Federal Deposit
Insurance Corporation

Supervision Program

The FDIC’s Supervision Program promotes the safety and soundness of FDIC-supervised insured depository institutions, protects consumers’ rights and promotes community investment initiatives by FDIC-supervised insured depository institutions. In 2010, the FDIC will continue its efforts to increase the effectiveness and efficiency of all of its supervisory programs. Ongoing industry consolidation, new technologies and product innovation have resulted in larger, more complex organizations. The FDIC will continue to increase the resources dedicated to analyzing the risks posed to the DIF by these larger, more complex financial institutions, particularly those that are systemically important. The FDIC will also continue to assess and modify, as appropriate, its examination procedures for all institutions in light of changing risk profiles for the industry and for individual institutions.

The FDIC is the primary federal regulator for state-chartered banks that are not members of the Federal Reserve System, generally known as state non-member banks. This includes state-licensed insured branches of foreign banks and state-chartered savings institutions. As insurer, the FDIC also has special examination authority for state member banks that are supervised by the Federal Reserve Board (FRB), national banks that are supervised by the Office of the Comptroller of the Currency (OCC) and savings associations that are supervised by the Office of Thrift Supervision (OTS). The FDIC’s roles as an insurer and primary supervisor are complementary, and many activities undertaken by the FDIC support both the insurance and supervision programs. Through the review of examination reports, offsite monitoring tools, participation in examinations conducted by other federal regulators, and, where appropriate, special (backup) examination activities, the FDIC regularly monitors the potential risks at all insured institutions, including those for which it is not the primary federal regulator.

As the primary federal regulator of all insured state non-member banks, the FDIC performs periodic examinations of these institutions to assess their overall financial condition, management policies and practices, and compliance with applicable laws and regulations. Through the examination process, the FDIC also assesses the adequacy of management and internal control systems to identify and control risks and to detect the risks of fraud or insider abuse. In addition, the FDIC has staff dedicated to offsite monitoring programs and enhancing the Corporation’s ability to identify emerging safety-and-soundness issues in a timely manner. The FDIC conducts separate examinations to assess institutions’ programs for compliance with consumer protection, fair lending, privacy, and Community Reinvestment Act (CRA) statutes. As part of the compliance examination process, the FDIC reviews substantive issues as well as the information and disclosures that are provided to consumers by the institutions.

If weaknesses are identified through the examination process, the FDIC promptly takes appropriate supervisory action. Formal and informal enforcement actions may be issued for institutions identified as having significant weaknesses or found to be operating in a deteriorated financial condition. The institution must operate under the action until these weaknesses are remedied. Noncompliance with consumer protection or fair lending laws can result in civil liability and negative publicity as well as the imposition of formal or informal enforcement actions by the FDIC to correct the identified violations.

The FDIC also investigates consumer complaints about FDIC-supervised insured depository institutions. Consumers write or electronically submit to the FDIC complaints and inquiries regarding consumer protection and fair lending issues. The FDIC attempts, through its investigation of and response to consumer complaints and inquiries, to help consumers better understand their rights under federal consumer protection and fair lending laws. The FDIC monitors the level of public satisfaction with its responses to consumer complaints and inquiries. Information on complaints is also reviewed as part of the supervisory process.

In addition, the FDIC acts on applications from FDIC-supervised insured depository institutions to undertake new or expanded business activities. When institutions apply for expansion of existing activities or locations, various factors are evaluated, including capital adequacy, quality of management, financial condition and compliance with applicable laws and regulations. An institution’s compliance with consumer protection, fair lending and privacy laws and its performance under the CRA are also considered when an institution applies to expand its business activities within the insured depository institution system.

Information about the FDIC’s supervisory program is available at www.FDIC.gov, which includes information about current laws and regulations and regulatory guidance. The FDIC’s semiannual Supervisory Insights journal provides information about bank supervision for bankers, bank examiners and other practitioners.

The following table depicts the strategic goal, strategic objective and annual performance goals for the Risk Management component of the Supervision Program.

The following table depicts the strategic goal, strategic objectives and annual performance goals for the Compliance and Consumer Affairs components of the Supervision Program.

Strategic Goal 2:
FDIC-insured institutions are safe and sound.

Strategic Objective 2.1
The FDIC exercises its statutory authority, in cooperation with primary financial regulators and state agencies, to ensure that all FDIC-insured institutions appropriately manage risk.

