I. Management’s Discussion and Analysis
Effective Management of Strategic Resources
The FDIC recognizes that it must effectively manage its human, financial, and technological resources to successfully carry out its mission and meet the performance goals and targets set forth in its annual performance plan. The FDIC must align these strategic resources with its mission and goals and deploy them where they are most needed to enhance its operational effectiveness and minimize potential financial risks to the DIF. Major accomplishments in improving the FDIC’s operational efficiency and effectiveness during 2011 follow.
Human Capital Management
The FDIC’s human capital management programs are designed to recruit, develop, reward, and retain a highly skilled, cross-trained, diverse, and results-oriented workforce. In 2011, the FDIC stepped up workforce planning and development initiatives that emphasized hiring the additional skill sets needed to address requirements of Dodd-Frank, especially as it related to the oversight of systemically important financial institutions. Workforce planning also addressed the need to start winding down bank closure activities in the next few years, based on the decrease in the number of financial institution failures and institutions in at-risk categories. The FDIC also deployed a number of strategies to more fully engage all employees in advancing its mission.
In 2011, the FDIC expanded its education and training curriculum for employees in the business lines and support functions, and for leadership development. Additionally, classroom learning and development opportunities were supplemented and supported with the expansion of e-learning, simulations, electronic performance support systems, job aids, and tool kits to quickly facilitate work processes and overall efficiencies. The FDIC also engaged in a number of knowledge management initiatives to capture lessons learned and best practices during the financial crisis, in support of future corporate readiness.
The FDIC continues to expand leadership development opportunities to all employees, including newly hired employees. This curriculum takes a holistic approach, aligning leadership development with critical corporate goals and objectives, and promotes the desired corporate culture. By developing employees across the span of their careers, the FDIC builds a culture of leadership and further promotes a leadership succession strategy. The final course of the new leadership curriculum, which consists of five core courses, was launched in November 2011. Four new electives were also delivered in 2011.
Additionally, the FDIC formalized its Master’s of Business Administration (MBA) program for Corporate Managers and Executive Managers, in conjunction with the University of Massachusetts. Two candidates were selected for the 2011–2014 class.
Strategic Workforce Planning and Readiness
The FDIC used various employment strategies in 2011 to meet the need for additional human resources resulting from the number of failed financial institutions and the volume of additional examinations. Among these strategies, the FDIC reemployed over 200 retired FDIC examiners, attorneys, resolutions and receiverships specialists, and support personnel, and hired employees of failed institutions in temporary and term positions. The FDIC also recruited mid-career examiners who had developed their skills in other organizations, recruited loan review specialists and compliance analysts from the private sector, and redeployed current FDIC employees with the requisite skills from other parts of the agency.
In response to the requirements of Dodd-Frank, the FDIC worked with the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), and the Consumer Financial Protection Bureau (CFPB) to close the OTS and transfer the OTS employees to the other agencies. In addition, certain employees from the Federal banking agencies were transferred to the CFPB. When the OTS closed on July 21, 2011, the FDIC received ninety five of its employees. Also, as part of the transfer under Dodd-Frank, the FDIC became the primary regulator for 61 state-chartered thrifts.
As the numbers of failed financial institutions increased during 2009 and 2010, the FDIC fully staffed two temporary satellite offices on both the West Coast and the East Coast to bring resources to bear in especially hard-hit areas. The West Coast Temporary Satellite Office opened in Irvine, California, in early spring of 2009 and as of yearend 2011 had 308 employees. The East Coast Temporary Satellite Office opened in Jacksonville, Florida, in the fall of 2009 and as of the end of 2011, had 383 employees. In January 2010, the FDIC Board authorized opening a third satellite office for the Midwest in Schaumburg, Illinois. During 2010, the office was established and, as of the end of 2011, had 255 employees. The FDIC also increased resolutions and receiverships staff in the Dallas regional office. Almost all of the employees in these new offices were hired on a nonpermanent basis to handle the temporary increase in bank-closing and asset management activities expected over the two to four years, beginning in 2009. The use of term appointments will allow the FDIC staff to return to an adjusted normal size once the crisis is over without the disruptions that reductions in permanent staff would cause.
During 2011, plans were formulated, based on projections of a drop in the numbers of bank failures in 2012 and beyond, to begin the orderly closing of the temporary satellite offices, beginning with the Irvine office in January 2012. The Midwest Office is scheduled to close in September 2012, and the East Coast Office will close no earlier than the fourth quarter of 2013. The FDIC will provide transition services to the departing temporary and term employees. In addition, a number of these employees may be hired as permanent staff to complete the FDIC’s adjusted core staffing requirements.
