the FDIC is the insurer for all insured depository institutions in the U.S.,
it is the primary federal supervisor only for state non-member banks.3 Nonetheless,
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 review of examination reports, off-site 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 supervisor. The FDIC also takes into account
supervisory considerations in the exercise of its authority to review and approve
applications for deposit insurance from new institutions, regardless of the
The FDIC pursues two
strategic goals in fulfilling its supervisory responsibilities as the
primary federal supervisor for state non-member banks:
institutions are safe and sound, and
- Consumers’ rights are protected and FDIC-supervised institutions
invest in their communities.
The FDIC promotes
safe and sound financial institution practices through regular risk management
examinations, publication of guidance and policy, ongoing communication
with industry officials, and the review of applications submitted by
FDIC-supervised institutions to expand their activities or locations.
When appropriate, the FDIC has a range of informal and formal enforcement
options available to resolve safety and soundness problems identified
at these institutions. The FDIC also 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 also promotes
institution compliance with consumer protection, fair lending,
and community reinvestment laws through a variety of activities, including
compliance and Community Reinvestment Act (CRA) examinations, the
dissemination of information to consumers about their rights and required
and the investigation and resolution of consumer complaints regarding
FDIC-supervised institutions. The FDIC also has a range of informal
and formal enforcement options available to resolve compliance problems
at these institutions.
of 9/30/08, the FDIC had primary supervisory responsibility for
5,134 FDIC-insured state-chartered commercial banks that are
not members of the Federal Reserve System and state-chartered savings
institutions are safe and sound.
FDIC exercises its statutory authority, in cooperation with primary
financial regulators and state agencies, to ensure that all FDIC-insured
institutions appropriately manage risk.
Means & Strategies:
As noted above,
the FDIC is the primary federal supervisor for all state non-member
banks. For those institutions and their technology service providers,
the FDIC performs risk management (safety and soundness), trust,
Bank Secrecy Act (BSA)/Anti-Money Laundering (AML), and information
technology examinations in cooperation with their state banking
regulators (the majority of state banking agencies participate
in an examination program under which certain examinations are
performed on an alternating basis by the state agency and the
FDIC). Risk management examinations are conducted in accordance
with statutorily-established time frames and assess an institution’s
overall financial condition, management practices and policies,
compliance with applicable laws and regulations, and the adequacy
of management and internal control systems to identify, measure
and control risks. Examination procedures may also disclose the
presence of fraud or insider abuse. In addition, the FDIC reviews
the risk management capabilities of those FDIC-supervised institutions
that apply for permission to engage in new or expanded business
and corrective action are important components of the FDIC’s
strategy for ensuring the safety and soundness of the institutions
it supervises. Risks identified during an examination are discussed
with the institution’s management and board of directors.
If an examination reveals serious weaknesses in the operations
of the institution or indicates that the institution is operating
in a weakened financial condition, the FDIC may issue formal
or informal enforcement actions that remain in effect until corrective
actions are taken and the identified weaknesses are addressed.
In the case of severe problems, the institution may be instructed
to seek additional capital or merge with another institution.
statutory authority also gives it a degree of supervisory responsibility,
in its role as insurer, for insured depository institutions for
which it is not the primary federal supervisor. The Corporation
has staff in each of its regional offices that regularly review
examination reports from primary federal regulators and other
available information on those institutions. The FDIC also performs
off-site monitoring of those institutions on an ongoing basis,
particularly for institutions with more than $10 billion in assets.
In addition, at the invitation of the primary federal supervisor,
FDIC examiners may participate in examinations of such institutions.
When deemed necessary, the FDIC also has the authority to undertake
special (backup) examination activities for institutions for
which it is not the primary federal supervisor.
safety and soundness of FDIC-insured institutions over the next
six years will require an effective supervisory response to current
economic and market turmoil, and alertness to potential new issues
that may lie ahead. The FDIC is currently devoting a relatively
greater share of risk-management examination resources to geographic
areas, loan types and specific banks perceived to be of higher
risk. The supervisory response includes staffing initiatives
described below under “External Factors.” The FDIC
also has staff dedicated to the identification of emerging issues.
