8

The Year in Review

In 2005, the FDIC continued to pursue 

an ambitious agenda in meeting its

responsibilities. Responding to the

multiple hurricanes that occurred 

this past year tested our readiness,

but it also underscored the critical

importance of our core mission –

maintaining stability of the nation’s

financial system and public confidence

in insured depository institutions. 

Highlights of the Corporation's 2005

accomplishments in each of its three

major business lines –Insurance,

Supervision and Consumer Protection,

and Receivership Management–as

well as in its program support areas

are presented in this section. 

Insurance

The FDIC insures bank and savings

association deposits. As insurer, the

FDIC must continually evaluate and

effectively manage how changes in

the economy, the financial markets

and the banking system affect the

adequacy and the viability of the

deposit insurance funds.

Deposit Insurance Reform

The FDIC again gave priority attention

to enactment of comprehensive

deposit insurance reform legislation

in 2005. 

I. Management’s Discussion and Analysis 

Both the House and the Senate

passed separate deposit insurance

reform bills in 2005. These bills 

were included as part of S.1932,

budget reconciliation legislation 

that contained many provisions 

unrelated to reform. 

The Senate took final action on 

S. 1932 on December 21, 2005,

passing the measure by voice vote.

On February 1, 2006, the House

cleared the bill for action by the

President by a vote of 216 to 214.

The President signed the bill into 

law on February 8, 2006. The

Federal Deposit Insurance Reform

Act of 2005, contained in S. 1932,

includes the major provisions of 

the FDIC’s deposit insurance 

reform proposals. H.R. 4636, 

the Deposit Insurance Reform

Conforming Amendments Act 

of 2005, contains the necessary

technical and conforming changes 

to implement deposit insurance

reform. H.R. 4636 was passed 

by the House and Senate in

December 2005, separately 

from S.1932. Specifically, together 

S. 1932 and H.R. 4636 would:

● Merge the Bank Insurance Fund 

(BIF) and the Savings Association 

Insurance Fund (SAIF) into a new 

fund, the Deposit Insurance Fund 

(DIF), effective no later than 

July 1, 2006.

● Establish a range for the designated

reserve ratio of 1.15 percent to 

1.50 percent. 
9

● Allow the FDIC to manage the 

pace at which the reserve ratio 

varies within this range. (However,

if the reserve ratio falls below 

1.15 percent – or is expected to 

within 6 months–the FDIC must 

adopt a restoration plan that 

provides that the DIF will return 

to 1.15 percent within 5 years.)

● Eliminate the connection between

designated reserve ratio (DRR) 

and premium rates and grant 

the FDIC’s Board of Directors 

the discretion to price deposit 

insurance according to risk for 

all insured institutions at all times.

● Mandate rebates to the industry 

of half of any amount above the 

1.35 percent level, unless the 

FDIC’s Board of Directors, 

considering statutory factors, 

suspends the rebates.

● Mandate rebates to the industry 

of all amounts in the fund above 

the 1.50 percent level.

● Grant a one-time initial assessment

credit (of approximately $4.7 billion)

to recognize institutions’ past 

contributions to the fund.

● Increase the coverage limit for 

retirement accounts to $250,000.

● Index this limit and the general 

deposit insurance coverage limit 

to inflation and allow the FDIC 

(in conjunction with the National 

Credit Union Administration) to 

increase the limits every five 

years beginning January 1, 2011, 

if warranted.

Implementation of deposit insurance

reform will be one of the FDIC’s

main priorities for 2006. 

International Capital Standards 

The FDIC, as insurer, has a substantial

interest in ensuring that bank capital

regulation effectively serves its 

function of safeguarding the federal

bank safety net against excessive

loss. During 2005, the FDIC participated on the Basel Committee on

Banking Supervision (BCBS) and

many of its subgroups. The FDIC also

participated in various U.S. regulatory

efforts aimed at interpreting international standards and establishing

sound policy and procedures for

implementing these standards.

The BCBS, jointly with the International Organization of Securities

Commissions (IOSCO), published

The Application of Basel II to Trading

Activities and the Treatment 

of Double Default Effects in 

July 2005. The document sets 

forth new capital treatments for

over-the-counter derivatives and

short term, repo-style transactions,

hedged exposures, trading book

exposures, and failed securities

trades. 

Ensuring the adequacy of insured

institutions’ capital under Basel II

remains a key objective for the 

FDIC. In 2005, the FDIC devoted

substantial resources to domestic

and international efforts to ensure

these new rules are designed 

appropriately. These efforts included

the continued development of a

notice of proposed rulemaking 

(NPR) and examination guidance,

which is intended to provide the

industry with regulatory perspectives

for implementation. Additionally, 

the fourth quantitative impact study

(QIS-4), which was begun in 2004 

to assess the potential impact of 

the Revised Framework on financial

institution and industry-wide capital

levels, was completed. The QIS-4

findings suggested that, without

modification, the Basel II framework

could result in an unacceptable

decline in minimum risk-based 

capital requirements. As a result, on

September 30, 2005, the domestic

bank and thrift regulatory authorities

issued a joint press release stating

that while they intend to move 

forward with the Basel II NPR, 

prudential safeguards must be 

incorporated into the Basel II 

framework to address the concerns

created by the QIS-4 findings. FDICsupervised institutions that plan to

operate under the new Basel Capital

Accord are making satisfactory

progress towards meeting the

expected requirements.
10

During 2005, the agencies published

two notices in the Federal Register

seeking comments on 56 regulations

covering Money Laundering; Safety

and Soundness; Securities; Banking

Operations; Directors, Officers and

Employees; and Rules of Procedure;

a total of 155 letters were received.

Since June 2003, the agencies have

issued five separate Requests for

Burden Reduction Recommendations

on a total of 127 regulations. More

than 900 comments were received

in response to those requests for

comment. They are being analyzed

by staff to determine the feasibility

of implementing the recommendations. All of the comment letters

received to date are available on

the EGRPRA Web site at 

www.EGRPRA.gov. 

The agencies, as part of the EGRPRA

initiative to gather recommendations

on regulatory burden reduction, 

held three outreach meetings with

bankers in Phoenix, New Orleans

and Boston; two meetings with 

community groups in Boston and

Washington, DC; and three joint

banker-community group meetings 

in Los Angeles, Kansas City and

Washington, DC. Significant issues

have been raised and the agencies

are in the process of weighing the

issues. 

The major success of the EGRPRA

project to date is that the agencies,

the industry and consumer groups

were able to have an open dialogue

about regulatory burden. Over 180

legislative proposals for regulatory

relief were presented to Congress

through testimony by the agencies,

the industry and consumer advocates.