Annual Performance Goal 2.1-1
Conduct onsite risk management examinations to assess the overall financial condition, management practices and policies, and compliance with applicable laws and regulations of FDIC-supervised depository institutions.

Indicator and Target

1. Percentage of required examinations conducted in accordance with statutory requirements and FDIC policy
• 100 percent of required risk management examinations are conducted on schedule.

Means and Strategies

Operational Processes (initiatives and strategies):
Risk management examinations assess the overall financial condition, management practices and policies, and compliance with applicable regulations of FDIC-supervised depository institutions. The FDIC performs safety and soundness, Bank Secrecy Act, and information technology (IT) reviews at each risk management examination of an FDIC-supervised insured depository institution. As applicable, the FDIC also conducts reviews of trust, registered transfer agent, municipal securities dealer and government security dealer activities at these examinations. In 2009, the FDIC projects that it will conduct over 2,400 risk management examinations required under statute, FDIC policy, or agreement with state supervisors. The FDIC follows a risk-focused approach to examinations, which allows examiners to focus resources on those areas with the greatest potential risk. The FDIC has several analytical models to identify higher-risk financial institutions by considering factors such as rapid growth, fluctuating earnings, economic downturns and concentrations in vulnerable industry sectors. Examiners use these offsite tools to help them risk-focus during onsite examinations. These models are also used to identify the need for inquiries or onsite visits to FDIC supervised institutions outside of the regular examination cycle.

The FDIC also continues to focus on risks posed by technology. Onsite examinations review technology-related activities to determine how each FDIC-supervised depository institution manages IT risks. The FDIC proactively monitors indicators of technology risks that may impact FDIC-supervised institutions and provides information to the industry about risks associated with technology outsourcing practices (e.g., contracting for computer services).

The FDIC is engaged in an ongoing dialogue with technology vendors, bank trade associations, and standards and rule-setting entities to identify effective risk management practices for emerging technologies.

During 2010, the FDIC will continue to work closely with state and other federal agencies to monitor institutions most impacted by the downward trend in the real estate market through onsite and offsite programs. Declines in the subprime and nontraditional mortgage lending areas have adversely affected construction and development loan portfolios, which are concentrated in 1- to 4-family residential development loans at numerous institutions. Commercial property markets are also showing signs of overbuilding and weakness, with high concentration levels at many institutions.

The FDIC has cooperative agreements with most states to conduct joint or alternating risk management examinations. However, resource constraints at the state level may impact the completion of scheduled examinations by state agencies in 2010. If a state supervisor responsible for completing an examination experiences scheduling, staffing, or other resource constraints, the statutory examination requirement may not be met. In such cases, the FDIC will work with the state supervisor to ensure that any delinquent examination is expeditiously scheduled and completed. When appropriate, the FDIC may conduct the examination in lieu of the state supervisor.

The number of risk management examinations conducted during 2010 may fluctuate as the number of FDIC-supervised insured depository institutions changes due to mergers, closings, newly approved charters and other actions. In addition, increases in asset size or changes to an institution’s condition or capital levels may accelerate examination cycles and increase the number of required examinations.

Human Resources (staffing and training):
The FDIC’s authorized risk management examination workforce increased from 1,723 Full-Time Equivalents (FTEs) in 2009 to 2,014 FTEs in 2010, including examiner trainees assigned to Corporate University. Staffing and training needs are reviewed on an ongoing basis to ensure that the staff resources supporting the examination program are adequate to conduct a high quality examination program and that employees possess the skills and knowledge to effectively and successfully examine emerging risks.

Information Technology:
The FDIC employs various automated tools, such as the General Examination System (GENESYS), Examination Documentation (ED) modules, Interest Rate Risk Standard Analysis software (IRRSA), and the Automated Loan Examination and Review Tool to improve the efficiency of its examinations.

Verification and Validation
The actual number of examinations conducted and adherence to required examination time frames is tracked through the ViSION system and reported through established management processes.

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

Annual Performance Goal 2.1-2
Take prompt and effective formal or informal supervisory action to address unresolved problems identified during the examination of FDIC supervised institutions that receive a composite Uniform Financial Institutions Rating of 3, 4 or 5. Monitor the compliance of FDIC-supervised insured depository institutions with formal and informal enforcement actions.