The FDIC continued to build workforce flexibility and readiness by increasing its entry-level hiring into the Corporate Employee Program (CEP). The CEP is a multiyear development program designed to cross-train new employees in FDIC major business lines. In 2011, 130 new business line employees (1,012 hired since program inception in 2005) entered this multi-discipline program. The CEP continued to provide a foundation across the full spectrum of the FDIC’s business lines, allowing for greater flexibility to respond to changes in the financial services industry and in meeting the FDIC’s human capital needs. As in years past, the program continued to provide FDIC flexibility as program participants were called upon to assist with both bank examination and bank closing activities based on the skills they obtained through their program requirements and experiences. As anticipated, participants are also successfully earning their commissioned bank examiner and resolutions and receiverships credentials, having completed their three to four years of specialized training in field offices across the country. The FDIC had approximately 240 commissioned participants by the end of 2011. These individuals are well-prepared to lead examination and resolutions and receiverships activities on behalf of the FDIC.
Corporate Risk Management
In January of 2011, the FDIC Board authorized the creation of an Office of Corporate Risk Management and the recruitment of a Chief Risk Officer (CRO). That position was filled in August of 2011, and the new CRO took a proposal to the Board in December related to the organizational structure of the new Office. The Board subsequently approved this proposal for a small (15 staff) organization that would work with other Divisions and Offices to assess, manage and mitigate risks to the FDIC in the following major areas:
- Open bank risks associated with the FDIC’s role as principal regulator of certain financial institutions and the provider of deposit insurance to all insured depository institutions.
- Closed bank risks associated with the FDIC management of risks associated with assets in receivership, including loss share arrangements and limited liability corporations.
- Economic and financial risks which are created for the FDIC and its insured institutions by changes in the macroeconomic and financial environment.
- Policy and regulatory risks arising in the legislative arena and those created by FDIC’s own policy initiatives.
- Internal structure and process risks associated with carrying out ongoing FDIC operations, including human resource management, internal controls, and audit work carried out by both OIG and GAO.
- Reputational risk associated with all of the activities of the FDIC as they are perceived by a range of external factors.
The Board also approved the creation of an Enterprise Risk Committee, chaired by the CRO, to replace the existing National Risk Committee and to broaden the mandate of this high level management committee to include both external and internal risks facing the FDIC. This Committee will help enhance senior management’s focus on risk, and support the preparation of quarterly reports to the Board on the risk profile of the institution.
Acting Chairman Martin J. Gruenberg, shown here accepting the awards for the first-place ranking and most improved agency on the list of Best Places to Work in the Federal Government®, with (from left) Arleas Upton Kea, Ira Kitmacher, Pamela Mergen, and Nancy Hughes.
The FDIC continually evaluates its human capital programs and strategies to ensure that it remains an employer of choice and that all of its employees are fully engaged and aligned with the mission. The FDIC uses the Federal Employee Viewpoint Survey mandated by Congress to solicit information from employees. A corporate Culture Change Initiative was instituted in 2008 to address issues resulting from the 2007 survey.
The Culture Change Initiative has continued to gain momentum, and significant progress is being made toward completing the goals identified in the Culture Change Strategic Plan. As evidenced of the progress made under the Culture Change Initiative, the FDIC was recognized in the 2011 “Best Places to Work” rankings as being the most improved federal agency and the overall number one best place to work in the Federal government, based on the results of the 2010 Federal Employee Viewpoint Survey.
Employee Learning and Development
The FDIC has a strong commitment to the learning and development of all employees that is embedded in its core values. Through its learning and development programs, the FDIC creates opportunity, enriches career development, and grows employees and future leaders. New employees can more quickly and thoroughly assume their job functions and assist with examination and resolution activities through the use of innovative learning solutions. To prepare new and existing employees for the challenges ahead, the FDIC has streamlined existing courses, promoted blended learning, and created online, just-in-time toolkits and job aids.
In support of business requirements, the FDIC provided its examiners with several new learning and development opportunities. “High Stakes Communication: Communicating with Resilience in Tough Situations,” was created to provide examiners with strategies and examples to enhance their skills in communicating with bank management during board and exit meetings. The video-based course was delivered to all examiners in 2011. The FDIC also increased the length of two of its core examiner schools, Loan Analysis School and Compliance Management School, to provide more content, instructor feedback, and practice time for application. In addition to developing new training, the FDIC anticipates a 20 percent increase in organic growth for examiner training in 2012.
