5

For 82 years, the FDIC has carried out its mission 

of maintaining public confidence and stability in 

the nation’s 

financial system. 

The FDIC does 

this by insuring 

deposits; 

supervising 

and examining 

financial 

institutions 

for safety, 

soundness, 

and consumer 

protection; 

and managing 

receiverships 

when banks fail.

At the end of September 2015, the FDIC insured 

deposits of $6.4 trillion in more than half a billion 

accounts at almost 6,300 institutions, supervised 

3,995 institutions, and managed 470 active 

receiverships having total assets of $23.9 billion.

The U.S. economy and the banking industry 

continued to improve in 2015. After experiencing the 

most severe financial crisis and economic downturn 

since the 1930s, the United States is now well into the 

recovery. The economy is expanding, although the 

pace of economic growth has been weaker than the 

long-term trend and bank profitability remains lower 

than pre-crisis levels. Still, the industry has been 

strengthening balance sheets, building capital, and 

enhancing liquidity. 

Stronger balance sheets indicate ample capacity for 

FDIC-insured institutions to continue to support the 

economic recovery. During the 12 months ended 

September 30, loan balances at banks increased by 

$482 billion, the largest 12-month dollar gain since 

the year ending June 2008. Moreover, that growth 

was broad-based, with all major loan categories 

posting increases, and more than three-quarters of 

all institutions reporting larger loan balances. Loan 

growth was strongest at community banks, which 

posted an 8.5 percent gain versus 5.9 percent for the 

industry overall. Rising loan demand and a recent 

pickup in the pace of economic activity are creating 

favorable conditions for FDIC-insured institutions, 

although the global economic outlook remains 

uncertain and poses a potential downside risk for the 

U.S. economy and financial system. 

The number of both failed and problem institutions 

declined again in 2015, and the Deposit Insurance 

Fund (DIF) balance, which was almost $21 billion in 

the red during the financial crisis, was $72.6 billion in 

the black at year-end.

The FDIC is working to wind down the receiverships 

of failed institutions and to address the emerging 

supervisory challenges of interest-rate risk, credit risk, 

and cybersecurity threats. This shift is indicative of 

the move from a post-crisis recovery environment 

to one of expanding economic growth and financial 

activity. Following is an overview of the key strategic 

challenges facing the FDIC. 

REBUILDING THE DIF, 

RESOLVING FAILED BANKS, 

AND FDIC RESOURCES

Under a restoration plan that reflects Dodd-Frank Act 

requirements to rebuild the DIF, the FDIC has had 

a steady increase in the year-end fund balance from 

2011 through 2015. Recently, lower than estimated 

losses for past bank failures, together with assessment 

income, have contributed to the increase in the fund 

balance to $72.6 billion as of December 31, 2015. 

The reserve ratio was 1.09 percent as of September 30, 

2015. 

The Dodd-Frank Act raised the minimum reserve 

ratio of the DIF from 1.15 percent to 1.35 percent 

and requires that the reserve ratio reach that level by 

September 30, 2020. Further, the Dodd-Frank Act 

MESSAGE FROM THE CHAIRMAN

MESSAGE FROM THE CHAIRMAN
6 FEDERAL DEPOSIT INSURANCE CORPORATION

also makes banks with $10 billion or more in total 

assets responsible for the increase from 1.15 percent 

to 1.35 percent. Under a rule adopted by the FDIC 

in 2011, regular assessment rates for all banks will 

decline when the reserve ratio reaches 1.15 percent. 

Banks with total assets of less than $10 billion will 

have substantially lower assessment rates then. To 

ensure that the reserve ratio reaches 1.35 percent by 

the statutory deadline, the FDIC proposed a rule 

in 2015 that would impose on banks with at least 

$10 billion in assets a surcharge of 4.5 cents per 

$100 of their assessment base, after making certain 

adjustments. The FDIC expects the reserve ratio 

– the ratio of the DIF balance to estimated insured 

deposits - would likely reach 1.35 percent after 

approximately two years of payments of the proposed 

surcharges.