In this regard, strategies include enhancing tools to glean supervisory
information from the thousands of examinations conducted annually,
as well as from a variety of external data sources.
important part of the risk to the DIF comes from exposures to
large and complex banks, the Corporation continues to enhance
its supervisory monitoring program for these institutions. The
FDIC will continue to add staff resources that have the advanced
knowledge and skills necessary to analyze the operations of these
banks and associated risks. The Corporation will also pursue
strategies to develop and retain existing personnel with those
a number of factors outside of the control of the FDIC that could
affect the successful achievement of this strategic objective.
In accordance with statutorily-established time frames, most
risk management examinations of well-capitalized and well-managed
state non-member institutions are point-in-time examinations
that occur at 18-month intervals. Between examinations, institutions
may enter new lines of business, extend their lending programs
into riskier areas, or implement new technologies without the
knowledge of the FDIC or state regulatory agencies. Major changes
in economic conditions also can impact institutions between examinations.
The FDIC will continue to improve offsite monitoring tools to
monitor institutions on a continuing basis between examinations.
of an increasing number of troubled institutions require more
time and resources. It is difficult to add experienced examiner
resources to the workforce quickly because of the multi-year
time frame required to train a new examiner. During the 18 months
ending June 30, 2008, the FDIC hired 235 new examiner trainees
to address a shortfall in examiner resources. The FDIC also is
hiring mid-career professionals and, on a temporary basis, retired
examiners and loan review specialists, to help address the workload
associated with the increase in the number of troubled insured
Under the alternating
examination program, certain examinations are conducted in alternating
periods by the state supervisory authority. Resource constraints
outside of the FDIC’s control sometimes affect the timely
completion of examinations by these state authorities. In such
cases, the FDIC will conduct the examination itself within a
reasonable time frame after the originally scheduled examination
date if the state agency is unable to do so.
are protected and FDIC-supervised institutions invest in their
||FDIC-supervised institutions comply with consumer protection, CRA and fair lending laws and do not engage in unfair and deceptive practices.
have access to accurate and easily understood information
about their rights and the disclosures due them under consumer
protection and fair lending laws.
public has fair access to banking services and is treated
equitably by FDIC-supervised institutions.
institutions comply with consumer protection, CRA and fair
lending laws and do not engage in unfair and deceptive practices.
Means & Strategies:
The FDIC pursues
this strategic objective primarily through compliance and CRA examinations
of all FDIC-supervised institutions. CRA examinations are subject
to statutory timelines while compliance examinations are conducted
in accordance with time frames established by FDIC policy. These
examinations evaluate the compliance of institutions with consumer
protection, privacy, CRA, and fair lending laws and regulations.
They also seek to identify unfair or deceptive practices that violate
consumer protection laws. Over the past three years, the FDIC has
substantially increased the number of compliance examiners in its
workforce and has delivered advanced compliance training to most
commissioned compliance examiners in an effort to enhance the quality
and effectiveness of its compliance examination program.
As with risk
management examinations, if an examination reveals serious violations,
the FDIC may take either formal or informal enforcement actions
to correct the identified violations. In extreme cases, non-compliance
with consumer laws may seriously damage the institution’s
reputation and could result in civil monetary liability. In addition,
when the FDIC finds a "pattern or practice" of violations
of fair lending laws at an institution, the matter is referred
to the Department of Justice. An institution’s failure
to comply with consumer protection, CRA, and fair lending laws
and regulations might also impact the application of an FDIC-supervised
institution seeking to engage in new or expanded business activities.
