capital 125,489,317 125,489,317

 Accumulated deficit (124,603,532) (124,610,778)

Total Resolution Equity 885,785 878,539

Total Liabilities and Resolution Equity $ 885,877 $ 878,565

The accompanying notes are an integral part of these financial statements.
2017

FINANCIAL SECTION 113

FSLIC RESOLUTION FUND (FRF)

Federal Deposit Insurance Corporation

FSLIC Resolution Fund Statement of Income and Accumulated Deficit

For the Years Ended December 31

(Dollars in Thousands) 2017 2016

REVENUE

 Interest on U.S. Treasury securities $ 7,065 $ 2,070

 Other revenue 764 3,278

Total Revenue 7,829 5,348

EXPENSES AND LOSSES

 Operating expenses 562 2,725

 Losses related to thrift resolutions (Note 6) 21 (993)

 Recovery of tax benefits 0 (3,750)

Total Expenses and Losses 583 (2,018)

Net Income 7,246 7,366

Accumulated Deficit - Beginning (124,610,778) (124,618,144)

Accumulated Deficit - Ending $ (124,603,532) $ (124,610,778)

The accompanying notes are an integral part of these financial statements.
ANNUAL REPORT

114 FINANCIAL SECTION

FSLIC RESOLUTION FUND (FRF)

Federal Deposit Insurance Corporation

FSLIC Resolution Fund Statement of Cash Flows

For the Years Ended December 31

(Dollars in Thousands) 2017 2016

OPERATING ACTIVITIES

Provided by:

Interest on U.S. Treasury securities $ 7,065 $ 2,070

Recovery of tax benefits 3,750 0

Recoveries from thrift resolutions 1,001 2,270

Department of Justice's return of unused goodwill legal expense funds (Note 3) 0 2,162

Miscellaneous receipts 4 0

Used by:

Operating expenses (555) (3,363)

Miscellaneous disbursements (59) (2)

Net Cash Provided by Operating Activities 11,206 3,137

Net Increase in Cash and Cash Equivalents 11,206 3,137

Cash and Cash Equivalents - Beginning 874,174 871,037

Cash and Cash Equivalents - Ending $ 885,380 $ 874,174

The accompanying notes are an integral part of these financial statements.
2017

FINANCIAL SECTION 115

FSLIC RESOLUTION FUND

NOTES TO THE FINANCIAL STATEMENTS 

December 31, 2017 and 2016 

1

1. Operations/Dissolution of the FSLIC Resolution Fund 

OVERVIEW 

The Federal Deposit Insurance Corporation (FDIC) is the 

independent deposit insurance agency created by Congress 

in 1933 to maintain stability and public confidence in the 

nation’s banking system. Provisions that govern the FDIC’s 

operations are generally found in the Federal Deposit 

Insurance (FDI) Act, as amended (12 U.S.C. 1811, et seq). In 

accordance with the FDI Act, the FDIC, as administrator of 

the Deposit Insurance Fund (DIF), insures the deposits of 

banks and savings associations (insured depository 

institutions). In cooperation with other federal and state 

agencies, the FDIC promotes the safety and soundness of 

insured depository institutions (IDIs) by identifying, 

monitoring, and addressing risks to the DIF. 

In addition to being the administrator of the DIF, the FDIC is 

the administrator of the FSLIC Resolution Fund (FRF). As 

such, the FDIC is responsible for the sale of remaining assets 

and satisfaction of liabilities associated with the former 

Federal Savings and Loan Insurance Corporation (FSLIC) and 

the former Resolution Trust Corporation (RTC). The FDIC 

maintains the DIF and the FRF separately to support their 

respective functions. 

The FSLIC was created through the enactment of the 

National Housing Act of 1934. The Financial Institutions 

Reform, Recovery, and Enforcement Act of 1989 (FIRREA) 

abolished the insolvent FSLIC and created the FRF. At that 

time, the assets and liabilities of the FSLIC were transferred 

to the FRF – except those assets and liabilities transferred to 

the newly created RTC – effective on August 9, 1989. 

Further, the FIRREA established the Resolution Funding 

Corporation (REFCORP) to provide part of the initial funds 

used by the RTC for thrift resolutions. 

The RTC Completion Act of 1993 terminated the RTC as of 

December 31, 1995. All remaining assets and liabilities of 

the RTC were transferred to the FRF on January 1, 1996. 

Today, the FRF consists of two distinct pools of assets and 

liabilities: one composed of the assets and liabilities of the 

FSLIC transferred to the FRF upon the dissolution of the 

FSLIC (FRF-FSLIC), and the other composed of the RTC assets 

and liabilities (FRF-RTC). The assets of one pool are not 

available to satisfy obligations of the other. 

OPERATIONS/DISSOLUTION OF THE FRF 

The FRF will continue operations until all of its assets are 

sold or otherwise liquidated and all of its liabilities are 

satisfied. Any funds remaining in the FRF-FSLIC will be paid 

to the U.S. Treasury. Any remaining funds of the FRF-RTC 

will be distributed to the REFCORP to pay the interest on the 

REFCORP bonds. In addition, the FRF-FSLIC has available 

until expended $602 million in appropriations to facilitate, if 

required, efforts to wind up the resolution activity of the 

FRF-FSLIC. 

The FDIC has extensively reviewed and cataloged the FRF's 

remaining assets and liabilities. Some of the unresolved 

issues are: 

• criminal restitution orders (generally have from 1 to 

21 years remaining to enforce); 

• collections of judgments obtained against officers 

and directors and other professionals responsible 

for causing or contributing to thrift losses 

(generally have up to 10 years remaining to 

enforce, unless the judgments are renewed or are 

covered by the Federal Debt Collections Procedures 

Act, which will result in significantly longer periods 

for collection of some judgments); 

• liquidation/disposition of residual assets purchased 

by the FRF from terminated receiverships; 

• one remaining issue related to assistance 

agreements entered into by the former FSLIC (FRF 

could continue to receive or refund overpayments 

of tax benefits sharing in future years); 

• a potential tax liability associated with a fully 

adjudicated goodwill litigation case (see Note 3); 

and 

• Affordable Housing Disposition Program 

monitoring (the last agreement expires no later 

than 2045; see Note 4). 

The FRF could realize recoveries from tax benefits sharing, 

criminal restitution orders, and professional liability claims. 

However, any potential recoveries are not reflected in the 

FRF’s financial statements, given the significant uncertainties 

surrounding the ultimate outcome. 
ANNUAL REPORT

116 FINANCIAL SECTION

FSLIC RESOLUTION FUND 

2

On April 1, 2014, the FDIC concluded its role as receiver of 

FRF receiverships when the last active receivership was 

terminated. In total, 850 receiverships were liquidated by 

the FRF and the RTC. To facilitate receivership terminations, 

the FRF, in its corporate capacity, acquired the remaining 

receivership assets that could not be liquidated during the 

life of the receiverships due to restrictive clauses and other 

impediments. These assets are included in the “Other assets, 

net” line item on the Balance Sheet. 

During the years of receivership activity, the assets held by 

receivership entities, and the claims against them, were 

accounted for separately from the FRF’s assets and liabilities 

to ensure that receivership proceeds were distributed in 

accordance with applicable laws and regulations. Also, the 

income and expenses attributable to receiverships were 

accounted for as transactions of those receiverships. The 

FDIC, as administrator of the FRF, billed receiverships for 

services provided on their behalf. 

2. Summary of Significant Accounting Policies 

GENERAL 

The financial statements include the financial position, 

results of operations, and cash flows of the FRF and are 

presented in accordance with U.S. generally accepted 

accounting principles (GAAP). During the years of 

receivership activity, these statements did not include 

reporting for assets and liabilities of receivership entities 

because these entities were legally separate and distinct, and 

the FRF did not have any ownership or beneficial interest in 

them. 

The FRF is a limited-life entity, however, it does not meet the 

requirements for presenting financial statements using the 

liquidation basis of accounting. According to Accounting 

Standards Codification Topic 205, Presentation of Financial 

Statements, a limited-life entity should apply the liquidation 

basis of accounting only if a change in the entity’s governing 

plan has occurred since its inception. By statute, the FRF is a 

limited-life entity whose dissolution will occur upon the 

satisfaction of all liabilities and the disposition of all 

assets. No changes to this statutory plan have occurred 

since inception of the FRF. 

USE OF ESTIMATES 

The preparation of the financial statements in conformity 

with GAAP requires management to make estimates and 

assumptions that affect the reported amounts of assets and 

liabilities, revenue and expenses, and disclosure of 

contingent liabilities. Actual results could differ from these 

estimates. Where it is reasonably possible that changes in 

estimates will cause a material change in the financial 

statements in the near term, the nature and extent of such 

potential changes in estimates have been disclosed. The 

estimate for other assets is considered significant. 

CASH EQUIVALENTS

Cash equivalents are short-term, highly liquid investments 

consisting primarily of U.S. Treasury Overnight Certificates. 

RELATED PARTIES 

The nature of related parties and a description of related 

party transactions are discussed in Note 1 and disclosed 

throughout the financial statements and footnotes. 

APPLICATION OF RECENT ACCOUNTING STANDARDS 

In January 2016, the Financial Accounting Standards Board 

(FASB) issued Accounting Standards Update (ASU) 2016-01, 

Financial Instruments—Overall (Subtopic 825-10): 

Recognition and Measurement of Financial Assets and 

Financial Liabilities. The ASU addresses certain aspects of 

recognition, measurement, presentation, and disclosure of 

financial instruments through targeted changes to existing 

guidance. The ASU permits nonpublic entities to exclude 

disclosures related to the fair value of financial instruments 

measured at amortized cost. The FDIC has early adopted 

this provision and Note 7 was revised accordingly. The FDIC 

has determined that the other provisions of the ASU, which 

are effective for the FRF beginning on January 1, 2019, will 

not have a material effect on the financial position of the FRF 

or its results of operations. 

In June 2016, the FASB issued ASU 2016-13, Financial 

Instruments – Credit Losses (Topic 326): Measurement of 

Credit Losses on Financial Instruments. The ASU will replace 

the incurred loss impairment model with a new expected

credit loss model for financial assets measured at amortized 

cost and for off-balance-sheet credit exposures. The FDIC 

has determined the ASU, which is effective for the FRF 

beginning on January 1, 2021, will not have a material effect 

on the financial position of the FRF or its results of 

operations. 

Other recent accounting pronouncements have been 

deemed not applicable or material to the financial 

statements as presented. 
2017

FINANCIAL SECTION 117

 

 

NOTES TO THE FINANCIAL STATEMENTS

3

3. Goodwill Litigation 

In United States v. Winstar Corp., 518 U.S. 839 (1996), the 

Supreme Court held that when it became impossible 

following the enactment of FIRREA in 1989 for the federal 

government to perform certain agreements to count 

goodwill toward regulatory capital, the plaintiffs were 

entitled to recover damages from the United States. The

contingent liability associated with the nonperformance of 

these agreements was transferred to the FRF on August 9, 

1989, upon the dissolution of the FSLIC. 

The FRF can draw from an appropriation provided by Section 

110 of the Department of Justice Appropriations Act, 2000 

(Public Law 106-113, Appendix A, Title I, 113 Stat. 1501A-3, 

1501A-20), such sums as may be necessary for the payment 

of judgments and compromise settlements in the goodwill 

litigation. This appropriation is to remain available until 

expended. Because an appropriation is available to pay such 

judgments and settlements, any estimated liability for 

goodwill litigation will have a corresponding receivable from 

the U.S. Treasury and therefore have no net impact on the 

financial condition of the FRF. 

The last remaining goodwill case was resolved in 2015. 

However, for another case fully adjudicated in 2012, an 

estimated loss of $8 million for the court-ordered 

reimbursement of potential tax liabilities to the plaintiff is 

reasonably possible. 

The FRF-FSLIC paid goodwill litigation expenses incurred by 

the Department of Justice (DOJ), the entity that defended 

these lawsuits against the United States, based on a 

Memorandum of Understanding (MOU) dated October 2, 

1998, between the FDIC and the DOJ. These expenses were 

paid in advance by the FRF-FSLIC and any unused funds 

were carried over by the DOJ and applied toward the next 

fiscal year charges. In September 2016, the DOJ returned $2

million of unused funds to the FRF-FSLIC and retained $250 

thousand to cover future administrative expenses. The 

returned funds were recognized in the “Other revenue” line 

item on the Statement of Income and Accumulated Deficit. 

4. Guarantees 

FANNIE MAE GUARANTEE 

On May 21, 2012, the FDIC, in its capacity as administrator of 

the FRF, entered into an agreement with Fannie Mae for the 

release of $13 million of credit enhancement reserves to the 

FRF in exchange for indemnifying Fannie Mae from all future 

losses incurred on 76 multi-family mortgage loans. The 

former RTC supplied Fannie Mae with the credit 

enhancement reserves in the form of cash collateral to cover 

future losses on these mortgage loans through 2020. Based 

on the most current data available, as of September 30, 

2017, the maximum exposure on this indemnification is the 

current unpaid principal balance of the remaining 18 multifamily loans totaling $919 thousand. Based on a contingent 

liability assessment of this portfolio as of September 30, 

2017, the majority of the loans are at least 90 percent 

amortized, and all are scheduled to mature within one to 

three years. Since all of the loans are performing and no

losses have occurred since 2001, future payments on this 

indemnification are not expected. No contingent liability for 

this indemnification has been recorded as of December 31, 

2017 and 2016. 

AFFORDABLE HOUSING DISPOSITION PROGRAM 

Required by FIRREA under section 501, the Affordable 

Housing Disposition Program (AHDP) was established in 

1989 to ensure the preservation of affordable housing for 

low-income households. The FDIC, in its capacity as 

administrator of the FRF-RTC, assumed responsibility for 

monitoring property owner compliance with land use 

restriction agreements (LURAs). To enforce the property 

owners’ LURA obligation, the RTC, prior to its dissolution, 

entered into Memoranda of Understanding with 34 

monitoring agencies to oversee these LURAs. As of 

December 31, 2017, 24 monitoring agencies oversee these 

LURAs. The FDIC, through the FRF, has agreed to indemnify 

the monitoring agencies for all losses related to LURA legal 

enforcement proceedings. 

Since 2006, the FDIC entered into two litigations against 

property owners and paid $23 thousand in legal expenses, 

which was fully reimbursed due to successful litigation. The 

maximum potential exposure to the FRF cannot be 

estimated as it is contingent upon future legal proceedings. 

However, loss mitigation factors include: (1) the 

indemnification may become void if the FDIC is not 

immediately informed upon receiving notice of any legal 

proceedings and (2) the FDIC is entitled to reimbursement of 

any legal expenses incurred for successful litigation against a 

property owner. AHDP guarantees will continue until the 

termination of the last LURA, or 2045 (whichever occurs first). 

As of December 31, 2017 and 2016, no contingent liability 

for this indemnification has been recorded. 
ANNUAL REPORT

118 FINANCIAL SECTION

FSLIC RESOLUTION FUND 

4

5. Resolution Equity 

As stated in the Overview section of Note 1, the FRF is 

composed of two distinct pools: the FRF-FSLIC and the FRFRTC. The FRF-FSLIC consists of the assets and liabilities of 

the former FSLIC. The FRF-RTC consists of the assets and 

liabilities of the former RTC. Pursuant to legal restrictions, 

the two pools are maintained separately and the assets of 

one pool are not available to satisfy obligations of the other. 

Contributed capital, accumulated deficit, and resolution 

equity consisted of the following components by each pool 

(dollars in thousands). 

December 31, 2017

FRF-FSLIC FRF-RTC

FRF 

Consolidated

Contributed capital - 

beginning $ 43,864,980 $ 81,624,337 $ 125,489,317

Contributed capital - 

ending 43,864,980 81,624,337 125,489,317

Accumulated deficit (43,022,301) (81,581,231) (124,603,532)

Total Resolution 

Equity $ $ 842,679 $ 43,106 885,785

December 31, 2016

FRF-FSLIC FRF-RTC

FRF 

Consolidated

Contributed capital - 

beginning $ 43,864,980 $ 81,624,337 $ 125,489,317

Contributed capital - 

ending 43,864,980 81,624,337 125,489,317

Accumulated deficit (43,029,200) (81,581,578) (124,610,778)

Total Resolution 

Equity $ $ 835,780 $ 42,759 878,539

CONTRIBUTED CAPITAL

The FRF-FSLIC and the former RTC received $43.5 billion and 

$60.1 billion from the U.S. Treasury, respectively, to fund 

losses from thrift resolutions prior to July 1, 1995. 

Additionally, the FRF-FSLIC issued $670 million in capital 

certificates to the Financing Corporation (a mixed-ownership 

government corporation established to function solely as a 

financing vehicle for the FSLIC) and the RTC issued $31.3 

billion of these instruments to the REFCORP. FIRREA 

prohibited the payment of dividends on any of these capital 

certificates. Through December 31, 2017, the FRF-FSLIC 

received a total of $2.3 billion in goodwill appropriations, the 

effect of which increased contributed capital. 

Through December 31, 2017, the FRF-RTC had returned $4.6 

billion to the U.S. Treasury and made payments of $5.1 

billion to the REFCORP. The most recent payment to the 

REFCORP was in July of 2013 for $125 million. In addition, 

the FDIC returned $2.6 billion to the U.S. Treasury on behalf 

of the FRF-FSLIC in 2013. These actions reduced contributed 

capital. 

ACCUMULATED DEFICIT 

The accumulated deficit represents the cumulative excess of 

expenses and losses over revenue for activity related to the 

FRF-FSLIC and the FRF-RTC. Approximately $29.8 billion and 

$87.9 billion were brought forward from the former FSLIC 

and the former RTC on August 9, 1989, and January 1, 1996, 

respectively. Since the dissolution dates, the FRF-FSLIC 

accumulated deficit increased by $13.2 billion, whereas the 

FRF-RTC accumulated deficit decreased by $6.3 billion. 

6. Losses Related to Thrift Resolutions

Losses related to thrift resolutions represent changes in the 

estimated losses on assets acquired from terminated 

receiverships, as well as expenses for the disposition and 

administration of these assets. These losses were $21 

thousand for 2017, compared to negative $993 thousand for 

2016. The negative balance in 2016 was due to a $1 million 

reduction in estimated losses for better-than-anticipated 

recoveries upon disposition of an asset. 

7. Fair Value of Financial Instruments

At December 31, 2017 and 2016, the FRF’s financial assets 

measured at fair value on a recurring basis are cash 

equivalents (see Note 2) of $842 million and $831 million, 

respectively. Cash equivalents are Special U.S. Treasury 

Certificates with overnight maturities valued at prevailing 

interest rates established by the U.S. Treasury’s Bureau of the 

Fiscal Service. The valuation is considered a Level 1 

measurement in the fair value hierarchy, representing 

quoted prices in active markets for identical assets. 
2017

FINANCIAL SECTION 119

 

 

NOTES TO THE FINANCIAL STATEMENTS

5

8. Information Relating to the Statement of Cash Flows 

The following table presents a reconciliation of net income 

to net cash from operating activities (dollars in thousands). 

December 31 December 31

2017 2016

Operating Activities

Net Income: $ 7,246 $ 7,366

Change in Assets and 

Liabilities:

Decrease (Increase) in 

other assets 3,894 (3,631)

Increase (Decrease) in 

accounts payable and 

other liabilities 66 (598)

Net Cash Provided by 

Operating Activities $ 11,206 $ 3,137

9. Subsequent Events 

Subsequent events have been evaluated through February 8, 

2018, the date the financial statements are available to be 

issued. Based on management’s evaluation, there were no 

subsequent events requiring disclosure. 
ANNUAL REPORT

120 FINANCIAL SECTION

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT

441 G St. N.W.

Washington, DC 20548

Independent Auditor’s Report

To the Board of Directors

The Federal Deposit Insurance Corporation

In our audits of the 2017 and 2016 financial statements of the Deposit Insurance Fund (DIF) and 

of the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund (FRF), both of 

which are administered by the Federal Deposit Insurance Corporation (FDIC),1 we found

• the financial statements of the DIF and of the FRF as of and for the years ended 

December 31, 2017, and 2016, are presented fairly, in all material respects, in accordance 

with U.S. generally accepted accounting principles;

• FDIC maintained, in all material respects, effective internal control over financial reporting 

relevant to the DIF and to the FRF as of December 31, 2017; and

• with respect to the DIF and to the FRF, no reportable noncompliance for 2017 with 

provisions of applicable laws, regulations, contracts, and grant agreements we tested. 

The following sections discuss in more detail (1) our report on the financial statements and on 

internal control over financial reporting and other information included with the financial 

statements;

2 (2) our report on compliance with laws, regulations, contracts, and grant 

agreements; and (3) agency comments. 

Report on the Financial Statements and on Internal Control over Financial Reporting

In accordance with Section 17 of the Federal Deposit Insurance Act, as amended,3 and the 

Government Corporation Control Act,

4 we have audited the financial statements of the DIF and 

of the FRF, both of which are administered by FDIC. The financial statements for the DIF 

comprise the balance sheets as of December 31, 2017, and 2016; the related statements of 

income and fund balance and of cash flows for the years then ended; and the related notes to 

the financial statements. The financial statements for the FRF comprise the balance sheets as 

of December 31, 2017, and 2016; the related statements of income and accumulated deficit and 

of cash flows for the years then ended; and the related notes to the financial statements. We 

also have audited FDIC’s internal control over financial reporting relevant to the DIF and to the 

FRF as of December 31, 2017, based on criteria established under 31 U.S.C. § 3512(c), (d), 

commonly known as the Federal Managers’ Financial Integrity Act (FMFIA).

 

1

A third fund managed by FDIC, the Orderly Liquidation Fund, established by Section 210(n) of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376, 1506 (July 21, 2010), is unfunded 

and did not have any transactions from its inception in 2010 through 2017. 

2

Other information consists of information included with the financial statements, other than the auditor’s report.

3

Act of September 21, 1950, Pub. L. No. 797, § 2[17], 64 Stat. 873, 890, classified as amended at 12 U.S.C. § 1827.

4

31 U.S.C. §§ 9101-9110. 
2017

FINANCIAL SECTION 121

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued)

We conducted our audits in accordance with U.S. generally accepted government auditing 

standards. We believe that the audit evidence we obtained is sufficient and appropriate to 

provide a basis for our audit opinions.

Management’s Responsibility 

FDIC management is responsible for (1) the preparation and fair presentation of these financial 

statements in accordance with U.S. generally accepted accounting principles; (2) preparing and 

presenting other information included in documents containing the audited financial statements 

and auditor’s report, and ensuring the consistency of that information with the audited financial 

statements; (3) maintaining effective internal control over financial reporting, including the 

design, implementation, and maintenance of internal control relevant to the preparation and fair 

presentation of financial statements that are free from material misstatement, whether due to 

fraud or error; (4) evaluating the effectiveness of internal control over financial reporting based 

on the criteria established under FMFIA; and (5) its assessment about the effectiveness of 

internal control over financial reporting as of December 31, 2017, included in the accompanying 

Management’s Report on Internal Control over Financial Reporting in appendix I.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements and opinions on FDIC’s 

internal control over financial reporting relevant to the DIF and to the FRF based on our audits. 

U.S. generally accepted government auditing standards require that we plan and perform the 

audits to obtain reasonable assurance about whether the financial statements are free from 

material misstatement, and whether effective internal control over financial reporting was 

maintained in all material respects. We are also responsible for applying certain limited 

procedures to other information included with the financial statements.

An audit of financial statements involves performing procedures to obtain audit evidence about 

the amounts and disclosures in the financial statements. The procedures selected depend on 

the auditor’s judgment, including the auditor’s assessment of the risks of material misstatement 

of the financial statements, whether due to fraud or error. In making those risk assessments, the 

auditor considers internal control relevant to the entity’s preparation and fair presentation of the 

financial statements in order to design audit procedures that are appropriate in the 

circumstances. An audit of financial statements also involves evaluating the appropriateness of 

the accounting policies used and the reasonableness of significant accounting estimates made 

by management, as well as evaluating the overall presentation of the financial statements. 

An audit of internal control over financial reporting involves performing procedures to obtain 

evidence about whether a material weakness exists.5 The procedures selected depend on the 

auditor’s judgment, including the assessment of the risk that a material weakness exists. An 

audit of internal control over financial reporting also includes obtaining an understanding of 

internal control over financial reporting, and evaluating and testing the design and operating 

effectiveness of internal control over financial reporting based on the assessed risk. Our audit of 

internal control also considered FDIC’s process for evaluating and reporting on internal control 

 

5

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such 

that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be 

prevented, or detected and corrected, on a timely basis. A deficiency in internal control exists when the design or 

operation of a control does not allow management or employees, in the normal course of performing their assigned 

functions, to prevent, or detect and correct, misstatements on a timely basis. 
ANNUAL REPORT

122 FINANCIAL SECTION

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued)

over financial reporting based on criteria established under FMFIA. Our audits also included 

performing such other procedures as we considered necessary in the circumstances.

