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MANAGEMENT’S 

DISCUSSION AND 

ANALYSIS

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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 
ANNUAL REPORT

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 
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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 
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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. 
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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 
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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