Moreover, effective September1, 2005,

the FDIC, the Office of the Comptroller

of the Currency (OCC), and the

Federal Reserve Board (FRB) made

changes to their uniform joint

Community Reinvestment Act (CRA)

regulations that will provide regulatory

relief for smaller community banks

and –at the same time – preserve 

the importance of community 

development in the CRA evaluations

of these banks. 

Additionally, the FDIC conducted 

a comprehensive review of its

International Banking Rules. The

revised rules, which became effective

July 1, 2005, amend Parts 303, 

325 and 327 relating to international

banking and revise Part 347, Subparts

A and B. As a result:

● The rules were reorganized and 

clarified to reduce regulatory 

burden.

● The availability of general consent 

for foreign branching and investments by insured state nonmember banks abroad was 

expanded.

● The “fixed” percentage asset 

pledge requirement for existing 

insured U.S. branches of foreign 

banks (“grandfathered branches”)

was replaced by a risk-focused 

asset pledge requirement. 

● The relocation rule for “grandfathered branches” was amended

to address intrastate and interstate

relocations. 

Domestic Capital Standards 

The FDIC led the development of

efforts to revise the existing riskbased capital standards for those

banks that will not be subject to

Basel II. These efforts are intended

to: (a) modernize the risk-based 

capital rules for non-Basel II banks 

to ensure that the framework

remains a relevant and reliable 

measure of the risks present in the

banking system, and (b) minimize

potential competitive inequities that

may arise between banks that adopt

Basel II and those banks that remain

under the existing rules. An Advance

Notice of Proposed Rulemaking

reflecting these efforts was published

in October 2005, with a comment

period extended to January 2006.

These revisions are currently anticipated to be finalized by domestic

bank and thrift regulatory authorities

in 2007 for implementation in

January 2008.

Regulatory Burden Reduction

Initiatives

The Economic Growth and Regulatory

Paperwork Reduction Act of 1996

(EGRPRA) requires the banking

agencies to solicit public comments

to identify outdated or burdensome

regulations, review the comments,

and publish a summary in the

Federal Register. The agencies 

must also eliminate unnecessary 

regulations to the extent appropriate.

Finally, the Federal Financial

Institutions Examination Council

must report to Congress the 

significant issues and the merit of

the issues raised during the public 

comment period and provide an

analysis of whether the agencies 

are able to address the issues by

regulation or whether the burdens

must be addressed by legislative

action.
11

Center for Financial Research

The FDIC’s Center for Financial

Research (CFR) was established 

in 2003 to promote and support 

innovative research on topics relating

to deposit insurance, the financial

sector, prudential supervision, risk

measurement and management, and

regulatory policy that are important

to the FDIC’s roles as deposit insurer

and bank supervisor. The CFR is 

a partnership between the FDIC 

and the academic community with

prominent scholars actively engaged

in administering its research program.

The CFR carries out its mission

through an agenda of research,

analysis, forums and conferences

that encourage and facilitate an

ongoing dialogue that incorporates

industry, academic and public-sector

perspectives. 

The CFR supports high-quality original

research by sponsoring relevant

research program lines and soliciting

rigorous analysis of the issues 

within six program areas (Deposit

Insurance, Credit and Market 

Risk, Bank Performance and the

Economy, Corporate Finance and

Risk Management, Consumer

Finance and Credit Issues and Policy

and Regulation). These programs

benefit from the leadership of 

program coordinators who are

drawn largely from the outside 

academic community. Input is 

also obtained from six prominent

economists who serve as Senior

Fellows. The CFR sponsors a Visiting

Research Fellows Program to provide

support for in-residence scholars for

defined time periods. The CFR also

organizes visits and encourages

interaction and collaboration between

outside scholars and FDIC staff on

subjects of mutual interest. 

The CFR co-sponsored two premier

research conferences during 2005.

The fifteenth annual Derivatives

Securities and Risk Management

Conference, co-sponsored by the

FDIC, Cornell University’s Johnson

Graduate School of Management,

and the University of Houston’s

Bauer College of Business, was 

held in April 2005. The CFR and 

The Journal for Financial Services

Research (JFSR) sponsored their

fifth annual research conference,

Financial Sector Integrity, and

Emerging Risks in Banking, in

September 2005. Both conferences

included high-quality presentations and

attracted more than 100 researchers,

including both domestic and international participants. Fourteen 

CFR Working Papers have been 

completed on topics dealing with

risk measurement, capital allocation,

or regulations related to these topics.

The CFR Senior Fellows met in June

to discuss ongoing CFR research on

Basel II and payday lending, and to

discuss CFR activities for the coming

year. 

FFIEC Central Data Repository

The FFIEC Central Data Repository

(CDR) was successfully implemented

on October 1, 2005. The CDR is

designed to consolidate the collection,

validation and publication of quarterly

bank financial reports. This multi-year

development effort was undertaken

by the FDIC, the FRB and the OCC,

and in cooperation with the Call

Report software vendors and the

banking industry. The CDR employs

new technology that uses the XBRL

(eXtensible Business Reporting

Language) data standard to streamline the collection, validation and

publication of Call Report data. 

Over 8,000 financial institutions 

were enrolled in the CDR and used 

it to file their financial reports for 

the third quarter of 2005. The initial

quality of the data was much higher

than in previous quarters, speeding

the availability of the data to our 

analysts and ultimately the public,

thus fulfilling one of the overarching

goals of the CDR project. Higher data

integrity, accuracy and consistency

will help to increase the efficiency

with which the data can be collected,

analyzed and released to the public.

In September 2005, the OCC, FRB

and the FDIC requested comments

on proposed revisions to the Call

Report, representing the first set of

revisions to the report content since

2002. The proposed changes would

affect banks of all sizes and would

take effect as of the March 31, 2006,

report date. The proposed revisions

would enhance the agencies’ onand off-site supervision activities,

which should alleviate overall 

regulatory burden on banks.
12

At year-end 2005, the Corporation

was the primary federal regulator for

5,265 FDIC-insured, state-chartered

institutions that are not members 

of the Federal Reserve System 

(generally referred to as “state 

non-member” institutions). Through 

safety and soundness, consumer

compliance and Community

Reinvestment Act (CRA) examinations

of these FDIC-supervised institutions,

the FDIC assesses their operating

condition, management practices

and policies, and their compliance

with applicable laws and regulations.

The FDIC also educates bankers and

consumers on matters of interest

and addresses consumers’ questions

and concerns.

Hurricane Recovery Assistance

The federal banking regulatory agencies (agencies) worked cooperatively

with state banking regulatory agencies

and other organizations to determine

the operating status of financial 

institutions located in the areas

affected by the Gulf Coast hurricanes

during 2005. The agencies quickly

released regulatory relief guidance 

to help facilitate rebuilding in the

areas affected by these hurricanes

and encouraged bankers to work

with consumers and business owners

experiencing difficulties due to the

storms. Exercising their authority

under Section 2 of the Depository

Institutions Disaster Relief Act of

1992 (DIDRA), the agencies made

exceptions to statutory and 

regulatory requirements relating 

to appraisals for transactions involving

real property in major disaster areas

when the exceptions would facilitate

recovery from the disaster and

would be consistent with principles

of safety and soundness. 

