Federal Deposit
Insurance Corporation

Insurance Program

The FDIC also had to consider its need for cash to pay for projected near-term failures. After notice and comment, the FDIC Board adopted a rule on November 12, 2009, requiring insured institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009, and for all of 2010, 2011, and 2012. The prepaid assessment for these periods was collected on December 30, 2009, along with each institution’s regular quarterly risk-based deposit insurance assessment for the third quarter of 2009. Those institutions that were likely to be severely adversely affected by the prepayment were exempted from this requirement. Any prepaid assessment not exhausted after collection of the amount due on June 30, 2013, will be returned to the institution at that time. Should industry conditions improve before that time, the FDIC Board may vote to return funds to the industry sooner. The FDIC collected $45.7 billion from the prepaid assessments – enough to fund current projected liquidity needs.

On October 3, 2008, the Emergency Economic Stabilization Act of 2008 was signed into law. It temporarily raised the basic limit on federal deposit insurance coverage from $100,000 to $250,000 per depositor, through December 31, 2009. On May 20, 2009, the President signed the Helping Families Save Their Homes Act of 2009, which among other provisions extended the temporary increase to December 31, 2013. After December 31, 2013, the standard maximum deposit insurance amount will return to $100,000.

The FDIC established the Temporary Liquidity Guarantee Program (TLGP) on October 13, 2008, in response to credit market disruptions, which reduced banks’ liquidity and impaired their ability to lend. The TLGP has two components, the Debt Guarantee Program (DGP) and the Transaction Account Guarantee Program (TAGP). The DGP guaranteed certain new, senior unsecured debt issued by banks or thrifts and bank holding companies, as well as most thrift holding companies and ended on October 31, 2009. In all, over $618 billion in guaranteed debt was issued under the DGP, and the program generated almost $10 billion in fees paid by participating institutions. The TAGP was extended through June 2010. It provides a full guarantee of all deposits in noninterest-bearing transaction accounts. Under the TAGP, the FDIC guaranteed an estimated $834 billion of deposits in noninterest-bearing transaction accounts that would not have otherwise been insured, and collected approximately $639 million in fees under the program.

Communication and coordination with the other bank regulatory agencies are top priorities. As the insurer, the FDIC by statute has special examination authority for all insured depository institutions. If significant emerging risks or other serious concerns are identified for an insured depository institution for which the FDIC is not the primary federal supervisor, the FDIC and the institution’s primary federal supervisor work together to address those risks or concerns.¹

The FDIC seeks to increase public awareness and understanding of deposit insurance rules and coverage. The FDIC and other federal regulatory agencies ensure that insured depository institutions make accurate disclosures about uninsured products. The FDIC also provides information to depositors and financial institution staff about the application of deposit insurance rules.

This provides the FDIC with tools to assist financial institution employees in interpreting the rules for deposit insurance coverage and responds to deposit insurance questions received from the public and the banking industry through the FDIC Call Center, the Internet and regular mail.

¹ An institution’s charter and its Federal Reserve System membership status determine which federal banking agency is the institution’s primary federal supervisor.

Indicator and Targets

1. Number of business days after an institution failure that depositors have access to insured funds either through transfer of deposits to the successor insured depository institution or depositor payout
   • Depositors have access to insured funds within one business day if the failure occurs on a Friday.
   • Depositors have access to insured funds within two business days if the failure occurs on any other day of the week.

2. Insured depositor losses resulting from a financial institution failure
   • There are no depositor losses on insured deposits.
   • No appropriated funds are required to pay insured depositors.

Means and Strategies

Operational Processes (initiatives and strategies):
When an insured institution is identified as a potential failure, the FDIC prepares a plan to handle the possible resolution of the institution. The FDIC begins the resolution process with an assessment of the institution’s assets and liabilities. The FDIC then develops an information package that is used as a marketing tool and is provided to all interested potential assuming institutions. The FDIC solicits proposals from approved bidders to find a buyer for the deposit franchise.

If the federal or state supervisor chooses to close the institution, the FDIC takes control of the failed institution and determines which deposits are insured. Once the FDIC is appointed receiver, it initiates the resolution process for the failed institution and provides the insured depositors with access to their accounts within one or two business days.