We did not evaluate all internal controls relevant to operating objectives as broadly established 

under FMFIA, such as those controls relevant to preparing performance information and 

ensuring efficient operations. We limited our internal control testing to testing controls over 

financial reporting. Our internal control testing was for the purpose of expressing an opinion on 

whether effective internal control over financial reporting was maintained, in all material 

respects. Consequently, our audit may not identify all deficiencies in internal control over 

financial reporting that are less severe than a material weakness. 

Definition and Inherent Limitations of Internal Control over Financial Reporting 

An entity’s internal control over financial reporting is a process effected by those charged with 

governance, management, and other personnel, the objectives of which are to provide 

reasonable assurance that (1) transactions are properly recorded, processed, and summarized 

to permit the preparation of financial statements in accordance with U.S. generally accepted 

accounting principles, and assets are safeguarded against loss from unauthorized acquisition, 

use, or disposition, and (2) transactions are executed in accordance with provisions of 

applicable laws, regulations, contracts, and grant agreements, noncompliance with which could 

have a material effect on the financial statements. 

Because of its inherent limitations, internal control over financial reporting may not prevent, or 

detect and correct, misstatements due to fraud or error. We also caution that projecting any 

evaluation of effectiveness to future periods is subject to the risk that controls may become 

inadequate because of changes in conditions, or that the degree of compliance with the policies 

or procedures may deteriorate.

Opinions on Financial Statements

In our opinion, 

• the DIF’s financial statements present fairly, in all material respects, the DIF’s financial 

position as of December 31, 2017, and 2016, and the results of its operations and its cash 

flows for the years then ended, in accordance with U.S. generally accepted accounting 

principles, and

• the FRF’s financial statements present fairly, in all material respects, the FRF’s financial 

position as of December 31, 2017, and 2016, and the results of its operations and its cash 

flows for the years then ended, in accordance with U.S. generally accepted accounting 

principles.

Opinions on Internal Control over Financial Reporting

In our opinion, 

• FDIC maintained, in all material respects, effective internal control over financial reporting 

relevant to the DIF as of December 31, 2017, based on criteria established under FMFIA

and 

• FDIC maintained, in all material respects, effective internal control over financial reporting 

relevant to the FRF as of December 31, 2017, based on criteria established under FMFIA.
2017

FINANCIAL SECTION 123

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued)

FDIC made progress during 2017 in addressing a significant deficiency6 that we reported in our 

2016 audit.7 Specifically, FDIC sufficiently addressed the deficiencies in information systems 

access and configuration management controls such that we no longer consider the remaining 

control deficiencies in this area, individually or collectively, to represent a significant deficiency 

as of December 31, 2017.

During our 2017 audit, we identified other deficiencies in FDIC’s internal control over financial 

reporting that we do not consider to be material weaknesses or significant deficiencies. 

Nonetheless, these deficiencies warrant FDIC management’s attention. We have communicated 

these matters to FDIC management and, where appropriate, will report on them separately.

Other Matters

Other Information

FDIC’s other information contains a wide range of information, some of which is not directly 

related to the financial statements. This information is presented for purposes of additional 

analysis and is not a required part of the financial statements. We read the other information 

included with the financial statements in order to identify material inconsistencies, if any, with 

the audited financial statements. Our audit was conducted for the purpose of forming opinions 

on the DIF and the FRF financial statements. We did not audit and do not express an opinion or 

provide any assurance on the other information. 

Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements

In connection with our audits of the financial statements of the DIF and of the FRF, both of 

which are administered by FDIC, we tested compliance with selected provisions of applicable 

laws, regulations, contracts, and grant agreements consistent with our auditor’s responsibility 

discussed below. We caution that noncompliance may occur and not be detected by these 

tests. We performed our tests of compliance in accordance with U.S. generally accepted 

government auditing standards.

Management’s Responsibility

FDIC management is responsible for complying with applicable laws, regulations, contracts, and 

grant agreements.

Auditor’s Responsibility

Our responsibility is to test compliance with selected provisions of applicable laws, regulations, 

contracts, and grant agreements that have a direct effect on the determination of material 

amounts and disclosures in the financial statements of the DIF and of the FRF, and to perform 

certain other limited procedures. Accordingly, we did not test FDIC’s compliance with all 

applicable laws, regulations, contracts, and grant agreements. 

 

6

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting 

that is less severe than a material weakness, yet important enough to merit attention by those charged with 

governance. 

7

GAO, Financial Audit: Federal Deposit Insurance Corporation Funds’ 2016 and 2015 Financial Statements, GAO-17-

299R (Washington, D.C.: Feb. 15, 2017). 
ANNUAL REPORT

124 FINANCIAL SECTION

GOVERNMENT ACCOUNTABILITY OFFICE 

AUDITOR’S REPORT (continued)

Results of Our Tests for Compliance with Laws, Regulations, Contracts, and Grant Agreements

Our tests for compliance with selected provisions of applicable laws, regulations, contracts, and 

grant agreements disclosed no instances of noncompliance for 2017 that would be reportable, 

with respect to the DIF and to the FRF, under U.S. generally accepted government auditing 

standards. However, the objective of our tests was not to provide an opinion on compliance with

applicable laws, regulations, contracts, and grant agreements. Accordingly, we do not express 

such an opinion. 

Intended Purpose of Report on Compliance with Laws, Regulations, Contracts, and Grant 

Agreements

The purpose of this report is solely to describe the scope of our testing of compliance with 

selected provisions of applicable laws, regulations, contracts, and grant agreements, and the 

results of that testing, and not to provide an opinion on compliance. This report is an integral 

part of an audit performed in accordance with U.S. generally accepted government auditing 

standards in considering compliance. Accordingly, this report on compliance with laws, 

regulations, contracts, and grant agreements is not suitable for any other purpose.

Agency Comments 

In commenting on a draft of this report, FDIC stated that it was pleased to receive unmodified 

opinions on the DIF’s and the FRF’s financial statements, and noted that we reported that FDIC 

had effective internal control over financial reporting and that there was no reportable 

noncompliance with tested provisions of applicable laws, regulations, contracts, and grant 

agreements. Further, FDIC stated that it remains committed to ensuring sound financial 

management remains a top priority. The complete text of FDIC’s response is reprinted in 

appendix II. 

James R. Dalkin

Director

Financial Management and Assurance

February 8, 2018
2017

FINANCIAL SECTION 125

MANAGEMENT’S REPORT ON INTERNAL CONTROL 

OVER FINANCIAL REPORTING

Appendix I
ANNUAL REPORT

126

MANAGEMENT’S RESPONSE TO THE AUDITOR’S REPORT

Appendix II

FINANCIAL SECTION
127

RISK MANAGEMENT 

AND INTERNAL 

CONTROLS

VI.
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129 129

2017

RISK MANAGEMENT AND INTERNAL CONTROLS

The FDIC uses several means to maintain 

comprehensive internal controls, ensure the overall 

effectiveness and efficiency of operations, and 

otherwise comply as necessary with the following 

federal standards, among others:

♦ Chief Financial Officers’ Act (CFO Act)

♦ Federal Managers’ Financial Integrity Act 

(FMFIA)

♦ Federal Financial Management Improvement 

Act (FFMIA)

♦ Government Performance and Results 

Act (GPRA)

♦ Federal Information Security Management 

Act (FISMA)

♦ OMB Circular A-123

♦ GAO’s Standards for Internal Control in the 

Federal Government

As a foundation for these efforts, the Division of 

Finance, Risk Management and Internal Controls 

Branch oversees a corporate-wide program of relevant 

activities by establishing policies and working with 

management in each division and office in the FDIC. 

The FDIC has made a concerted effort to ensure that 

financial, reputational, and operational risks have been 

identified and that corresponding control needs are 

being incorporated into day-to-day operations. The 

program also requires that comprehensive procedures 

be documented, employees be thoroughly trained, 

and supervisors be held accountable for performance 

and results. Compliance monitoring is carried out 

through periodic management reviews and by the 

distribution of various activity reports to all levels of 

management. Conscientious attention is also paid to 

the implementation of audit recommendations made 

by the FDIC Office of Inspector General, the GAO, 

and other providers of external/audit scrutiny. The 

FDIC has received unmodified/unqualified opinions 

on its financial statement audits for 26 consecutive 

years, and these and other positive results reflect 

the effectiveness of the overall management control 

program.

In 2017, efforts were focused on data mining, 

continuity of operations, process mapping, process 

improvements, internal controls of outsourced service 

providers, continuation of efforts on failed bank 

data, and systems security. Considerable energy was 

devoted to ensuring that the FDIC’s processes and 

systems of control have kept pace with the workload, 

and that the foundation of controls throughout the 

FDIC remained strong. 

During 2018, RMIC will continue to focus on 

enhancing FDIC’s Risk Management program, 

improving data mining capabilities, identifying 

performance metrics, mapping key operational areas, 

exploring opportunities for process improvement, 

monitoring FDIC’s internal controls over outsourced 

service providers, continuing efforts with stakeholders 

on failed bank data, and system security. Also, 

continued emphasis and management scrutiny will be 

applied to the accuracy and integrity of transactions 

and oversight of systems development efforts in 

general.

FRAUD REDUCTION AND 

DATA ANALYTICS ACT OF 2015

The Fraud Reduction and Data Analytics Act of 2015 

was signed into law on June 30, 2016. The law is 

intended to improve federal agency financial and 

administrative controls and procedures to assess and 

mitigate fraud risks, and to improve federal agencies’ 

development and use of data analytics for the purpose 

of identifying, preventing, and responding to fraud, 

including improper payments. 

The FDIC’s enterprise risk management and internal 

control program considers the potential for fraud and 

incorporates elements of Principle 8 – Assess Fraud 

Risk, of the GAO Standards of Internal Control in 

the Federal Government. The FDIC implemented 

a Fraud Risk Assessment Framework as a basis for 

identifying potential financial fraud risks and schemes, 

ensuring that preventive and detective controls are 

present and working as intended. Examples of fraud 

risks are contractor payments, wire transfers, travel 

card purchases, and theft of cash receipts. 
ANNUAL REPORT

130 RISK MANAGEMENT AND INTERNAL CONTROLS

As part of the Framework, potential fraud areas are 

identified and key controls are evaluated/implemented 

as proactive measures to fraud prevention. Although 

no system of internal control provides absolute 

assurance, the FDIC’s system of internal control 

can provide reasonable assurance that key controls 

are adequate and working as intended. Monitoring 

activities include supervisory approvals, management 

reports, and exception reporting.

FDIC management performs due diligence in areas 

of suspected or alleged fraud. At the conclusion of 

due diligence, the matter is either dropped or referred 

to the Office of Inspector General for investigation. 

During 2017, there has been no systemic fraud 

identified within the FDIC.

MANAGEMENT REPORT 

ON FINAL ACTIONS

As required under amended Section 5 of the 

Inspector General Act of 1978, the FDIC must report 

information on final action taken by management 

on certain audit reports. The tables on the following 

pages provide information on final action taken by 

management on audit reports for the federal fiscal 

year period October 1, 2016, through September 30, 

2017.

TABLE 2: 

MANAGEMENT REPORT ON FINAL ACTION ON AUDITS WITH RECOMMENDATIONS TO 

PUT FUNDS TO BETTER USE FOR FISCAL YEAR 2017

Dollars in Thousands

(There were no audit reports in this category.)

TABLE 1: 

MANAGEMENT REPORT ON FINAL ACTION ON AUDITS 

WITH DISALLOWED COSTS FOR FISCAL YEAR 2017

Dollars in Thousands

Audit Reports Number of 

Reports

Disallowed 

Costs 

A. Management decisions – final action not taken at beginning of period 1 $55

B. Management decisions made during the period 2 $6

C. Total reports pending final action during the period (A and B) 3 $61

D. 1. Recoveries: 

(a) Collections & offsets 3 $791

(b) Other 0 $0

2. Write-offs 0 $0

3. Total of 1 & 2 3 $79

E. Audit reports needing final action at the end of the period 0 $02

1 Amount collected in D1(a) included excess recoveries of $18,000 for one report, EVAL-16-005.

2 The amount is zero because all recoveries were collected during the reporting period.
2017

RISK MANAGEMENT AND INTERNAL CONTROLS 131

TABLE 3: 

AUDIT REPORTS WITHOUT FINAL ACTIONS BUT WITH MANAGEMENT DECISIONS 

OVER ONE YEAR OLD FOR FISCAL YEAR 2017

Report No. and 

Issue Date OIG Audit Finding Management Action Disallowed Costs

AUD-14-002

11/21/2013

The Director, Division of Administration 

(DOA) should coordinate with Division 

of Information Technology (DIT)

and FDIC division and office officials, 

as appropriate, to address potential 

gaps that may exist between the 12-

hour timeframe required to restore 

mission essential functions following 

an emergency and the 72-hour recovery 

time objective for restoring mission 

critical applications.

The Chief Information Officer 

Organization developed cost estimates for 

recovering applications within 12-72 hours 

and prepared a Board Case that presented 

the approach for meeting the associated 

continuity of operations objectives.

Due Date: Subsequently Closed

$0

AUD-15-008

09/16/2015

The Directors of RMS and DCP should 

coordinate to assess the effectiveness 

of the FDIC’s supervisory policy and 

approach with respect to the issues and 

risks discussed in this report after a 

reasonable period of time is allowed for 

implementation.

RMS, jointly with DCP, is developing 

the scope and methodology for the 

Survey, which will include participation 

of a cross-section of personnel in three 

regions to assess their implementation and 

understanding of supervisory guidance. 

The Survey will include a final written 

document summarizing the results.

Due Date: 3/30/2018

$0

AUD-16-001

10/28/2015

The Acting CIO should assess the 

ISM Outsourced Information Service 

Provider Assessment Methodology 

processes supporting information service 

provider assessments to determine and 

implement any needed improvements to 

ensure timely completion of assessments.

The Chief Information Officer 

Organization has developed a new 

methodology for managing the process. 

A transition plan will be developed and 

executed to ensure timely completion of 

assessments while the new methodology is 

being phased in.

Due Date: 6/30/2018

$0

AUD-16-004

07/07/2016

The CIO should revise procedures 

and controls for incident handling, to 

include major incidents, to ensure that 

risks associated with these incidents are 

sufficiently documented and supported 

by appropriate evidence.

Procedures were revised and controls 

improved to ensure that risks associated 

with incidents, to include major incidents, 

are sufficiently documented and supported 

by appropriate evidence.

Due Date: Completion undergoing 

independent review.

$0
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133

VII.

APPENDICES
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135 135

2017

A. KEY STATISTICS

APPENDICES

FDIC ACTIONS ON FINANCIAL INSTITUTIONS APPLICATIONS 

2015–2017

2017 2016 2015

Deposit Insurance 12 7 5

Approved1 12 7 5

Denied 0 0 0

New Branches 500 507 548

Approved 500 507 548

Denied 0 0 0

Mergers 218 245 270

Approved 218 245 270

Denied 0 0 0

Requests for Consent to Serve2 104 167 240

Approved 104 164 239

Section 19 1 9 7

Section 32 103 155 232

Denied 0 3 1

Section 19 0 0 0

Section 32 0 3 1

Notices of Change in Control 17 14 20

Letters of Intent Not to Disapprove 17 14 20

Disapproved 0 0 0

Brokered Deposit Waivers 12 14 20

Approved 11 13 20

Denied 1 1 0

Savings Association Activities 1 0 1

Approved 1 0 1

Denied 0 0 0

State Bank Activities/Investments3 2 5 10

Approved 2 5 10

Denied 0 0 0

Conversion of Mutual Institutions 5 5 4

Non-Objection 5 5 4

Objection 0 0 0

1 Includes deposit insurance application filed on behalf of (1) newly organized institutions, (2) existing uninsured financial services companies seeking 

establishment as an insured institution, and (3) interim institutions established to facilitate merger or conversion transactions, and applications to 

facilitate the establishment of thrift holding companies.

2 Under Section 19 of the Federal Deposit Insurance (FDI) Act, an insured institution must receive FDIC approval before employing a person convicted 

of dishonesty or breach of trust. Under Section 32, the FDIC must approve any change of directors or senior executive officers at a state nonmember 

bank that is not in compliance with capital requirements or is otherwise in troubled condition. 

3

 Section 24 of the FDI Act, in general, prohibits a federally-insured state bank from engaging in an activity not permissible for a national bank and 

requires notices to be filed with the FDIC.
ANNUAL REPORT

136 APPENDICES

COMBINED RISK AND CONSUMER ENFORCEMENT ACTIONS 

2015–2017

2017 2016 2015

Total Number of Actions Initiated by the FDIC 231 259 268

Termination of Insurance 9 5 11

Involuntary Termination 0 0 0

Sec. 8a For Violations, Unsafe/Unsound Practices or Conditions 0 0 0

Voluntary Termination 9 5 11

Sec. 8a By Order Upon Request 0 0 0

Sec. 8p No Deposits 8 5 6

Sec. 8q Deposits Assumed 1 0 5

Sec. 8b Cease-and-Desist Actions 26 30 48

Notices of Charges Issued 0 2 3

Orders to Pay Restitution 4 0 9

Consent Orders 14 26 36

Personal Cease and Desist Orders 8 2 0

Sec. 8e Removal/Prohibition of Director or Officer 65 97 88

Notices of Intention to Remove/Prohibit 7 8 4

Consent Orders 58 89 84

Sec. 8g Suspension/Removal When Charged With Crime 0 0 0

Civil Money Penalties Issued 47 37 45

Sec. 7a Call Report Penalties 0 0 0

Sec. 8i Civil Money Penalties 42 34 36

Sec. 8i Civil Money Penalty Notices of Assessment 5 3 9

Sec. 10c Orders of Investigation 9 10 19

Sec. 19 Waiver Orders 71 72 51

Approved Section 19 Waiver Orders 71 72 51

Denied Section 19 Waiver Orders 0 0 0

Sec. 32 Notices Disapproving Officer/Director’s Request for Review 0 1 0

Truth-in-Lending Act Reimbursement Actions 135 83 64

Denials of Requests for Relief 0 0 0

Grants of Relief 0 0 0

Banks Making Reimbursement* 135 83 64

Suspicious Activity Reports (Open and closed institutions)* 182,647 222,836 189,505

Other Actions Not Listed 4 7 6

* These actions do not constitute the initiation of a formal enforcement action and, therefore, are not included in the total number of actions initiated.
2017

APPENDICES 137

ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND, 

DECEMBER 31, 1934, THROUGH SEPTEMBER 30, 20171

Dollars in Millions (except Insurance Coverage)

Deposits in Insured 

Institutions2

Insurance Fund as 

a Percentage of

Year

Insurance 

Coverage2

Total Domestic 

Deposits

Est. Insured

Deposits

Percentage 

of Domestic 

Deposits

Deposit 

Insurance

Fund

Total 

Domestic 

Deposits

Est. Insured

Deposits

2017 $250,000 $11,963,382 $7,091,993 59.3 $90,505.9 0.76 1.28 

2016 250,000 11,691,575 6,914,305 59.1 83,161.5 0.71 1.20 

2015 250,000 10,950,122 6,522,388 59.6 72,600.2 0.66 1.11 

2014 250,000 10,408,187 6,196,472 59.5 62,780.2 0.60 1.01 

2013 250,000 9,825,479 5,998,238 61.0 47,190.8 0.48 0.79 

2012 250,000 9,474,720 7,402,053 78.1 32,957.8 0.35 0.45 

2011 250,000 8,782,291 6,973,483 79.4 11,826.5 0.13 0.17 

2010 250,000 7,887,858 6,301,542 79.9 (7,352.2) (0.09) (0.12)

2009 250,000 7,705,354 5,407,773 70.2 (20,861.8) (0.27) (0.39)

2008 100,000 7,505,408 4,750,783 63.3 17,276.3 0.23 0.36 

2007 100,000 6,921,678 4,292,211 62.0 52,413.0 0.76 1.22 

2006 100,000 6,640,097 4,153,808 62.6 50,165.3 0.76 1.21 

2005 100,000 6,229,753 3,890,930 62.5 48,596.6 0.78 1.25 

2004 100,000 5,724,621 3,622,059 63.3 47,506.8 0.83 1.31 

2003 100,000 5,223,922 3,452,497 66.1 46,022.3 0.88 1.33 

2002 100,000 4,916,078 3,383,598 68.8 43,797.0 0.89 1.29 

2001 100,000 4,564,064 3,215,581 70.5 41,373.8 0.91 1.29 

2000 100,000 4,211,895 3,055,108 72.5 41,733.8 0.99 1.37 

1999 100,000 3,885,826 2,869,208 73.8 39,694.9 1.02 1.38 

1998 100,000 3,817,150 2,850,452 74.7 39,452.1 1.03 1.38 

1997 100,000 3,602,189 2,746,477 76.2 37,660.8 1.05 1.37 

1996 100,000 3,454,556 2,690,439 77.9 35,742.8 1.03 1.33 

1995 100,000 3,318,595 2,663,873 80.3 28,811.5 0.87 1.08 

1994 100,000 3,184,410 2,588,619 81.3 23,784.5 0.75 0.92 

1993 100,000 3,220,302 2,602,781 80.8 14,277.3 0.44 0.55 

1992 100,000 3,275,530 2,677,709 81.7 178.4 0.01 0.01 

1991 100,000 3,331,312 2,733,387 82.1 (6,934.0) (0.21) (0.25)

1990 100,000 3,415,464 2,784,838 81.5 4,062.7 0.12 0.15 

1989 100,000 3,412,503 2,755,471 80.7 13,209.5 0.39 0.48 

1988 100,000 2,337,080 1,756,771 75.2 14,061.1 0.60 0.80 

1987 100,000 2,198,648 1,657,291 75.4 18,301.8 0.83 1.10 

1986 100,000 2,162,687 1,636,915 75.7 18,253.3 0.84 1.12 

1985 100,000 1,975,030 1,510,496 76.5 17,956.9 0.91 1.19 
ANNUAL REPORT

138 APPENDICES

ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND, 

DECEMBER 31, 1934, THROUGH SEPTEMBER 30, 20171

 (continued)

Dollars in Millions (except Insurance Coverage) 

Deposits in Insured 

Institutions2

Insurance Fund as 

a Percentage of

Year

Insurance 

Coverage2

Total Domestic 

Deposits

Est. Insured

Deposits

Percentage 

of Domestic 

Deposits

Deposit 

Insurance

Fund

Total

Domestic 

Deposits

Est. Insured

Deposits

1984 100,000 1,805,334 1,393,421 77.2 16,529.4 0.92 1.19 

1983 100,000 1,690,576 1,268,332 75.0 15,429.1 0.91 1.22 

1982 100,000 1,544,697 1,134,221 73.4 13,770.9 0.89 1.21 

1981 100,000 1,409,322 988,898 70.2 12,246.1 0.87 1.24 

1980 100,000 1,324,463 948,717 71.6 11,019.5 0.83 1.16 

1979 40,000 1,226,943 808,555 65.9 9,792.7 0.80 1.21 

1978 40,000 1,145,835 760,706 66.4 8,796.0 0.77 1.16 

1977 40,000 1,050,435 692,533 65.9 7,992.8 0.76 1.15 

1976 40,000 941,923 628,263 66.7 7,268.8 0.77 1.16 

1975 40,000 875,985 569,101 65.0 6,716.0 0.77 1.18 

1974 40,000 833,277 520,309 62.4 6,124.2 0.73 1.18 

1973 20,000 766,509 465,600 60.7 5,615.3 0.73 1.21 

1972 20,000 697,480 419,756 60.2 5,158.7 0.74 1.23 

1971 20,000 610,685 374,568 61.3 4,739.9 0.78 1.27 

1970 20,000 545,198 349,581 64.1 4,379.6 0.80 1.25 

1969 20,000 495,858 313,085 63.1 4,051.1 0.82 1.29 

1968 15,000 491,513 296,701 60.4 3,749.2 0.76 1.26 

1967 15,000 448,709 261,149 58.2 3,485.5 0.78 1.33 

1966 15,000 401,096 234,150 58.4 3,252.0 0.81 1.39 

1965 10,000 377,400 209,690 55.6 3,036.3 0.80 1.45 

1964 10,000 348,981 191,787 55.0 2,844.7 0.82 1.48 

1963 10,000 313,304 177,381 56.6 2,667.9 0.85 1.50 

1962 10,000 297,548 170,210 57.2 2,502.0 0.84 1.47 

1961 10,000 281,304 160,309 57.0 2,353.8 0.84 1.47 

1960 10,000 260,495 149,684 57.5 2,222.2 0.85 1.48 

1959 10,000 247,589 142,131 57.4 2,089.8 0.84 1.47 

1958 10,000 242,445 137,698 56.8 1,965.4 0.81 1.43 

1957 10,000 225,507 127,055 56.3 1,850.5 0.82 1.46 

1956 10,000 219,393 121,008 55.2 1,742.1 0.79 1.44 

1955 10,000 212,226 116,380 54.8 1,639.6 0.77 1.41 

1954 10,000 203,195 110,973 54.6 1,542.7 0.76 1.39 

1953 10,000 193,466 105,610 54.6 1,450.7 0.75 1.37 

1952 10,000 188,142 101,841 54.1 1,363.5 0.72 1.34 
2017

APPENDICES 139

ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND, 

DECEMBER 31, 1934, THROUGH SEPTEMBER 30, 20171

 (continued)

Dollars in Millions (except Insurance Coverage) 

Deposits in Insured 

Institutions2

Insurance Fund as 

a Percentage of

Year

Insurance 

Coverage2

Total Domestic 

Deposits

Est. Insured

Deposits

Percentage 

of Domestic 

Deposits

Deposit 

Insurance

Fund

Total

Domestic 

Deposits

Est. Insured

Deposits

1951 10,000 178,540 96,713 54.2 1,282.2 0.72 1.33 

1950 10,000 167,818 91,359 54.4 1,243.9 0.74 1.36 

1949 5,000 156,786 76,589 48.8 1,203.9 0.77 1.57 

1948 5,000 153,454 75,320 49.1 1,065.9 0.69 1.42 

1947 5,000 154,096 76,254 49.5 1,006.1 0.65 1.32 

1946 5,000 148,458 73,759 49.7 1,058.5 0.71 1.44 

1945 5,000 157,174 67,021 42.6 929.2 0.59 1.39 

1944 5,000 134,662 56,398 41.9 804.3 0.60 1.43 

1943 5,000 111,650 48,440 43.4 703.1 0.63 1.45 

1942 5,000 89,869 32,837 36.5 616.9 0.69 1.88 

1941 5,000 71,209 28,249 39.7 553.5 0.78 1.96 

1940 5,000 65,288 26,638 40.8 496.0 0.76 1.86 

1939 5,000 57,485 24,650 42.9 452.7 0.79 1.84 

1938 5,000 50,791 23,121 45.5 420.5 0.83 1.82 

1937 5,000 48,228 22,557 46.8 383.1 0.79 1.70 

1936 5,000 50,281 22,330 44.4 343.4 0.68 1.54 

1935 5,000 45,125 20,158 44.7 306.0 0.68 1.52 

1934 5,000 40,060 18,075 45.1 291.7 0.73 1.61 

1 For 2017, figures are as of September 30; all other prior years are as of December 31. Prior to 1989, figures are for the Bank Insurance Fund (BIF) 

only and exclude insured branches of foreign banks. For 1989 to 2005, figures represent the sum of the BIF and Savings Association Insurance Fund 

(SAIF) amounts; for 2006 to 2017, figures are for DIF. Amounts for 1989-2017 include insured branches of foreign banks. Prior to year-end 1991, 

insured deposits were estimated using percentages determined from June Call and Thrift Financial Reports.

