MESSAGE FROM THE CHAIRMAN 5 

2020

MESSAGE FROM THE CHAIRMAN 

Last year was truly unprecedented in many respects. In 

the face of the COVID-19 pandemic and corresponding 

shutdowns across the globe, financial markets and the 

broader economy experienced significant stress and 

volatility. Although considerable uncertainty remains 

about the path of the economy, our banking system has 

served as a source of strength throughout this period. 

In response to the challenges posed by the pandemic, 

the Federal Deposit Insurance Corporation (FDIC) has 

worked to maintain stability and public confidence in the 

U.S. financial system, and I could not be more proud of 

our unwavering commitment to this mission. 

In addition to responding to economic risks related 

to COVID-19, the FDIC has made significant progress 

in several areas over the past year: supporting 

communities in need; promoting diversity and inclusion 

at the FDIC; finalizing outstanding rulemakings; fostering 

technology solutions and encouraging innovation; and 

enhancing resolution readiness. 

RESPONDING TO ECONOMIC 

RISKS RELATED TO COVID-19

Concurrent with the declaration of the national 

emergency in early March related to the COVID-19 

pandemic, economic and banking conditions took a 

sharp turn. The economy shifed dramatically from the 

longest-lasting economic expansion in U.S. history to the 

most severe recession in recent history, as many states 

implemented broad stay-at-home orders and businesses 

abruptly closed. Financial markets experienced broad 

sell-ofs across all major markets, reducing market 

liquidity and impairing trading of even the safest 

markets, such as U.S. Treasury securities and agency 

mortgage-backed securities. 

Beginning in early March, the FDIC took a series of 

swif, decisive actions that helped maintain stability in 

financial markets. These actions focused on providing 

necessary flexibility to both banks and their borrowers 

– particularly the most heavily afected individuals 

and businesses – while maintaining the overall safety 

and soundness of the banking system. To support the 

ability of banks to meet customer needs, we made 

targeted, temporary regulatory changes to facilitate 

lending and other financial intermediation and took 

supervisory actions to encourage banks to work with 

their borrowers. For example, the FDIC worked with the 

other banking agencies and the Financial Accounting 

Standards Board (FASB) to provide relief from troubled 

debt restructuring (TDR) accounting treatment for loan 

modifications related to COVID-19, and issued multiple 

interim final rules providing flexibility under the capital 

rules to enable the banks to support creditworthy 

businesses and consumers. 

In addition, we worked to foster small business lending, 

including through the Small Business Administration’s 

Paycheck Protection Program (PPP). This program 

has highlighted the vital role of our nation’s banks — 

especially community banks — in supporting small 

businesses through commercial and industrial (C&I) 
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lending. Banks hold the vast majority of PPP loans, 

and community banks held approximately 31 percent 

of these loans as of the third quarter, a significant share 

relative to their 15 percent of total industry loans and 13 

percent of total C&I loans. 

SUPPORTING COMMUNITIES 

IN NEED 

As the pandemic continues to disrupt the daily lives of 

all Americans, we are particularly mindful that minority 

and low- and moderate-income (LMI) communities have 

sufered disproportionately, from both a health and an 

economic perspective. As the nation’s deposit insurer 

and primary supervisor of community banks, including 

minority depository institutions (MDIs), the FDIC plays an 

important role in helping ensure these institutions can 

meet the needs of their customers and communities. 

A significant part of my focus as FDIC Chairman has been 

bridging the gap between those that actively participate 

in the financial system and those that do not. The need 

to create a financial system of inclusion and belonging 

is not theoretical or merely academic to me; as an 

immigrant who arrived in this country as an 18-year-old 

with just $500 in my pocket, it is personal. 

We know that individuals from LMI communities are 

ofen the least likely to have banking and financial 

services. With respect to minority communities in 

particular, despite meaningful improvements in recent 

years, the rates for Black and Hispanic households who 

do not have a checking or savings account at a bank 

remain substantially higher than the overall “unbanked” 

rate. 

We have embraced our statutory responsibility to 

promote and preserve the health of MDIs by seeking new 

and innovative ways to engage with these institutions 

and better understand their needs. One of the options 

we are exploring to support MDIs and Community 

Development Financial Institutions (CDFIs) is a framework 

that would match these banks with investors interested 

in the particular challenges and opportunities facing 

those institutions and their communities. The MissionDriven Bank Fund will provide a vehicle through which 

investors’ funds can be invested in or with MDIs and 

CDFIs, including direct equity, structured transactions, 

funding commitments to loan participations, or potential 

loss-share arrangements. 

PROMOTING DIVERSITY AND 

INCLUSION AT THE FDIC 

The FDIC is deeply committed to fostering a diverse 

workforce and inclusive work environment. The racial, 

ethnic, and gender diversity of the FDIC workforce, 

including our leadership, continues to steadily increase. 

In addition to increasing the diversity of our workforce, 

we have continued to promote the participation of 

minority- and women-owned businesses (MWOBs) in 

FDIC contracting actions. In 2020, we took a number of 

actions to improve the ability of MWOBs to compete for 

contracts. 

While we have had success with recent initiatives, we are 

not yet satisfied with our progress or the pace of change. 