In the wake of the 2005 hurricane

season, the agencies confirmed that

the banking industry is resilient in

the face of tremendous devastation.

There were 280 financial institutions,

with approximately $270 billion in

total assets, operating in the area

impacted by Hurricane Katrina. 

Only a handful of smaller institutions

remain as supervisory concerns. The

majority of institutions operating in

the path of Hurricane Katrina were

well-run, had strong management

teams, implemented sound back-up

contingency plans, and were well

capitalized. 

The Federal Financial Institutions

Examination Council (FFIEC)

announced the formation of an 

interagency working group to enhance

the agencies’ coordination and 

communication on, and supervisory

responses to, issues facing 

the industry in the aftermath of

Hurricane Katrina. This working

group established a user-friendly,

web-based, frequently asked 

questions forum on the FFIEC’s 

Web site at www.ffiec.gov. The 

task force will also publish examiner

guidance to clarify expectations with

respect to the assessment of credit

risk and other supervisory issues. 

Risk Analysis Center 

The Risk Analysis Center (RAC),

established in 2003 to provide 

information about current and

emerging risk issues, is guided 

by its Management and Operating

Committees – represented by the

Division of Supervision and Consumer

Protection, the Division of Insurance

and Research and the Division of

Resolutions and Receiverships.

These Committees oversee and

coordinate risk-monitoring activities

that include presentations and

reports regarding risk issues, and

special projects. The activities in 

the RAC are guided by the National

Risk Committee, which is chaired by

the Chief Operating Officer. Major

projects in-process or completed for

2005 include the following: Evaluation

of Operational and Reputation Risk,

Mortgage Credit Trends Analysis,

Enhancing the Effectiveness of the

Regional Risk Committee Process,

Quantification of Bank Vulnerability

to Rising Interest Rates, Hedge

Funds, Market Data Repository,

Offsite Monitoring, and Collateralized

Debt Obligations.

Supervision and 

Consumer Protection

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 FDICsupervised insured depository 

institutions, protects consumers’

rights, and promotes community

investment initiatives by FDICsupervised insured depository 

institutions.

DRR Director Mitchell Glassman, 

second from left, chairs a meeting 

of the Hurricane Task Force at 

Washington Headquarters.
13

In addition to interagency efforts, 

the FDIC established a 24-hour hotline

and a Web page devoted to assisting

hurricane victims to obtain information about their financial institution’s

operating status, as well as tips 

on other financial matters, such as

replacing identification documents,

checks and credit cards.

Safety and Soundness

Examinations 

As of December 31, 2005, the

Corporation had conducted 2,399, 

or 100 percent of the statutorily

required safety and soundness

examinations. The number and total

assets of FDIC-supervised institutions

identified as "problem" institutions

(defined as having a composite

CAMELS1 rating of “4” or “5”)

declined during 2005. As of 

December 31, 2005, 29 institutions

with total assets of $2.9 billion 

were identified as problem institutions, compared to 44 institutions

with total assets of $5.4 billion on

December 31, 2004. These changes

represent a decrease of 34.1 percent

and 46.3 percent, respectively, in 

the number and assets of problem

institutions. During 2005, 36 institutions were removed from problem

institution status due to composite

rating upgrades, mergers, consolidations or sales, and 19 were newly

identified as problem institutions.

Additionally, two problem institutions

converted to State non-member

charters and are now under FDIC

supervision. The FDIC is required to

conduct follow-up examinations of

all designated problem institutions

within 12 months of the last examination. As of December 31, 2005,

100 percent of all follow-up examinations for problem institutions had

been performed on schedule.

Compliance and Community

Reinvestment Act (CRA)

Examinations 

The FDIC conducted 815 comprehensive compliance-CRA examinations,

1,198 compliance-only examinations,2

and seven CRA-only examinations 

in 2005, compared to 1,459 joint

compliance-CRA examinations, 

673 compliance-only examinations,

and four CRA-only examinations in

2004. The FDIC conducted 100 percent of all joint and comprehensive

examinations within established time

frames. As of December 31, 2005,

three institutions were assigned a

“4” rating for compliance, and no

institutions were rated “5.” The first

“4”- rated institution is currently under

an outstanding Cease and Desist

Order and an on-site examination was

underway at year-end. Management

of the second institution executed

a Memorandum of Understanding

on October 5, 2005. The third 

institution was examined in 2005

and the Regional Office is currently

finalizing a Cease and Desist Order

to address the FDIC’s examination

findings.

Relationship Manager Program 

On October 1, 2005, the Corporation

implemented the Relationship

Manager Program for all FDICsupervised institutions. The program,

which was piloted in 390 institutions

during 2004, is designed to strengthen

communication between bankers

and the FDIC, as well as improve 

the coordination, continuity and

effectiveness of regulatory 

supervision. Each FDIC-supervised

institution was assigned a relationship

manager, who serves as a local

point of contact over an extended

period and will often participate 

in or lead examinations for his or 

her assigned institution. The program

will allow for flexibility in conducting

examination activities at various

times during the 12- or 18-month

examination cycle based on risk 

or staffing considerations. 

Members of the Dallas Region 

Hurricane Katrina Task Force (l-r): 

Randy Taylor, Nann Wright, 

Stan Ivie, Cheryl Couch and 

Cynthia Scott.

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).

1

Compliance-only examinations are conducted for most institutions at or near the mid-point between joint complianceCRA examinations under the Community Reinvestment Act of 1977, as amended by the Gramm-Leach-Bliley Act of 1999. 

CRA examinations of financial institutions with aggregate assets of $250 million or less are subject to a CRA examination 

no more than once every five years if they receive a CRA rating of “Outstanding” and no more than once every four years 

if they receive a CRA rating of “Satisfactory.”

2
14

Homeland Security 

The financial sector is a critical part of

the infrastructure in the United States,

and the FDIC has taken a leadership

role in assisting the financial sector

to prepare for emergencies. As a

member of the Financial and Banking

Information Infrastructure Committee

(FBIIC), the FDIC sponsored a 

series of outreach meetings titled

Protecting the Financial Sector: 

A Public and Private Partnership.

From 2003 to early 2005, the 

homeland security meetings were

held in 29 cities across the United

States with the last meeting held in

New York City, NY. These meetings

provided members of the financial

sector with the opportunity to 

communicate with senior government

officials, law enforcement, emergency

management personnel and private

sector leaders about emergency 

preparedness. A second round of

homeland security meetings started

in late 2005 with four meetings held

during this timeframe. Homeland

Security meetings are planned for 

21 cities in 2006.