2 The year-end 2008 coverage limit and estimated insured deposits do not reflect the temporary increase to $250,000 then in effect under the 

Emergency Economic Stabilization Act of 2008. The Dodd-Frank Wall Street Reform and Consumer Protection (Dodd-Frank) Act made this coverage 

limit permanent. The year-end 2009 coverage limit and estimated insured deposits reflect the $250,000 coverage limit. The Dodd-Frank Act also 

temporarily provided unlimited coverage for non-interest bearing transaction accounts for two years beginning December 31, 2010. Coverage for 

certain retirement accounts increased to $250,000 in 2006. Initial coverage limit was $2,500 from January 1 to June 30, 1934.
ANNUAL REPORT

140 APPENDICES

INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS, 

SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2017 

Dollars in Millions

Income Expenses and Losses

Year Total

Assessment 

Income

Assessment 

Credits

Investment 

and Other

Effective

Assessment 

Rate1 Total

Provision 

for 

Ins. Losses

Admin.

and 

Operating 

Expenses2

Interest

& Other 

Ins. 

Expenses

Funding 

Transfer

from the 

FSLIC 

Resolution Fund

Net 

Income/

(Loss)

TOTAL $242,293.1 $175,595.0 $11,392.9 $78,091.0 $149,306.1 $108,291.2 $31,549.0 $9,466.0 $139.5 $93,126.5 

2017 11,663.7 10,594.8 0.0 1,068.9 0.0717% 1,558.2 (183.1) 1,739.4 2.0 0 10,105.5 

2016 10,674.1 9,986.6 0.0 687.5 0.0699% 150.6 (1,567.9) 1,715.0 3.5 0 10,523.5 

2015 9,303.5 8,846.8 0.0 456.7 0.0647% (553.2) (2,251.3) 1,687.2 10.9 0 9,856.7 

2014 8,965.1 8,656.1 0.0 309.0 0.0663% (6,634.7) (8,305.5) 1,664.3 6.5 0 15,599.8 

2013 10,458.9 9,734.2 0.0 724.7 0.0775% (4,045.9) (5,659.4) 1,608.7 4.8 0 14,504.8 

2012 18,522.3 12,397.2 0.2 6,125.3 0.1012% (2,599.0) (4,222.6) 1,777.5 (153.9) 0 21,121.3 

2011 16,342.0 13,499.5 0.9 2,843.4 0.1115% (2,915.4) (4,413.6) 1,625.4 (127.2) 0 19,257.4 

2010 13,379.9 13,611.2 0.8 (230.5) 0.1772% 75.0 (847.8) 1,592.6 (669.8) 0 13,304.9 

2009 24,706.4 17,865.4 148.0 6,989.0 0.2330% 60,709.0 57,711.8 1,271.1 1,726.1 0 (36,002.6)

2008 7,306.3 4,410.4 1,445.9 4,341.8 0.0418% 44,339.5 41,838.8 1,033.5 1,467.2 0 (37,033.2)

2007 3,196.2 3,730.9 3,088.0 2,553.3 0.0093% 1,090.9 95.0 992.6 3.3 0 2,105.3 

2006 2,643.5 31.9 0.0 2,611.6 0.0005% 904.3 (52.1) 950.6 5.8 0 1,739.2 

2005 2,420.5 60.9 0.0 2,359.6 0.0010% 809.3 (160.2) 965.7 3.8 0 1,611.2 

2004 2,240.3 104.2 0.0 2,136.1 0.0019% 607.6 (353.4) 941.3 19.7 0 1,632.7 

2003 2,173.6 94.8 0.0 2,078.8 0.0019% (67.7) (1,010.5) 935.5 7.3 0 2,241.3 

2002 2,384.7 107.8 0.0 2,276.9 0.0023% 719.6 (243.0) 945.1 17.5 0 1,665.1 

2001 2,730.1 83.2 0.0 2,646.9 0.0019% 3,123.4 2,199.3 887.9 36.2 0 (393.3)

2000 2,570.1 64.3 0.0 2,505.8 0.0016% 945.2 28.0 883.9 33.3 0 1,624.9 

1999 2,416.7 48.4 0.0 2,368.3 0.0013% 2,047.0 1,199.7 823.4 23.9 0 369.7 

1998 2,584.6 37.0 0.0 2,547.6 0.0010% 817.5 (5.7) 782.6 40.6 0 1,767.1 

1997 2,165.5 38.6 0.0 2,126.9 0.0011% 247.3 (505.7) 677.2 75.8 0 1,918.2 

1996 7,156.8 5,294.2 0.0 1,862.6 0.1622% 353.6 (417.2) 568.3 202.5 0 6,803.2 

1995 5,229.2 3,877.0 0.0 1,352.2 0.1238% 202.2 (354.2) 510.6 45.8 0 5,027.0 

1994 7,682.1 6,722.7 0.0 959.4 0.2192% (1,825.1) (2,459.4) 443.2 191.1 0 9,507.2 

1993 7,354.5 6,682.0 0.0 672.5 0.2157% (6,744.4) (7,660.4) 418.5 497.5 0 14,098.9 

1992 6,479.3 5,758.6 0.0 720.7 0.1815% (596.8) (2,274.7) 614.83 1,063.1 35.4 7,111.5 

1991 5,886.5 5,254.0 0.0 632.5 0.1613% 16,925.3 15,496.2 326.1 1,103.0 42.4 (10,996.4)

1990 3,855.3 2,872.3 0.0 983.0 0.0868% 13,059.3 12,133.1 275.6 650.6 56.1 (9,147.9)

1989 3,494.8 1,885.0 0.0 1,609.8 0.0816% 4,352.2 3,811.3 219.9 321.0 5.6 (851.8)

1988 3,347.7 1,773.0 0.0 1,574.7 0.0825% 7,588.4 6,298.3 223.9 1,066.2 0 (4,240.7)

1987 3,319.4 1,696.0 0.0 1,623.4 0.0833% 3,270.9 2,996.9 204.9 69.1 0 48.5 

1986 3,260.1 1,516.9 0.0 1,743.2 0.0787% 2,963.7 2,827.7 180.3 (44.3) 0 296.4 

1985 3,385.5 1,433.5 0.0 1,952.0 0.0815% 1,957.9 1,569.0 179.2 209.7 0 1,427.6 

1984 3,099.5 1,321.5 0.0 1,778.0 0.0800% 1,999.2 1,633.4 151.2 214.6 0 1,100.3 

1983 2,628.1 1,214.9 164.0 1,577.2 0.0714% 969.9 675.1 135.7 159.1 0 1,658.2 

1982 2,524.6 1,108.9 96.2 1,511.9 0.0769% 999.8 126.4 129.9 743.5 0 1,524.8 
2017

APPENDICES 141

INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS, 

SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2017 (continued)

Dollars in Millions

Income Expenses and Losses

Year Total

Assessment 

Income

Assessment 

Credits

Investment 

and Other

Effective

Assessment 

Rate1 Total

Provision 

for 

Ins. Losses

Admin.

and 

Operating 

Expenses2

Interest

& Other 

Ins. 

Expenses

Funding 

Transfer

from the 

FSLIC 

Resolution Fund

Net 

Income/

(Loss)

1981 2,074.7 1,039.0 117.1 1,152.8 0.0714% 848.1 320.4 127.2 400.5 0 1,226.6 

1980 1,310.4 951.9 521.1 879.6 0.0370% 83.6 (38.1) 118.2 3.5 0 1,226.8 

1979 1,090.4 881.0 524.6 734.0 0.0333% 93.7 (17.2) 106.8 4.1 0 996.7 

1978 952.1 810.1 443.1 585.1 0.0385% 148.9 36.5 103.3 9.1 0 803.2 

1977 837.8 731.3 411.9 518.4 0.0370% 113.6 20.8 89.3 3.5 0 724.2 

1976 764.9 676.1 379.6 468.4 0.0370% 212.3 28.0 180.44 3.9 0 552.6 

1975 689.3 641.3 362.4 410.4 0.0357% 97.5 27.6 67.7 2.2 0 591.8 

1974 668.1 587.4 285.4 366.1 0.0435% 159.2 97.9 59.2 2.1 0 508.9 

1973 561.0 529.4 283.4 315.0 0.0385% 108.2 52.5 54.4 1.3 0 452.8 

1972 467.0 468.8 280.3 278.5 0.0333% 65.7 10.1 49.6 6.0 5 0 401.3 

1971 415.3 417.2 241.4 239.5 0.0345% 60.3 13.4 46.9 0.0 0 355.0 

1970 382.7 369.3 210.0 223.4 0.0357% 46.0 3.8 42.2 0.0 0 336.7 

1969 335.8 364.2 220.2 191.8 0.0333% 34.5 1.0 33.5 0.0 0 301.3 

1968 295.0 334.5 202.1 162.6 0.0333% 29.1 0.1 29.0 0.0 0 265.9 

1967 263.0 303.1 182.4 142.3 0.0333% 27.3 2.9 24.4 0.0 0 235.7 

1966 241.0 284.3 172.6 129.3 0.0323% 19.9 0.1 19.8 0.0 0 221.1 

1965 214.6 260.5 158.3 112.4 0.0323% 22.9 5.2 17.7 0.0 0 191.7 

1964 197.1 238.2 145.2 104.1 0.0323% 18.4 2.9 15.5 0.0 0 178.7 

1963 181.9 220.6 136.4 97.7 0.0313% 15.1 0.7 14.4 0.0 0 166.8 

1962 161.1 203.4 126.9 84.6 0.0313% 13.8 0.1 13.7 0.0 0 147.3 

1961 147.3 188.9 115.5 73.9 0.0323% 14.8 1.6 13.2 0.0 0 132.5 

1960 144.6 180.4 100.8 65.0 0.0370% 12.5 0.1 12.4 0.0 0 132.1 

1959 136.5 178.2 99.6 57.9 0.0370% 12.1 0.2 11.9 0.0 0 124.4 

1958 126.8 166.8 93.0 53.0 0.0370% 11.6 0.0 11.6 0.0 0 115.2 

1957 117.3 159.3 90.2 48.2 0.0357% 9.7 0.1 9.6 0.0 0 107.6 

1956 111.9 155.5 87.3 43.7 0.0370% 9.4 0.3 9.1 0.0 0 102.5 

1955 105.8 151.5 85.4 39.7 0.0370% 9.0 0.3 8.7 0.0 0 96.8 

1954 99.7 144.2 81.8 37.3 0.0357% 7.8 0.1 7.7 0.0 0 91.9 

1953 94.2 138.7 78.5 34.0 0.0357% 7.3 0.1 7.2 0.0 0 86.9 

1952 88.6 131.0 73.7 31.3 0.0370% 7.8 0.8 7.0 0.0 0 80.8 

1951 83.5 124.3 70.0 29.2 0.0370% 6.6 0.0 6.6 0.0 0 76.9 

1950 84.8 122.9 68.7 30.6 0.0370% 7.8 1.4 6.4 0.0 0 77.0 

1949 151.1 122.7 0.0 28.4 0.0833% 6.4 0.3 6.1 0.0 0 144.7 

1948 145.6 119.3 0.0 26.3 0.0833% 7.0 0.7 6.36 0.0 0 138.6 

1947 157.5 114.4 0.0 43.1 0.0833% 9.9 0.1 9.8 0.0 0 147.6 

1946 130.7 107.0 0.0 23.7 0.0833% 10.0 0.1 9.9 0.0 0 120.7 

1945 121.0 93.7 0.0 27.3 0.0833% 9.4 0.1 9.3 0.0 0 111.6 
ANNUAL REPORT

142 APPENDICES

INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS, 

SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2017 (continued)

Dollars in Millions

Income Expenses and Losses

Year Total

Assessment 

Income

Assessment 

Credits

Investment 

and Other

Effective

Assessment 

Rate1 Total

Provision 

for 

Ins. Losses

Admin.

and 

Operating 

Expenses2

Interest

& Other 

Ins. 

Expenses

Funding 

Transfer

from the 

FSLIC 

Resolution Fund

Net 

Income/

(Loss)

1944 99.3 80.9 0.0 18.4 0.0833% 9.3 0.1 9.2 0.0 0 90.0 

1943 86.6 70.0 0.0 16.6 0.0833% 9.8 0.2 9.6 0.0 0 76.8 

1942 69.1 56.5 0.0 12.6 0.0833% 10.1 0.5 9.6 0.0 0 59.0 

1941 62.0 51.4 0.0 10.6 0.0833% 10.1 0.6 9.5 0.0 0 51.9 

1940 55.9 46.2 0.0 9.7 0.0833% 12.9 3.5 9.4 0.0 0 43.0 

1939 51.2 40.7 0.0 10.5 0.0833% 16.4 7.2 9.2 0.0 0 34.8 

1938 47.7 38.3 0.0 9.4 0.0833% 11.3 2.5 8.8 0.0 0 36.4 

1937 48.2 38.8 0.0 9.4 0.0833% 12.2 3.7 8.5 0.0 0 36.0 

1936 43.8 35.6 0.0 8.2 0.0833% 10.9 2.6 8.3 0.0 0 32.9 

1935 20.8 11.5 0.0 9.3 0.0833% 11.3 2.8 8.5 0.0 0 9.5 

1933-34 7.0 0.0 0.0 7.0 N/A 10.0 0.2 9.8 0.0 0 (3.0)

1 The effective assessment rate is calculated from annual assessment income (net of assessment credits), excluding transfers to the Financing 

Corporation (FICO), Resolution Funding Corporation (REFCORP) and FSLIC Resolution Fund, divided by the average assessment base. Figures 

represent only BIF-insured institutions prior to 1990, and BIF- and SAIF-insured institutions from 1990 through 2005. After 1995, all thrift closings 

became the responsibility of the FDIC and amounts are reflected in the SAIF. Beginning in 2006, figures are for the DIF.

The annualized assessment rate for 2017 is based on full year assessment income divided by a four quarter average of 2017 quarterly assessment base 

amounts. The assessment base for fourth quarter 2017 was estimated using the third quarter 2017 assessment base and an assumed quarterly growth 

rate of one percent.

Historical Assessment Rates:

1934 – 1949 The statutory assessment rate was 0.0833 percent.

1950 – 1984 The effective assessment rates varied from the statutory 

rate of 0.0833 percent due to assessment credits 

provided in those years.

1985 – 1989 The statutory assessment rate was 0.0833 percent (no 

credits were given).

1990 The statutory rate increased to 0.12 percent.

1991 – 1992 The statutory rate increased to a minimum of 0.15 

percent. The effective rates in 1991 and 1992 varied 

because the FDIC exercised new authority to increase 

assessments above the statutory minimum rate when 

needed.

1993 – 2006 Beginning in 1993, the effective rate was based on a 

risk-related premium system under which institutions 

paid assessments in the range of 0.23 percent to 0.31 

percent. In May 1995, the BIF reached the mandatory 

recapitalization level of 1.25 percent. As a result, BIF 

assessment rates were reduced to a range of 0.04 

percent to 0.31 percent of assessable deposits, effective 

June 1995, and assessments totaling $1.5 billion were 

refunded in September 1995. Assessment rates for the 

BIF were lowered again to a range of 0 to 0.27 percent 

of assessable deposits, effective the start of 1996. In 

1996, the SAIF collected a one-time special assessment 

of $4.5 billion. Subsequently, assessment rates for the 

SAIF were lowered to the same range as the BIF, effective 

October 1996. This range of rates remained unchanged 

for both funds through 2006.

2007 – 2008 As part of the implementation of the Federal Deposit 

Insurance Reform Act of 2005, assessment rates were 

increased to a range of 0.05 percent to 0.43 percent of 

assessable deposits effective at the start of 2007, but 

many institutions received a one-time assessment credit 

($4.7 billion in total) to offset the new assessments.

2009 – 2011 For the first quarter of 2009, assessment rates were 

increased to a range of 0.12 percent to 0.50 percent 

of assessable deposits. On June 30, 2009, a special 

assessment was imposed on all insured banks and 

thrifts, which amounted in aggregate to approximately 

$5.4 billion. For 8,106 institutions, with $9.3 trillion in 

assets, the special assessment was 5 basis points of 

each insured institution’s assets minus tier one capital; 

89 other institutions, with assets of $4.0 trillion, had their 

special assessment capped at 10 basis points of their 

second quarter assessment base. From the second 

quarter of 2009 through the first quarter of 2011, initial 

assessment rates ranged between 0.12 percent and 0.45 

percent of assessable deposits. Initial rates are subject 

to further adjustments.
2017

APPENDICES 143

2011 – 2016 Beginning in the second quarter of 2011, the assessment 

base changed to average total consolidated assets 

less average tangible equity (with certain adjustments 

for banker’s banks and custodial banks), as required 

by the Dodd-Frank Act. The FDIC implemented a new 

assessment rate schedule at the same time to conform 

to the larger assessment base. Initial assessment 

rates were lowered to a range of 0.05 percent to 0.35 

percent of the new base. The annualized assessment 

rates averaged approximately 17.6 cents per $100 of 

assessable deposits for the first quarter of 2011 and 

11.1 cents per $100 of the new base for the last three 

quarters of 2011 (which is shown in the table).

2016 Beginning July 1, 2016, initial assessment rates were 

lowered from a range of 5 basis points to 35 basis points 

to a range of 3 basis points to 30 basis points, and 

an additional surcharge was imposed on large banks 

(generally institutions with $10 billion or more in assets) of 

4.5 basis points of their assessment base (after making 

adjustments).

2 These expenses, which are presented as operating expenses in the Statement of Income and Fund Balance, pertain to the FDIC in its corporate 

capacity only and do not include costs that are charged to the failed bank receiverships that are managed by the FDIC. The receivership expenses are 

presented as part of the “Receivables from Resolutions, net” line on the Balance Sheet. The narrative and graph presented on page 91 of this report 

shows the aggregate (corporate and receivership) expenditures of the FDIC.