The FDIC works with the assuming institution so that the insured deposit accounts are transferred to it as soon as possible. If no assuming institution is found during the resolution process, the FDIC disburses insured deposit balances directly to customers of the failed institution.

As banking industry practices and technologies evolve, the FDIC continues to review and enhance existing plans, processes and systems in response to potential risks that might impact the resolution process.

Human Resources (staffing and training):
The 2010 Corporate Operating Budget provides for significant increases in authorized staffing in the Division of Resolutions and Receiverships (DRR) to address potentially elevated resolutions and receivership management workload. Most of the staffing increases will be non-permanent. Authorized 2010 DRR staffing is proposed to increase to 2,310 positions.

Information Technology:
Technology is critical to improving the efficiency of deposit insurance determinations and payments. The FDIC is in the midst of a multi-year effort to redesign and automate its deposit insurance claims and payment processes. This project, approved in late 2006, will provide an integrated solution that meets the Corporation’s current and future deposit insurance determination needs and will be based on adaptable technology that is compatible with industry standards. In 2010, the Corporation will deploy the new Claims Administration System to replace current systems used for this purpose.

Verification and Validation
In the case of a transfer of insured deposits to a successor institution, the number of business days for depositors to have access to their insured funds will be verified by comparing the date of failure with the date that the successor insured depository institution opens for business and makes insured funds available to the failed institution’s depositors. In the case of a depositor payout, this will be verified by comparing the date of failure with the date that deposit insurance checks are mailed to depositors or made available for pickup at the premises of the failed institution.

2009 Performance Results
This annual performance goal and its associated performance indicators and targets are unchanged from 2009. There were 140 insured financial institution failures during 2009, and the FDIC successfully met the performance targets for each failure.

Strategic Objective 1.2
The FDIC promptly identifies and responds to potential risks to the DIF.

Annual Performance Goal 1.2-1
Disseminate data and analyses on issues and risks affecting the financial services industry to bankers, supervisors, the public and other stakeholders.

Indicator and Targets

1. Scope and timeliness of information dissemination on identified or potential issues and risks
   • Disseminate results of research and analyses in a timely manner through regular publications, ad hoc reports and other means.
   • Undertake industry outreach activities to inform bankers and other stakeholders about current trends, concerns and other available FDIC resources.

Means and Strategies

Operational Processes (initiatives and strategies):
The FDIC maintains a vigorous research and publications program on issues and topics of importance to the banking industry. Much of this research is conducted in collaboration with the academic community through the Center for Financial Research (CFR). Research findings are disseminated through CFR working papers, articles in professional journals and presentations at conferences and other events. The FDIC also disseminates information and analyses on industry risks through periodic reports, publications (e.g., the FDIC Quarterly Banking Profile and the FDIC Quarterly), Financial Institution Letters and participation in industry events and other outreach activities.

The FDIC conducts outreach sessions several times each year throughout the country. In addition, FDIC employees regularly attend conferences and meet with industry analysts and trade groups to exchange views and analyses. They also present Directors’ College outreach sessions to local bank board members. During these sessions, information on current risks, new regulations and other emerging issues is communicated to bank directors. In addition, banker roundtable events are conducted by local FDIC offices nationwide to provide a forum for bankers to receive information and raise questions about new regulatory guidance or emerging risks.

Human Resources (staffing and training):
The FDIC employs economists, financial analysts and other staff members who monitor risks within the banking industry and communicate those risks to FDIC management, other regulators, the industry, the public and other stakeholders through a variety of media and forums. In addition, outside scholars participate in the Corporation’s risk analysis program, and risk-focused examination training has been incorporated into the FDIC’s examination schools. The FDIC also maintains a cadre of staff members throughout the country to conduct banker outreach sessions.

Information Technology:
The FDIC’s website (www.FDIC.gov) is a centralized source of information on FDIC research and analysis on potential areas of risk for the industry, the public and other regulators. The data is in eXtensible Business Reporting Language (XBRL) to provide faster access to financial institution information for all users of the data, including financial institutions, bank regulators and the public.