The FDIC served as FBIIC’s liaison

with the Department of Homeland

Security (DHS) during 2005 and

assisted DHS with items relating 

to the financial sector. 

Bank Secrecy Act

The FDIC is committed to assisting

in efforts designed to thwart the

inappropriate use of the banking 

system through activities conducted

by terrorists and other criminals. In

2005, the Division of Supervision and

Consumer Protection established a

new Anti-Money Laundering (AML)

and Financial Crimes Branch to focus

important resources and attention 

on our increasing responsibilities in

these areas. The new branch brings

together specialists to address

issues related to Bank Secrecy Act

(BSA) compliance, money laundering,

financial crimes, terrorist financing,

and cyber-fraud. 

The FDIC continued in 2005 to play 

a critical role in the fight against

money laundering and terrorist

financing. Our efforts included:

● Contributing to the development 

and implementation of rules and 

interpretive guidance related to 

BSA and the USA PATRIOT Act.

● Adopting through the FFIEC, 

comprehensive interagency 

examination procedures. The 

new procedures emphasize 

a banking organization’s 

responsibility to establish and 

implement risk-based policies 

and procedures to comply with 

the BSA and safeguard its 

operations from money laundering

and terrorist financing.

IT Examinations 

The FDIC has updated its risk-focused

information technology (IT) examination procedures for FDIC-supervised

financial institutions under its 

new Information Technology Risk

Management Program (IT-RMP). 

IT-RMP procedures were issued 

to examiners on August 15, 2005. The

new procedures focus on the financial

institution’s information security 

program and risk-management

practices for securing information

assets. The program integrates with

the Relationship Manager Program

by embedding the IT examination

within the Risk Management Report

of Examination for all FDIC-supervised

financial institutions, regardless of

size, technical complexity or prior

examination rating. IT-RMP eliminates

separate reporting of IT component

ratings and reports only a single

technology rating.

2005 2004 2003

Safety and Soundness:

State Nonmember Banks 2,198 2,276 2,182

Savings Banks 199 236 231

Savings Associations 1 0 0

National Banks 0 0 5

State Member Banks 1 3 3

Subtotal - Safety and Soundness Examinations 2,399 2,515 2,421

CRA/Compliance Examinations:

Compliance-Community Reinvestment Act 815 1,459 1,610

Compliance-only 1,198 673 307

CRA-only 7 4 2

Subtotal CRA/Compliance Examinations 2,020 2,136 1,919

Specialty Examinations:

Trust Departments 450 534 501

Data Processing Facilities 2,708 2,570 2,304

Subtotal-Specialty Examinations 3,158 3,104 2,805

Total 7,577 7,755 7,145

FDIC Examinations 2003-2005
15

● Dedicating more staff to BSA/AML

oversight. The number of trained 

BSA/AML subject-matter experts 

has more than doubled to 347 

since 2004. These specialists 

perform BSA/AML examinations 

at institutions that have a higherrisk profile due to geographic 

location, customer base, BSA/AML

compliance record, or types of 

products or services offered.

● Providing various forms of 

examiner and industry training 

including one outreach session 

per region, over 70 events hosted 

by Washington and Regional 

offices and representation in 

212 BSA/AML events sponsored 

by states and other entities. In 

total, the banker calls and outreach

events reached more than 23,000 

bankers and examiners.

Minority-Depository Institutions 

The FDIC has long recognized the

importance of minority depository

institutions and their importance 

in promoting the economic viability

of minority and under-served communities. As a reflection of the FDIC’s

commitment to minority depository

institutions, on April 9, 2002, the

FDIC issued a Policy Statement

Regarding Minority Depository

Institutions. The policy, which 

can be found at www.fdic.gov/

regulations/resources/index.html,

implements an outreach program

designed to preserve and encourage

minority ownership of financial 

institutions. 

Since the adoption of the policy 

by the FDIC Board of Directors,

the program’s National Coordinator 

has maintained contact with various

minority depository institution trade

associations, and has met periodically

with the other Federal banking 

regulators to discuss the initiatives

underway at the FDIC, and to identify

opportunities where the agencies

might work together to assist minority

institutions. All of the FDIC’s six DSC

Regions have held annual Minority

Depository Institution Outreach

Programs, made annual contact

with each FDIC-supervised minority

depository institution, and offered to

make return visits to these institutions

following the examination process.

During 2004, the FDIC created the

Minority Bankers’ Roundtable series,

a forum designed primarily to explore

partnerships between the minority

depository institutions community

and the FDIC. During 2005, there

were six sessions held in: Nashville,

Tennessee; New York, New York;

Houston, Texas; Santa Monica,

California; Atlanta, Georgia; and 

San Juan, Puerto Rico. The Minority

Banker Roundtable and annual

regional outreach events will 

continue in 2006. 

In 2005, the FDIC also provided

technical assistance, training and

educational programs and held 

interagency forums to address the

unique challenges faced by minority

depository institutions. Training and

educational programs for minority

depository institutions included the

FDIC’s Director's College Program and

the FDIC’s Money Smart Program.

The FDIC co-hosted Regional Forums

with the America’s Community

Bankers Association and the 

National Bankers Association in

2005. FDIC also participated in

and/or co-sponsored conferences

with America’s Community Bankers,

National Bankers Association,

National Association of Chinese

American Bankers, Western

Independent Bankers, and 

Puerto Rico Bankers Association. 

FDIC also supported the preservation

of minority depository institutions in

its response to Hurricane Katrina.

The FDIC Task Force on Minority

Community Banking and Non-Branch

Banking met with representatives

from the Utah industrial loan 

company industry to facilitate their

assistance to minority depository

institutions in the Gulf Coast region

affected by Hurricane Katrina. The

result has been that as of year-end

2005, the Utah industrial loans 

companies have pledged more than

$18 million in deposits and over

$120,000 in direct grants to this

effort. Efforts similar to these made

by this FDIC task force will continue

in 2006.

FDIC will continue its minority

depository institution programs 

in 2006. 

At the BSA/AML teleconference 

in the FDIC RAC (l-r): 

William Spaniel, FFIEC; 

Bridget Neil, Federal Reserve; 

Lisa Arquette, FDIC-DSC; 

John Wagner, OCC; and 

Timothy Leary, OTS 
16

capital to support that exposure. In

addition, the International and Large

Bank Policy Branch is responsible 

for policy development regarding

large-bank supervision and 

international matters. 