3 Includes $210 million for the cumulative effect of an accounting change for certain postretirement benefits (1992).

4 Includes a $106 million net loss on government securities (1976).

5 This amount represents interest and other insurance expenses from 1933 to 1972.

6 Includes the aggregate amount of $81 million of interest paid on capital stock between 1933 and 1948.
ANNUAL REPORT

144 APPENDICES

FDIC INSURED INSTITUTIONS CLOSED DURING 2017

Dollars in Thousands

Codes for Bank Class:

NM = State-chartered bank that is not a 

 member of the Federal Reserve System

N = National Bank

SB = Savings Bank

SI = Stock and Mutual 

Savings Bank

SM= State-chartered bank that is a 

member of the Federal Reserve System

SA = Savings Association

Name and Location

Bank 

Class

Number

of 

Deposit 

Accounts

Total 

Assets1

Total 

Deposits1

Insured 

Deposit 

Funding and 

Other 

Disbursements

Estimated 

Loss to 

the DIF2

Date of 

Closing 

or Acquisition

Receiver/Assuming 

Bank and Location

Purchase and Assumption - All Deposits

First NBC Bank

New Orleans, LA

NM 53,549 $3,325,870 $3,032,208 $2,966,960 $826,903 04/28/17 Whitney Bank

Gulfport, MS

Guaranty Bank

Milwaukee, WI

SA 287,742 $1,031,900 $1,002,026 $988,104 $143,423 05/05/17 First-Citizens Bank 

& Trust Company

Raleigh, NC

Fayette County Bank

Saint Elmo, IL

SM 1,257 $34,370 $33,972 $32,625 $9,015 05/26/17 United Fidelity 

Bank, FSB

Evansville, IN

Insured Deposit Transfer

Washington Federal 

Bank for Savings

Chicago, IL

SA 2,593 $166,345 $143,964 $137,509 $60,511 12/15/17 Royal 

Savings Bank

Chicago, IL

Whole Bank Purchase and Assumption - All Deposits

Harvest 

Community Bank

Pennsville, NJ

NM 7,083 $124,223 $122,177 $122,425 $22,689 01/13/17 First-Citizens Bank 

& Trust Company

Raleigh, NC

Seaway Bank and 

Trust Company

Chicago, IL

NM 19,239 $297,809 $256,505 $244,633 $55,465 01/27/17 State Bank 

of Texas

Dallas, TX

Proficio Bank

Cottonwood 

Heights, UT

NM 253 $68,208 $65,042 $57,157 $11,763 03/03/17 Cache Valley Bank

Logan, UT

The Farmers and 

Merchants State 

Bank of Argonia

Argonia, KS

NM 1,407 $33,012 $27,466 $27,411 $2,595 10/13/17 Conway Bank

Conway 

Springs, KS

1 Total Assets and Total Deposits data are based upon the last Call Report filed by the institution prior to failure.

2 Estimated losses are as of December 31, 2017. Estimated losses are routinely adjusted with updated information from new appraisals and asset 

sales, which ultimately affect the asset values and projected recoveries. Represents the estimated loss to the DIF from deposit insurance obligations. 
2017

APPENDICES 145

RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS 

FOR THE PROTECTION OF DEPOSITORS, 1934 - 2017

Dollars in Thousands

Bank and Thrift Failures1

Year2

Number 

of Banks/

Thrifts

Total 

Assets3

Total 

Deposits3 Funding4 Recoveries5

Estimated 

Additional 

Recoveries

Final and 

Estimated 

Losses6

2,623 $946,643,412 $713,234,800 $586,955,906 $415,743,180 $64,090,944 $107,121,782 

2017 8 5,081,737 4,683,360 4,576,824 1,372,516 2,071,944 1,132,364 

2016 5 277,182 268,516 261,476 0 214,362 47,114 

2015 8 6,706,038 4,870,464 4,561,973 743,513 2,951,918 866,542 

2014 18 2,913,503 2,691,485 2,681,159 455,889 1,833,025 392,245 

2013 24 6,044,051 5,132,246 5,020,975 273,511 3,499,492 1,247,972 

2012 51 11,617,348 11,009,630 11,039,374 1,722,978 6,854,792 2,461,604 

2011 92 34,922,997 31,071,862 30,710,664 3,217,179 20,989,325 6,504,160 

20107 157 92,084,988 78,290,185 82,305,089 55,641,718 10,307,410 16,355,961 

20097 140 169,709,160 137,835,121 136,081,390 95,397,606 13,759,165 26,924,619 

20087 25 371,945,480 234,321,715 205,833,992 184,490,213 3,182,784 18,160,995 

2007 3 2,614,928 2,424,187 1,920,667 1,461,932 296,884 161,851 

2006 0 0 0 0 0 0 0 

2005 0 0 0 0 0 0 0 

2004 4 170,099 156,733 139,236 134,978 341 3,917 

2003 3 947,317 901,978 883,772 812,933 8,192 62,647 

2002 11 2,872,720 2,512,834 1,567,805 1,711,173 (493,685) 350,317 

2001 4 1,821,760 1,661,214 21,131 1,138,677 (1,410,011) 292,465 

2000 7 410,160 342,584 297,313 265,175 0 32,138 

1999 8 1,592,189 1,320,573 1,308,274 711,758 10,035 586,481 

1998 3 290,238 260,675 293,091 58,248 12,486 222,357 

1997 1 27,923 27,511 25,546 20,520 0 5,026 

1996 6 232,634 230,390 201,533 140,918 0 60,615 

1995 6 802,124 776,387 609,043 524,571 0 84,472 

1994 13 1,463,874 1,397,018 1,224,769 1,045,718 0 179,051 

1993 41 3,828,939 3,509,341 3,841,658 3,209,012 0 632,646 

1992 120 45,357,237 39,921,310 14,541,476 10,866,760 567 3,674,149 

1991 124 64,556,512 52,972,034 21,501,674 15,496,730 1,918 6,003,026 

1990 168 16,923,462 15,124,454 10,812,484 8,040,995 0 2,771,489 

1989 206 28,930,572 24,152,468 11,443,281 5,247,995 0 6,195,286 

1988 200 38,402,475 26,524,014 10,432,655 5,055,158 0 5,377,497 

1987 184 6,928,889 6,599,180 4,876,994 3,014,502 0 1,862,492 

1986 138 7,356,544 6,638,903 4,632,121 2,949,583 0 1,682,538 

1985 116 3,090,897 2,889,801 2,154,955 1,506,776 0 648,179 

1984 78 2,962,179 2,665,797 2,165,036 1,641,157 0 523,879 

1983 44 3,580,132 2,832,184 3,042,392 1,973,037 0 1,069,355 

1982 32 1,213,316 1,056,483 545,612 419,825 0 125,787 

1981 7 108,749 100,154 114,944 105,956 0 8,988 

1980 10 239,316 219,890 152,355 121,675 0 30,680 

1934 - 1979 558 8,615,743 5,842,119 5,133,173 4,752,295 0 380,878
ANNUAL REPORT

146 APPENDICES

RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS 

FOR THE PROTECTION OF DEPOSITORS, 1934 - 2017

Dollars in Thousands

Assistance Transactions1

Year2

Number 

of Banks/

Thrifts

Total 

Assets3

Total 

Deposits3 Funding4 Recoveries5

Estimated 

Additional 

Recoveries

Final and 

Estimated 

Losses6

154 $3,317,099,253 $1,442,173,417 $11,630,356 $6,199,875 $0 $5,430,481 

2017 0 0 0 0 0 0 0 

2016 0 0 0 0 0 0 0 

2015 0 0 0 0 0 0 0 

2014 0 0 0 0 0 0 0 

2013 0 0 0 0 0 0 0 

2012 0 0 0 0 0 0 0 

2011 0 0 0 0 0 0 0 

2010 0 0 0 0 0 0 0 

20098 8 1,917,482,183 1,090,318,282 0 0 0 0 

20088 5 1,306,041,994 280,806,966 0 0 0 0 

2007 0 0 0 0 0 0 0 

2006 0 0 0 0 0 0 0 

2005 0 0 0 0 0 0 0 

2004 0 0 0 0 0 0 0 

2003 0 0 0 0 0 0 0 

2002 0 0 0 0 0 0 0 

2001 0 0 0 0 0 0 0 

2000 0 0 0 0 0 0 0 

1999 0 0 0 0 0 0 0 

1998 0 0 0 0 0 0 0 

1997 0 0 0 0 0 0 0 

1996 0 0 0 0 0 0 0 

1995 0 0 0 0 0 0 0 

1994 0 0 0 0 0 0 0 

1993 0 0 0 0 0 0 0 

1992 2 33,831 33,117 1,486 1,236 0 250 

1991 3 78,524 75,720 6,117 3,093 0 3,024 

1990 1 14,206 14,628 4,935 2,597 0 2,338 

1989 1 4,438 6,396 2,548 252 0 2,296 

1988 80 15,493,939 11,793,702 1,730,351 189,709 0 1,540,642 

1987 19 2,478,124 2,275,642 160,877 713 0 160,164 

1986 7 712,558 585,248 158,848 65,669 0 93,179 
2017

APPENDICES 147

RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS 

FOR THE PROTECTION OF DEPOSITORS, 1934 - 2017 (continued)

Dollars in Thousands

Assistance Transactions1

Year2

Number 

of Banks/

Thrifts

Total 

Assets3

Total 

Deposits3 Funding4 Recoveries5

Estimated 

Additional 

Recoveries

Final and 

Estimated 

Losses6

1985 4 5,886,381 5,580,359 765,732 406,676 0 359,056 

1984 2 40,470,332 29,088,247 5,531,179 4,414,904 0 1,116,275 

1983 4 3,611,549 3,011,406 764,690 427,007 0 337,683 

1982 10 10,509,286 9,118,382 1,729,538 686,754 0 1,042,784 

1981 3 4,838,612 3,914,268 774,055 1,265 0 772,790 

1980 1 7,953,042 5,001,755 0 0 0 0 

1934-1979 4 1,490,254 549,299 0 0 0 0

1 Institutions for which the FDIC is appointed receiver, including deposit payoff, insured deposit transfer, and deposit assumption cases.

2 For 1990 through 2005, amounts represent the sum of BIF and SAIF failures (excluding those handled by the RTC); prior to 1990, figures are only 

for the BIF. After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. For 2006 to 2017, figures are 

for the DIF.

3 Assets and deposit data are based on the last Call Report or TFR filed before failure.

4 Funding represents the amounts provided by the DIF to receiverships for subrogated claims, advances for working capital, and administrative 

expenses paid on their behalf. Beginning in 2008, the DIF resolves failures using whole-bank purchase and assumption transactions, most with an 

accompanying shared-loss agreement (SLA). The DIF satisfies any resulting liabilities by offsetting receivables from resolutions when receiverships 

declare a dividend and/or sending cash directly to receiverships to fund an SLA and other expenses.

5 Recoveries represent cash received and dividends (cash and non-cash) declared by receiverships.

6 Final losses represent actual losses for unreimbursed subrogated claims of inactivated receiverships. Estimated losses represent the difference 

between the amount paid by the DIF to cover obligations to insured depositors and the estimated recoveries from the liquidation of receivership 

assets.

7 Includes amounts related to transaction account coverage under the Transaction Account Guarantee Program (TAG). The estimated losses as of 

December 31, 2017, for TAG accounts in 2010, 2009, and 2008 are $378 million, $1.1 billion, and $13 million, respectively.

8 Includes institutions where assistance was provided under a systemic risk determination.
ANNUAL REPORT

148 APPENDICES

NUMBER, ASSETS, DEPOSITS, LOSSES, AND LOSS TO FUNDS OF INSURED 

THRIFTS TAKEN OVER OR CLOSED BECAUSE OF FINANCIAL DIFFICULTIES, 

1989 THROUGH 19951

Dollars in Thousands

Year

Number of 

Institutions Assets Deposits

Final 

Receivership 

Loss2

Loss to 

Fund3

Total 748 $393,986,574 $318,328,770 $75,977,846 $81,581,231

1995 2 423,819 414,692 28,192 27,750 

1994 2 136,815 127,508 11,472 14,599 

1993 10 6,147,962 5,708,253 267,595 65,212 

1992 59 44,196,946 34,773,224 3,286,908 3,832,145 

1991 144 78,898,904 65,173,122 9,235,967 9,734,263 

1990 213 129,662,498 98,963,962 16,062,685 19,257,578 

19894 318 134,519,630 113,168,009 47,085,027 48,649,684

1

 Beginning in 1989 through July 1, 1995, all thrift closings were the responsibility of the Resolution Trust Corporation (RTC). Since the RTC was 

terminated on December 31, 1995, and all assets and liabilities transferred to the FSLIC Resolution Fund (FRF), all the results of the thrift closing activity 

from 1989 through 1995 are now reflected on the FRF’s books. Year is the year of failure, not the year of resolution.

2

 The Final Receivership Loss represents the loss at the fund level from receiverships for unreimbursed subrogated claims of the FRF and unpaid 

advances to receiverships from the FRF.

3

 The Loss to Fund represents the total resolution cost of the failed thrifts in the FRF-RTC fund. In addition to the receivership losses, this includes 

corporate revenue and expense items such as interest expense on Federal Financing Bank debt, interest expense on escrowed funds, administrative 

expenses, and interest revenue on advances to receiverships.

4

 Total for 1989 excludes nine failures of the former FSLIC.
2017

APPENDICES 149

B. MORE ABOUT THE FDIC

FDIC Board of Directors

Martin J. Gruenberg 

Martin J. Gruenberg is the 

20th Chairman of the FDIC, 

receiving Senate confirmation 

on November 15, 2012, for a 

five-year term. Mr. Gruenberg 

served as Vice Chairman and 

Member of the FDIC Board 

of Directors from August 22, 

2005, until his confirmation as Chairman. He served 

as Acting Chairman from July 9, 2011, to November 

15, 2012, and also from November 16, 2005, to 

June 26, 2006.

Mr. Gruenberg joined the FDIC Board after broad 

congressional experience in the financial services and 

regulatory areas. He served as Senior Counsel to 

Senator Paul S. Sarbanes (D-MD) on the staff of the 

Senate Committee on Banking, Housing, and Urban 

Affairs from 1993 to 2005. Mr. Gruenberg advised 

the Senator on issues of domestic and international 

financial regulation, monetary policy, and trade. 

He also served as Staff Director of the Banking 

Committee’s Subcommittee on International Finance 

and Monetary Policy from 1987 to 1992. Major 

legislation in which Mr. Gruenberg played an active 

role during his service on the Committee includes 

the Financial Institutions Reform, Recovery, and 

Enforcement Act of 1989 (FIRREA); the Federal 

Deposit Insurance Corporation Improvement Act of 

1991 (FDICIA); the Gramm-Leach-Bliley Act; and 

the Sarbanes-Oxley Act of 2002.

Mr. Gruenberg served as Chairman of the Executive 

Council and President of the International Association 

of Deposit Insurers (IADI) from November 2007 to 

November 2012.

Mr. Gruenberg holds a J.D. from Case Western 

Reserve Law School and an A.B. from Princeton 

University, Woodrow Wilson School of Public and 

International Affairs.

Thomas M. Hoenig

Thomas M. Hoenig was 

confirmed by the Senate as 

Vice Chairman of the FDIC 

on November 15, 2012. He 

joined the FDIC on April 

16, 2012, as a member of 

the Board of Directors of the 

FDIC for a six-year term. 

Prior to serving on the FDIC Board, Mr. Hoenig was 

the President of the Federal Reserve Bank of Kansas 

City and a member of the Federal Reserve System’s 

Federal Open Market Committee from 1991 to 2011.

Mr. Hoenig was with the Federal Reserve for 38 

years, beginning as an economist, and then as a 

senior officer in banking supervision during the U.S. 

banking crisis of the 1980s. In 1986, he led the 

Kansas City Federal Reserve Bank’s Division of Bank 

Supervision and Structure, directing the oversight of 

more than 1,000 banks and bank holding companies 

with assets ranging from less than $100 million to 

$20 billion. He became President of the Kansas City 

Federal Reserve Bank on October 1, 1991.

Mr. Hoenig is a native of Fort Madison, Iowa, and 

received a doctorate in economics from Iowa State 

University.
ANNUAL REPORT

150 APPENDICES

Mick Mulvaney 

Mick Mulvaney is Acting 

Director of the Consumer 

Financial Protection Bureau.

Mick Mulvaney is the current 

Director of the Office of 

Management and Budget and 

the Acting Director of the 

Consumer Financial Protection Bureau.

Prior to his appointments, he served the people of the 

5th District of South Carolina as their Congressman 

where he was first elected in 2010, he is the first 

Republican member to hold the seat in 128 years.

A lifelong Carolinas resident, he attended Georgetown 

University, graduating with honors in International 

Economics, Commerce, and Finance. He completed 

his formal education at Harvard Business School’s 

OPM program in 2006.

While in the private sector, he was a lawyer, a real 

estate developer, a home builder, and a restaurant 

franchiser and franchisee.

While in Congress, he served on the Budget 

Committee, Joint Economic Committee, Small 

Business Committee, Financial Services Committee, 

and the Oversight and Government Reform 

Committee.

He is a regular spokesperson for the Administration, 

having appeared on major network shows, including: 

Meet the Press, Face the Nation, This Week, and Fox 

News Sunday. He also makes regular appearances 

on cable television news, national radio, and online 

media.

Mick and Pam were married in 1998, and are the 

proud parents of triplets: James, Caroline, and 

Finnegan, and two great Danes: Guiness and Harper. 

Joseph M. Otting

Joseph M. Otting was sworn 

in as the 31st Comptroller of 

the Currency on November 

27, 2017.

The Comptroller of the 

Currency is the administrator 

of the federal banking system 

and chief officer of the Office of the Comptroller of 

the Currency (OCC). The OCC supervises nearly 

1,400 national banks, federal savings associations, 

and federal branches and agencies of foreign banks 

operating in the United States. The mission of the 

OCC is to ensure that national banks and federal 

savings associations operate in a safe and sound 

manner, provide fair access to financial services, treat 

customers fairly, and comply with applicable laws and 

regulations.

The Comptroller also serves as a director of the 

Federal Deposit Insurance Corporation and member 

of the Financial Stability Oversight Council and the 

Federal Financial Institutions Examination Council.

Prior to becoming Comptroller of the Currency, Mr. 

Otting was an executive in the banking industry. He 

served as President of CIT Bank and Co-President of 

CIT Group from August 2015 to December 2015.

Mr. Otting previously was President, Chief Executive 

Officer, and a member of the Board of Directors 

of OneWest Bank, N.A. Prior to joining OneWest 

Bank, he served as Vice Chairman of U.S. Bancorp, 

where he managed the Commercial Banking Group 

and served on the Bancorp’s executive management 

committee. He also served as a member of U.S. 

Bank’s main subsidiary banks’ Board of Directors.

From 1994 to 2001, Mr. Otting was with Union 

Bank of California, where he was Executive Vice 

President and Group Head of Commercial Banking. 

Before joining Union Bank, he was with Bank of 

America and held positions in branch management, 

preferred banking, and commercial lending.
2017

APPENDICES 151

Mr. Otting has played significant roles in charitable 

and community development organizations. He has 

served as a board member for the California Chamber 

of Commerce, the Killebrew-Thompson Memorial 

foundation, the Associated Oregon Industries, the 

Oregon Business Council, the Portland Business 

Alliance, the Minnesota Chamber of Commerce, and 

Blue Cross Blue Shield of Oregon. He was also a 

member of the Financial Services Roundtable, the Los 

Angeles Chamber of Commerce, and the Board and 

Executive Committee of the Los Angeles Economic 

Development Corporation.

Mr. Otting holds a bachelor of arts in management 

from the University of Northern Iowa and is a 

graduate of the School of Credit and Financial 

Management, which was held at Dartmouth College 

in Hanover, New Hampshire.

Thomas J. Curry

Thomas J. Curry, former Comptroller of the 

Currency, resigned from the FDIC Board of Directors 

as of May 5, 2017. Mr. Curry served as a director 

of the FDIC beginning in 2004 and was the secondlongest serving Board member in FDIC history. 

Richard Cordray

Richard Cordray, former Director of the Consumer 

Financial Protection Bureau, resigned on November 

24, 2017. Mr. Cordray served as the first Director of 

the Consumer Financial Protection Bureau.
ANNUAL REPORT

152 APPENDICES

DIVISION OF INFORMATION 

TECHOLOGY

Russell G. Pittman

Director

OFFICE OF CHIEF INFORMATION 

SECURITY OFFICER

Noreen Padilla

 Acting Chief Information 

Security Ofcer

DEPUTY TO THE CHAIRMAN 

AND CHIEF OPERATING OFFICER,

CHIEF OF STAFF

Barbara A. Ryan

SPECIAL ADVISOR FOR

SUPERVISORY MATTERS

Jason C. Cave

SPECIAL ADVISOR FOR

INFORMATION TECHOLOGY

Lawrence Gross

DEPUTY TO THE CHAIRMAN

Kymberly K. Copa

CHIEF INFORMATION OFFICER 

AND CHIEF PRIVACY OFFICER

Howard Whyte

DEPUTY TO THE CHAIRMAN 

AND CHIEF FINANCIAL OFFICER

Steven O. App

INTERNAL OMBUDSMAN

Robert D. Harris

OFFICE OF INSPECTOR GENERAL

Jay N. Lerner

Inspector General

DEPUTY TO THE CHAIRMAN

FOR COMMUNICATIONS

Barbara Hagenbaugh

SPECIAL ADVISOR

Arthur Murton

WRITER-EDITOR

Michele A. Heller

OFFICE OF 

COMMUNICATIONS

DIVISION OF RESOLUTIONS 

AND RECEIVERSHIPS

Bret D. Edwards

Director

LEGAL DIVISION

Charles Yi

General Counsel

DIVISION OF INSURANCE 

AND RESEARCH

Diane Ellis

Director

DIVISION OF DEPOSITOR 

AND CONSUMER PROTECTION

Mark E. Pearce

Director

OFFICE OF COMPLEX

FINANCIAL INSTITUTIONS

Ricardo (Rick) Deln

Director

DIVISION OF RISK 

MANAGEMENT SUPERVISION

Doreen R. Eberley

Director

DIVISION OF 

ADMINISTRATION

Arleas Upton Kea

Director

DIVISION OF FINANCE

Craig R. Jarvill

Director

CORPORATE UNIVERSITY

Suzannah L. Susser

Chief Learning Ofcer and Director

OFFICE OF 

LEGISLATIVE AFFAIRS

Andy Jiminez

Director

OFFICE OF 

THE OMBUDSMAN

M. Anthony Lowe

Ombudsman

OFFICE OF MINORITY AND 

WOMEN INCLUSION

Saul Schwartz

 Acting Director 

OFFICE OF FINANCIAL 

INSTITUTION ADJUDICATION

C. Richard Miserendino

 Administrative Law Judge

BOARD OF DIRECTORS

Martin J. Gruenberg

FDIC

Chairman

Vacant

FDIC

Board Member

Thomas M. Hoenig

FDIC

Vice Chairman, Board Member

Joseph Otting

OCC

Board Member

Mick Mulvaney

CFPB (Acting Director)

Board Member

FDIC ORGANIZATION CHART/OFFICIALS
2017

APPENDICES 153

Notes: 2008-2017 staffing totals reflect year-end full time equivalent staff. 

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

9,000

6,000

3,000

0

4,988 6,557 8,150 7,973 7,476

FDIC Year–End On-Board Stafng

7,254 6,631 6,385 6,096 5,880

CORPORATE STAFFING 

STAFFING TRENDS 2008-2017
ANNUAL REPORT

154 APPENDICES

NUMBER OF EMPLOYEES BY DIVISION/OFFICE 2016 AND 2017 (YEAR-END)1

Total Washington Regional/

Division or Office: 2017 2016 2017 2016 2017 2016

Division of Risk Management Supervision 2,558 2,627 197 204 2,361 2,423

Division of Depositor and Consumer Protection 831 838 120 116 711 722

Division of Resolutions and Receiverships 457 537 134 138 323 399

Legal Division 506 531 326 340 180 191

Division of Administration 358 370 246 256 112 114

Division of Information Technology 276 301 219 237 57 64

Corporate University 217 210 211 202 6 8

Division of Insurance and Research 194 193 157 153 37 40

Division of Finance 166 167 162 164 4 3

Office of the Chief Information Security Officer2 36 34 36 34 0 0

Office of Inspector General 126 122 78 76 48 47

Office of Complex Financial Institutions 62 67 48 50 14 17

Executive Offices3 26 22 26 22 0 0

Executive Support Offices4 68 79 60 72 8 7

TOTAL 5,880 6,096 2,019 2,062 3,861 4,034

1 The FDIC reports staffing totals using a full-time equivalent methodology, which is based on an employee’s scheduled work hours. Division/Office 

staffing has been rounded to the nearest whole FTE. Totals may not foot due to rounding.

2

 Formerly known as the Information Security and Privacy Staff.

3

 Includes the Offices of the Chairman, Vice Chairman, Director (Appointive), Chief Operating Officer, Chief Financial Officer, and Chief lnformation Officer.

4

 Includes the Offices of Legislative Affairs, Communications, Ombudsman, Minority and Women Inclusion, and Corporate Risk Management 

(the functions of which were absorbed by the Division of Finance in 2017).
2017

APPENDICES 155

FDIC Website

www.fdic.gov

A wide range of banking, consumer, and financial 

information is available on the FDIC’s website. This 

includes the FDIC’s Electronic Deposit Insurance 

Estimator (EDIE), which estimates an individual’s 

deposit insurance coverage; the Institution Directory, 

which contains financial profiles of FDIC-insured 

institutions; Community Reinvestment Act 

evaluations and ratings for institutions supervised by 

the FDIC; Call Reports, which are bank reports of 

condition and income; and Money Smart, a training 

program to help individuals outside the financial 

mainstream enhance their money management skills 

and create positive banking relationships. Readers 

also can access a variety of consumer pamphlets, 

FDIC press releases, speeches, and other updates on 

the agency’s activities, as well as corporate databases 

and customized reports of FDIC and banking 

industry information. 

FDIC Call Center

Phone: 877-275-3342 (877-ASK-FDIC) 

703-562-2222 

Hearing Impaired: 800-925-4618 

703-562-2289 

The FDIC Call Center in Washington, DC, is the 

primary telephone point of contact for general 

questions from the banking community, the public, 

and FDIC employees. The Call Center directly, or 

with other FDIC subject-matter experts, responds to 

questions about deposit insurance and other consumer 

issues and concerns, as well as questions about FDIC 

programs and activities. The Call Center also refers 

callers to other federal and state agencies as needed. 

Hours of operation are 8:00 a.m. to 8:00 p.m., 

Eastern Time, Monday – Friday, and 9:00 a.m. to 

5:00 p.m., Saturday – Sunday. Recorded information 

about deposit insurance and other topics is available 

24 hours a day at the same telephone number.

As a customer service, the FDIC Call Center has 

many bilingual Spanish agents on staff and has access 

to a translation service, which is able to assist with 

over 40 different languages.

Public Information Center 

3501 Fairfax Drive

Room E-1021

Arlington, VA 22226

Phone: 877-275-3342 (877-ASK-FDIC),

703-562-2200

Fax: 703-562-2296

FDIC Online Catalog: https://catalog.fdic.gov

E-mail: publicinfo@fdic.gov

Publications such as FDIC Quarterly and Consumer 

News and a variety of deposit insurance and 

consumer pamphlets are available at www.fdic.gov

or may be ordered in hard copy through the FDIC 

online catalog. Other information, press releases, 

speeches and congressional testimony, directives to 

financial institutions, policy manuals, and FDIC 

documents are available on request through the Public 

Information Center. Hours of operation are 9:00 

a.m. to 4:00 p.m., Eastern Time, Monday – Friday.

Office of the Ombudsman

3501 Fairfax Drive

Room E-2022

Arlington, VA 22226

Phone: 877-275-3342 (877-ASK-FDIC) 

Fax: 703-562-6057

E-mail: ombudsman@fdic.gov

The Office of the Ombudsman (OO) is an 

independent, neutral, and confidential resource and 

liaison for the banking industry and the general 

public. The OO responds to inquiries about the 

FDIC in a fair, impartial, and timely manner. It 

researches questions and fields complaints from 

bankers and bank customers. OO representatives 

are present at all bank closings to provide accurate 

information to bank customers, the media, bank 

employees, and the general public. The OO also 

recommends ways to improve FDIC operations, 

regulations, and customer service.