Indicator and Target

1. Percentage of follow-up examinations of 3-, 4- and 5-rated institutions conducted within required time frames
• 100 percent of follow-up examinations are conducted within 12 months of completion of the prior examination to confirm that identified problems have been corrected.
• 100 percent of required follow-up examinations are conducted within 12 months of completion of the prior examination to confirm that identified problems have been corrected.

Means and Strategies

Operational Processes (initiatives and strategies):
Troubled and problem institutions (those with a composite rating of 3, 4 or 5) are identified primarily through the examination process. While reason and moral suasion are the primary corrective tools, the FDIC has broad enforcement powers to correct practices, conditions or violations of law that threaten an insured depository institution’s safe and sound condition. The FDIC may use informal and formal enforcement actions against an institution or responsible individuals to address identified problems. Except in rare instances where it is determined by FDIC management to be unnecessary, a follow-up examination or onsite visit is conducted to review compliance with supervisory actions for each institution that receives a composite CAMELS rating of 3, 4 or 5. Additional follow-up action is taken where the corrective program is determined to have been insufficient in addressing the identified problem.

The responsible case manager and senior regional officials closely monitor each troubled and problem depository institution. In addition to a follow-up examination or onsite visit, progress in complying with an enforcement action is assessed through progress reports from the institution, use of offsite monitoring tools, and direct communication with management of the financial institution.

Human Resources (staffing and training):
Case managers and other regional office officials are primarily responsible for finalizing and monitoring compliance with enforcement programs. Follow-up examinations and onsite visits are conducted by field examination staff. The FDIC has increased the number of authorized case managers as well as field examination positions in 2010. Staffing and training needs are reviewed on an ongoing basis to ensure that resources available for this function are adequate and that employees possess the required skills and knowledge.

Information Technology:
The ViSION system is used to monitor all enforcement action activity and other significant events at troubled institutions and to schedule follow-up examinations of 4- and 5-rated institutions.

Verification and Validation
The examination report identifies corrective actions to be taken. If deemed necessary, a formal or informal enforcement action is transmitted to the financial institution along with the report of examination. To ensure that supervisory actions are taken promptly, the FDIC monitors the time it takes to provide examination reports to FDIC-supervised institutions after the completion of an examination. The ViSION system is used to track enforcement actions and the time frame for required onsite visits and follow-up examinations.

The FDIC will also continue to use the Regional Office Internal Control Review program to ensure that regions are effectively monitoring FDIC-supervised insured depository institutions’ compliance with formal and informal enforcement actions. This review incorporates various components of the supervisory process, including assessment of the appropriateness, implementation and follow-up of formal and informal corrective actions. Any material exceptions noted during the reviews are brought to management’s attention for appropriate action.

2009 Performance Results
This annual performance goal and the associated performance indicator and target for follow-up examinations are essentially unchanged from 2009. A new performance target for follow-up onsite visits has been added for 2010. The FDIC successfully met the 2009 performance target.

Annual Performance Goal 2.1-3
Assist in protecting the infrastructure of the U.S. banking system against terrorist financing, money laundering and other financial crimes.

Indicator and Target

1. Percentage of required examinations conducted in accordance with statutory requirements and FDIC policy
• 100 percent of required Bank Secrecy Act examinations are conducted on schedule.

Means and Strategies

Operational Processes (initiatives and strategies):
Bank Secrecy Act/Anti-Money Laundering (BSA/AML) examinations and Office of Foreign Assets Control (OFAC) reviews assess an institution’s overall BSA/AML and OFAC compliance programs. These reviews encompass sound risk management, compliance with recordkeeping requirements, and the ability of the institution to identify and report suspicious activity. The FDIC performs BSA/AML and OFAC reviews as a part of all risk management examinations of FDIC-supervised insured depository institutions. In 2010, the FDIC projects that it will conduct over 2,500 BSA/AML examinations concurrent with risk management examinations (required by the Federal Deposit Insurance Act), FDIC policy, or agreement with state supervisors.

The FDIC will also perform BSA/AML examinations in conjunction with risk management examinations conducted by state regulators for the small number of state bank regulatory agencies (currently six) that do not incorporate BSA/AML examination procedures into their own examinations. The FDIC follows a risk-focused approach to BSA/AML examinations and OFAC reviews, which allows examiners to focus resources on those areas with the greatest potential risk.