International Stability

The FDIC, as a member of the

Consultative Group (CG) with respect

to the Middle East-North Africa

(MENA) Partnership for Financial

Excellence (PFE) initiative, continues

to work with the other federal banking agencies, the State Department

and the Department of Treasury, 

to develop technical assistance 

programs to meet needs in the

MENA region. In 2005, the FDIC

delivered two courses under the

MENA training initiative in 2005:

Principles of Bank Resolutions and

Receiverships hosted by the Arab

Academy for Training and Financial

Sciences in Amman, Jordan; and

Examination Management hosted 

by the Central Bank of Tunisia in

Tunis. Preparations are underway 

to establish training venues and

course curriculum for this initiative 

in 2006. The objective of this 

initiative is to help foster economic

growth in the region through the

implementation of sound supervisory

systems. 

The FDIC chairs the Association of

Supervisors of Banks of the Americas,

(ASBA) Working Group on Deposit

Insurance and Bank Resolutions. 

The Working Group, an outgrowth of

action plans for ASBA’s 2004-2008

strategic plan, is charged with promoting best practices and identifying

opportunities for improvement 

in deposit insurance and bank 

resolutions. Similarly, in 2005, 

the FDIC also actively participated 

in ASBA’s Working Group on Credit

and Operational Risk, which was

formed to identify best practices 

and opportunities for improvement 

in credit risk and operational risk

management policies and procedures

among ASBA’s membership.

The FDIC fulfilled 20 technical 

assistance missions in 2005. The

missions provided technical support

in supervision, deposit insurance,

resolutions/receiverships, and legal

underpinnings of supervision and

insurance. Beneficiaries of these

missions included Macedonia,

Russia, Tanzania, Thailand, Ukraine,

several Latin American countries,

and several countries involved in the

Partnership for Financial Excellence

Program in the Middle East and

North Africa. The FDIC also held 

60 meetings with representatives

from foreign countries, typically 

representing a country’s central bank,

bank supervisory authority or deposit

insurance agency. Frequent visitors

included: Albania (2), Canada (2),

China (11), France (2), Japan (6),

Korea (8), Malaysia (2), Russia (2),

and Taiwan (2). 

Identity Theft and Consumer

Privacy

In 2005, the FDIC continued to take 

a leading role in helping banks 

combat identity theft. The FDIC

solicited public comment on its study,

Putting an End to Account-Hijacking

and Identity Theft, published in

December 2004; and in June 2005,

published a study supplement. 

The study and the supplement took

an in-depth look at identity theft,

focusing on account hijacking 

(the unauthorized use of deposit

accounts). 

Chairman Powell praises 

Michael Jackson, 

Sandra Thompson and 

Donna Gambrel for their 

work on a recent conference 

on preventing identity theft.

Large-Bank Program 

In recognition of the increasing 

concentration of risk exposure in

large insured institutions, as well 

as new challenges posed by the

implementation of the Basel II 

Capital Accord, the FDIC enhanced

its large-bank supervision and risk

assessment efforts in 2005 by 

creating two branches– the Large

Bank Supervision Branch and the

International and Large Bank Policy

Branch. 

The Large Bank Supervision Branch

is responsible for supporting supervisory activities in large banks and

establishing minimum standards and

supervisory strategies necessary to

ensure a consistent approach to

large-bank supervision on a national

basis. In 2005, Branch staff was

actively involved in domestic and

international discussions intended 

to ensure effective implementation

of the Basel II Capital Accord, which

included participation in numerous

“supervisory working group”meetings

with foreign regulatory authorities to

address Basel II home-host issues.

The International and Large Bank

Policy Branch is responsible for 

supporting supervisory activities 

in the areas of risk model assessment, economic capital processes, 

examination work related to market

risk under Part 325 Appendix C 

of the FDIC rules and regulations and

other processes that are dependent

on quantitative methods. The purpose

of Part 325 Appendix C is to ensure

that banks with significant exposure

to market risk maintain adequate
17

One of the study's conclusions was

that increased consumer education

and information sharing could reduce

the incidence of identity theft. As a

result of these recommendations,

the FDIC sponsored four symposia

in 2005 in Washington, DC, Atlanta,

Los Angeles and Chicago that brought

together experts representing federal

and state government, the banking

industry, consumer groups, and 

law enforcement who discussed 

current efforts to combat scams

such as phishing, which can lead to

account hijacking. The symposium

speakers also addressed efforts 

to educate consumers on avoiding

other scams that can lead to identity

theft and on the steps to take in the

unfortunate event that identity theft

should happen to them. 

The FDIC is one of several federal

agencies charged with implementing

the provisions of the Fair and Accurate

Credit Transactions Act of 2003

(FACT Act), which substantially

amended the Fair Credit Reporting

Act, particularly in the areas of 

consumer access to and quality 

of credit information, privacy, and

identity theft. The FACT Act: 

● preserves uniform national 

standards for the content of 

consumer report information 

and creditor access to such 

information, 

● improves consumer access to 

credit information, 

● improves the quality of reported 

credit information, 

● protects privacy, 

● combats identity theft, and 

● promotes financial literacy. 

Consistent with the privacy 

requirements of the FACT Act,

the FDIC worked with other federal

agencies to finalize rules in 2005 

that permit creditors to obtain, use

and share medical information only

to the degree necessary to facilitate

legitimate operational needs. The

FDIC is training its examiners on the

concepts underlying the entire FACT

Act, and is developing examination

procedures to evaluate industry 

compliance. 

Consistent with the identity theft

provision of the FACT Act, the FDIC

worked with other federal agencies

in 2005 to propose rules that would

require banks to implement a written

identity theft protection program

which includes procedures to evaluate

red flags that might indicate identity

theft. The FDIC, with the other 

agencies, also finalized rules requiring

institutions to properly dispose of

consumer information derived from

credit reports in order to prevent

identity theft and other fraud. 

The rules on disposal of consumer

information became effective on

July 1, 2005. 

Consumer Complaints 

and Inquiries 

The FDIC's centralized Consumer

Response Center (CRC) is responsible

for investigating all types of consumer

complaints about FDIC-supervised

institutions and for answering inquiries

about consumer protection laws and

banking practices. During 2005, the

FDIC received 8,851 complaints, of

which 3,307 were against state nonmember institutions. Approximately

36 percent of the state non-member

bank consumer complaints concerned

credit card accounts, with the most

frequent complaints involving billing

disputes and account errors, loan

denials, terms and conditions, 

collection practices, reporting of 

erroneous information, credit card

fees and service charges, interest

rates, and disclosures. The FDIC

responded to over 97 percent of

written complaints on a timely 

basis. 

The FDIC also responded to 4,042

written and 9,395 telephone inquiries

from consumers and members 

of the banking community about

consumer protection issues. In 

addition, the FDIC responded to 

over 64,000 written and telephone

inquiries from bankers and consumers

about the FDIC’s deposit insurance

program and insurance coverage

issues.

Deposit Insurance Education 

An important part of the FDIC’s 

role in insuring deposits and 

protecting the rights of depositors 

is its responsibility to ensure that

bankers and consumers have access

to accurate information about FDIC’s

deposit insurance rules. To that end,

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

targeting both bankers and 

consumers.