Bank failures in 2015 totaled eight, down dramatically 

from a peak of 157 in 2010, while the number of 

banks on the problem bank list (banks rated 4 or 5 

on the CAMELS rating scale) fell to 203 at the end of 

September 2015 from a high of 888 in March 2011. 

The United States is now approaching pre-crisis levels 

for failed banks and problem banks. 

As the banking industry continues to recover, 

the FDIC requires fewer resources. The agency’s 

authorized workforce for 2015 was 6,886 full-time 

equivalent positions compared with 7,200 the year 

before. The 2015 Corporate Operating Budget was 

$2.3 billion, a decrease of 3.0 percent from 2014.

The FDIC reduced its budget for 2016 from the 

prior year by 4.7 percent to $2.2 billion and reduced 

authorized staffing by approximately 4.6 percent to 

6,569 positions, in anticipation of a further drop in 

bank failure activity in the years ahead. However, 

contingent resources are included in the budget 

to ensure readiness should economic conditions 

unexpectedly deteriorate.

During 2015, the FDIC successfully used various 

resolution strategies to protect insured depositors of 

failed institutions at the least cost to the DIF. The 

FDIC actively marketed failing institutions and sold 

them to other financial institutions. These strategies 

protected insured depositors and preserved banking 

relationships in many communities, providing 

depositors and customers with uninterrupted access 

to essential banking services. 

IMPLEMENTING THE FDIC’S 

AUTHORITIES UNDER THE 

DODD-FRANK ACT 

The FDIC continues to make progress in developing a 

framework under the Dodd-Frank Act for the orderly 

failure of a large, complex, systemically important 

financial institution while avoiding the taxpayer 

bailouts and the market breakdowns that took place 

during the recent financial crisis. 

Under the Dodd-Frank Act, bankruptcy is the 

statutory first option for the failure of a Systemically 

Important Financial Institution (SIFI). The largest 

bank holding companies, as well as non-bank financial 

companies designated by the Financial Stability 

Oversight Council for supervision by the Federal 

Reserve Board, are required to prepare resolution 

plans, also referred to as “living wills,” under Title 

I of the Dodd-Frank Act. These living wills must 

demonstrate that the firm could be resolved under 

bankruptcy without severe adverse consequences 

for the financial system or the U.S. economy. As 

a backstop, for circumstances in which an orderly 

bankruptcy might not be possible, Title II of the 

Dodd-Frank Act provides the Orderly Liquidation 

Authority. This public resolution authority allows the 

FDIC to manage the orderly failure of the firm.

The Living Wills Process

The FDIC and the Board of Governors of the 

Federal Reserve System are charged with reviewing 

and assessing each firm’s plan. If a plan does not 

demonstrate the firm’s resolvability, the FDIC and the 

Federal Reserve may jointly determine that it is not 

credible or would not facilitate an orderly resolution 

of the company under the Bankruptcy Code and issue 

a notice of deficiencies. 

In August 2014, the FDIC and the Federal Reserve 

Board delivered individual letters to the largest 
MESSAGE FROM THE CHAIRMAN 7

financial firms that identified common shortcomings 

of the plans. These shortcomings included 

assumptions that the agencies regard as unrealistic 

or inadequately supported, and the failure to make, 

or even to identify, the kinds of changes in firm 

structure and practices that would be necessary to 

enhance the prospects for orderly resolution. The 

firms were directed to address these shortcomings and 

improve their resolvability including by simplifying 

and rationalizing their organizations, ensuring the 

continuity of critical services in resolution, and 

demonstrating operational capabilities for resolution 

preparedness. The 2015 plans were submitted on July 

1 and were under review by the FDIC and the Federal 

Reserve at year-end.