In support of knowledge and succession management, the FDIC is focused on capturing, maintaining, and documenting best practices and lessons learned from bank closing activity over the past two years. Capturing this information now is strategically important to ensure corporate readiness, while at the same time maintaining effectiveness as experienced employees retire and the temporary positions created to support the closing activity expire. The FDIC maintains its commitment to establish and maintain an effective solution to capture, maintain, and document best practices to help identify and develop future training and learning opportunities.
In 2011, the FDIC provided its employees with approximately 170 instructor-led courses and 1,100 web-based courses to support various mission requirements. Approximately 12,000 instructor-led courses and 17,200 web-based courses were completed.
In 2011, the FDIC received two prestigious awards for its learning and development programs. The Leadership Development Award from the Training Officers Consortium recognized the FDIC’s comprehensive leadership development curriculum, which includes learning opportunities for employees at all levels. The Learning Team received the Gold Award from Human Capital Media, recognizing the FDIC’s excellence in the design and delivery of employee development programs, including both technical training and leadership development.
Information Technology Management
In today’s rapidly changing business environment, technology is frequently the foundation for achieving many FDIC business goals, especially those addressing efficiency and effectiveness in an industry where timely and accurate communication and data are paramount for supervising institutions, resolving institution failures, and monitoring associated risks in the marketplace.
Strengthening the FDIC’s Privacy Program
The FDIC has a well-established Privacy Program that works to maintain privacy awareness and promote transparency and public trust. Privacy and the protection of Sensitive Information (SI), such as personally identifiable information (PII), are integral to accomplishing the mission of the FDIC in both the banking industry and among U.S. consumers. The Privacy Program is a critical part of the FDIC’s business operations.
In response to the surge in bank closings associated with the crisis, the FDIC completed the third of three in-depth assessments of the bank closing process to identify and address risks to the privacy and security of bank-customer SI. The recommended action items stemming from the third assessment will be incorporated into FDIC’s strategic objectives for 2012. In addition, during 2011, the FDIC improved the agency’s monitoring of the enterprise network to identify at-risk privacy data and prevent the loss of that information, particularly Social Security numbers. The FDIC proactively conducted unannounced privacy assessments of headquarter offices to assess any potentially unsecured SI. These walk-throughs were instrumental in improving employee and management awareness regarding proper privacy safeguards in the workplace. Further, the FDIC initiated an annual review of the agency’s digital library to identify, monitor, reduce, and secure documents containing sensitive data.
As with information security, the banking crisis has resulted in an increased reliance on third-party vendors that process significant amounts of SI in support of bank closings. To ensure this PII is protected in accord with the FDIC’s privacy requirements, the agency performed vendor assessments of their controls over this sensitive information. In addition, the FDIC held its annual Privacy Clean-up Day for employees and contractors to reduce the volume of sensitive information held by the agency and therefore reduce the risk to internal and external individuals, and the FDIC. The FDIC also conducted an in-depth review of the FDIC’s thirty-two Privacy Act System of Record Notices (SORNs) and provided the results to the FDIC Board of Directors.
IT Support for Regulatory Reform
The FDIC established a program designed to identify IT-related tasks needed to support the implementation of the requirements of Dodd-Frank. As of October 20, 2011, twenty IT-related initiatives supporting Dodd-Frank requirements had been approved by the related IT Steering Committee. Of the approved projects, thirteen have been completed and two are in progress. Additional projects have been identified for 2012 and are being considered under the normal budgeting process.
Establishing a Business Intelligence Service Center
The recent financial crisis has magnified the FDIC’s need to collect, validate, aggregate, and analyze data from internal and external sources, and to securely share this information via reports and dashboards with authorized cross-organizational decision makers. As a result, the FDIC established a Business Intelligence Service Center (BISC) to provide expert technical advice and assistance to line of business users in the acquisition, management, and analysis of data from internal and external sources; deliver Business Intelligence (BI) technical solutions, contribute to the enterprise data architecture, and facilitate corporate information sharing and management strategy. Since the BISC group was established in early 2011, the demand for BI project support has increased. Projects being conducted by the FDIC include Strategic Workforce Planning, Large Complex Financial Institutions Liquidity Monitoring and Reporting, Qualified Financial Contracts Analysis, Limited Liability Corporation Data Management, and Risk Share Assessment Management (the Chairman’s Dashboard). The BISC team also provides primary technical support for multiple corporate BI tools that support the Executive Resource Information Portal and the Office of Complex Financial Institution’s Liquidity Monitoring and Reporting.