Chicago Region team makes sure 

bankers get the answers they need (l-r): 

Art Khan, Sharon Vejvoda, Dan Peters, 

Angelina Pollard, Ronald Regal, 

Teresa Sabanty, and Ray Jackson
18

● A major update of The Financial 

Institution Employee’s Guide to 

Deposit Insurance, the FDIC’s 

most authoritative resource on 

deposit insurance coverage for 

bankers. 

The FDIC also released its two 

most popular brochures for bank

customers—Insuring Your Deposits

(a basic primer on deposit insurance

coverage) and Your Insured Deposits

(a comprehensive guide to deposit

insurance coverage) in Chinese 

and Korean. 

The FDIC conducted 27 seminars 

for financial institution employees

and consumer organizations on 

the rules for deposit insurance 

coverage. These seminars, which

were conducted in a variety of 

formats, including Internet, teleconference and classroom, provided 

a comprehensive review of how

FDIC insurance works, including 

the FDIC’s rules for coverage of 

different types of deposit accounts. 

Financial Education and

Community Development 

The FDIC’s financial education 

activities continue to serve as a 

vital part of the Corporation’s efforts

to help maintain the stability of the

nation's financial system, support

community development and

strengthen the economy. Since

launching its award-winning Money

Smart financial education program 

in 2001, the FDIC has helped 

thousands of consumers get started

on the road to greater financial 

independence and gain access to

mainstream products and services.

The FDIC continues to distribute 

and promote the Money Smart

curriculum, which is available in 

five languages–English, Spanish,

Chinese, Korean and Vietnamese.

The FDIC exceeded two of the three

program goals for Money Smart.

With over 252,000 copies of the 

curriculum having been distributed,

the FDIC has exceeded by more than

two times the original distribution

goal of 100,000 copies. This year,

the FDIC also exceeded its goal to

recruit 1,000 partners for Money

Smart Alliance. Over 1,200 organizations throughout the country have

joined with the FDIC to help deliver

and promote financial education.

The FDIC has also made significant

strides towards achieving the 

third goal– to provide one million 

consumers with financial education–

more than 589,000 consumers have

now been reached. Of the consumers

that have taken Money Smart classes,

the FDIC is aware of over 82,100

who have subsequently opened bank

accounts. Some class participants

have become first-time home-buyers

and others have engaged in other

asset-building activities. 

To raise awareness of the FDIC’s

Money Smart program among

Hispanic adults and encourage them

to ask about Money Smart classes

and products, a summer-long Spanish

language advertising campaign

included print and radio ads that ran

in 14 key markets. A total of 1,080 

people attended Money Smart

classes as a result of the advertising

campaign. The FDIC introduced a

Spanish-language Web page at

www.fdic.gov/quicklinks/spanish.html

that contains many consumer-related

materials, including Money Smart. In

recognition of the FDIC’s leadership

in financial education and outreach 

to the Hispanic community, President

Bush asked the FDIC to be a part 

of his national public-private sector 

During 2005, the FDIC completed

development of a major update of its

popular Electronic Deposit Insurance

Estimator (EDIE) for consumers, an

Internet application located on FDIC’s

Web site that estimates insurance

coverage for users’ deposit accounts

at insured institutions. The new

Consumer EDIE offers two different

approaches for estimating coverage,

one for novice users and one for 

frequent users. The new Consumer

EDIE application is available for 

public use starting January 2006. 

During 2005, the FDIC conducted 

a nationwide series of telephone/

Internet seminars for bankers and 

a nationwide survey of insured 

institutions to gather information

about current awareness of, and

opinions about, the FDIC’s existing

educational resources on the deposit

insurance rules. The FDIC also initiated

an effort to encourage more bank

trade organizations to sponsor FDIC

deposit insurance seminars for their

members. 

In 2005, the FDIC released several

new job aids for bankers, including:

● A new 100-minute video for 

bankers that provides an in-depth 

review of FDIC deposit insurance 

coverage, available on CD-ROM 

and for viewing on the FDIC’s 

Web site.

● An Inventory of Deposit Insurance

Guidance (IDIG), which is an 

electronic support system on 

CD-ROM that includes a searchable database of deposit insurance

information and has links to 

all FDIC deposit insurance 

publications, application tools 

and services.
19

Annual Independent Audits and

Reporting Requirements 

The Corporation amended Part 363

of its regulations by raising the assetsize threshold from $500 million to

$1 billion for requirements relating 

to internal control assessments and

reports by management and external

auditors. The amendment also

relieved covered institutions with

total assets of less than $1 billion 

of the requirement that all outside

directors on the audit committee 

be independent of management;

under the amended rule, a majority

of independent directors on the 

audit committee is sufficient. The

amendment does not relieve public

covered institutions from their 

obligation to comply with applicable

provisions of the Sarbanes-Oxley 

Act and the Securities and Exchange

Commission's implementing rules.

The amendments took effect in

December 2005.

Receivership Management

The FDIC has the unique mission of

protecting depositors of insured banks

and savings associations. No insured

depositor has ever experienced 

a loss in a FDIC-insured institution

due to a failure. 

Once an institution is closed by its

chartering authority – the state for

state-chartered institutions, the

Office of the Comptroller of the

Currency (OCC) for national banks and

the Office of Thrift Supervision (OTS)

for federal savings associations –the

FDIC is responsible for resolving 

that failed bank or savings association.

The FDIC staff gathers data about

the troubled institution, estimates

the potential loss to the insurance

fund(s) from various resolution 

alternatives, solicits and evaluates

partnership to ensure financial 

education is available consistently

and comprehensively to Hispanic

communities. The partnership, which

includes representatives from the

FDIC, U.S.Department of Treasury,

Small Business Administration,

Latino Coalition, U.S. Hispanic

Chamber of Commerce and others,

is charged with directing federal,

non-profit and private resources to

areas in need of financial education

and coordinating private sector

resources to reach Hispanics 

nationwide. 

In 2005, the FDIC provided assistance

to the Inter-American Development

Bank (IADB) Multilateral Investment

Fund to offer financial education

services and help develop products

with special remittance features.

These products were created in 

collaboration with Latin American

Consulates, foreign banks, U.S.

financial institutions and bank trade

groups. The FDIC also spoke on 

panels at the 2005 International

Forum on Remittances sponsored 

by the IADB Multilateral Investment

Fund. The panels focused on financial

education curricula and outreach 

and the importance of balancing

competition and regulation in the

remittance market. In addition, 

FDIC participated in the Forum’s

Remittances, Business Models 

and Technology Trade Fair. This fair

provided attendees the opportunity

to network and view innovative 

electronic transfer products, which

can enable community banks, 

credit unions, credit cooperatives,

and micro-finance institutions 

to become more competitive 

in pricing and product features. 