SOURCES OF INFORMATION
ANNUAL REPORT

156 APPENDICES

REGIONAL AND AREA OFFICES

Atlanta Regional Office Chicago Regional Office

Michael J. Dean, Regional Director John P. Conneely, Regional Director

10 Tenth Street, NE 300 South Riverside Plaza

Suite 800 Suite 1700

Atlanta, Georgia 30309 Chicago, Illinois 60606

(678) 916-2200 (312) 382-6000

Alabama Illinois

Florida Indiana

Georgia Kentucky

North Carolina Michigan

South Carolina Ohio

Virginia Wisconsin

West Virginia

Dallas Regional Office Memphis Area Office

Kristie K. Elmquist, Regional Director Kristie K. Elmquist, Director

1601 Bryan Street 6060 Primacy Parkway

Dallas, Texas 75201 Suite 300

(214) 754-0098 Memphis, Tennessee 38119

(901) 685-1603

Colorado

New Mexico Arkansas

Oklahoma Louisiana

Texas Mississippi

Tennessee

Kansas City Regional Office New York Regional Office

James D. LaPierre, Regional Director John F. Vogel, Regional Director

1100 Walnut Street 350 Fifth Avenue

Suite 2100 Suite 1200

Kansas City, Missouri 64106 New York, New York 10118

(816) 234-8000 (917) 320-2500

Iowa Delaware

Kansas District of Columbia

Minnesota Maryland

Missouri New Jersey

Nebraska New York

North Dakota Pennsylvania

South Dakota Puerto Rico

Virgin Islands
2017

APPENDICES 157

Boston Area Office San Francisco Regional Office

John F. Vogel, Director Kathy L. Moe, Regional Director

15 Braintree Hill Office Park 25 Jessie Street at Ecker Square

Suite 100 Suite 2300

Braintree, Massachusetts 02184 San Francisco, California 94105

(781) 794-5500 (415) 546-0160

Connecticut Alaska

Maine American Samoa

Massachusetts Arizona

New Hampshire California

Rhode Island Federated States of Micronesia

Vermont Guam

Hawaii

Idaho

Montana

Nevada

Oregon

Utah

Washington

Wyoming
ANNUAL REPORT

158 APPENDICES

C. IMPLEMENTATION 

OF KEY REGULATIONS 

During 2017, the FDIC undertook a number 

of initiatives to implement regulations or clarify 

supervisory expectations. 

Swap Margin Guidance 

In February 2017, the FDIC, the Federal Reserve 

Board (FRB), and the Office of the Comptroller of 

the Currency (OCC) issued a joint release explaining 

how supervisors should examine for compliance with 

the swap margin rule, which requires the prudent 

posting of collateral for swaps that are not cleared 

through a clearinghouse. The guidance explains 

that swap entities covered by the rule were expected 

to prioritize their compliance efforts surrounding 

the March 1, 2017 variation margin deadline 

according to the size and risk of their counterparties. 

Furthermore, the guidance clarifies that swap 

entities’ compliance with counterparties that present 

significant credit and market risk exposures is 

expected to be in place on the due date, as laid out 

in the final rule. For other counterparties that do 

not present significant credit and market risks, swap 

entities were expected to make good faith efforts to 

comply with the final rule in a timely manner, but 

not later than September 1, 2017. At this time, a 

number of FDIC-supervised institutions are affected 

by the rule in their capacity as swaps counterparties, 

but none are “covered swaps entities” as defined by 

the rule. 

Qualified Financial Contracts

Recordkeeping 

In July 2017, the FDIC approved a final rule 

amending its regulations regarding Recordkeeping 

Requirements for Qualified Financial Contracts 

(QFCs). The final rule enhances and updates 

recordkeeping requirements relating to the QFCs of 

insured depository institutions (IDIs) in a troubled 

condition. Among other things, the final rule ensures 

that the FDIC has access to expanded QFC data to 

facilitate the orderly resolution of IDIs with more 

complex QFC portfolios. The changes to both the 

formatting and the quantity of information will 

enable the FDIC, as receiver, to make better informed 

and efficient decisions during the one business day 

stay period for the transfer of QFCs. The effective 

date of the final rule is October 1, 2017. 

Restrictions on Certain 

FDIC-Supervised Institutions

During 2017, the FDIC, FRB, and OCC coordinated 

on the issuance of rules applying to QFCs of 

systemically important U.S. banking organizations 

and systemically important foreign banking 

organizations in order to improve their resolvability 

and protect the financial stability of the United States. 

Together the agencies’ final rules promote orderly 

resolution by preventing large-scale early terminations 

of derivatives portfolios of an institution in resolution. 

Early terminations of QFCs, as illustrated by the 

failure of Lehman Brothers in September 2008, 

contribute to financial instability by promoting fire 

sales of assets and spreading contagion within the 

financial system.

In October 2017, the FDIC approved its final rule, 

which also enhances the resilience and the safety 

and soundness of certain state savings associations 

and state-chartered nonmember banks for which 

the FDIC is the primary federal regulator (FDICSupervised Institutions). This final rule requires 

FDIC supervised institutions that are affiliated with a 

systemically important financial institution (SIFI) to 

ensure that covered QFCs to which they are a party 

provide that any default rights and restrictions on the 

transfer of the QFCs are limited to the same extent 

as they would be under the Dodd-Frank Wall Street 

Reform and Consumer Protection Act (Dodd-Frank 

Act) and the Federal Deposit Insurance (FDI) Act. In 

addition, SIFIs are generally prohibited from being 

party to QFCs that would allow a QFC counterparty 

to exercise default rights against the SIFI based on the 

entry into a resolution proceeding under the FDI Act 
2017

APPENDICES 159

or any other resolution proceeding of an affiliate of 

the SIFI. The final rule also amends the definition of 

‘‘qualifying master netting agreement’’ in the FDIC’s 

capital and liquidity rules and certain related terms 

in the FDIC’s capital rules. These amendments are 

intended to ensure that the regulatory capital and 

liquidity treatment of QFCs to which a SIFI is 

party would not be affected by the implementation 

of the rule.

Guidelines for Appeals of Material 

Supervisory Determinations

In July 2017, the FDIC adopted revised Guidelines 

for Appeals of Material Supervisory Determinations. 

The revised guidelines expand the circumstances 

under which banks may appeal a material supervisory 

determination and improves the consistency of the 

appeals processes among the FDIC, FRB, and OCC. 

Specifically, the revised guidelines:

♦ Permit the appeal of the level of compliance 

with an existing formal enforcement action, the 

initiation of an informal enforcement action, and 

matters requiring board attention;

♦ Specify that formal enforcement-related actions 

or decisions do not affect a pending appeal, and 

expand the opportunities for appeal available in 

certain circumstances; and

♦ Require annual reports of Division Directors’ 

decisions with respect to material supervisory 

determinations.

In September 2017, the FDIC issued financial 

institution letter (FIL) 42-2017 to distribute the 

revised guidelines to the industry. 

Current Expected Credit Losses Accounting 

Standard Frequently Asked Questions

In September 2017, the FDIC, FRB, OCC, and 

National Credit Union Administration (NCUA) 

issued a second set of frequently asked questions 

(FAQs) on the application of the Financial 

Accounting Standards Board’s new accounting 

standard on credit losses and related supervisory 

expectations. This accounting standard, which 

will apply to all institutions, introduces the current 

expected credit losses (CECL) methodology for 

estimating credit loss allowances on loans and certain 

other exposures. The second set of FAQs address a 

variety of technical issues and questions related to the 

implementation of the new accounting standard. The 

second set of FAQs was combined with those issued 

in December 2016 to form a single self-contained 

document to assist institutions and examiners. 

Securities Transaction Settlement Cycle

In September 2017, the FDIC and OCC jointly 

issued a Notice of Proposed Rulemaking (NPR) 

titled Securities Transaction Settlement Cycle that 

was published in the Federal Register for a 30-day 

comment period, with comments due October 

11, 2017. The NPR would shorten the standard 

settlement cycle from three to two days for securities 

purchased or sold by FDIC-supervised institutions, 

national banks, and federal savings associations, 

thereby aligning the FDIC’s and OCC’s regulations 

with the new industry standard settlement cycle as 

implemented by the U.S. Securities and Exchange 

Commission (SEC). The three-day settlement cycle 

is referred to as the “trade date plus three days”, 

or “T+3”, and is the current standard for the U.S. 

securities industry. The NPR is part of an industrywide shift to a T+2 days settlement cycle. For many 

FDIC-supervised institutions, the majority of the 

changes needed to implement T+2 will be completed 

by third-party industry custodians, systems and 

service providers, and broker-dealers through which 

institutions trade for themselves or on behalf of 

their fiduciary.

Net Stable Funding Ratio

During the financial crisis, a number of large banking 

organizations failed, or experienced serious difficulties, 

in part because of severe liquidity problems. In May 

2016, the FDIC and other banking agencies proposed 

a rule that would reduce the vulnerability of large 
ANNUAL REPORT

160 APPENDICES

banking organizations to liquidity risk. The Net 

Stable Funding Ratio (NSFR) Rule would require 

certain large banks to maintain sufficient levels of 

stable funding, including capital, long-term debt, 

and other stable sources over a one-year window, 

to account for the liquidity risks arising from their 

assets, derivatives, and off-balance sheet activities. 

Comments received and reviewed about the 

proposed NSFR rule concerned the stable funding 

requirements for assets, liabilities and off-balance 

sheet exposures, as well as the estimated costs 

and benefits and the empirical foundation and 

underpinnings supporting the proposal. The federal 

banking agencies are reviewing these comments and 

considering how to proceed with the proposed rule.
2017

APPENDICES 161

D. OFFICE OF INSPECTOR GENERAL’S ASSESSMENT 

OF THE MANAGEMENT AND PERFORMANCE 

CHALLENGES FACING THE FDIC TOP MANAGEMENT AND PERFORMANCE CHALLENGES FACING THE 

FEDERAL DEPOSIT INSURANCE CORPORATION

Emerging Cybersecurity 

Risks at Insured Financial Institutions 

In August 2017, the President’s National Infrastructure Advisory Council (“NIAC”)1 highlighted

significant cybersecurity risks to the financial services sector and concluded that the country had 

“a narrow and fleeting window of opportunity before a watershed, 9/11-level cyber attack to 

organize effectively and take bold action.” The Federal Deposit Insurance Corporation (“FDIC”), 

in its Annual Performance Plan for 2017, recognized that cybersecurity was a ”significant concern 

for the banking industry because of the 

industry’s use of and reliance on technology, 

not only in bank operations, but also as an 

interface with customers.” The FDIC 

Performance Plan further stated that 

“[c]ybersecurity has become one of the most 

critical challenges facing the financial services 

sector due to the frequency and increasing 

sophistication of cyber attacks.” 

The Financial Stability Oversight Council 

(“FSOC”) also underscored cybersecurity risks 

to the banking sector in its Annual Report 

(2017), stating that, “[i]f severe enough, a 

cybersecurity failure could have systemic 

implications for the financial sector and the U.S. economy more broadly.”2

 The Department of 

the Treasury’s Office of Financial Research (“OFR”) Annual Report to Congress 2017 added that 

“[t]he financial system is an attractive target for cyber thieves and other hackers because 

financial companies manage the nation’s wealth and handle trillions of dollars in transactions 

every day that underlie the U.S. economy.” The International Monetary Fund Working Paper, 

Cyber Risk, Market Failures, and Financial Stability (2017), also recognized that the financial 

sector experienced the most cybersecurity incidents across all industries with confirmed data 

 

1 The NIAC was established on October 16, 2001 and advises the President, through the Secretary of Homeland Security, on security and 

resilience of the Nation’s critical infrastructure sectors and their functional systems, physical assets, and cyber networks.

2 The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 established the FSOC, which has accountability for identifying 

risks and responding to emerging threats to financial stability. The FSOC is a collaborative body that brings together the expertise of federal 

financial regulators (including the FDIC), an independent insurance expert appointed by the President, and state regulators. The Office of 

Financial Research is a bureau within the Department of the Treasury that provides support to the FSOC, the Council’s member organizations, 

and the public. 

Common Cyber-Criminal Strategies

• Distributed denial-of-service – prevents customer 

access to bank websites and is also used as a 

diversionary tactic by criminals attempting to 

commit fraud using stolen credentials to initiate wire 

transfers.

• Malicious software – a broad class of attack that 

is generally delivered by email and lures the 

recipient into reading the email, opening an 

attachment, and providing sensitive information. 

• Compound attack – deploys more than one 

method of attack simultaneously.

• Ransomware – limits users from accessing their 

system, either by locking the system's screen or by 

locking the users' files unless a ransom is paid.

Sources: FDIC Supervisory Insights, A Framework for 

Cybersecurity and FFIEC Joint Statement-Cyber Attacks 

Involving Extortion
ANNUAL REPORT

162 APPENDICES

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

losses in 2015, and by a substantial margin. 

In addition, on December 1, 2017, the 

Federal Reserve Vice Chair for Supervision, 

Randal Quarles, described cybersecurity as 

the biggest risk facing the financial sector 

and encouraged that federal banking 

regulators should be “bringing more of the 

resources of the government to bear” to 

boost digital defenses.3

The FDIC plays an important role as a 

financial regulator to ensure the stability of 

the financial system, and as the primary 

federal regulator of approximately 

3,700 financial institutions. In addition, as of the third quarter of 2017, the FDIC provided

deposit insurance coverage for 5,738 institutions with total assets of $17.2 trillion and deposits 

of $7.1 trillion. Therefore, the FDIC has a significant financial interest in mitigating cybersecurity 

risks at insured banks. If a bank fails, the FDIC will need to step in and may have to fund the 

losses from its Deposit Insurance Fund. 

Given the significance of cybersecurity risk to U.S. financial institutions, FDIC information 

technology (“IT”) examinations are an important tool to identify weaknesses and vulnerabilities 

in FDIC-supervised institutions. According to the Federal Financial Institutions Examination 

Council4

 (“FFIEC”) Cybersecurity Threat and Vulnerability Monitoring and Sharing Statement, 

“[f]inancial institution management is expected to monitor and maintain sufficient awareness of 

cybersecurity threats and vulnerability information so they may evaluate risk and respond 

accordingly.” 

FDIC IT examinations assess the management of IT risks, including cybersecurity, at FDICsupervised institutions and at select third-party technology service providers (“TSP”). When 

examinations identify undue risks and weak risk management practices at institutions, the FDIC 

may use informal or formal enforcement procedures to address those risks and practices as well 

as deteriorating financial conditions, or violations of laws or regulations.5

 Many financial 

 

3 American Banker, Regulators Have Bigger Role to Play in Cybersecurity (December 1, 2017). 4 The Federal Financial Institutions Examination Council is an interagency body empowered to prescribe uniform principles, standards, and 

report forms for the federal examination of financial institutions by the Board of Governors of the Federal Reserve System, FDIC, National 

Credit Union Administration, Office of the Comptroller of the Currency, and Consumer Financial Protection Bureau and to make 

recommendations to promote uniformity in the supervision of financial institutions.

5 Risk Management Manual of Examination Policies, Part I 1.1 Basic Examination Concepts and Guidelines and Part IV Administrative and 

Enforcement Actions.
2017

APPENDICES 163

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

institutions maintain contracts with TSPs to outsource certain bank functions such as IT 

operations or business or product lines. As recognized in the Office of the Comptroller of the 

Currency’s (“OCC”) Semiannual Risk Perspectives (Spring 2017),6 TSPs are also targets for 

cybercrime and may provide a back door into bank operations through the supply of IT 

products and services that allow remote access and management of bank operations or 

applications. In addition, the OCC identified concerns with large numbers of banks relying on a 

small number of TSPs. For example, OCC examiners identified third-party services for merchant 

card processing, denial of service mitigation, and trust account systems as instances of 

concentration among providers. As such, if a TSP has its systems or information compromised, 

it may significantly impact a large segment of the banking industry. 

In our OIG evaluation, Case Study of a Computer Security Incident Involving a Technology Service 

Provider (2016), we reviewed allegations about a computer security incident potentially involving 

unauthorized access to unencrypted Personally Identifiable Information (“PII”)7 from multiple 

client financial institutions residing on a TSP’s computer server. We concluded that a poor 

internal control environment and a vague incident response policy limited the TSP’s ability to 

protect against the incident and hampered incident response efforts. The TSP did not collect or 

retain forensics information such as an image of the server, and it lacked a computer activity log 

to identify data access and exfiltration.

Further, in our OIG evaluation, Technology Service Provider Contracts with FDIC-Supervised 

Institutions (February 2017), we assessed how FDIC-supervised institutions’ contracts with TSPs 

addressed the TSP’s responsibilities related to business continuity planning and responding to 

and reporting on cybersecurity incidents. Based on our sample of 48 contracts with 

19 institutions, we did not see evidence that most financial institutions reviewed fully considered

and assessed the potential impact that TSPs may have on the institution’s business continuity 

planning and cybersecurity incident response and reporting operations. 

In 2015, we issued an OIG evaluation report, The FDIC’s Supervisory Approach to Cyberattack 

Risks, which found inconsistencies in the quality and depth of IT examination assessments and 

documentation of findings among examiners, because examiners had discretion in conducting 

and documenting IT work. We also found a few situations where IT examinations of complex 

financial institutions were led by individuals that either did not have sufficient IT expertise or 

 

6 These risks were recently reiterated in the OCC’s Semiannual Risk Perspective (Fall 2017) released on January 18, 2018.

7 According to OMB Memorandum 07-16, Safeguarding Against and Responding to the Breach of Personally Identifiable Information, the term 

PII refers to information that can be used to distinguish or trace an individual's identity, such as their name, Social Security Number, biometric 

records, etc. alone, or when combined with other personal or identifying information that is linked or linkable to a specific individual, such as 

date and place of birth, mother’s maiden name, etc.
ANNUAL REPORT

164 APPENDICES

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

required on-the-job training. The FDIC has taken steps described in the paragraphs below to 

address issues identified in these reports. 

In July 2015, the Government Accountability Office (“GAO”) issued a report, Cybersecurity: Banks

and Other Depository Regulators Need Better Data Analytics and Depository Institutions Want

More Usable Threat Information. GAO examined how the bank regulators – the FDIC, the OCC, 

and the Federal Reserve Board – oversee financial institutions’ efforts to mitigate cyber risk. The 

GAO found that the regulators were not routinely aggregating and analyzing data on IT 

deficiencies found in individual financial institutions in order to analyze trends in specific security

problems across institutions and use that information to better target future examinations. 

In the last 2 years, the FDIC modified its IT examination process, in part in response to concerns

identified. In July 2016, the FDIC implemented a new Information Technology Risk Examination 

(“InTREx”) program for financial institutions. InTREx provides baseline work programs 

supplemented by FFIEC Information Technology Examination Handbook (IT Handbook) 

programs for more complex or high-risk areas. A work program provides a series of questions

and steps to guide examiners. The IT Handbook also provides examination procedures for TSPs. 

According to the FDIC, InTREx enhances identification, assessment, and validation of IT and 

operations risks in financial institutions. InTREx contains both structured and unstructured

information that should facilitate supervisory tasks and horizontal analysis across institutions. 

We will be conducting an audit that will assess the InTREx program. 

A key challenge associated with IT examinations is ensuring that the FDIC has the right number

of examiners with appropriate skills, training, and experience to match institution IT complexity. 

According to the FDIC’s InTREx Program Examination Procedures, examiner staffing is based on 

a financial institution’s Information Technology Profile (“ITP”) questionnaire score. Upon receipt

of the completed ITP information, the FDIC validates the profile, makes qualitative adjustments,

and determines the net technology score that translates into a complexity level of high, medium,

or low. The FDIC then attempts to match the examiner’s IT training to the complexity of the

institution’s IT systems. Thus, a highly complex bank requires an examiner trained in advanced

IT skills. 

During 2016, the FDIC trained 1,594 field examiners in InTREx low-complexity IT examination

processes and completed a reorganization that established a new Operational Risk Branch led

by a Deputy Director. In addition, the FDIC advised that it had established a new IT supervision 

group, updated its core IT training for examiners, added an IT examination requirement for

examiners, increased the pace of IT subject-matter expert training, and hired term IT specialists. 
2017

APPENDICES 165

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

We are planning to conduct an evaluation of the FDIC’s approach to examiner staffing, including 

IT examination resources. 

In addition to examinations, the FDIC provides cybersecurity awareness resources to financial 

institutions. For example, the FDIC, through the FFIEC website, provides bankers with access to 

technical assistance videos, articles, exercises, and Financial Institution Letters (“FIL”)8 that 

address cybersecurity risks. According to OIG analysis, the FDIC issued 21 FILs related to 

cybersecurity to Chief Executive Officers at financial institutions between January 2008 and 

December 2017. These FILs included information such as cybersecurity awareness webinars 

(October 25, 2016), introduction of cybersecurity assessment tools (July 2, 2015), and statements 

on malware (March 30, 2015). The FFIEC also issues statements and alerts to financial 

institutions regarding threats and vulnerabilities. Between October 2013 and May 2017, the 

FFIEC issued 15 statements and alerts related to cybersecurity. To illustrate, in June 2016, the 

FFIEC issued a statement advising financial institutions to review risk management practices and 

controls over payment networks. 

The FDIC must continue its efforts to mitigate cybersecurity risks at financial institutions and 

TSPs in order to protect the Deposit Insurance Fund and consumers. In this regard, the FDIC 

should continue building its capabilities to assess IT risks and trends and deploy IT examination 

staff commensurate with risks at FDIC-supervised institutions. Further, the FDIC should take 

prompt supervisory action when banks do not have effective information security programs. 

 

8 FILs are addressed to the Chief Executive Officers of financial institutions and are used by the FDIC to announce new regulations and 

policies, new FDIC publications, and a variety of other matters of principal interest to those responsible for operating a bank or savings 

association.
ANNUAL REPORT

166 APPENDICES

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

Management of 

Information Security and Privacy Programs

According to the United States Computer Emergency Readiness Team (“US-CERT”), from 2014 

through 2016, federal government agencies reported more than 177,000 cybersecurity incidents, 

with more than 50,000 involving PII.9

 GAO’s report, High Risk Series: Progress on Many High-Risk 

Areas, While Substantial Efforts Needed on Others (2017), recognized that safeguarding

computer systems from cyber threats is a high risk across the Federal government and has been 

a long-standing concern for over 20 years. Without proper safeguards, computer systems are 

vulnerable to individuals and groups with malicious intentions who can intrude and use their 

access to obtain sensitive information, commit fraud and identity theft, disrupt operations, or 

launch attacks against other computer systems and networks. 

In 2015, the records of the Office of Personnel Management were compromised. The computer 

hack resulted in the theft of records containing the PII of more than 21 million prospective, 

current, and former Federal employees. This breach alone is estimated to cost $350 million for 

credit and identity monitoring services, identity theft protection, and identity restoration services

for affected individuals. This data breach brought into focus the need for strong management 

of information security and privacy protection programs within the FDIC. 

Recent guidance from the Office of Management and Budget (“OMB”), OMB Memorandum 

M-17-12, entitled Preparing for and Responding to a Breach of Personally Identifiable Information

(January 3, 2017), further describes the gravity of cybersecurity breaches: “Identity theft 

represented 16 percent (490,220) of the over 3 million complaints received by the Federal Trade 

Commission (“FTC”) in 2015. In 2014, the Department of Justice reported that 17.6 million 

individuals or 7 percent of all U.S. residents age 16 or older, were victims of one or more 

occurrences of identity theft.” 

The FDIC uses IT systems and applications to perform its several mission goals regarding safety 

and soundness for financial institutions, consumer protection, managing the Deposit Insurance

Fund, and resolution and receivership of failed institutions. These systems and applications hold 

significant amounts of sensitive data.10 For example, the FDIC’s Failed Bank Data System 

contains more than 2,500 terabytes of sensitive information from more than 500 bank failures. 

 

9 US-CERT is an organization within the Department of Homeland Security that assists federal civilian agencies with their data breach incident 

handling efforts. The Federal Information Security Modernization Act of 2014 (“FISMA 2014”) requires federal agencies to report security 

incidents to US-CERT, which analyzes the information to identify trends and indicators of attack across the federal government. 10 FDIC Circular 1360.9, Protecting Sensitive Information, defines sensitive information as “information that contains an element of 

confidentiality. It includes information that is exempt from disclosure by the Freedom of Information Act and information whose disclosure is 

governed by the Privacy Act of 1974. Sensitive information requires a high level of protection from loss, misuse, and unauthorized access or 

modification.” 
2017

APPENDICES 167

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

In addition, FDIC systems contain substantial amounts of PII, including, for example, names, 

Social Security Numbers, and addresses related to bank officials, depositors, and borrowers at

FDIC-insured institutions and failed banks, and FDIC employees. Of the FDIC’s 261 system 

applications, 151 applications required Privacy Impact Assessments because they collect, 

maintain, or disseminate PII. 