Verification and Validation
Timely analyses of banking industry risks are included in regular publications or as ad hoc reports. Industry outreach activities aimed at the banking community and industry trade groups promote discussion of current trends and concerns, and inform bankers about available FDIC resources. Publications and outreach events are documented through established reporting processes.

2009 Performance Results
This annual performance goal and its associated performance indicator and targets are unchanged from 2009. In 2009, the FDIC successfully met these performance targets.

Annual Performance Goal 1.3

Strategic Objective 1.3
The DIF and the deposit insurance system remain strong and adequately financed.

Annual Performance Goal 1.3-1
Set assessment rates to restore the insurance fund reserve ratio to the statutory minimum of at least 1.15 percent of estimated insured deposits by year-end 2016, in accordance with the Amended Restoration Plan.

Indicator and Targets

1. Update projections and recommend changes for assessments, as necessary
   • Provide updated fund projections to the FDIC Board of Directors by June 30, 2010, and December 31, 2010.
   • Recommend deposit insurance assessment rates for the DIF to the FDIC Board as necessary.


2. Monitor progress in achieving the Amended Restoration Plan
   • Provide updates to the FDIC Board by June 30, 2010, and December 31, 2010.

Means and Strategies

Operational Processes (initiatives and strategies):
The FDIC’s Financial Risk Committee (FRC) develops quarterly failure projections and loss estimates to establish contingent loss reserves for the DIF. The FRC continues to enhance the techniques and methodologies used to analyze the nature of risk exposure, including scenario analysis and stress testing. Models that forecast failures and failure resolution costs are maintained and enhanced, as necessary. The FRC regularly reviews adverse events to identify lessons or implications for monitoring and addressing risks and consults with the other federal banking agencies in its deliberations. Based on an analysis of projected failed bank assets and other pertinent information, the FRC recommends to the Chief Financial Officer the level of the contingent loss reserve for the DIF, as determined by the FDIC’s reserving methodology. FDIC staff also uses the information provided by the FRC on projected insurance losses as one factor in determining the level of assessment revenue necessary to maintain adequate funding in the DIF. Projected insurance losses, as well as projections of investment revenue, operating expenses and insured deposit growth, are key elements in estimating assessment revenue needs.

As noted above, the FDIC Board adopted a Restoration Plan in October 2008 to restore the reserve ratio to at least 1.15 percent within five years. The continued decline in the DIF balance throughout 2009 and an increase in FDIC’s projections for future losses, however, necessitated amendments to the Restoration Plan in February and September 2009. The Amended Restoration Plan adopted by the FDIC Board on September 29, 2009, projects that the DIF will be returned to a reserve ration of 1.15 percent within eight years, absent extraordinary circumstances.

Human Resources (staffing and training):
Staff in the FDIC’s Washington, D.C., office administers and performs the analytical work associated with deposit insurance pricing. The FDIC will continue to expand its ties to the academic community to broaden the information and analytical perspectives available to the Corporation as steward of the DIF. In 2010, the FDIC will engage an independent consultant to review and evaluate the methodologies and assumptions used by the Corporation to calculate the five-year projections of loss to the DIF and to make recommendations for enhancing the accuracy and reliability of the projections.

Information Technology:
The Risk-Rated Premium System (RRPS), the information system supporting the assessment process, calculates the premiums that financial institutions are assessed for deposit insurance. RRPS is updated and tested with any changes in the insurance assessment pricing structure.

Verification and Validation
To ensure that the RRPS identifies higher risk institutions and appropriately assesses higher insurance premiums, a Federal Information Security Management Act (FISMA) self-assessment of RRPS is conducted annually. In addition, the Government Accountability Office annually reviews the methodology used to determine the contingent loss reserve. In 2010, the FRC will again conduct semiannual reviews of the contingent loss reserve methodology through an analysis of the variance between projected and actual losses.
Staff will report semiannually to the FDIC Board of Directors on the FDIC’s progress in meeting the goals of the Amended Restoration Plan.