In 2005, the FDIC expanded its

efforts with the New Alliance Task

Force (NATF), originally launched 

and continuing in Chicago, to two

additional markets – Los Angeles,

California and Austin, Texas – with 

60 financial institutions participating

in those markets. NATF is a broadbased coalition comprised of banks,

community-based organizations, bank

regulatory agencies, government

agencies, representatives from 

the secondary market and private

mortgage insurance companies 

and the Mexican Consulate. The

foundation has also been laid for 

the launch of NATF in four other

markets – Boston, New York City,

Raleigh-Durham and Kansas City.

Virtual Supervisory Information

On The Net (ViSION) 

In February 2005, the FDIC released

the fourth and final phase of ViSION,

a comprehensive processing and

tracking system supporting the

Corporation’s supervision function.

This phase represents the culmination

of a five-year and approximately 

$32 million capital-investment project

and brings together– in a single, 

customized product–detailed 

information on examination, 

application, enforcement and 

numerous other bank activities. 

The system, which includes such

features as automated event 

notification, deadline tracking, 

and job-specific role-based security, 

is used by more than 3,200 federal

and state regulators. 
20

Receivership Management

Activities

The FDIC, as receiver, manages the

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 the failed institutions have been 

sold and the final distribution of 

any proceeds are made, the FDIC

terminates the receivership estates.

In 2005, the number of receiverships

under management was reduced by

31 percent (from 94 to 65), while the

book value of assets under management was reduced by 28 percent

(from $615 million to $441 million). 

Professional Liability Recoveries

The FDIC staff works to identify

potential claims against directors 

and officers, accountants, appraisers,

attorneys and other professionals who

may have contributed to the failure 

of an insured financial institution.

Once a claim is deemed viable and

cost effective to pursue, FDIC initiates

legal action against the appropriate

parties. During the year, the FDIC

recovered approximately $65 million

from these professional liability suits.

In addition, as part of the sentencing

process for those convicted of 

criminal wrongdoing against failed

institutions, the court may order a

defendant to pay restitution to the

receivership. The FDIC, working in

conjunction with the U.S. Department

of Justice, collected more than 

$6 million in criminal restitution during

the year. The FDIC’s caseload at the

end of 2005 included investigations,

lawsuits and ongoing settlement 

collections involving 21 claims and

106 other active collections, down

from 233 at the beginning of 2005.

At the end of 2005, there were 

995 pending restitution orders, 

down from 1,181. This includes RTC

orders that the FDIC inherited on

January 1, 1996.

Effective Management of Strategic

Resources 

To carry out its mission successfully,

the FDIC must effectively manage

and utilize a number of critical 

strategic resources particularly its

human, financial, and information

technology (IT) resources. Major

accomplishments in improving the

Corporation’s operational efficiency

and effectiveness are described

below. Although the FDIC is 

not subject to the President’s

Management Agenda, many 

of these efforts are consistent 

with the spirit of that agenda. 

bids from potential acquirers, and

recommends the least-costly 

resolution method to the FDIC’s

Board of Directors.

Resolving Financial Institutions

Failures 

During 2005, there were no institution failures. This is the first calendar

year in the history of the FDIC 

during which no federally-insured

institutions failed.

Protecting Insured Depositors 

Although the focus of the FDIC 

in recent years has shifted from

resolving large numbers of failed

institutions to addressing existing

and emerging risks in insured 

depository institutions, the FDIC 

continues to protect deposits in

those institutions that fail. The

FDIC’s ability to attract healthy 

institutions to assume deposits 

and purchase assets of failed banks

and savings associations minimizes

the disruption to customers and

allows some assets to be returned

to the private sector immediately.

Assets remaining after resolution 

are liquidated by the FDIC in an

orderly manner and the proceeds 

are used to pay creditors, including

depositors whose accounts exceeded

the insured $100,000 limit. During

2005, the FDIC paid dividends of

77.9 percent of the deposit amount

exceeding the insured limit. These

dividends paid in 2005 are up 4.9

percent from 2004. 

2005 2004 2003

Total Resolved Banks 0 3 3

Assets of Resolved Banks $ 0.00 $ 0.15 $ 1.10

Total Resolved Savings Associations 0 1 0

Assets of Resolved Savings Associations $ 0.00 $ 0.01 $ 0.00

Net Collections from Assets in Liquidation■$ 0.37 $ 0.38 $ 1.70

Total Assets in Liquidation■$ 0.44 $ 0.61 $ 0.81

Total Dividends Paid ■$ 0.44 $ 0.38 $ 1.06

Savings Over Cost of Liquidation▼$ 0 $11.6 million $28.2 million

No failures in 2005.

Includes activity from thrifts resolved by the former Federal Savings and Loan Insurance Corporation and the 

Resolution Trust Corporation. 

Least Cost Test Savings.

Dollars in billions (except where noted)

Liquidation Highlights 2003-2005

●

■

▼

●
21

Management of Financial

Resources

Beginning in 2003, the Corporation

separated its investment expenses

from its annual operating budget 

in order to ensure a more rigorous

approach to the approval and 

management of major investment

initiatives. The single most significant

current initiative is the construction

of additional FDIC office and multipurpose buildings adjacent to the

existing facilities at Virginia Square.

This project will eliminate the 

need for the Corporation to lease

commercial space in downtown

Washington, DC, and will substantially

reduce future facility costs. 

Management processes have been

implemented to ensure adherence

to the project budget and schedule.

Once completed and occupied, the

new building will provide estimated

cost savings of approximately 

$78 million (net present value) over

20 years, when compared to the 

projected costs associated with 

the current headquarters leasing

arrangements. Construction has 

progressed on schedule and under

budget. Occupancy began in 

mid-January 2006 and should be 

completed prior to the end of the

first quarter 2006, as targeted. 

Human Capital Management

The FDIC’s employees are its most

important resource for accomplishing

its mission. For that reason, it seeks

to continue to be the employer of

choice within the financial regulatory

community and to operate a human

resources program that attracts,

develops, evaluates, rewards and

retains a high-quality results-oriented

workforce. This has been a difficult

challenge over the past 13 years

because the Corporation has been 

in a continuous downsizing mode as

it completed the residual workload

from the banking and thrift crises 

of the late 1980s and early 1990s.

Although the pace of downsizing 

has slowed in the past few years,

the Corporation continues to adjust

both the size and composition of 

its workforce to meet the changing

course of the financial services

industry. In 2005, the FDIC 

implemented a number of strategies

identified in the human capital plan

developed in 2004 to procure the skill

sets needed in this new environment.