Over time, the FDIC has experienced a number of cybersecurity incidents. In August 2011, the 

FDIC began to experience a sophisticated, targeted attack on its network known as an Advanced 

Persistent Threat (“APT”).11 The attacker behind the APT penetrated more than 90 workstations 

or servers within the FDIC’s network over a significant period of time, including computers used 

by the former Chairman and other senior FDIC officials. The attacker further gained 

unauthorized access to a significant quantity of sensitive data. The FDIC’s Division of 

Information Technology failed to fully inform senior FDIC executives of the severity and 

magnitude of the intrusion. In response to this incident, the FDIC hired a cybersecurity firm to 

perform additional analysis and realigned its IT functions. 

In late 2015 and early 2016, the FDIC was again impacted by significant cybersecurity 

incidents. In this case, the FDIC detected eight data breaches as departing employees 

improperly took sensitive information shortly before leaving the FDIC. The FDIC initially 

estimated that this sensitive information included the PII of approximately 200,000 individual 

bank customers associated with approximately 380 financial institutions, as well as the 

proprietary and sensitive data of financial institutions; however, the FDIC later revised the 

number of affected individuals to 121,633. 

In our OIG report, The FDIC’s Controls for Mitigating the Risk of an Unauthorized Release of 

Sensitive Resolution Plans (July 2016), we reviewed the September 2015 breach in which a former 

employee copied, without authorization, highly confidential components of three sensitive 

resolution plans onto an unencrypted Universal Serial Bus (“USB”) storage device and took the 

information upon abruptly resigning. OIG law enforcement officials subsequently recovered the 

USB device containing all of the exfiltrated data as well as a sensitive Executive Summary for a 

fourth resolution plan in hard copy. Based on the OIG criminal investigation, the employee was 

subsequently charged in the Federal District Court for the Eastern District of New York with theft 

of government property (18 U.S.C. Section 641).

In another OIG report, The FDIC’s Process for Identifying and Reporting Major Information 

Security Incidents (July 2016), we reviewed the FDIC’s process to address the breach involving 

 

11 An advanced persistent threat may occur when an entity gains unauthorized access to a computer network, escalates its privileges, and

develops an ongoing presence within the network to compromise the network data and component-level security. 
ANNUAL REPORT

168 APPENDICES

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

an employee’s use of a USB storage device to copy more than 10,000 documents, including

more than 10,000 unique Social Security Numbers upon the employee’s departure from the 

FDIC. We found that over 4 weeks elapsed between the discovery of the incident and a 

determination that the incident involved a data breach. We concluded the FDIC had not 

devoted sufficient resources to review potential violations. 

 

In a recent OIG report, The FDIC’s Processes for Responding to Breaches of Personally Identifiable 

Information (September 2017), we assessed the adequacy of the FDIC’s processes to evaluate 

the risk of harm to individuals affected by a breach of PII and to notify and provide services to 

those individuals when appropriate. We reviewed a sample of suspected or confirmed breaches 

occurring between January 1, 2015 and December 1, 2016, potentially affecting 13,000

individuals. We found that the FDIC did not notify affected individuals until more than 9 months 

had elapsed from the date of discovery of the breaches. Further, we noted that the FDIC had 

not devoted sufficient resources to address a dramatic increase in breach investigation activities. 

We also determined that the individuals responsible for examining the data breaches did not 

always have the necessary skills and training to ensure proper performance of their duties.

In another recent OIG report, Audit of the FDIC’s Information Security Program – 2017

(October 2017), we identified FDIC security control weaknesses that limited the effectiveness of 

the FDIC’s information security program and practices and placed the confidentiality, integrity, 

and availability of the FDIC’s information systems and data at risk. Security control weaknesses 

included, for example: 

• Contingency Planning. The FDIC’s IT restoration capabilities were limited, and the 

agency had not taken timely action to address known limitations with respect to its 

ability to maintain or restore critical IT systems and applications during a disaster. 

• Information Security Risk Management. The FDIC established the Information 

Security Risk Advisory Council (“the Council”) in 2015. However, the Council did not 

fulfill several of its key responsibilities as defined in FDIC policy. 

• Enterprise Security Architecture. The FDIC had not established an enterprise security 

architecture that (i) describes the FDIC’s current and desired state of security and 

(ii) defines a plan for transitioning between the two. The lack of an enterprise security 

architecture increased the risk that the FDIC’s information systems would be developed 

with inconsistent security controls that are costly to maintain.

• Technology Obsolescence. The FDIC was using certain software in its server operating 

environment that was at the end of its useful life and for which the vendor was not 

providing support to the FDIC. 

• Information Security Strategic Plan. The FDIC had drafted, but not yet finalized, an 

information security strategic plan. 
2017

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• Patch Management. We noted instances in which patches addressing high-risk 

vulnerabilities were not installed on servers, desktop computers, and laptop computers 

within the timeframes established by FDIC policy. 

• Credentialed Scanning. We found instances in which network IT devices were not 

subject to a “credentialed” scan—a thorough type of scan that involves logging into the 

IT device to inspect for vulnerabilities. 

• Security Information and Event Management (“SIEM”) Tool. The FDIC had not 

developed a process to ensure that all servers on the FDIC’s network routed log data to 

the FDIC’s SIEM tool. 

We determined that, according to the FISMA Reporting Metrics, the FDIC was rated as 

“Defined,” which indicated that policies and procedures were formalized and documented, but 

not consistently implemented.

GAO also assessed information security controls over key financial systems, data, and networks

as part of its audit of the FDIC’s financial statements. In its report, Information Security: FDIC 

Needs to Improve Controls over Financial Systems and Information (May 2017), GAO identified 

information security deficiencies at the FDIC. For example, GAO found that the FDIC did not 

implement sufficient controls to isolate financial systems from other parts of its network to 

prevent unauthorized users and systems from communicating with the financial systems. 

Further, GAO reported that the FDIC did not implement sufficient controls over a privileged 

account used by systems engineers to manage the FDIC’s virtual environment. As a result, the 

FDIC had diminished ability to distinguish between authorized and unauthorized activity in the 

systems. According to GAO, those information system control issues “represented a significant 

deficiency in the FDIC’s internal control over financial reporting systems as of 

December 31, 2016.”

12 

Weaknesses in Management of Contractor Personnel. Our OIG report, Controls over 

Separating Personnel’s Access to Sensitive Information (September 2017), identified weaknesses

in the management of contractor access to FDIC systems, data, and facilities. We found that 

separating contractor employees may present greater risks than FDIC employees, because the 

FDIC may not know as much about an individual contractor’s personnel history and the 

contractor may depart without advanced notice. Further, we found that the priority review of 

network activity using the Data Loss Prevention (“DLP”)13 tool was not conducted in the pre-exit 

clearance process for many contractors. We estimated that at least 43 percent of FDIC 

 

12 At the time of issuance of this report, we were advised by the FDIC that the GAO had not identified a significant deficiency in the FDIC’s 

internal control over financial reporting as of December 31, 2017.

13 The DLP operates as a guard around the digital perimeter of the FDIC and monitors various electronic ways sensitive information could leave 

the FDIC. For example, the DLP monitors outgoing emails, documents sent to network printers, website uploads, and downloads to external

media.
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contractors who separated between October 1, 2015 and September 30, 2016 were not subject 

to such DLP priority review. In addition, the FDIC could not locate clearance records for 46 

percent of the contractors we sampled, and records management liaisons did not review data 

questionnaires before contractors separated in 94 percent of the cases we reviewed.

Further our OIG report, Follow-on Audit of the FDIC’s Identity, Credential, and Access 

Management Program (June 2017), found that the FDIC did not maintain current, accurate, and 

complete contractor personnel data to ensure Personal Identity Verification (“PIV”) card (i.e., a 

badge) credential issuance to authorized FDIC contractors. Absent reliable contractor 

information, PIV cards may not be issued and revoked in a timely manner, presenting an 

increased risk of unauthorized access to FDIC facilities and networks. 

Contracts for IT goods and services also pose risks because there are often multiple tiers of 

outsourcing, as well as numerous actors such as suppliers, acquirers, systems integrators, and 

service providers that interact to design, manufacture, and deploy products and services. The 

National Institute of Standards and Technology described the vulnerabilities in the “supply 

chain” for U.S. Government agencies to include the influence of foreign governments, 

counterfeit products, unauthorized production, tampering, and insertion of malicious software 

and hardware. For example, on December 12, 2017, legislation was enacted that banned the 

U.S. Government’s use of Kaspersky Labs, a supplier of antivirus products, due to concerns of 

foreign government influence. The FDIC contracts for the purchase of laptops, servers, and 

other IT products in support of its mission and should maintain awareness of supply chain risks. 

Change in Cyber Management at FDIC. Turnover in key leadership positions affected the 

management of the FDIC’s cybersecurity and privacy programs. Between 2010 and 2017, the 

FDIC had seven acting or permanent Chief Information Officers (“CIO”) who also held the role of 

Chief Privacy Officer (“CPO”). During this same period of time, the FDIC also had seven Chief 

Information Security Officers. These senior management changes impact the direction of an 

organization because turnover affects management strategy, planning, budgets, and staffing. 

As noted by GAO in Federal Chief Information Officers: Responsibilities, Reporting Relationships, 

Tenure, and Challenges (2004), a high turnover rate in CIOs negatively impacts their effectiveness 

because there is limited time to put their agenda in place or form close working relationships 

with agency leadership. In the case of the FDIC, the turnover hindered progress in establishing 

and implementing an IT governance framework, such as an Enterprise Architecture, IT Strategic 

Plan, and Information Security Plan—all of which are fundamental to a successful IT program.

A recent example highlights how turnover experienced by the FDIC contributed to the 

underlying challenge of managing information security. The former CIO at the FDIC 
2017

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(November 2015 to October 2017) began an initiative to move FDIC IT operations to cloudbased solutions. Adopting a cloud-based IT approach reflected a significant change not 

contemplated in the governance documents referenced above, as it moved IT procurement, 

development, and maintenance from on-site services to off-site services. Such a move involved

migrating the FDIC’s data center to a contractor owned and operated facility and a shift in FDIC 

IT personnel skills, governance, and policies and procedures towards oversight, management, 

and monitoring of cloud contracts. However, the FDIC’s current CIO decided to take a more 

measured approach by moving some IT operations to the cloud in October 2017. FDIC 

resources devoted to cloud strategy planning from March to October 2017 could have been 

deployed to other IT initiatives.

The FDIC’s Privacy Program. The FDIC has designated its CIO as the CPO, also referred to as 

the Senior Agency Official for Privacy (“SAOP”). Notably, however, OMB Memorandum M-16-24, 

Role and Designation of Senior Agency Officials for Privacy, states that “agencies should 

recognize that privacy and security are independent and separate disciplines. While privacy and 

security require coordination, they often raise distinct concerns and require different expertise 

and different approaches. The distinction between privacy and security is one of the reasons 

that the Executive Branch has established a Federal Privacy Council independent from the Chief 

Information Officers Council.” 

In light of the updated requirements and responsibilities for the SAOP/CPO, the FDIC may wish 

to consider whether the CIO should continue to serve as SAOP/CPO. The perspectives of the 

SAOP/CPO are different from those of the CIO. The CIO has responsibility for maintaining a 

broad, strategic orientation focused on enterprise issues and concerns and protecting the 

agency’s IT resources. These issues relate to the management of the FDIC’s IT systems, 

enterprise architecture, governance of programs and resources, acquisition of hardware, backup 

systems, personnel, security systems, and processes to keep the IT systems running efficiently 

and effectively. In contrast, the CPO’s (and SAOP’s) role is oriented towards protecting the 

privacy of individuals, including FDIC programs, policies, and procedures that affect bank 

customers and FDIC personnel, and reducing the risk of harm to potentially affected individuals 

in the event of a breach. 

Also, the SAOP/CPO has responsibility for privacy issues and concerns that extend beyond IT 

issues. For example, the SAOP/CPO has responsibilities for privacy implications related to FDIC 

materials that are not in electronic form. In addition, the SAOP/CPO is responsible for the 

privacy implications of internal FDIC programs that might affect FDIC personnel. The SAOP/CPO 

is further responsible for the privacy implications of disclosures of information outside of the 

FDIC, and this official may need to make decisions about the laws and regulations governing 
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privacy law, discovery productions in litigation, Freedom of Information Act requests, and other 

disclosure laws and regulations.

The FDIC’s Performance Plan for 2017 indicated that it would prioritize efforts “to protect its 

networks and data from unauthorized access, data breaches, and intrusions.” The Plan further 

stated that the FDIC intends to implement technologies to improve its ability to classify and 

protect sensitive data. Also, in 2017, the FDIC updated its IT strategic plan, revised its Breach 

Response Plan, and established a new Office of the Chief Information Security Officer. The FDIC 

also issued PIV cards to all employees and contractors and began requiring use of the cards to 

access FDIC computers. Looking ahead, the FDIC also plans to integrate cybersecurity into the 

FDIC-wide enterprise architecture and update its policies and procedures for expiring and 

outdated software and patch management. In addition, the FDIC is working to improve 

contingency planning in order to maintain or restore critical IT systems and applications during 

a disaster. 

As global cyber intrusions continue to increase, the FDIC must continue to safeguard its own 

computer systems and data. The FDIC should ensure that IT and privacy program managers 

address weaknesses and build capabilities to prevent cybersecurity attacks, and minimize the 

risks associated with breaches, including the compromise of sensitive and PII data. 
2017

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Utilizing Threat Information to Mitigate 

Risk in the Banking Sector 

On February 12, 2013, the President issued Presidential Policy Directive 21 entitled, Critical 

Infrastructure Security and Resilience. This directive identified the banking sector as one of 

16 critical infrastructure sectors that are vital to public confidence and the nation’s safety, 

prosperity, and well-being. The President’s National Infrastructure Advisory Council 

recommended and encouraged public and private sectors “to move actionable information to 

the right people at the speed required by cyber threats.”14 The FSOC, in its Annual Report 

(2017), also highlighted the importance of sharing threat information among the public and 

private sector as a “key priority” to reduce the risk of cybersecurity incidents and mitigate their 

impact if they occur. 

The financial sector is diverse and interconnected, and spans from the largest institutions (assets 

greater than $2 trillion) to the smallest community banks. The International Monetary Fund in 

its Working Paper, Cyber Risk, Market Failures, and Financial Stability (2017), stated that “given 

the financial system’s dependence on a relatively small set of technical systems, knock-on effects 

from downtimes and service disruptions due to successful attacks have the potential to be 

widespread and systemic.” As identified by the FDIC in Crisis and Response, An FDIC History 

2008-2013, financial system interconnectedness played a role in the financial crisis, “[e]ven 

financial institutions without large exposures to mortgage assets or derivatives were affected 

because they were deeply interconnected with the financial system in which these exposures 

played so significant a role.” 

According to Presidential Policy Directive 21, the national preparedness systems must be 

integrated to secure critical infrastructure, withstand all hazards, and rapidly recover from 

disasters. Federal departments and agencies must collaborate with private sector critical 

infrastructure owners and operators. Both the Departments of the Treasury and Homeland 

Security recognized that sharing timely and actionable information is critical to managing risk. 

In 2007, the Department of Homeland Security issued the National Infrastructure Protection Plan

(“NIPP”); one portion of the NIPP relates to the financial sector – the Banking and Finance 

Critical Infrastructure and Key Resources Sector-Specific Plan. This Sector-Specific Plan described 

that financial regulators, including the FDIC, and the private sector are responsible for securing

critical infrastructure, under the leadership of the Treasury Department. This relationship is 

addressed through several working groups and committees, including the Financial and Banking 

 

14 The President’s National Infrastructure Advisory Council, Securing Cyber Assets – Addressing Urgent Cyber Threats to Critical Infrastructure

(August 2017).
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Information Infrastructure Committee (“FBIIC”),15 the Financial Services Sector Coordinating 

Council (“FSSCC”),16 and the Financial Services Information Sharing and Analysis Center (“FSISAC”).17 These organizations provide structures through which financial sector participants 

share information at the national and local levels, assess and mitigate sector-wide risks, develop 

and maintain key relationships, and conduct periodic testing of emergency protocols. The FDIC 

participates in these organizations to monitor cybersecurity, share information, and coordinate 

responses.

The U.S. Government gathers threat information about U.S. financial institutions and the 

financial system. For example, in its report entitled, Cybersecurity: Bank and Other Depository 

Regulators Need Better Data Analytics and Depository Institutions Want More Usable Threat 

Information (2015), the GAO identified numerous sources of threat information that is provided 

to financial institutions.

 

15 The FBIIC was created in 2001 to improve the reliability and security of the financial sector infrastructure and consists of 18 federal and state 

member organizations across the financial regulatory community.

16 The FSSCC was established in 2002 to work collaboratively with key government agencies to protect the nation’s critical infrastructure from 

cyber and physical threats and consists of 70 private sector members, including trade associations, financial utilities, and critical financial firms. 17 The FS-ISAC was established in 1999 as a member-owned non-profit entity to share timely, relevant, and actionable physical and cyber 

security threat and incident information. FS-ISAC has 7,000 members across 39 countries. 
2017

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As part of its review, GAO discussed the receipt of cyber threat information from the 

government with representatives from more than 50 depository institutions. The participants 

said that the information received from government sources was repetitive, not timely, and 

could not always be acted upon, because the information lacked sufficient details. Financial 

institutions said they rarely obtained cyber threat information from the government that they 

had not already received from other sources and that in some cases, smaller banks struggled 

with the volume of information from government agencies. 

The GAO report also identified barriers to sharing threat information and reporting incidents in a 

timely manner. For example, institutions stated that information received from the government

about cyber threats and actual attacks lacked sufficient context or details to allow institutions to 

take appropriate protective actions. In addition, some institutions were often reluctant or 

unable to share information with government agencies or other institutions, and expressed 

concern that the information shared could negatively impact their competitive advantages 

because reported information may become public. GAO also reported that classified 

information could not be shared with bank officials who did not have access to such 

information. As a result, intelligence community and law enforcement representatives were 

often cautious about declassifying certain information based on their concern that sensitive

sources and methods used might be divulged. 

In its Annual Report for 2017, the FSOC also recognized that there was a body of relevant 

information held by the government that was classified as national security information and 

must maintain its classification restrictions. Nevertheless, the FSOC encouraged agencies to 

“balance the need to keep information secure with efforts to share information with industry to 

enhance cybersecurity resilience.” Therefore, the FSOC called on government agencies to 

“consider how to share information appropriately and, where possible, continue efforts to 

declassify (or downgrade classification) to the extent practicable, consistent with national 

security needs.” Further, Federal Reserve Vice Chair for Supervision, Randal Quarles, recently 

stated that bank regulators have a bigger role to play in preventing cybercrime and should focus 

more on connecting financial institutions with national security agencies.18 The former 

Comptroller of the Currency, Thomas Curry, also warned in his statement accompanying the 

agency’s Semiannual Risk Perspective (Fall 2015) that “[w]e can’t allow the federal banking 

system to be compromised by hackers or used by criminals or terrorists.” 

The financial sector also faces threats based on new technology; one worth noting in particular

is the rapid growth of the virtual currency markets. According to Forbes, there are more than

 

18 American Banker, Regulators Have Bigger Role to Play in Cybersecurity (December 1, 2017).
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1,000 different virtual currencies with a total market value of $650 billion.19 In addition, there 

has been widespread volatility in the marketplace. For example, CNN reported on 

December 9, 2017, that Bitcoin value soared from just under $10,000 per coin to more than 

$18,000 within one week. Clearinghouses and brokerages expressed concern about liability due 

to Bitcoin’s high volatility and risk of manipulation because of the lack of transparency and 

regulation underlying Bitcoin futures products. 20

Moreover, virtual currencies do not require the disclosure of information about a user’s identity 

and therefore give participants some degree of anonymity. In the GAO’s Virtual Currencies: 

Emerging Regulatory, Law Enforcement, and Consumer Protection Challenges (2014) report, it 

noted that “[b]ecause some virtual currency transactions provide greater anonymity than 

transactions using traditional payment systems, law enforcement and financial regulators have 

raised concerns about the use of virtual currencies for illegal activities.” The GAO further 

identified concerns about the use of virtual currencies in money laundering, financial and other 

crimes including cross-border criminal activities, and consumer protection issues related to the 

loss of funds on virtual currency exchanges.21 

At present, the United States does not have a direct and comprehensive program to conduct 

oversight of the virtual currency markets. However, some government regulators and agencies 

have issued guidance to address concerns about virtual currencies, including the Financial 

Crimes Enforcement Network (“FinCEN”), Internal Revenue Service, Commodity Futures Trading 

Commission (CFTC), and Securities and Exchange Commission (SEC).

22 The FDIC has analyzed 

the potential impact that virtual currencies pose to financial institutions and formed a Financial 

Technology Working Group to monitor virtual currencies and other financial technology 

innovations. Among the challenges identified by the FDIC are the potential for illicit use and 

connection to criminal activity, legal and supervisory challenges, and integration with and risk to 

financial institutions. The FDIC should continue to monitor issues surrounding virtual currencies, 

to ensure that examiners and institutions are aware of the threats posed by these evolving 

technologies and markets.

 

Further, the Financial Services Sector-Specific Plan of the NIPP also described physical threats, 

such as natural disasters, terrorist attacks, and floods that have significant potential to disrupt 

the financial system. For example, CNN reported on November 10, 2017, Hurricanes Could Bring 

 

19 2018 Will See Many More Cryptocurrencies Double In Value (January 2, 2018). 20 Bitcoin to start futures trading, stoking Wild West worries, Reuters (December 7, 2017). 21 In the Statement of GAO’s Director, Financial Markets and Community Investment before the Senate Committee on Banking, Housing, and 

Urban Affairs (September 12, 2017), GAO also identified data and privacy risks in the use of blockchain technology.

22 FinCEN’s Advisory to Financial Institutions on Cyber-Events and Cyber-Enabled Crime (FIN-2016-A005 October 25, 2016); CFTC 

Backgrounder on Oversight of and Approach to Virtual Currency Futures Markets (January 4, 2018); SEC Chairman Jay Clayton Statement on 

Cryptocurrencies and Initial Coin Offerings (December 11, 2017).
2017

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Another Disaster: Foreclosure, that approximately 4.8 million mortgaged properties were in the 

paths of Hurricanes Harvey, Irma, and Maria, representing nearly $746 billion in unpaid 

mortgage principal balances. Threats to financial institutions also may come from, or be 

exacerbated by, their dependence on other critical infrastructure services, such as energy, 

electricity, communication, and transportation. The recent hurricanes in Puerto Rico provide an 

example of the effect of the loss of electricity and transportation to the banking industry. 

During Hurricane Maria, banks lost electrical power to run their operations, and armored cars 

could not reach branches to stock ATMs due to road conditions. 

Threat Information Critical to Financial Institutions and Their Service Providers. Threat 

information held by the U.S. Government is critical to financial institutions and their service 

providers. As discussed in FDIC’s Supervisory Insights, A Framework for Cybersecurity, “financial 

institutions should have a program for gathering, analyzing, understanding, and sharing 

information about vulnerabilities to arrive at ‘actionable intelligence.’” The Supervisory Insights 

article further stated that actionable intelligence can be gathered through a number of public 

and private resources, including FS-ISAC and the Department of Homeland Security’s U.S. 

Computer Emergency Readiness Team. The FDIC, along with the FFIEC, has encouraged 

financial institutions to participate in FS-ISAC. Also, FDIC IT examiners assess an institution’s 

process to gather threat information. 

As noted in GAO’s 2015 report referenced above, financial institutions are required to quickly 

respond to and mitigate the impact of data breaches. In order to secure their systems, 

institutions must have timely and actionable threat information. The 2015 Financial Services 

Sector-Specific Plan explained that “an incident impacting one firm has the potential to have 

cascading impacts that quickly affect other firms or sectors.” The financial crisis provided an 

example of how the default of poorly underwritten mortgages at one bank rippled through the 

financial system to other banks, brokerages, and insurance companies through asset-backed 

securities and collateralized debt obligations backed by those mortgages. 

Threat Information Critical to FDIC Examiners. Threat information held by the U.S. 

Government is also critical to FDIC examiners. Examiners should have access to relevant threat 

information and an understanding of the current threat level and types of threats, in order to 

focus examinations and prioritize areas for supervisory attention. 