In 2010, the FDIC will work with the other federal banking agencies, the Financial Crimes Enforcement Network (FinCEN), the Conference of State Bank Supervisors and OFAC to update the Federal Financial Institutions Examination Council (FFIEC) BSA/AML Examination Manual to ensure that the guidance remains current for existing laws, regulations, and policy interpretations. Further guidance will be provided to risk management staff through written memoranda, participation in the FFIEC BSA/AML Examination Workshop, and attendance at the Advanced BSA/AML Specialists Conference.

Human Resources (staffing and training):
The FDIC currently has 310 examiners who are designated as BSA/AML subject matter experts, including 85 with advanced certifications for this discipline. Staffing and training needs are reviewed on an ongoing basis to ensure that the staff resources supporting the BSA/AML examination program are adequate and that employees possess the skills and knowledge to effectively and successfully assess compliance with BSA/AML requirements and detect any emerging risks.

Information Technology:
BSA/AML reference materials are available on the FDIC’s external website at www.fdic.gov/regulations/examinations/bsa/index.html. This link provides the banking industry and the regulatory community with centralized and expanded access to BSA/AML resources. The link also provides updated information and instruction related to BSA/AML examination procedures, interpretive guidance, websites of related agencies, instructions for reporting suspicious activity and terrorist-financing activity, and an overview of governing rules and regulations. In concert with the release of the interagency FFIEC BSA/AML Examination Manual, the federal banking agencies have also made available through the FFIEC website (www.ffiec.gov) a BSA/AML Examination Manual InfoBase. It includes the interagency BSA/AML Examination Manual, BSA regulations, and guidance provided by each federal banking agency. BSA/AML examinations are tracked in the ViSION system.

Verification and Validation
The actual number of examinations conducted and adherence to required examination timeframes are tracked in the ViSION system through established management processes.

2009 Performance Results
This annual performance goal and its associated performance indicator and target are unchanged from 2009. The FDIC successfully met this performance target in 2009.

Annual Performance Goal 2.1-4
More closely align regulatory capital with risk and ensure that capital is maintained at prudential levels.

Indicator and Targets

1. Final Basel II Standardized Approach
   • Complete by December 31, 2010, the rulemaking for implementing the Standardized Approach for an appropriate subset of U.S. banks.


2. Controls on banks’ use of internal or external ratings
   • Complete by December 31, 2010, the rulemaking for amending the floors for banks that calculate their risk-based capital requirement under the Advanced Approaches capital rule to ensure capital requirements meet safety-and-soundness objectives.


3. Revisions to the Market Risk Amendment of 1996
   • Complete by December 31, 2010, the rulemaking for implementing revisions to the Market Risk Amendment of 1996.


4. Revisions to regulatory capital charges for resecuritzations and asset-backed commercial paper liquidity facilities
   • Complete by December 31, 2010, the rulemaking for implementing revisions to regulatory capital charges for resecuritizations and asset-backed commercial paper liquidity facilities.

Means and Strategies

Operational Processes (initiatives and strategies):
The FDIC continues to focus on ensuring that banks’ capital is adequate to weather the stresses of a more difficult financial environment. These efforts include revising the capital framework, enhancing offsite monitoring capabilities, and bolstering examination support.

The objective of Basel II is to more closely align regulatory capital with risk in large or multinational banks. Under the Basel II Advanced Approaches final rule, these banks are required to use the most advanced approaches of Basel II for determining their risk-based capital requirements. Implementation of the Basel II Advanced Approaches requires these banks to develop complex internal models to estimate capital requirements. Supervisors will evaluate these processes during a “parallel run” and a minimum three-year transition period during which the agencies will apply floors that limit the amount by which each bank's risk-based capital could decline. Thus far, one U.S. institution has completed a year of the parallel run. A number of other U.S. institutions are expected to start the parallel run in 2010. The FDIC will assess the capital adequacy of this institution and other banks that commence the parallel run phase and determine whether the models appropriately reflect the loss experiences of the recent financial turmoil. The agencies also intend to issue a series of reports that will provide timely and relevant information on the implementation of the advanced approaches.

The agencies issued the Supervisory Review Process of Capital Adequacy (Pillar 2) under the Basel II Advanced Capital Framework in 2008. This guidance provides clarification to support the implementation of the Advanced Approaches final rule. The FDIC intends to monitor banks’ progress in implementing the supervisory guidance.