In 2005, the FDIC completed its

workforce restructuring activities 

in the Division of Resolutions and

Receiverships and the Division of

Information Technology, and identified

the skills sets needed to better 

position these organizations for

future challenges. Through judicious

use of Voluntary Early Retirement

Authority, Voluntary Separation

Incentive Payments, and outplacement assistance, our Information

Technology organization met its

workforce restructuring goals without

the need for involuntary separations.

The Division of Resolutions and

Receiverships involuntarily separated

66 employees, while reducing its

workforce by over 50 percent (a

reduction of more than 250 positions

from the 2004 authorized level). 

In both organizations, any remaining

vacancies were filled by matching

existing employees with the requisite skill sets. The Corporation also

plans workforce restructurings in

several support divisions in 2006. 

In 2005, the FDIC established the

Corporate Employee Program (CEP)

to begin the cross-training that 

will produce the flexible workforce 

envisioned in the FDIC’s Human

Capital Plan. During the year, four

CEP training classes were held 

for approximately 100 new hires 

and existing employees. In addition,

employees in the Supervision 

business line who had prior 

experience in the Resolutions 

and Receiverships business line

received refresher training. 

The FDIC requested increased 

flexibilities from the U.S. Office 

of Personnel Management (OPM) 

to facilitate implementation of 

its Human Capital Plan. In 2005, 

the FDIC received OPM approval 

to establish a three-year career

internship for the Corporate Employee

Program. This delegation provided

additional hiring flexibility with the

Expansion of Virginia Square 

Facility
22

and cost analysis. The annual BIA

examined the Corporate Business

Continuity Plan to determine

whether it was current with regard

to the Corporation’s critical business 

functions and resources needed 

to manage those functions during 

an emergency. The Corporation 

also enhanced its emergency 

preparedness training with the 

development of computer-based

instruction for all employees. In 

addition, the FDIC continued to 

conduct emergency preparedness

exercises that included evacuation

and shelter-in-place drills, as well 

as tabletop and functional exercises. 

Other Significant Information

Technology Initiatives

On May 2, 2005, the FDIC 

implemented the New Financial

Environment (NFE) and its supporting

systems. The implementation was

the culmination of years of effort 

by the FDIC to modernize its aging,

highly-customized and complex

financial systems environment. 

The NFE project was a corporate-wide

effort focused on implementing an

enterprise-wide, integrated software

solution to support the current and

future financial needs of the FDIC.

NFE also enhanced the capability 

of other significant development

efforts such as the Corporate 

Human Resources Information

System Time and Attendance

System, and the Legal Integrated

Management System, and also 

provided more robust cost information for improved decision making.

The FDIC continues to collect quality

and timely information in 2005 with

the use of FDICconnect. FDICconnect

is a secure Web site that facilitates

electronic communication with FDICinsured institutions, and became 

the primary method of delivery 

for the quarterly deposit insurance

assessment invoices through a rule

change effective with the March 2005

assessment cycle. In 2005, over

150,000 transactions were completed

by financial institutions using 

FDICconnect.

Transformation of the Information

Technology Program

In 2005, the FDIC completed critical

steps toward transforming its 

information technology program–

an initiative began in 2004. Using 

a roadmap developed with Deloitte

Touche over 18 months ago, the

FDIC implemented an outsourcing

strategy, employee buyout and 

divisional reorganization that 

significantly improved the program’s

overall efficiency and effectiveness.

The immediate benefits of steps

taken so far include:

● Establishment of the Chief 

Information Officer (CIO) Council, 

advising the CIO on all aspects 

of adoption and use of IT at the 

FDIC.

● Additional IT expertise and best 

practices from global contracting 

partners.

● A leaner organization with fewer 

staff and an increased span of 

control.

● A streamlined technical 

infrastructure.

ability to permanently retain or

release these employees at the 

end of three years. The FDIC also

established a Corporate Expert 

pay plan to hire and retain nationally

recognized experts in a limited 

number of senior, non-managerial

positions. In addition, the Corporation

received authority to waive the dual

compensation restrictions allowing

the rehiring of annuitants in critical

positions in the event of a severe

banking emergency. In 2006, 

the Corporation will continue to 

seek increased human resources

flexibilities through OPM authorities

and legislation as needed.

The FDIC conducted negotiations

with the National Treasury Employees

Union (NTEU) over compensation

and benefits, and met its goals 

of providing competitive pay and

benefits that allow the Corporation to

continue its status as an “employer

of choice” in the financial regulatory

community. A significant portion of

the compensation in all pay plans

remains linked to each employee’s

contributions to the FDIC’s goals 

and objectives and overall success.

Emergency Preparedness 

During 2005, the FDIC has strengthened and refined the FDIC Emergency

Preparedness Program, which

includes the Emergency Response

Plan and the Business Continuity Plan.

Some of the major accomplishments

include expanding the capabilities 

at the headquarters alternate site 

to include IT back-up operations;

developing a new emergency notification system to allow for immediate

electronic and voice notification 

of staff; and conducting an annual 

business impact analysis (BIA) 

with major emphasis on IT systems
23

● A realigned IT product and services

delivery-management structure 

that is organized along the lines 

of the new systems development 

life cycle (Rational Unified ProcessRUP).

● A new delivery management 

structure that in conjunction with 

the new Project Management 

Office (PMO) provides a consistent

approach for all IT projects.

● Enhanced integration of information 

security requirements and 

perspectives in all IT projects.

● The consolidation of nearly 100 

support contracts into six. The 

structure of the new contracts 

emphasized contractor performance and linked contractor 

compensation to results achieved 

rather than costs incurred.

Once completed, the FDIC anticipates

that the benefits of the transformation

will include: ● The greater use of contracting 

partners for operation and 

implementation allowing in-house 

staff to focus on strategic business

planning, design and consultation.

● Reduced costs through improving 

the efficiency and effectiveness 

of IT products and services.

● A targeted long-term plan 

for personal and technical 

development of all IT employees 

resulting from a new skills 

assessment to be conducted 

during 2006.

Privacy Program

In 2005, the charter of the Chief

Information Officer's Council was

expanded to include oversight of

Privacy Act responsibilities, and 

the corporate Privacy Program 

was enhanced under the guidance 

of the newly appointed Chief 

Privacy Officer (CPO). The 

program’s objective is to ensure 

that the FDIC is taking appropriate

steps to protect personally identifiable

information from unauthorized use,

access, disclosure or sharing, and 

to protect associated information

systems from unauthorized access,

modification, disruption or destruction. 

One of the first priorities is increasing

employee awareness. The program

requires mandatory privacy training

so that all FDIC employees and 

contractors are aware of the requirements for safeguarding sensitive

information and know where to

obtain privacy-related reference

material. Many initiatives were 

completed in 2005 in support of the

newly enhanced Corporate Privacy

Program, including mandatory 

computer-based privacy training

and distribution of a Privacy

Awareness Package.