that are Home Mortgage Disclosure Act (HMDA) data reporters,
the FDIC reviews the pricing information submitted by the institution
to determine whether any pricing disparities exist for minorities
or females in one or more product areas. In instances where such
a pricing disparity is identified, the FDIC will conduct a full
fair lending review of the institution to determine if the disparity
represented unlawful discrimination or was attributable to non-discriminatory
The FDIC also
has staff that is dedicated to the identification and analysis
of emerging consumer protection issues related to marketing activities
and new industry products, services, and practices. The FDIC
participates actively in interagency policy development efforts
to identify and address unfair and deceptive acts and practices
through the issuance of policy guidance to examiners and the
FDIC sponsors or participates in numerous outreach and technical
assistance activities that are designed to facilitate better
understanding of and compliance with CRA, consumer protection,
and fair lending laws and regulations by FDIC-supervised institutions.
economic and market turmoil has increased the demands on the
FDIC workforce in the areas of risk-management examinations and
receivership-related activity. In some cases, compliance or CRA
examiners with relevant expertise may be called on to assist
with this additional workload. Moreover, the wave of foreclosures
and the decline in housing prices that is underway is generally
attributed in part to a multi-year period of unsound or irresponsible
lending practices and deficiencies in certain areas of regulation.
Implementing new mortgage lending regulations, and possibly other
new regulations, will be an additional responsibility for the
compliance examination program. The FDIC manages these workload
challenges through its hiring strategies and by prioritizing
examination resources on areas of highest potential risk for
violations of law or potential harm to consumers.
Consumers have access to accurate and easily understood information
their rights and the disclosures due them under consumer protection
and fair lending laws.
Means & Strategies:
FDIC provides information about consumer protection and fair lending
laws and regulations to help consumers understand their rights.
This information is disseminated through brochures and other
the FDIC’s website (www.fdic.gov).
In addition, the FDIC frequently conducts or participates in focus
conferences on consumer protection and fair lending issues in an
effort to help both consumers and insured institutions better understand
consumer protection, CRA, and fair lending laws and regulations.
FDIC maintains a toll-free call center for consumer complaints
and inquiries about FDIC-supervised institutions and has established
target time frames for investigating and responding to these
complaints. It is also a leader in promoting greater financial
literacy, primarily through its award winning Money Smart curriculum.
The Corporation will continue to expand its outreach with this
product over the next several years by adapting the basic curriculum
to additional target audiences.
economic and market turbulence has increased the number of troubled
and failing banks. While the rate of mortgage foreclosures, other
forms of credit distress, and problem and failing banks remain
elevated, a substantial increase in the number of consumer complaints
and inquiries could temporarily challenge the FDIC’s capacity
to respond within targeted time frames. In such cases, the FDIC
would augment its staff resources for this function as quickly
public has fair access to banking services and is treated
equitably by FDIC-supervised institutions.
Means & Strategies:
FDIC has played a national leadership role in recent years in
promoting broader economic inclusion within the nation’s
banking system. In pursuit of this objective, the FDIC sponsors
or participates in targeted outreach and technical assistance
activities with both the institutions it supervises and various
community-based organizations. These efforts are designed to
encourage financial institutions to develop programs to serve
those segments of the population that are currently unbanked
or underserved by mainstream financial institutions. The FDIC
is completing its first biennial survey of insured depository
institutions and underserved consumers to identify obstacles
to banking services and ways to overcome them. The FDIC also
established an Alliance for Economic Inclusion in 11 cities across
the country, comprised of more than 800 banks, community organizations,
public officials and others to identify products and services
and marketing strategies to reach into the underserved market.
In addition, the FDIC is sponsoring a two-year pilot program,
to be completed in 2010, to assess the feasibility of various
small-dollar loan programs to provide affordable loans to those
who have not traditionally participated in the banking system.
Other FDIC outreach and technical assistance initiatives are
designed to help develop and implement effective foreclosure
prevention strategies, such as a national partnership with NeighborWorks
America. These initiatives will facilitate neighborhood revitalization
through affordable housing, small business development, and related
period in which many financial institutions are experiencing
losses and reassessing their exposure to credit risk, the overall
supply of credit could diminish. If institutions were to make
credit decisions in these more challenging times based on prohibited
factors, there could be a risk of loss of access to credit
or other banking services by underbanked segments of the population.