2009 Performance Results
This annual performance goal was revised from 2009 to focus on the Amended Restoration Plan and the Corporation’s efforts to return the reserve ratio to 1.15 percent within eight years. The performance indicator and targets have also been updated for 2010. The FDIC successfully met the performance targets established for the goal in 2009. 

Annual Performance Goal 1.3-2
Expand and strengthen the FDIC’s participation and leadership role in supporting robust international deposit insurance systems.

Indicator and Targets

1. Scope of information sharing and assistance available to international governmental bank regulatory and deposit insurance entities
   • Undertake outreach activities to inform and train foreign bank regulators and deposit insurers.
   • Foster strong relationships with international banking regulators and associations that promote sound banking supervision and regulation, failure resolution and deposit insurance practices.
   • Develop methodology for assessing compliance with implementation of the Core Principles for Effective Deposit Insurance Systems.

Means and Strategies

Operational Processes (initiatives and strategies):
The FDIC demonstrates its leadership role in promoting sound deposit insurance, bank supervision, and bank resolution practices by providing technical guidance, training, consulting services and information to international governmental banking and deposit insurance organizations in many countries around the world. The global crisis that began in the summer of 2007 and intensified in 2008 led many international authorities, including deposit insurers, to take a series of unprecedented actions to restore public confidence and financial stability. In response to this crisis, the International Association of Deposit Insurers (IADI), the FDIC, and the Basel Committee on Bank Supervision (BCBS) jointly led an effort to establish a set of deposit insurance core principles. The collaborative effort culminated in the issuance of the Core Principles for Effective Deposit Insurance Systems in June 2009. This was a significant milestone for improving deposit insurance systems worldwide. The Core Principles were subsequently recognized by the Financial Stability Board (formerly the Financial Stability Forum) at its inaugural meeting in June 2009.

The FDIC will collaborate with IADI, the International Monetary Fund and the BCBS to develop a methodology for assessing compliance with the Core Principles for Effective Deposit Insurance Systems.

Human Resources (staffing and training):
The FDIC will consider each international request for assistance from a strategic perspective and will appropriately leverage its resources to address these requests. The FDIC’s Office of International Affairs (OIA) plans and coordinates the FDIC’s role in the international program. Resources include a small permanent OIA staff and employees on temporary detail assignments. In 2010, the FDIC will continue to balance permanent and temporary staff to support the international program and enhance the FDIC’s leadership role in international bank supervision, failure resolution, and international deposit insurance organizations.

Information Technology:
Information about international governmental bank regulatory or deposit insurance activities and the FDIC’s international program are communicated through the FDIC’s website.

Verification and Validation
Achievement of this annual performance goal will be demonstrated in the development of the methodology for assessing compliance with the Core Principles for Effective Deposit Insurance Systems and through enhanced FDIC participation and leadership roles in key international organizations. Progress in meeting this annual goal will be tracked by the FDIC’s International Affairs Working Group through established reporting processes.

2009 Performance Results
This annual performance goal has been slightly revised and its associated performance indicator and targets changed from 2009. In addition, a performance target was added on developing the assessment methodology. The FDIC successfully met the performance targets for the predecessor goal in 2009.

Strategic Objective 1.4
The FDIC resolves the failure of insured depository institutions in the manner least costly to the DIF.

Annual Performance Goal 1.4-1
Market failing institutions to all known qualified and interested potential bidders.

Indicator and Targets

1. Scope of qualified and interested bidders solicited
   • Contact all known qualified and interested bidders.

Means and Strategies

Operational Processes (initiatives and strategies):
The FDIC markets the deposits and assets of failing institutions to all known qualified and interested potential bidders to stimulate as much competition as possible. The FDIC maintains an inventory of qualified financial institutions that may potentially be interested in bidding to purchase a failing institution. In preparing a list of potential bidders for each failing institution, the FDIC takes into account the failed institution’s geographic location, competitive environment, minority-owned status, financial condition, asset size, capital level, and regulatory ratings. The FDIC contacts these potential bidders and holds an informational meeting and/or uses the Internet to provide information on the failing institution. Potential bidders are then given the opportunity to perform due diligence on the failing institution’s assets and liabilities before determining whether to submit bids.