The living wills submitted by firms also include 

public portions. Public and market understanding 

of the process for improving the resolvability of 

Global Systemically Important Financial Institutions 

(G-SIFIs) is important for a number of reasons, 

including allowing for the development of realistic 

market expectations about how the resolution of a 

G-SIFI might proceed. In the past year the agencies 

provided guidance to the firms requiring that the 

public portions of the plans include more detailed 

information in a number of areas. As a result, 

this year’s public plans provide substantially more 

information. 

The Orderly Liquidation Authority

Given the challenges and the uncertainty surrounding 

any particular failure scenario, Title II of the DoddFrank Act provides the Orderly Liquidation Authority, 

which is effectively a public-sector bankruptcy process 

for institutions whose resolution under the U.S. 

Bankruptcy Code would pose systemic concerns. 

The Orderly Liquidation Authority is the mechanism 

for ensuring that policymakers will not be faced with 

the same poor choices they faced in 2008. Its tools are 

intended to enable the FDIC to carry out the process 

of winding down and liquidating the firm, while 

ensuring that shareholders, creditors, and culpable 

management are held accountable and taxpayers do 

not bear losses. In the years since enactment of DoddFrank, the FDIC has made significant progress in 

developing the operational capabilities to carry out a 

resolution if needed. 

Further, since passage of the Dodd-Frank Act, other 

major jurisdictions have followed the United States 

in enacting systemic resolution authorities that are 

comparable to those provided in the Dodd-Frank Act. 

Pursuant to provisions of the Orderly Liquidation 

Authority, the FDIC has worked closely with all the 

major foreign jurisdictions, including the United 

Kingdom, Germany, France, Switzerland, and Japan, 

as well as European entities including the new Single 

Resolution Board and Single Supervisory Mechanism. 

This cooperation is essential to identifying issues and 

to addressing obstacles to cross-border resolution.

In 2014, the European Parliament established a Single 

Resolution Mechanism (SRM) for the resolution of 

financial institutions in Europe. The FDIC is actively 

engaging with the new Single Resolution Board, which 

oversees the SRM, to be of assistance in its set up 

and to discuss cooperation and resolution planning 

for G-SIFIs with assets and operations in the United 

States and the Eurozone. The FDIC and the European 

Commission have established a joint Working Group 

to focus on both resolution and deposit insurance 

issues. In addition, the FDIC participates in the Crisis 

Management Groups for G-SIFIs with significant 

assets and operations in the United States. Deepening 

our cross-border relationships with the key foreign 

jurisdictions will be an ongoing priority for the FDIC’s 

work on systemic resolution.

Large Bank Deposit Insurance Determinations

In April, the FDIC issued an Advance Notice of 

Proposed Rulemaking (ANPR) that sought comment 

on some approaches aimed at improving the way 

deposit insurance determinations could be done at 

banks with a large number of deposit accounts—

not just banks that are part of SIFIs, but any bank 

with a large number of deposit accounts. Providing 

depositors with prompt access to their funds is 

essential for preserving public confidence and 

maintaining financial system stability. For the typical 

bank resolved by the FDIC, insured deposits are 
8 FEDERAL DEPOSIT INSURANCE CORPORATION

available the next business day. The questions and 

alternatives in the ANPR were aimed at bolstering the 

FDIC’s capability to make equally prompt deposit 

insurance determinations at banks with a large 

number of deposit accounts, such as two million 

accounts. 

Interest-Rate Risk and Credit Risk

While there were a number of positive trends in the 

banking industry, there are signs of growing interestrate risk and credit risk that warrant attention. In 

order to mitigate the impact of low rates on net 

interest margins, banks have been going out further 

on the yield curve and increasing the mismatch 

between asset and liability maturities. Lending in 

higher-risk loan categories has been growing. The 

recent Shared National Credits review of large 

syndicated loans noted that “credit risk in the 

portfolio remains high, despite a relatively favorable 

economic environment.” And loan portfolios in 

regions that depend on oil and gas revenue are 

increasingly at risk due to the significant decline in 

energy prices.

At the same time risk profiles have been rising, 

banks have not seen corresponding growth in 

overall revenue.