Domestically, the FDIC will seek to improve or strengthen regulatory capital requirements for all banks by directly monitoring bank capital adequacy based on experience with the financial turmoil during this period of stress. This includes tracking institutions whose reported financial data and market indicators are indicative of a heightened risk of capital or liquidity stresses. Other strategies include supporting field examiners involved in determining the appropriate capital levels for securitizations, particularly those securitizations that have been downgraded by the credit rating agencies, and revisions to the domestic capital frameworks for banks, including incorporating proposed revisions to the Basel II Accord, as proposed in the consultative papers published in 2009 and the Market Risk Amendment of 1996.

Internationally, through the FDIC’s participation on the Basel Committee on Banking Supervision, the FDIC will continue to work to promote strong international bank capital standards. To accomplish this goal, the FDIC will participate in the Basel Committee’s various groups and sub-groups, including the Policy Development Group, the Definition of Capital subgroup, the Trading Book Group, and other international groups and forums.

Although this annual performance goal will be pursued over a multi-year time frame, 2010 will be a year of intensive work. Key efforts include participating in Basel’s comprehensive quantitative impact study; calibrating the minimum capital requirement, the new international leverage ratio, and the new liquidity requirements; conducting fundamental reviews of the trading book and counterparty credit risk; implementing regulatory capital charges for central counterparties; implementing new approaches to provisioning and countercyclical capital buffers; and the development of a regulatory capital charge for systemically important financial institutions.

Human Resources (staffing and training):
The FDIC will continue in 2010 to expand the number of staff with expertise on bank capital. The breadth and depth of knowledge among FDIC staff on bank capital matters has expanded, due in part to the continued participation and active involvement of these employees in policy development groups. The FDIC will also continue to strengthen its ability to participate actively in the dialogue on capital adequacy through the use of internal and external training to augment skill sets of current staff.

Information Technology:
The FDIC will use existing technology to accomplish this annual performance goal.

Verification and Validation
Progress in meeting this annual performance goal will be tracked through periodic meetings and established reporting processes.

2009 Performance Results
This annual performance goal is unchanged. From 2009, however, its associated performance indicators and targets have been updated for 2010. In 2009, the FDIC successfully met all the performance targets for this goal.

Strategic Goal 3:
Consumers’ rights are protected and FDIC-supervised institutions invest in their communities.

Strategic Objective 3.1
FDIC-supervised institutions comply with consumer protection, Community Reinvestment Act (CRA) and fair lending laws and do not engage in unfair or deceptive practices.

Annual Performance Goal 3.1-1
Conduct onsite CRA and compliance examinations to assess compliance with applicable laws and regulations by FDIC-supervised depository institutions.

Indicator and Target

1. Percentage of examinations conducted in accordance with statutory requirements and FDIC policy
• 100 percent of required examinations are conducted on schedule.

Means and Strategies

Operational Processes (initiatives and strategies):
The FDIC conducts CRA and compliance examinations of FDIC-supervised depository institutions in order to determine compliance with consumer protection and fair lending laws and performance under CRA. The frequency of these examinations is specified by applicable law and FDIC policy. For CRA examinations, the FDIC’s examination frequency policy conforms to applicable provisions of the Gramm-Leach-Bliley Act (GLBA), which establishes the CRA examination cycle for most small banks. In 2010, the FDIC estimates that it will conduct approximately 1,900 compliance and/or CRA examinations.

The FDIC’s compliance examination approach places great emphasis on an institution’s compliance risk-management practices as opposed to exhaustive transactional testing. This approach involves an expanded review of an institution’s systems and compliance policies so that transaction testing can be better targeted and focused on areas of greatest risk exposure. This approach creates a more efficient and effective use of examination resources, especially in financial institutions with high compliance risk profiles.

Human Resources (staffing and training):
The FDIC’s authorized compliance examination workforce increased from 462 in 2009 to 469 in 2010, including examiner trainees assigned to Corporate University (CU). Staffing and training needs are reviewed on an ongoing basis to ensure that staff resources supporting the compliance examination program are adequate and that employees possess the skills and knowledge to effectively implement this program.

Information Technology:
The System of Uniform Reporting of Compliance and CRA Examinations (SOURCE) is used to schedule and track financial institution compliance examinations, support pre-examination planning and provide management information.

Verification and Validation
The FDIC will analyze examination-related data collected in SOURCE to determine whether targeted performance levels were achieved during the reporting period. Results will be reported through established management processes.