Human Resources (staffing and training):
Franchise marketing is carried out primarily by specialized FDIC personnel with support, as needed, from staff in other disciplines. Staffing requirements are continually assessed within the context of current and projected workload to ensure that the FDIC is appropriately staffed. The FDIC also uses contractor support, non-permanent employees, and employees temporarily assigned from divisions and offices within the Corporation to meet workload demands and mission responsibilities in this area. The Corporation is in the midst of developing a new Resolutions and Receiverships Commissioning Program to ensure the future availability of qualified personnel to handle all of its insurance and receivership management responsibilities, including the resolution of failed institutions.

Information Technology:
The FDIC implemented a new asset management and servicing system (4-C) in 2007 that replaced a number of legacy systems with more current and secure technology. In August 2008, the FDIC implemented enhancements to 4-C that added franchise and asset marketing capabilities. These enhancements replaced several standalone applications that were used to support those functions. Franchise marketing activities are now tracked through 4-C.

Verification and Validation
The franchise marketing process is tracked in 4C, and data from this system are used to report on marketing and sales progress.

2009 Performance Results
This annual performance goal and its associated performance indicator and target are unchanged from 2009. The performance target was successfully met for the 140 failures that occurred in 2009.

Strategic Objective 1.5
The public and FDIC-insured depository institutions have access to accurate and easily understood information about federal deposit insurance coverage.

Annual Performance Goal 1.5-1
Provide educational information to insured depository institutions and their customers to help them understand the rules for determining the amount of insurance coverage on deposit accounts.

Indicator and Targets

1. Timeliness of responses to deposit insurance coverage inquiries
   • Respond within two weeks to 90 percent of written inquiries from consumers and bankers about FDIC deposit insurance coverage.

2. Initiatives to increase public awareness of deposit insurance coverage changes
   • Conduct at least three sets of the Deposit Insurance Seminars/teleconferences per quarter for bankers.

Means and Strategies

Operational Processes (initiatives and strategies):
The FDIC uses a variety of means to educate insured financial institution employees and depositors about FDIC deposit insurance coverage. In addition to conducting seminars for bank employees, the FDIC encourages the dissemination of educational information through the banking industry and the media. During 2010, the FDIC will update all deposit insurance coverage educational resources to reflect statutory and regulatory changes made in 2009. The FDIC works with insured financial institutions to encourage them to use these resources and to make them available to bank employees and customers. The FDIC also operates a toll-free call center (877-ASK-FDIC) that answers basic deposit insurance inquiries and refers more complex inquiries to deposit insurance specialists, maintains deposit insurance coverage educational resources on the FDIC’s website, publishes articles on insurance coverage rules in the FDIC Consumer News (a quarterly newsletter for consumers published by the FDIC), and works to raise awareness of deposit insurance coverage through the national and regional news media.

Human Resources (staffing and training):
The FDIC has a dedicated staff of deposit insurance specialists that respond to inquiries and administer public education programs on deposit insurance. Staffing and training needs are reviewed on an ongoing basis to ensure that the resources supporting deposit insurance educational initiatives are adequate and that employees possess the skills and knowledge to implement this program effectively and successfully.

Information Technology:
The FDIC tracks the receipt of and response to written banker and public inquiries about the FDIC’s deposit insurance program through the Specialized Tracking and Reporting System (STARS). During 2010, the FDIC will update the Electronic Deposit Insurance Estimator (EDIE) to ensure that all enhancements in support of statutory and regulatory changes have been applied, as well as enhancing STARS to address the tracking and reporting of tens of thousands of consumer and banker inquiries. The FDIC will also continue to use the Internet and audio technology to reach large audiences of financial institution employees and to deliver deposit insurance educational tools and materials to the banking community and the public.

Verification and Validation
Progress in meeting the performance targets for this goal will be tracked through STARS and established reporting processes.

2009 Performance Results
This annual performance goal is unchanged for 2010, but the associated performance indicators and targets have been slightly revised. The FDIC successfully met this performance goal and the associated performance targets for 2009.