These signs of growing interest-rate risk and credit 

risk are important because – as history tells us – it 

is during this phase of the credit cycle when lending 

decisions are made that could lead to future losses. 

Timely attention by banks to address these growing 

risks will benefit banks and contribute to the 

sustainability of the current economic expansion. 

These risks will continue to be a focus of supervisory 

attention.

REGULATORY REVIEW

The Economic Growth and Regulatory Paperwork 

Reduction Act of 1996 (EGRPRA) requires that 

regulations adopted by the federal banking agencies, 

including the FDIC, be reviewed by the agencies at 

least once every 10 years. The current cycle began in 

late 2014 and will end in 2016 when a final report 

is sent to Congress. The purpose of this review is 

to identify outdated or unnecessary regulations and 

consider how to reduce regulatory burden on insured 

depository institutions while, at the same time, 

ensuring that safety and soundness and consumer 

compliance standards are maintained. The FDIC 

in 2015 hosted and participated in public outreach 

meetings nationwide to hear firsthand from bankers 

and consumer groups.

The regulatory review process is one we take very 

seriously. A particular interest to the FDIC is the 

impact of our regulations on community and rural 

banks. As the EGRPRA process unfolded in 2015, 

we worked with the other agencies through the 

Federal Financial Institutions Examination Council 

(FFIEC) on a multi-step process to review Call Report 

burden and the real estate appraisal standards. The 

agencies anticipate taking further actions prior to the 

issuance of the final report. 

COMMUNITY BANKING 

INITIATIVE

Community banks are critically important to our 

economy and banking system. Community banks 

account for 13 percent of the banking assets in the 

United States, but also account for 44 percent of 

the small loans to businesses and farms made by all 

banks, making them key partners in supporting local 

economic development and job creation. Since the 

FDIC is the primary federal supervisor of the majority 

of community banks in the United States, community 

banking will continue to be an important focus of 

FDIC supervision, technical assistance, and research.

In late 2012, the FDIC published a comprehensive 

study on community banking. The study confirmed 

that the traditional community bank business model 

– careful relationship lending, funding from stable 

core deposits, and local market expertise – performed 

comparatively well during the recent banking crisis. 

Of the more than 500 banks that failed since 2007, 

the highest failure rates were among non-community 

banks and community banks that departed from this 
MESSAGE FROM THE CHAIRMAN 9

traditional model by investing in risky assets funded 

by non-core deposits.

In 2015, FDIC analysts published a new study on the 

challenges and opportunities facing small, closely held 

community banks. 

Apart from research, the community bank initiative 

includes a robust technical assistance program for 

bank directors, officers, and employees. The FDIC’s 

latest innovation is a series of more than 20 online 

videos that are helping community bankers to 

understand better their management responsibilities. 

During 2015, new videos were released on interestrate risk, corporate governance, cybersecurity, vendor 

management, the loan originator compensation rule, 

and mortgage servicing rules. 

Finally, the FDIC’s Advisory Committee on 

Community Banking is an ongoing forum for 

discussing current issues and receiving valuable 

feedback from the industry. The committee, which 

met three times during 2015, is composed of 15 

community bank CEOs 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.

CYBERSECURITY

The rapidly evolving nature of cybersecurity 

risks reinforces the need for regulators, financial 

institutions, and critical technology service providers 

to have appropriate procedures to effectively respond 

to cybersecurity risk. The FDIC works with other 

bank regulators to analyze and respond to emerging 

cyber threats, bank security breaches, and other 

harmful or disruptive technology-related incidents. 

The federal banking agencies are currently reviewing 

security readiness at banks and technology service 

providers. We are also evaluating our supervisory 

policies for potential improvements.