FDIC examiners use standard work programs to assess safety and soundness risk; however, they 

also have discretion to modify the scope of an examination and assess whether certain areas 

require greater scrutiny or expanded examination procedures. Therefore, understanding 

common threats across all institutions, even those not supervised by the FDIC, is important to 
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examiners. This information can be used by an examiner to test risk management programs at 

financial institutions. FDIC examiners should have relevant information concerning current

threats and risks relating to an institution or a geographic region, which allows them to tailor 

examination procedures accordingly. 

In addition, if examiners identify weaknesses in an institution’s risk assessment process, 

including components related to gathering threat intelligence, they are instructed to identify 

such weaknesses in the Report of Examination. If the weaknesses are significant, an 

enforcement action may be used to specify and monitor the required corrective action. Further, 

FDIC examiners may initiate limited-scope examinations and visitations to investigate adverse or 

unusual situations based on up-to-date threat and risk information. These examinations and 

visitations have flexible formats. Examiners must assess whether bank staff have adequate 

threat information, and whether they take appropriate remediation action. Without relevant 

threat information, examiners may not be able to direct examination efforts effectively. 

The FDIC, along with its government partners, collects and queries threat information contained 

within U.S. Government databases and repositories. The FDIC should continue to ensure that 

relevant threat information is disseminated to its examiner personnel to target risk areas at 

institutions and focus the FDIC’s resources. The FDIC should also continue to assess whether 

financial institutions have access to and receive relevant threat information to mitigate risks. 

When institutions and examiners have threat information, they can more effectively take action

to mitigate threats. 
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Readiness for Banking Crises 

According to the Financial Crisis Inquiry Commission (2011),23 nearly $11 trillion in household 

wealth vanished during the financial crisis that began in 2008. During the financial crisis, 

4 million families lost their homes to foreclosure, and another 4-1/2 million slipped into the 

foreclosure process or were seriously behind on mortgage payments, and 26 million Americans 

were out of work, could not find full-time jobs, or gave up looking for work.24 As reported in the 

FDIC’s Crisis and Response, An FDIC History, 2008-2013, the net cost of the crisis was up to 

“roughly 80 percent of an entire year’s gross domestic product.”25 The financial crisis resulted in 

489 bank failures from 2008 through 2013. These failures cost the Deposit Insurance Fund 

(“DIF”) approximately $72 billion, and it fell to the lowest level in history, a negative $20.9 billion 

by the end of 2009.26 In addition, the number of problem banks peaked in early 2011 at almost 

900, constituting nearly 12 percent of all FDIC-insured institutions.27

As this crisis unfolded, it challenged every aspect of the FDIC’s operations, not only because of 

its severity, but also because of the speed with which problems unfolded. According to FDIC 

analysis, failure rates increased much faster during the 2008–2013 crisis than during the 1980s 

and early 1990s banking and thrift crises. For example, by 2009 almost 2 percent of banks had 

failed—a rate that was not reached in the previous crisis until the eighth year. In November 

2017, the FDIC Chairman stated that “[i]t is also worth keeping in mind that the evolution of the 

global financial system towards greater interconnectedness and complexity may tend to 

increase the frequency, severity, and speed with which the financial crises occur.” 

The FDIC Chairman further remarked that “regulators must guard against the temptation to 

become complacent about the risk facing the financial system.” The OFR noted in its Annual 

Report for 2017 that new vulnerabilities have emerged since the previous financial crisis and 

highlighted key threats to the financial system. There have been several changes in the financial 

markets since the crisis – for example: the increased use of automated trading systems, 

increased speed of executing financial transactions, and a wider variety of trading venues and 

 

23 The Financial Crisis Inquiry Commission was established by statute, Financial Enforcement and Recovery Act (2009), to “examine the 

causes of the current financial and economic crisis in the United States.” The Commission was independent and composed of a 10-member 

panel of experienced financial experts knowledgeable in housing, economics, finance, market regulation, banking, and consumer protection. 

These members were selected by the leadership in Congress at the time. 

24 The Commission and staff reviewed millions of pages of documents, interviewed more than 700 witnesses, and held 19 days of public 

hearings. See also, U.S. Government Accountability Office, Financial Regulatory Reform: Financial Crisis Losses and Potential Impact of the 

Dodd-Frank Act, (February 2013). 25 The FDIC conducted a study of the financial crisis entitled Crisis and Response, An FDIC History, 2008-2013, published in December 2017. 26 Since the end of 2009, the DIF has grown every quarter and became positive in the second quarter of 2011. The DIF balance as of 

December 31, 2017 was $92.7 billion. 27 The FDIC identifies “problem banks” as those with examination ratings of 4 or 5 (the two lowest ratings), which refers to institutions that 

exhibit deficiencies in practice or performance so severe that failure is either a distinct possibility (4 rating) or likely (5 rating) unless deficiencies 

are corrected.
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liquidity providers. Vice Chair Quarles of the Federal Reserve Board stated that “the banking 

industry and technology firms have been seeking innovations in financial services that mirror 

and complement changes that have been made in other industries. Innovation is coming to 

finance with changes to consumer lending, financial advice, and retail payments, to name 

a few. . . . With a steady diet of news about the effect of electronic networks, personal devices, 

apps, and more on U.S. industries, many question the effect of these technologies on the 

payment system.”28 

The financial system continues to evolve with new risks and complexities, and such changes 

have the potential to create unanticipated risks. To carry out its program activities and meet its 

mission – and to prepare for the next banking crisis – the FDIC should ensure that its personnel 

and examiners have the proper skillsets. The FDIC has an effort underway to address succession 

planning and develop advanced subject-matter expertise. 

The FDIC must continue to ensure that it has adequate plans in place to address disruptions to 

the banking system, irrespective of their cause, nature, magnitude, or scope. Further, its plans 

should be current and up-to-date, and incorporate lessons learned from past crises and the 

related bank failures. In addition, the plans should contemplate the present and foreseeable 

state of the banking and financial services sector, as banking industry practices and technologies 

continue to evolve. Also, the FDIC plans should continue efforts aimed at ensuring seamless 

coordination with and among other federal agencies and financial regulators, as well as with its 

international partners. The FDIC also should be able to react and respond quickly to a crisis. It 

should exercise and test its plans periodically to ensure that it is capable of fulfilling its mission, 

and ensure that its personnel and examiners have the proper skillsets to carry out program 

activities and meet the mission of the agency. 

Authorities and Mechanisms. The FDIC must also continue to evaluate whether it has the 

proper authorities and tools in place for the next financial crisis. Since the previous crisis, the 

FDIC has been granted authority, pursuant to the Dodd-Frank Wall Street Reform and Consumer 

Protection Act (“Dodd-Frank Act”), to resolve the failure of systemically important financial 

institutions (“SIFI”)29 through orderly liquidation authority.30 The FDIC must continue to ensure 

that it can execute these authorities effectively, especially with respect to the orderly liquidation 

authority. The FDIC continues to build upon its capabilities through monitoring of resolution 

 

28 Vice Chairman for Supervision Randal K. Quarles speech, Thoughts on Prudent Innovation in the Payment System (November 30, 2017). 29 In Resolution Plans: Regulators Have Refined Their Review Process but Could Improve Transparency and Timeliness (April 2016), GAO 

defines a SIFI as a term “commonly used by academics and other experts to refer to bank holding companies with $50 billion or more in total 

consolidated assets and nonbank financial companies designated by the Financial Stability Oversight Council for Federal Reserve supervision 

and enhanced prudential standards, but the Dodd-Frank Wall Street Reform and Consumer Protection Act does not use the term.” 30 Orderly liquidation authority acts as a backstop where SIFIs cannot otherwise be resolved through Bankruptcy Code processes.
2017

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plans and pre-planning exercises with key stakeholders and international partners. However, 

planning for these activities is complex, and the processes remain untested.

The Dodd-Frank Act also gave the FDIC greater discretion to manage the DIF, including where 

to set the designated reserve ratio.31 Consistent with the Act, the FDIC implemented a plan for 

the DIF by amending FDIC regulations to set the designated reserve ratio at 2 percent.32 

The FDIC should also continue evaluating whether it has the proper mechanisms to address 

failing institutions in the next crisis. For example, the FDIC has used Shared-Loss Agreements 

(“SLA”) to resolve failed institutions. In an SLA, a healthy acquiring institution agrees to 

purchase a failing institution, whereby the FDIC also agrees to absorb a significant portion of the 

losses experienced by the acquiring institution. According to the FDIC study on the financial 

crisis, SLAs were used by the FDIC for 62 percent of the failed banks and 82 percent of failed 

bank assets.33 The FDIC study identifies a number of issues in its analysis of lessons learned – 

including exploring options for maintaining readiness in a low-failure environment, considering 

broadening its options for funding resolutions, and implementing the necessary back-office 

operations and infrastructure to oversee the loss share program. We have work planned to 

evaluate whether the SLAs utilized by the FDIC achieved its program goals effectively. The FDIC 

should explore whether there are other mechanisms that should be considered for the next 

financial crisis and ensure that such tools are ready to be implemented should they be needed. 

When resolving a failing or failed bank, the FDIC uses an automated tool called the Claims 

Administration System (“CAS”) to identify a depositor’s insured and uninsured funds. When 

planning for the development of the CAS program, the FDIC expected that CAS could make 

insurance determinations for an institution of any size, up to 5 million deposit accounts; 

however, over time, the FDIC recognized the challenges of inconsistent and incomplete data at 

institutions. To mitigate these challenges, the FDIC issued a final rule on April 1, 2017 that 

required large institutions with greater than 2 million accounts to develop the capability to 

calculate deposit insurance coverage for their customers.34 As of December 2016, this rule 

would cover 38 financial institutions that maintain between 2 million and 87 million deposit 

accounts, at an expected cost of approximately $478 million. The FDIC has used CAS to make 

insurance determinations for a failing bank with greater than 2 million accounts during preclosing resolution planning but has not yet tested the system for institutions with greater than 

 

31 The reserve ratio is the DIF balance divided by estimated insured deposits. 32 The FDIC stated in the background of the Final Rule on the Designated Reserve Ratio that “a fund that is sufficiently large is a necessary 

precondition to maintaining a positive fund balance during a banking crisis and allowing for long-term, steady assessment rates. 75 Fed. Reg. 

79,286 (December 20, 2010).

33 The failure of the Washington Mutual financial institution was not included in these figures, because of its size and unique characteristics. 34 12 C.F.R. Part 370.
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2 million deposit accounts during a closing weekend. Accordingly, the FDIC is continuing to 

upgrade CAS capacity and timeliness. We have ongoing work to assess to what extent CAS has 

achieved expectations for accuracy, timeliness, and capacity in making insurance 

determinations. 

Staffing Plans. Determining the right number and skillsets of permanent staff needed to carry 

out and support the FDIC’s program areas is a fundamental challenge. At the peak of the 

financial crisis in 2011, the FDIC maintained approximately 9,250 permanent, term, and 

temporary positions, whereas it’s proposed staffing level for 2018 is 6,076 positions – a 34-

percent reduction. The FDIC’s annual budget is formulated primarily on the basis of an analysis 

of projected workload for each of the FDIC’s business lines35 and its program support functions. 

Risk Management Supervision (“RMS”). With respect to RMS, the FDIC viewed its 

corps of experienced examiners as a great asset during the last financial crisis. However, much 

of the current FDIC workforce will transition into retirement over the next decade. According to 

FDIC data, more than 25 percent of the FDIC’s current permanent workforce is projected to 

retire over the next 10 years, and many others are eligible to retire. While the FDIC has initiated 

a multi-year Workforce Development Initiative, it must maintain a steady flow of new examiners 

to step into the roles currently filled by seasoned examiners. In addition, the FDIC should ensure 

that there is a “knowledge transfer” from the more experienced personnel to the newer staff. To 

that end, RMS’s strategic plan includes a goal to ensure that the knowledge, expertise, and 

experiences of its most tenured workforce are shared with and transferred to a less tenured 

workforce.

RMS uses a staffing model to forecast a range for the appropriate number of examiners and its 

overall staffing size. This staffing model has been validated on two prior occasions. However, as 

noted earlier, in periods of crisis, the number of problem banks typically increases. For example, 

in March 2011, the number of problem banks was 888, whereas it currently stands at 

approximately 100 (as of September 2017). These problem banks required additional attention 

from FDIC RMS examiners, because they had elevated safety and soundness risks. As a result, 

the risk management examination staff was 2,237 positions in 2011, and has now been reduced 

to 1,549 in 2018 — a 31-percent reduction. During the financial crisis of 2008-2013, the FDIC 

reduced specialty examinations, examiner training, and temporary assignments, and 

repurchased employees’ annual leave, and hired temporary staff to address the increased 

workload. The FDIC also prioritized examination activities, increased staffing levels, and made 

greater use of off-site monitoring and on-site visitations between examinations. 

 

35 The FDIC has three major business lines: The Division of Risk Management Supervision (“RMS”) for safety and soundness and IT 

examinations; the Division of Resolutions and Receiverships (“DRR”) for failed bank resolutions and receivership activities; and the Division of 

Depositor and Consumer Protection (“DCP”) to ensure financial institutions treat customers and depositors fairly.
2017

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Resolutions and Receiverships (“DRR”). DRR staffing requirements during the financial 

crisis were significantly higher than current staffing because of the bank failure workload. In 

2010, there were 157 financial institutions that failed, as compared to only 5 failures in 2016 and 

8 in 2017. As a result, DRR authorized staffing fell from 2,460 positions in 2010 to 409 positions 

in 2018 — an 83-percent reduction.

DRR has developed an operational readiness framework. The framework is composed of several 

elements, including resource management, operation training, knowledge management, 

contract management, operational governance (i.e., delegated authorities, budget, and other 

organizational issues to address readiness), and technology support. The framework outlines a 

rapid hiring strategy through the use of contractors, retirees, and temporary employees. DRR

has established number of contracts to support an increase in workload. The FDIC has 

determined that having the contracts in place minimizes the time to ramp up the acquisition 

process. 

At the peak of the previous financial crisis, more than 80 percent of DRR staffing consisted of 

term and temporary employees. In 2005, the FDIC implemented a Corporate Employee Program 

(“CEP”) that was designed to train new and experienced FDIC employees in a variety of 

functions, with the goal of creating a flexible workforce that could be re-allocated depending 

upon economic conditions and level of resolution activity. Subsequently, the FDIC determined 

that the CEP did not work as designed for augmenting DRR staffing needs, because it assumed 

that many of the employees who would be shifted to resolution tasks would come from the 

supervision division. However, as resolution activity began to increase, the workload of other 

divisions—including supervision—also increased, so that the realignment of resources could not 

be achieved as intended.

Other Challenges to FDIC Staffing Issues. The staffing challenges identified above are 

difficult to address quickly within a compressed timeframe, because the FDIC requires 

background investigations before hiring new employees. The FDIC requires that employees, 

appointees, and applicants for employment undergo a National Agency Check and Inquiry with 

Credit or other appropriate background investigation according to the positions they hold. 

Background investigations are critical to ensure that the FDIC employs and retains only those 

persons who meet all federal requirements for suitability (i.e., character, reputation, honesty, 

integrity, trustworthiness) and whose employment or conduct would not jeopardize the 

accomplishment of the FDIC’s duties or responsibilities. A high-quality suitability program is 

essential to minimizing the risk of unauthorized disclosures of sensitive information and to 

helping ensure that information about individuals with criminal backgrounds or other 

questionable behavior is identified and assessed as part of the process for granting or retaining 
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ASSESSMENT (continued)

clearances. Our OIG evaluation, The FDIC’s Personnel Security and Suitability Program, examined 

the timeliness of background checks for FDIC personnel. We found that during the period of 

2011 to 2013, the submissions from the FDIC to investigate the background of employees and 

contractors exceeded OPM’s 14-day requirement, and that the average delays extended nearly 

2 months. 

According to the Division of Administration’s (“DOA”) Acquisition Services Branch (“ASB”), ASB

initially had difficulty recruiting and hiring term employees at the beginning of the most recent 

financial crisis. It appeared that prospective candidates were not interested in such term-limited 

appointments. However, as the crisis persisted, ASB expanded the number of permanent 

positions, reorganized, and was able to attract candidates for term appointments and complete 

contracting requirements. 

In addition, the current Administration has requested that government agencies develop reform 

plans aimed at reducing staffing levels. In June 2017, the FDIC submitted its multi-year strategy 

used to reduce operating and staffing on an annual basis to the OMB. The FDIC indicated in its 

submission that from 2010 through 2017, it had reduced its annual budget by approximately 

46 percent and it’s staffing by 30 percent. The FDIC anticipates a permanent workforce of no 

more than 6,000 in the near term but noted that adjustments may be necessary. 

Readiness of Support Functions. In addition to staffing models, the FDIC should also ensure 

that it has the proper infrastructure in place, in order to address the administrative functions of 

the agency in a timely manner during the next banking crisis. For example, the FDIC must 

ensure that it has the proper contracting services in place. During the recent financial crisis, the 

FDIC issued over 6,000 awards totaling more than $8 billion. The vast majority of these awards 

went to support resolution and receivership activity at FDIC headquarters and in the Dallas 

Regional Office. In addition to the contracting activity, the FDIC should also ensure that it has 

the proper support services for such contracts, including legal support (Legal Division), as well as 

oversight managers and technical monitors. In addition the FDIC should ensure that it has the 

proper level of human resources personnel to hire new employees and annuitants. The agency 

should continue to ensure that there is sufficient IT equipment (including computers, servers, 

peripheral devices, software licenses, and communications devices) in preparation for the next 

financial crisis, and a robust infrastructure so that these computer systems may operate in a 

secure environment.

The FDIC must continue to maintain and update its readiness strategies, and test and exercise its 

plans to ensure they keep pace with an ever-changing financial environment and incorporate 

important lessons from the past. 
2017

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Enterprise Risk Management Practices

Enterprise Risk Management (“ERM”) is a decision-making tool that assists federal leaders in 

anticipating and managing risks at an agency, and helps to consider and compare multiple risks 

and how they present challenges and opportunities when viewed across the organization. 

According to OMB guidance, ERM is beneficial because it addresses a fundamental 

organizational issue: the need for information about major risks to flow both vertically (i.e., up 

and down the organization) and horizontally (i.e., across its organizational units) to improve the 

quality of decision-making. When implemented effectively, ERM seeks to open channels of 

communication, so that managers have access to the information they need to make sound 

decisions. ERM can also help executives recognize how risks interact (i.e., how one risk can 

exacerbate or offset another risk). Further, ERM examines the interaction of risk treatments 

(actions taken to address a risk), such as acceptance or avoidance. ERM encompasses many risk 

areas, including financial risk, operational risk, reporting risk, compliance risk, governance risk, 

strategic risk, and reputational risk. 

In July 2016, OMB issued an updated Circular A-123, Management’s Responsibility for Enterprise 

Risk Management and Internal Control, to ensure that federal officials effectively manage risks

that could affect the achievement of 

agency strategic objectives.36 OMB 

Circular A-123 requires agencies to 

integrate risk management and 

internal control functions and guides 

agencies’ processes to integrate 

organizational performance and ERM. 

The Circular emphasizes the need for 

agencies to coordinate risk 

management and strong and 

effective internal controls into 

existing business activities as an 

integral part of governing and 

managing an agency. 

OMB Circular A-123 encouraged agencies to establish a Risk Management Council (“RMC”); 

develop “Risk Profiles”, which identify risks arising from mission and mission-support operations; 

 

36 The FDIC has determined that while Circular A-123 is not binding on the FDIC, the Circular provides “good government” principles that may 

be useful to the FDIC’s own ERM program.

OMB defines the following terms:

• Risk. The effect of uncertainty on objectives. 

• Risk management. A series of coordinated activities 

to direct and control challenges or threats to 

achieving an organization’s goals and objectives. 

• Enterprise Risk Management. An effective agencywide approach to addressing the full spectrum of 

the organization’s significant internal and external 

risks by understanding the combined impact of risks 

as an interrelated portfolio, rather than addressing 

risks only within silos.

Source: OMB Circular A-123 
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and consider those risks as part of the annual strategic review process. An effective RMC 

includes senior officials from program operations and mission-support functions to ensure the 

identification of risks that have the most significant impact on the mission outcomes. The Chief 

Operating Officer (“COO”) or a senior official with responsibility for the enterprise should serve 

as RMC chairperson.

OMB Circular A-123 complements OMB Circular A-11, Preparation, Submission, and Execution of 

the Budget, Section 270, which discusses agency responsibilities for identifying and managing 

strategic and programmatic risk as part of agency strategic planning, performance management, 

and performance reporting practices. Together, these two OMB Circulars constitute the ERM 

policy framework for the federal government. OMB views ERM as part of the overall governance 

process, and internal controls as an integral part of risk management and ERM. 

The Relationship Between Internal Controls and ERM

Source: OMB Circular A-123.

OMB Circular A-123 specifies elements that federal agencies’ ERM frameworks should include 

and steps agencies should take to develop these frameworks. These include a planned risk 

management governance structure, a process for considering risk appetite and risk tolerance 

levels, a methodology for developing a risk profile, a general implementation timeline, and a 

plan for developing the depth and quality of the risk profiles over time. The organization’s 

senior leadership should establish a risk appetite (i.e., amount of risk an organization is willing to 

accept), which serves as a guidepost to establish strategy and select objectives, and a risk 

Governance

Enterprise Risk 

Management

Risk 

Management

Internal 

Controls
2017

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OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

tolerance (i.e., an acceptable level of variance in performance relative to the achievement of 

objectives).

GAO reported that effective ERM implementation starts with an agency establishing a 

customized ERM program that fits its specific organizational mission, culture, operating 

environment, and business processes.37 GAO identified six essential elements to assist federal 

agencies as they move forward with ERM implementation. 

Source: GAO-17-63.

In our 2008 report, The FDIC’s Internal Risk Management Program, we evaluated the extent to 

which the FDIC’s implementation of an ERM program complied with applicable governmentwide guidance. We found that the FDIC should institutionalize how the various FDIC 

committees interrelate and support ERM, and ensure the continuity of risk management efforts 

as changes in leadership and/or senior management occur. Since that report, the FDIC has 

taken steps described below to develop an ERM framework, but in light of recent organizational 

 

37 Enterprise Risk Management: Selected Agencies’ Experiences Illustrate Good Practices in Managing Risk (December 2016).
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changes to the program, the FDIC must continue to enhance and develop its ERM infrastructure 

to achieve an effective and efficient ERM program. 

ERM is especially important for the FDIC at this time since it is experiencing significant changes 

at its senior levels, including the Board of Directors38 and its governance bodies. The FDIC has a 

Board with five members: the FDIC Chairman, the FDIC Vice Chairman, the Director of the 

Consumer Financial Protection Bureau (“CFPB”), the Comptroller of the Currency, and an internal 

FDIC board member. The FDIC Chairman’s term expired in November 2017, but he continues to 

serve as Chairman until a nominee is confirmed. The Vice-Chairman’s term expires in April 2018. 

The Comptroller of the Currency was appointed in November 2017, and the CFPB Director is 

currently in an acting role. In addition, the FDIC internal board member position has been 

vacant since June 4, 2015. 

In 2010, the FDIC engaged a consulting firm to evaluate its existing risk management practices 

and recommend improvements. The consulting firm identified several gaps in the FDIC’s risk 

management structure. For example, most risks at the FDIC were addressed within existing 

hierarchical organizational structures, with limited communication across the agency 

organizational units. Further, while the FDIC had a network of internal committees to address 

various risks, governance over those committees was ambiguous. The consultant recommended 

the establishment of a centralized, independent risk management organization headed by a 

Chief Risk Officer (“CRO”) that should report directly to the FDIC Chairman. 

In January 2011, the FDIC Board of Directors established the CRO position and subsequently, in 

December 2011, the FDIC Board approved the creation of an Office of Corporate Risk 

Management (“OCRM”) with staffing of 15 employees. The CRO reported operationally to the 

FDIC Chairman and functionally to the Board of Directors. The OCRM provided an organization 

within the FDIC to review external and internal risks with a system-wide perspective and instill 

risk governance as part of the FDIC’s culture. In addition, the FDIC established an Enterprise Risk 

Committee (“ERC”) chaired by the CRO. The newly established ERC evaluated significant 

external business risks facing the FDIC and banking industry. 

The first CRO assumed his position in August 2011 and the OCRM staffing was authorized at 

15 positions. The initial CRO retired in May 2016 and the then-Deputy CRO became the Acting 

CRO until his retirement in June 2017. Further, due to other staff departures, there were only 

five professional staff in OCRM by September 2017. 