We have announced the first corporate performance 

goal dedicated to improving diversity, equity, and 

inclusion. We will soon release a comprehensive 

Diversity, Equity, and Inclusion Strategic Plan, 

incorporating extensive feedback from our employees 

and external stakeholders. Our Strategic Plan will detail 

concrete steps the FDIC plans to take over the next 

several years to promote diversity, equity, and inclusion 

in our workforce, in our operations, and in the banking 

system. 

FINALIZING OUTSTANDING 

RULEMAKINGS 

The FDIC continues to focus our eforts on modernizing 

and improving our regulatory framework to promote 

economic growth and an eficient and resilient financial 

system. In addition to the series of rulemakings related 

to the pandemic, the FDIC finalized a number of key 

rulemakings that: 

♦ Established a new framework for regulating 

brokered deposits, the first meaningful, 

comprehensive update to the brokered deposits 

regulation in 30 years; 

♦ Amended the methodology for calculating interest 

rate caps applicable to less than well-capitalized 

institutions; 

♦ Streamlined the “covered funds” provisions of 

the Volcker Rule to improve access to capital for 

businesses; 
MESSAGE FROM THE CHAIRMAN 7 

2020

 

 

♦ Codified longstanding FDIC legal interpretations Tohelp overcome these challenges, we established 

that the permissibility of an interest rate is not an ofice of innovation – FDiTech – in 2019, and began 

afected by subsequent events, such as the sale or working on several initiatives to promote innovation and 

transfer of the loan; and support financial inclusion, including: 

♦ Established minimum conditions and commitments 

for industrial banks and their parent companies to 

enter into as a condition for approval for deposit 

insurance. 

FOSTERING TECHNOLOGY 

SOLUTIONS AND 

ENCOURAGING INNOVATION 

As we consider additional ways to create a more 

inclusive banking system, we recognize the tremendous 

benefits that financial innovation can deliver to 

consumers, including in the areas of payments and 

credit. New technologies have the potential to bring 

more people into the banking system, provide access 

to new products and services, and lower the cost of 

products and services. 

For example, in October we released our latest biennial 

survey on household use of banking and financial 

services, which shows that individuals have been 

increasingly moving to digital banking.1

 Mobile banking 

and online banking are now the primary methods used 

to access bank accounts for more than 56 percent of 

banked households, while use of bank tellers is the 

primary method for 21 percent of banked households. 

Because the survey was conducted in June 2019, it does 

not reflect changes in consumer behavior associated 

with the COVID-19 pandemic. 

As these trends continue, regulators should aim to foster 

the development of new technologies that improve the 

way banks operate by working to remove unnecessary 

barriers that create operational and regulatory 

uncertainty for institutions that want to innovate, but are 

reluctant to do so. 

For some community banks, including MDIs, the path to 

innovation can be challenging, particularly because the 

cost to innovate is ofen prohibitively high. They may lack 

the expertise, information technology infrastructure, or 

research and development budgets to independently 

develop and deploy their own technology. 

♦ Encouraging the use of alternative data in credit 

underwriting; 

♦ Encouraging financial institutions to ofer 

responsible small-dollar loans; 

♦ Facilitating partnerships between banks and 

fintechs, including by initiating a proposal to create 

a standard setting organization (or “SSO”) to 

establish standards for due diligence of vendors and 

for the technologies they develop; and 

♦ Launching a competition to develop technologies 

that will provide more regular and granular 

financial information without increasing reporting 

burdens or costs on those institutions that choose 

to participate. 

These are only a few of the actions we are taking to 

facilitate the introduction of innovative technology into 

the banking industry. We expect them to make banks 

more eficient and to help introduce new products and 

services to the market that are safe, afordable, and 

accessible. 

ENHANCING RESOLUTION 

READINESS 

As we responded to the immediate impact of the 

COVID-19 pandemic, we also focused on enhancing 

our resolution readiness in several ways. Although we 

entered the pandemic with a historically low number of 

bank failures, we recognized that the absence of failures 

could not last forever. 

Accordingly, the FDIC has taken steps to improve our 

resolution-related capabilities by: 

♦ Centralizing our supervision and resolution 

activities for the largest banks; 

♦ Coordinating with our international counterparts 

on cross-border resolutions for globalsystemically 

important banks; 

♦ Carrying out targeted engagement and capabilities 

testing with select firms on an as-needed basis; 

1 How America Banks: Household Use of Banking and Financial Services can be accessed at https://www.fdic.gov/analysis/household-survey/. 
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♦ Regularly reviewing institution and financial 

industry data to inform FDIC resource management 

decisions and prepare for potential surge activities, 

if necessary; and 

♦ Finalizing rules that will improve our resolutionrelated activities. 

The FDIC has established a new approach to bank 

closing activities to help protect the health of our 

employees during the pandemic, successfully executing 

three resolutions at institutions that failed since March 

due to enduring financial challenges unrelated to 

COVID-19. Lessons learned from these resolutions are 

being incorporated into plans for future supervisory 

and resolution activities that may be required on-site at 

financial institutions during the pandemic. 

LOOKING AHEAD 

As we have responded to risks posed by the pandemic, 

the 5,800 dedicated employees of the FDIC have risen 

to the occasion to fulfill the agency’s critical mission. I 

remain honored to serve alongside them as we continue 

to navigate these challenges together. 

Sincerely, 

Jelena McWilliams