The FDIC has taken a number of actions to raise 

awareness of cyber risks and to encourage practices 

to protect the banks we supervise, particularly 

community banks. For example, in 2015 the FDIC 

distributed to all FDIC-supervised banks three 

new videos that are part of our Cyber Challenge: 

a Community Bank Cyber Exercise series; added 

a cyber-awareness video to the Directors’ Resource 

Center; and hosted a cybersecurity teleconference for 

the industry. Cyber Challenge provides operational 

risk-related scenarios and challenge questions designed 

to facilitate discussion and allow community bankers 

to assess their preparedness for and response to 

cyber-related events. The FDIC, in coordination 

with other members of the FFIEC, also published a 

Cybersecurity Assessment Tool to help institutions 

identify risks and determine their preparedness. 

The voluntary tool includes a process for measuring 

cybersecurity preparedness over time. 

The FDIC monitors cybersecurity issues on a 

regular basis through on-site bank examinations and 

regulatory and intelligence reports. The FDIC also 

works with other federal agencies, law enforcement 

and a number of government groups and industry 

coordinating councils to facilitate collaboration and 

information sharing across the financial services 

sector.

PROTECTING CONSUMERS 

AND EXPANDING ACCESS 

TO BANKING SERVICES

Expanding access to mainstream banking services 

is part of the FDIC’s core mission. The FDIC’s 

National Survey of Unbanked and Underbanked 

Households, conducted every two years with the 

U.S. Census Bureau, has documented that a large 

number of households in our country do not have a 

relationship with an insured depository institution or 

rely on high cost alternative financial service providers 

to meet some of their financial services needs. The 

survey, which was last released in October 2014, is 

widely used by the industry, academics, government, 

consumer and community organizations, the media, 

and many others to better understand who lacks 

access to mainstream banking services in the United 
10 FEDERAL DEPOSIT INSURANCE CORPORATION

States and to gain insights into opportunities to 

expand participation.

During 2015, the FDIC continued its efforts to 

protect consumers and expand access to mainstream 

banking services. A new national effort, for example, 

was launched to promote local outreach and awareness 

of safe accounts. These safe accounts, which are 

offered by banks with branches in counties where 

nearly 80 percent of Americans live, provide secure, 

affordable transaction services. The accounts follow 

the standards for a Model SAFE account developed 

by the FDIC’s Advisory Committee on Economic 

Inclusion. The advisory committee, composed of 

bankers, community and consumer organizations 

and academics, also began the process of determining 

how mobile banking technologies could help expand 

economic inclusion in the banking system and 

explored opportunities to address the financial services 

needs of individuals with disabilities.

The FDIC has a longstanding commitment to 

financial education. In 2015, we added a new Money 

Smart for Young People curriculum series to the 

recently enhanced Teacher Online Resource Center. 

This age-appropriate resource involves educators, 

parents/caregivers, and young people in the learning 

process, including through the use of Parent/Caregiver 

Guides that are available in English and Spanish. 

Since financial education can be enhanced through 

hands-on learning approaches, we expanded a pilot 

to 21 participating banks that combine the offer of a 

savings account with financial education programs for 

young people. And along with the Financial Literacy 

and Education Commission and other regulatory 

agencies, the FDIC issued guidance that encourages 

banks to offer youth savings programs and answers 

related frequently asked questions. Entrepreneurs can 

also benefit from an enhanced Money Smart for Small 

Business curriculum, which is now also available in 

Spanish.

CONCLUSION

During 2015, the U.S. banking industry continued its 

recovery from the recent financial crisis. The industry 

benefited from stronger balance sheets, fewer problem 

banks and bank closings, increased lending activity, 

and a larger balance in the DIF. At the same time, 

it remains important for bankers and supervisors to 

heed the lessons of the recent crisis by maintaining a 

steady focus on risk management. 

In 2016, the FDIC will continue to work to fulfill its 

mission of maintaining public confidence and stability 

in the nation’s financial system. The workforce 

of the FDIC remains committed to the agency’s 

core mission. I am very grateful to the dedicated 

professionals of the FDIC for their commitment to 

public service and for the high level at which they 

carry out their important responsibilities. 

Sincerely,

Martin J. Gruenberg