 

38 According to the Federal Deposit Insurance Act, the management of the FDIC is vested in a Board of Directors consisting of five members 

who each serve 6-year terms – the Comptroller of the Currency, the Director of the Consumer Financial Protection Bureau, and three members 

appointed by the President with advice and consent of the Senate. 12 U.S.C. §1821(a) and (b). The three members are the Chairman of the 

FDIC, the FDIC Vice Chairman, and an internal FDIC Director.
2017

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In September 2017, the FDIC transferred OCRM functions into the Division of Finance (“DOF”). 

The reorganization combined the OCRM and the Corporate Management Control (“CMC”) 

Branch into a newly-constituted Risk Management and Internal Controls Branch (“RMIC”) within 

DOF. The title of CRO will now be held by a Deputy Director in DOF. Currently, the Acting 

Deputy Director heads RMIC. The FDIC plans to select a permanent CRO in early 2018. As part 

of the 2017 reorganization, the FDIC also decided to use the existing Operating Committee as 

the focal point for the coordination of risk management at the FDIC, thus disbanding and 

replacing the ERC. The FDIC also maintains a framework to enhance awareness of external 

threats that may impact FDIC operations. The framework consists of Regional Risk Committees 

that review regional economic and banking trends; the Management Risk Roundtable that 

examines risks to the banking industry and the Deposit Insurance Fund; and the External Risk 

Forum that facilitates information sharing and awareness of risks facing the banking industry 

and the FDIC. We intend to conduct an evaluation of the effectiveness of the FDIC ERM 

Program.

The FDIC should continue institutionalizing ERM and best practices outlined in OMB guidance. 

The FDIC Board of Directors, senior management, and individuals at every level throughout the 

FDIC should acknowledge, understand, and take ownership of current and emerging risks to the 

FDIC mission and be prepared to take steps to mitigate these risks. 
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Acquisition Management and Oversight

According to the GAO’s Framework for Assessing the Acquisition Function at Federal Agencies

(2005), agencies should effectively manage their acquisition process in order to ensure that

contract requirements are defined clearly and all aspects of contracts are fulfilled.

39 GAO noted 

that clear descriptions of contract requirements lead to the acquisition of goods and services at 

a fair price. Vague statements of work, however, can lead to miscommunication, uncertainty, 

delays, and increased costs. Agencies must properly oversee contractor performance and 

identify any deficiencies, as well ensure appropriate verification of expenditures. 

Over the last 10 years (2008 through 2017), the FDIC awarded more than 12,600 contracts 

totaling nearly $11.2 billion. The DOA ASB provides a wide range of contracting programs and 

services to support day-to-day operations at the FDIC. As shown in the chart below, the FDIC 

awarded $2.6 billion in contracts from January 2014 to December 2017. In addition, the FDIC 

budget for 2018 includes more than $457 million in contracting expenses for outside services. 

FDIC Contract Awards January 2014-December 2017

Source: FDIC Division of Administration

Three divisions, DOA, the Division of Information Technology (“DIT”), and DRR, accounted for 

96 percent ($2.5 billion) of all contract awards through DOA’s ASB between January 2014 and 

December 2017. DOA contracts for services such as security, facilities, and records 

management. DIT procures contracts for technology services, such as help desk personnel, 

 

39 GAO, Framework for Assessing the Acquisition Function at Federal Agencies (2005); See also, Testimony of GAO Assistant Comptroller 

General before the Subcommittee on Oversight and Investigations, U.S. House of Representatives (December 3, 1992).

 $-

 $100,000,000

 $200,000,000

 $300,000,000

 $400,000,000

 $500,000,000

 $600,000,000

 $700,000,000

 $800,000,000

 $900,000,000

 $1,000,000,000

2014 2015 2016 2017

Total Value of Contract Awards
2017

APPENDICES 191

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

computer systems design, and telecommunications. DRR is responsible for managing the 

resolution process, which involves a range of contracts to support the closing functions at failed 

institutions, and management and disposition of receivership assets. For example, DRR 

contracts include appraisal management services, credit card consulting, commercial loan 

servicing, and data management. 

Contracting Officers are responsible for ensuring the performance of all actions necessary for 

efficient and effective contracting, compliance with contract terms, and protection of the FDIC’s 

interests in all of its contractual relationships. In addition, FDIC program offices develop 

contract requirements, and program office Oversight Managers and Technical Monitors oversee 

the contractor’s performance and technical work. Oversight management involves monitoring 

contract expenses and ensuring that the contractor delivers the required goods or performs the 

work according to the delivery schedule in the contract. In Crisis and Response, An FDIC History, 

2008-2013, the FDIC explained that contracting was an essential part of the FDIC’s failure 

resolution process during the financial crisis, but it was overtaxed early in the crisis. Specifically, 

staffing was thin, contract timeframes to approve new contracts or modify existing contracts 

were too long to support the volume of failures, and the FDIC had to rapidly hire and train 

Oversight Managers. We are initiating an evaluation to review FDIC’s current contract oversight 

program. 

The FDIC also must continue to ensure that its contractors and contracting personnel meet 

security and suitability standards for employment and access to sensitive information. In 

addition, contractors must meet criteria for integrity and fitness such as conflicts of interest,

ethical responsibilities, and use of confidential information.40 These security protections are 

important since the contractors have access to FDIC space and information and use FDIC 

equipment. Such information includes sensitive information related to bank closings as well as 

personally identifiable information for private citizens and FDIC employees. DOA’s Security and 

Emergency Preparedness Section, Personnel Security Unit, is responsible for establishing and 

implementing contractor personnel security policy, including evaluations, adjudications, 

approvals, and clearances, and ensuring appropriate background investigations are conducted 

on contractor personnel.41 

With regard to contracting for legal services, for the 4 years from 2014 through 2017, the FDIC’s 

Legal Division spent $364 million on outside counsel. The Legal Division has independent 

contracting authority and is excluded from FDIC procurement policies executed by ASB. The 

Legal Division contracts for services of outside counsel in areas such as bankruptcy and 

creditor’s rights; collections; environmental law; federal, state, and local taxation; foreclosures; 

 

40 12 C.F.R. Part 366.

41 FDIC Circular 1610.2, Personnel Security Policy and Procedures for FDIC Contractors.
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real estate; and financial transactions. The Legal Division retains outside counsel through Legal 

Services Agreements that contain terms and conditions applicable to referrals of FDIC legal 

matters. The Legal Division assigns an Oversight Attorney (“OA”) responsible for all strategic 

and major tactical decisions associated with a matter. The OA also monitors progress against a 

case plan and budgets. 

The FDIC characterizes “large contracts” as those with award amounts exceeding $20 million or 

that require greater oversight based on the complex nature of the contract. As of January 2018, 

the FDIC had 11 large contracts between $20 and $112 million in value. Over the past 2 years, 

DRR and DIT oversaw a total of 540 contracts, each with a value of $1 million or more.

In our OIG work, we have noted several shortcomings in contractor oversight, which can lead to 

delays and cost overruns. In our report, The FDIC’s Failed Bank Data Services Project (March 

2017), we reviewed a 10-year, $295 million project related to the transition of the management 

of failed financial institution data from one contractor to another. Our review focused on 

transition costs of approximately $24.4 million. The audit concluded that transition milestones 

were not met, resulting in a one year delay. Further, transition costs, while less than projected 

in the approval, were greater than the initial estimates at contract inception, by $14.5 million. 

We concluded that the reasons for the increase were that the FDIC faced challenges related to 

defining contract requirements, coordinating contracting and program office personnel, and 

establishing implementation milestones. We reported that FDIC personnel did not fully 

understand the requirements for transitioning failed financial institution data and services to a 

new contractor, or communicate these requirements to bidders in a comprehensive transition 

plan as part the solicitation. Further, the FDIC did not establish clear expectations in the 

contract documents and did not implement a project management framework and plans.

In addition, our OIG report on the FDIC’s Identity, Credential, and Access Management Program

(2015), reviewed the FDIC’s Identity, Credential, and Access Management Program (“ICAM”) and 

identified significant issues or program risks. We found that the FDIC had not achieved its goal 

of issuing identity credentials (known as personal identity verification (PIV) cards) to all eligible 

employees and contractor personnel. The FDIC had not established appropriate governance to 

ensure the ICAM program’s success. The FDIC awarded an initial contract for $3.4 million to 

procure expertise and support for planning and implementing the credential program. We 

reported that the milestone goals for this project slipped by more than 2 years (from 

August 2014 to December 2016) and that the contract cost ceiling needed to be increased by 

$1.5 million — a 44 percent increase. We determined that these delays and cost overruns were 

the result of technical hurdles as well as unclear roles and responsibilities of the parties involved 

in governing the ICAM program. 
2017

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ASSESSMENT (continued)

In 2017, we conducted a Follow-on Audit of the FDIC’s Identity, Credential, and Access 

Management Program (June 2017) and found that the FDIC addressed the issues from the 2015 

report but experienced considerable challenges that warranted management’s attention. For 

example, the FDIC had not established policies and procedures governing the management and 

use of PIV cards for physical and logical access. We also concluded that the FDIC did not 

maintain current, accurate, and complete contractor personnel data needed to manage PIV 

cards, and management had not finalized and approved a plan for retiring the FDIC’s legacy PIV 

card system. 

In response to recommendations made in OIG reports, the FDIC is taking actions to improve 

contract management and oversight. For example, 346 Oversight Managers and Technical 

Monitors received training, and ASB was developing an Oversight Manager refresher course 

during 2017.

In a time of reduced budget and staff, the FDIC should continue efforts aimed at optimizing its 

use of contract resources by clearly defining work and deliverables, managing contract 

milestones, and overseeing contract expenditures. Taking those steps helps to ensure that the 

FDIC receives goods and services at a fair price and without undue delays and costly 

inefficiencies.
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Measuring Costs and Benefits of FDIC Regulations

GAO’s report, Dodd-Frank Act Regulations: Implementation Could Benefit from Additional 

Analyses and Coordination (2011), recognizes that, while not required, many Federal financial 

regulators generally perform cost-benefit analysis when they propose a new rule. The 

Congressional Research Service (“CRS”) has recognized that the use of cost-benefit analysis may 

improve the quality and effectiveness of federal rules and minimize burden in its Cost-Benefit 

and Other Analysis Requirements in the Rulemaking Process (2014). 

On February 3, 2017, the President issued Executive Order 13772 that set forth seven core 

principles for Federal regulations governing U.S. financial institutions, including “make 

regulation[s] efficient, effective, and appropriately tailored.” As required by this Executive Order, 

the Department of the Treasury issued a report, A Financial System That Creates Economic 

Opportunities (June 2017), examining costs relating to compliance with regulations imposed on 

banks. This report recommended that financial regulatory agencies should conduct rigorous 

cost-benefit analysis and make greater use of proposed rulemaking to solicit public comment. 

While there is no formal requirement for financial regulators to conduct cost-benefits analysis

for rulemaking, the FDIC generally conducts this analysis on its own initiative for proposed rules. 

In addition, the FDIC routinely solicits comments from the public for Notice of Proposed 

Rulemakings in accordance with the provisions of the Administrative Procedures Act , and 

because of the difficulty in obtaining quantitative data measuring regulatory costs and benefits, 

it considers such comments to be an important source of information. 

The FDIC has developed a framework for conducting analysis of regulations. According to the 

FDIC’s Statement of Policy on Development and Review of FDIC Regulations and Policies (updated 

December 2017), the agency “evaluate[s] benefits and costs based on available information, and 

consider[s] reasonable possible alternatives; the main alternatives should be described and 

analyzed for consistency with statutory or regulatory objectives, effectiveness, and burden on 

the public or industry.” Also, in 2015, the FDIC organized an Office of the Chief Economist and 

Regulatory Analysis within the Division of Insurance and Research, which, according to the FDIC, 

aims to provide consistency and rigor in its regulatory analysis.42 

The CRS report, Cost Benefit Analysis and Financial Regulator Rulemaking (2017), recognized that 

performing cost benefit analysis “can be useful in determining whether or not a regulation is 

beneficial. However, performing CBA [Cost Benefit Analysis] can be a difficult and timeconsuming process, and it produces uncertain results because it involves making assumptions 

 

42 The Federal Reserve also recently established a new office to analyze the impact of its regulations. (See Fed adds staff for new office 

dedicated to gauging economic impact of regulations, Politico Pro, January 18, 2018).
2017

APPENDICES 195

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ASSESSMENT (continued)

about future outcomes.” The CRS report also noted that cost benefit analysis, “for financial 

regulation is particularly challenging, due largely to the high degree of uncertainty over precise 

regulatory costs and outcomes.” The report identified three challenges to making accurate cost 

benefit analysis: (1) behavioral changes of people as they adapt to a new regulation, 

(2) quantification that must overcome uncertainty over the causal relationship between the 

regulation and outcomes, and (3) monetization, which is difficult for outcomes that do not have 

easily discernable monetary values. 

In addition, the Yale Law Journal published a review entitled Cost-Benefit Analysis of Financial 

Regulations Case Studies and Implications (2015), which examined select financial regulations. 

This review determined “that the capacity of anyone . . . to conduct qualified [Cost Benefit 

Analysis on Financial Regulations] with any real precision or confidence does not exist for 

important, representative types of financial regulation.” The review concluded that, “[t]oo many 

contestable assumptions are required for anyone producing or consuming guesstimate [Cost 

Benefit Analysis on Financial Regulations] to have any confidence in any specific estimate of 

costs or benefits, even if expressed in ranges or bounds.” 

Another CRS report, An Analysis of the Regulatory Burden on Small Banks (2015), noted that 

bank regulators, including the FDIC, generally did not quantify overall costs or benefits for 

14 major rules issued in accordance with the Dodd-Frank Act requirements, although regulators 

did assess some costs associated with individual rules. The bank regulators quantified some 

costs for two rules and qualitatively discussed costs and benefits for three rules. The CRS did 

not identify any cost-benefit analysis for the other remaining rules. 

Similarly, GAO’s report, Dodd-Frank Regulations: Agencies’ Efforts to Analyze and Coordinate 

Their Recent Final Rules (2016), reviewed five major rules, one of which was issued by the FDIC, 

and found that regulators quantified some costs in all five rules. The FDIC rule was one of the 

two where some benefits were quantified. GAO cited earlier work that noted that bank 

regulators faced difficulties in quantifying benefits because financial regulatory concepts are 

complex and challenging to define and model; research methodologies do not necessarily 

address economic values and the distribution of risk; and flows of future costs and benefits can 

be uncertain and difficult to project.43 For these reasons, the FDIC faces challenges with proper 

data collection and lack of available information with respect to measuring costs and identifying 

benefits for a particular rule. 

In responses to the GAO report, regulators advised GAO that there are industry concerns about 

the potential for unintended consequences from Dodd-Frank Act rulemaking and 

 

43 Dodd-Frank Regulations: Regulators’ Analytical and Coordination Efforts (2014).
ANNUAL REPORT

196 APPENDICES

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

implementation and were undertaking retrospective reviews of rules. For example, in February 

2016, the FDIC issued a proposed rule on Recordkeeping for Timely Deposit Insurance 

Determination. The FDIC experienced challenges in quantifying the costs and benefits of this 

rule. The FDIC had engaged an independent contracting firm to estimate the expected costs 

that 36 large banks would incur as a result of the proposed rule requiring such banks to 

calculate insured deposits within 24 hours of failure. The contractor estimated that the cost to 

the industry was $328 million (80 cents per deposit account). The FDIC found, however, that the 

benefits of the rule were difficult to determine, explaining that “[b]ecause there is no market in 

which the value of these public benefits can be determined, it is not possible to monetize these 

benefits.” 

During the comment period for this rule, the American Bankers Association, Clearinghouse 

Association, Consumer Bankers Association, and Securities Industry and Financial Markets 

Association provided comments that outlined numerous concerns about the proposed rule. 

One such concern was that the FDIC had not adequately considered the costs the rule would 

place on financial intermediaries, the disruption that it would cause in deposit markets, and the 

risk that it would place on the security of depositors’ personal information. The associations

further stated that the FDIC contractor had underestimated the actual implementation costs of 

the rule and did not contemplate ongoing costs to the institutions. In addition, the associations

asserted that the FDIC did not fully consider that the increased costs would likely be passed on 

to customers at the institutions. They also noted that “the FDIC has a responsibility to provide 

concrete evidence to support the purported benefits” of the rule and “conduct a full-fledged 

cost-benefit analysis.” 

After evaluating public comments on the proposed rule, the FDIC issued a final rule with a 

revised total cost of $478 million in which the cost to the covered institutions was estimated at 

$368 million with the remaining costs accrued to depositors and the FDIC. In the final rule, the 

FDIC stated that the rule would ensure “prompt and efficient deposit insurance determinations 

by the FDIC and thus the liquidity of deposit funds; enabl[e] the FDIC to more readily resolve a 

failed [Insured Depository Institution]; reduc[e] the costs of failure of a covered institution by 

increasing the FDIC’s resolution options; and promot[e] long term stability in the banking 

system by reducing moral hazard.” The FDIC further advised us that the estimated costs of 

implementation would amount to less than one seventh of one percent of 2015 total 

noninterest expenses for institutions required to implement the rule.

The FDIC engages in a regulatory review process at least every 10 years, in accordance with the 

Economic Growth and Regulatory Paperwork Reduction Act. This process considers whether any 

of the FDIC’s regulations are outdated, unnecessary, or unduly burdensome. In addition, in
2017

APPENDICES 197

OFFICE OF INSPECTOR GENERAL’S 

ASSESSMENT (continued)

2009, the FDIC established an Advisory Committee on Community Banking to provide advice 

and guidance on policy issues impacting small community banks, including current examination 

policies and procedures, credit and lending practices, deposit insurance assessments, insurance 

coverage, and regulatory compliance, including the cost and benefit of regulations. Community 

banks include rural and urban institutions supervised by the FDIC. Further, in 2012, the FDIC 

conducted a Community Banking Study to identify and explore issues and questions about 

community banks. The Study found a number of areas warranting additional FDIC research, 

including how regulatory costs for community banks have changed. As part of its Annual 

Performance Plan for 2017, the FDIC committed to follow up on issues identified in the Study 

relating to efficiency, consistency, and transparency of its supervisory processes. 

While the FDIC aims to conduct cost-benefit analyses for proposed rules, it faces challenges in

collecting the necessary data and information, and estimating the costs and benefits of its 

regulations with a degree of precision. The FDIC should continue efforts to make meaningful 

cost-benefit determinations because regulations have lasting effects on institutions and 

consumers.
ANNUAL REPORT

198 APPENDICES

E. ACRONYMS

AEI Alliance for Economic Inclusion

AFS Available-For-Sale

AIG American International Group, Inc.

AML Anti-Money Laundering

AML/CFT Anti-Money Laundering and Countering the 

Financing of Terrorism

ASBA Association of Supervisors of Banks of the 

Americas

ASC Accounting Standards Codification

ASU Accounting Standards Update

BCBS Basel Committee on Banking Supervision

BoA Bank of America

BSA Bank Secrecy Act

Call Report Consolidated Reports of Condition and 

Income

CAMELS 

rating scale Capital adequacy; Asset quality; Management 

quality; Earnings; Liquidity; Sensitivity to 

market risks

CAT Cybersecurity Assessment Tool

CCP Central Counterparties

CDFI Community Development Financial 

Institution

CECL Current Expected Credit Losses

CEO Chief Executive Officer

CEP Corporate Employee Program

CFI Complex Financial Institution

CFO Act Chief Financial Officers’ Act

CFPB Consumer Financial Protection Bureau

CFR Center for Financial Research

CFTC Commodity Futures Trading Commission

CIO Chief Information Officer

CMG Crisis Management Group

CMP Civil Money Penalty

ComE-IN Advisory Committee on Economic Inclusion

CPI-U Consumer Price Index for All Urban 

Consumers

CRA Community Reinvestment Act

CRE Commercial Real Estate

CSF Cybersecurity Framework

CSRS Civil Service Retirement System

DCP Division of Consumer Protection

DFA Dodd-Frank Act

DIF Deposit Insurance Fund

DIR Division of Insurance and Research

DIT Division of Information Technology

DOA Division of Administration

DRR Designated Reserve Ratio

DRR (FDIC) Division of Resolutions and Receiverships

EC European Commission

EDIE Electronic Deposit Insurance Estimator

EGRPRA Economic Growth and Regulatory Paperwork 

Reduction Act of 1996

ERM Enterprise Risk Management

FASB Financial Accounting Standards Board

FBIIC Financial and Banking Information 

Infrastructure Committee 

FBO Foreign Bank Organization

FDI Act Federal Deposit Insurance Act

FDIC Federal Deposit Insurance Corporation

FEHB Federal Employees Health Benefits

FERS Federal Employees Retirement System

FFB Federal Financing Bank

FFIEC Federal Financial Institutions Examination 

Council

FFMIA Federal Financial Management Improvement 

Act

FHLB Federal Home Loan Banks

FICO Financing Corporation

FIL Financial Institution Letter

Fintech Financial Technology

FIRREA Financial Institutions Reform, Recovery 

Enforcement Act

FIS Financial Institution Specialists

FISMA Federal Information Security Management Act

FMFIA Federal Managers’ Financial Integrity Act

FMSP Financial Management Scholars Program

FRB Board of Governors of the Federal Reserve 

System

FRF FSLIC Resolution Fund

FSB Financial Stability Board

FS-ISAC Financial Services Information Sharing and 

Analysis Center
2017

APPENDICES 199

FSLIC Federal Savings and Loan Insurance 

Corporation

FSOC Financial Stability Oversight Council

FTE Full-Time Employee

GAAP Generally Accepted Accounting Principles

GAO U.S. Government Accountability Office

GDP Gross Domestic Product

GECC General Electric Capital Corporation, Inc.

GPRA Government Performance and Results Act

G-SIBs Global Systemically Important Banks

G-SIFI Global SIFIs

HMDA Home Mortgage Disclosure Act

IADI International Association of Deposit Insurers

IDI Insured Depository Institution

IMF International Monetary Fund

IMFB IndyMac Federal Bank

InTREx Information Technology Risk Examination 

Program

IT Information Technology

ITCIP Insider Threat and Counterintelligence 

Program

ITSP Information Technology Strategic Plan

LIDI Large Insured Depository Institution

LLC Limited Liability Company

MDI Minority Depository Institutions

MOL Maximum Obligation Limitation

MOU Memoranda of Understanding

MRM Model Risk Management

MRBA Matters Requiring Board Attention

MWOB Minority- and Women-Owned Business

NCUA National Credit Union Administration

NPR Notice of Proposed Rulemaking

NSFR Net Stable Funding Ratio

OCC Office of the Comptroller of the Currency

OCRM Office of Corporate Risk Management

OIG Office of the Inspector General

OLA Orderly Liquidation Authority

OLF Orderly Liquidation Fund

OMB U.S. Office of Management and Budget

OMWI Office of Minority and Women Inclusion

OO Office of the Ombudsmen

OPM Office of Personnel Management

ORE Owned Real Estate

OTS Office of Thrift Supervision

P&A Purchase and Assumption

PIV Personal Identity Verification

PRU Prudential Incorporation

QBP Quarterly Banking Profile

QFC Qualified Financial Contracts

REMA Reasonably Expected Market Area

ReSG FSB’s Resolution Steering Committee

RMIC Risk Management and Internal Controls

RMS Division of Risk Management Supervision

RTC Resolution Trust Corporation

SBA Small Business Administration

SEC Securities and Exchange Commission

SIFI Systemically Important Financial Institution 

SLA Shared-Loss Agreement

SME Subject Matter Expert

SMS Systemic Monitoring System

SNC Shared National Credit Program

SRAC Systemic Resolution Advisory Committee

SRR SIFI Risk Report

SRB Single Resolution Board

SSGN Structured Sale of Guaranteed Note

TIPS Treasury Inflation-Protected

TSP Federal Thrift Savings Plan

TSP (IT-related) Technology Service Providers

UBPR Uniform Bank Performance Report

URSIT Uniform Rating System for Information 

Technology

VIEs Variable Interest Entities

WE Workplace Excellence

WIOA Workforce Investment Opportunity Act

YSP Youth Savings Program
NOTES
2017

Federal Deposit 

Insurance Corporation

This Annual Report was produced by talented and dedicated staff. 

To these individuals, we would like to offer our sincere thanks and 

appreciation. Special recognition is given to the following for their 

contributions:

❏ Jannie F. Eaddy 

❏ Barbara A. Glasby

❏ Pamela A. Brownfield

❏ Financial Reporting Section Staff

❏ Division and Office Points-of-Contact

FEDERAL DEPOSIT INSURANCE CORPORATION
H H H

H H H

550 17th Street, N.W.

Washington, DC 20429-9990

www.fdic.gov

FDIC-003-2018