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

Annual Performance Goal 3.1-2
Take prompt and effective supervisory action to address unresolved problems identified during compliance examinations of FDIC-supervised institutions that receive a composite 3, 4 or 5 rating for compliance with consumer protection and fair lending laws. Monitor the compliance of FDIC-supervised insured depository institutions with formal and informal enforcement actions.

Indicator and Target

1. Percentage of follow-up examinations or onsite visits of 3-, 4- and 5-rated institutions conducted within required time frames
• 100 percent of required follow-up examinations or onsite visits are conducted within 12 months of completion of the prior examination to confirm that the institution is fulfilling the requirements of the corrective program and that the identified problems have been corrected.

Means and Strategies

Operational Processes (initiatives and strategies):
Institutions with compliance deficiencies are identified primarily through the examination process. While discussions with bank management are usually sufficient to correct these deficiencies, the FDIC has broad enforcement powers to correct practices, conditions or violations of law that threaten an institution’s compliance with consumer protection and fair lending laws or a consumer’s rights under those laws. The FDIC may address identified problems through the use of formal or informal enforcement actions against the institution or responsible individuals. Except in rare instances where it is determined by FDIC management to be unnecessary, a follow-up examination or onsite visit is conducted to review compliance with supervisory actions for each institution that receives a composite rating of 3, 4 or 5. Additional follow-up action is taken where the initial corrective program is determined to have been insufficient in addressing the identified problem.

The responsible review examiner and senior regional officials closely monitor each institution that is rated 3, 4 or 5 for compliance with consumer protection and fair lending laws. In addition to a follow-up examination or onsite visit, progress in complying with an enforcement action is assessed through quarterly progress reports from and direct communication with management of the financial institution.

Human Resources (staffing and training):
Monitoring and follow-up on enforcement actions is primarily the responsibility of compliance field examination staff and managers. Staffing and training needs are reviewed on an ongoing basis to ensure that resources supporting these functions are adequate and that employees possess the required skills and knowledge.

Information Technology:
The SOURCE system is used for examination scheduling and processing. The ViSION system is used to monitor all enforcement action activity.

Verification and Validation
The examination report identifies required corrective actions. If deemed necessary, a formal or informal enforcement action is transmitted to the financial institution with the report of examination. To ensure that supervisory actions are taken promptly, the FDIC monitors the time it takes to provide examination reports to FDIC-supervised institutions after the completion of an examination.

The FDIC will also continue to use the Regional Office Internal Control Review program to ensure that regions are effectively monitoring FDIC-supervised insured depository institutions’ compliance with formal and informal enforcement actions. This review incorporates various components of the supervisory process, including an assessment of the appropriateness, implementation and follow-up on formal and informal corrective actions. Any material exceptions noted during the reviews are brought to management’s attention for appropriate action.

2009 Performance Results
This annual performance goal and the associated performance indicator and target are essentially unchanged from 2009. The 2009 performance target was successfully met for all 4- and 5-rated institutions, but was not fully achieved for all 3-rated institutions.

Strategic Objective 3.2
Consumers have access to easily understood information about their rights and the disclosures due them under consumer protection and fair lending laws.

Annual Performance Goal 3.2-1
Effectively investigate and respond to written consumer complaints and inquiries about FDIC-supervised financial institutions.

Indicator and Target

1. Timely responses to written consumer complaints and inquiries.
   • Respond to 95 percent of written consumer complaints and inquiries within time frames established by policy, with all complaints and inquiries receiving at least an initial acknowledgement within two weeks.

Means and Strategies

Operational Processes (initiatives and strategies):
The FDIC investigates and responds to written complaints regarding consumer protection and fair lending issues, including those received electronically through the Customer Assistance Form on the FDIC’s website. The FDIC projects that it will receive approximately 19,500 written complaints and 3,150 written inquiries in 2010. Complaints regarding FDIC-supervised institutions are investigated by FDIC staff; those regarding institutions with other primary regulators are referred to those agencies. Target response times vary by the type of complaint. The Corporation also provides consumer protection information to financial institutions and the public. When performed effectively, these activities help consumers better understand their rights under consumer protection and federal fair lending laws.

Human Resources (staffing and training):
The FDIC’s Consumer Response Center responds to consumer complaints and inquiries about consumer protection matters. This centralized program helps maintain staff knowledge and expertise and provides greater flexibility in balancing staff resources and workload.

Information Technology:
The FDIC uses STARS to capture and report information, including response time, about complaints.

Verification and Validation
The FDIC will closely monitor the timeliness of its acknowledgment letters and responses using its STARS tracking system. Results will be reported through established management processes. Additionally, the FDIC surveys a sample of consumers who have filed written consumer protection and fair lending complaints in order to assess their satisfaction with the FDIC’s investigations and responses. Accepted survey research methods have been employed to ensure the validity of the customer satisfaction survey instrument and to verify the accuracy of the survey results.

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

Strategic Objective 3.3
The public has fair access to banking services and is treated equitably by FDIC-supervised institutions.

Annual Performance Goal 3.3-1
Establish, in consultation with the FDIC’s Advisory Committee on Economic Inclusion and other regulatory agencies, national objectives and methods for reducing the number of unbanked and underbanked individuals.

Indicator and Targets

1. Completion of initiatives to facilitate progress in improving the engagement of low- and moderate-income individuals with mainstream financial institutions
   • Facilitate completion of final recommendations on the initiatives identified in the Advisory Committee’s strategic plan.
   • Implement, or establish plans to implement, Advisory Committee recommendations approved by the FDIC for further action, including new research, demonstration and pilot projects, and new and revised supervisory and public policies.

Means and Strategies

Operational Processes (initiatives and strategies):
Over 25 percent of U.S. households, with 60 million adults residing in them, are currently underserved by the banking industry. This includes both “unbanked” households—those with no checking or savings account—and “underbanked” households—those with a checking or savings account but rely primarily on non-bank alternative financial services and providers, such as money orders, check cashing services, payday loans, rent-to-own agreements, pawn shops, or refund anticipation loans. Certain racial and ethnic groups are more likely to be underserved than the population as a whole. Almost 54 percent of black households, 45 percent of American Indian/Alaskan Native households, and 43 percent of Hispanic households are underserved.

Banks would appear to have a strong financial incentive for pursuing underserved consumers, given the sheer size of the alternative financial services industry. However, according to the “FDIC Survey of Banks’ Efforts to Serve the Unbanked and Underbanked” (February 2009), fewer than 18 percent of banks identify expansion of their services to these consumers as a priority in their business strategies. From a consumer perspective, there are two major benefits to access to mainstream financial institutions. First, FDIC-insured banks provide a safe place for consumer savings. Additionally, mainstream financial institutions are often less costly than alternative financial services.

The FDIC’s Advisory Committee on Economic Inclusion supports research, demonstrations, and pilot projects and promotes sound supervisory and public policies to improve the appropriate engagement of underserved households with mainstream financial institutions. Appropriate engagement means that households are using financial products and services that are affordable, easy to understand, and not subject to unfair or unforeseen fees. According to the Advisory Committee’s Strategic Plan, during 2010 the Committee will focus its work in certain program areas in order to facilitate progress on improving appropriate engagement with mainstream financial institutions. The Committee’s plan focuses on five work groups – transactional accounts, savings, affordable credit, financial literacy, and incentives. Each work group has established a set of initiatives to pursue in the coming year with estimated completion targets for each activity.

The Committee may recommend specific measures of improvement in this area to the FDIC. It recognizes, however, that certain of these measures are national objectives that would require the participation and cooperation of multiple stakeholders, including the FDIC, other federal agencies, federal, state, and local policy makers, the financial services industry, nonprofit and philanthropic groups, and consumer groups.

Human Resources (staffing and training):
he activities of the Advisory Committee are supported by staff in several FDIC divisions, including the Division of Insurance and Research, the Division of Supervision and Consumer Protection, and the Legal Division. Staff in these divisions provides appropriate support for the Advisory Committee, including research and demonstration activity.

Information Technology:
The FDIC uses Vodium Web Presence to broadcast the public meetings for transparency and to reduce travel costs.

Verification and Validation
Progress in meeting this annual performance goal will be measured by the progress made by the work groups in completing final recommendations to the FDIC on the initiatives identified in the Advisory Committee’s strategic plan, and will be monitored through established management reporting processes. Progress in increasing the engagement of low- and moderate-income individuals with mainstream financial institutions will be measured through the ongoing Household and Bank surveys conducted by the FDIC (the next one is expected to be administered in 2011).

2009 Program Results
This annual performance goal and its associated performance indicator and targets are new for 2010.