FDIC Business Challenges
IT is a fast-paced industry and being aware of the trends, opportunities and challenges that would impact how FDIC conducts business is critical. This information was used to inform the strategy to help prioritize the activities that will address the issues identified. Additionally, the CIOO reviewed and discussed business needs and possible potential solutions to inform the strategy.
The accelerating pace of technological change impacts the way the financial industry and federal agencies achieve their missions. As a result, the FDIC has an opportunity to leverage emerging technologies and other advances in IT to offer new foundational ways of delivering IT services.
Cybersecurity breaches are a significant threat to consumers, banks, other businesses, and financial market utilities, as well as government agencies, including the FDIC. The FDIC maintains sensitive financial, supervisory, and personal information in the conduct of its mission. The FDIC must continue to enhance its responsiveness to the increasing number of threats to the security, privacy, and integrity of its large holdings of sensitive data. There are opportunities to strengthen and merge physical security with enhanced data security where traditional authentication is insufficient to keep up with dynamic threats. This requires strong partnerships between security and business operations to develop new and innovative approaches to securing data.
The FDIC exercises broad supervisory responsibility for all insured depository institutions (IDIs) in the United States, although it is the primary federal supervisor only for state-chartered banks and savings institutions that are not members of the Federal Reserve System. 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, use of off-site monitoring tools to analyze large sets of data, and participation in examinations conducted by other federal regulators (either through agreements with these regulators or, in limited circumstances, under the exercise of the FDIC’s authority to conduct special (backup) examination activities), the FDIC regularly monitors 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 and other applications from IDIs, regardless of the chartering authority.
The FDIC carries out its supervision programs through a geographically dispersed workforce and in close collaboration with other agencies and institutions. The FDIC's ability to carry out its supervision programs depends upon the availability of various IT platforms. Better collaboration through systems, processes, and tools; systems enhancements; better connectivity; and increased amounts of secure data storage capacity are needed to ensure the continued availability and integrity of these IT platforms.
The FDIC maintains large collections of confidential supervisory information and data. The FDIC's ability to carry out its supervision programs depends on the security and integrity of this information and data. Enhanced system and database security and protection of confidential supervisory information are needed to ensure the security and integrity of this information and data.
Finally, the FDIC must be able to ensure continuity of operations to carry out its supervision programs. Continuity of the supervision program operations is key to supporting the FDIC's mission of maintaining stability and public confidence in the nation's financial system, and its strategic goals of ensuring that FDIC-insured institutions are safe and sound and consumers' rights are protected. Infrastructure and business continuity processes need to be strengthened to ensure the continuity of the FDIC's supervision programs.
Deposit insurance is a fundamental component of the FDIC’s role in maintaining stability and public confidence in the U.S. financial system. By promoting industry and consumer awareness of deposit insurance, the FDIC promotes confidence in banks and savings associations of all sizes. To keep pace with the evolving banking industry and sustain its readiness to protect insured depositors, the FDIC prepares and keeps current contingency plans that promptly address a variety of IDI failures and conducts large-scale simulations to test its plans.
When IDIs fail, the FDIC ensures that the financial institution’s customers have timely access to their insured deposits and other services. Continuity of operations is critical to achieving the FDIC's mission of maintaining public confidence in the financial system and its strategic goal of providing depositors with timely access to insured funds and financial services.
Infrastructure and business continuity processes need to be strengthened to enable the FDIC to continue to provide mission essential functions, systems, and operations without interruption.
The FDIC, in cooperation with the other primary federal regulators, proactively identifies and evaluates the risk and financial condition of individual IDIs. It also identifies broader economic and financial risk factors that affect all insured institutions. It accomplishes these objectives through a wide variety of activities, including the following:
- A risk-based deposit insurance assessment system whereby institutions that pose greater risk to the Deposit Insurance Fund (DIF) pay higher premiums.
- A strong examination and enforcement program.
- Collection and publication of detailed banking data and statistics.
- A vigorous research program.
- An off-site monitoring system that analyzes and assesses changes in banking profiles, activities, and risk factors.
- A comprehensive ongoing analysis of the risks in financial institutions with more than $10 billion in assets through the Large Insured Depository Institution Program.
- Thorough review of deposit insurance applications and other applications from IDIs.
- Enhanced data collection and analytic capability is needed to enable the FDIC to keep pace with an evolving financial industry and to proactively identity and evaluate risks.
The FDIC also ensures that the public and insured depository institutions have access to accurate and easily understood information about federal deposit insurance coverage. As mobile banking and information sharing become more prevalent, the FDIC needs enhanced mobile information delivery to ensure easy public accessibility.
Resolutions and Receiverships
When an IDI fails, the FDIC is ordinarily appointed receiver under the Federal Deposit Insurance Act. In that capacity, it assumes responsibility for efficiently recovering the maximum amount possible from the disposition of the receivership’s assets and the pursuit of the receivership’s claims. Funds that are collected from the sale of assets and the disposition of valid claims are distributed to the receivership’s creditors according to priorities set by law.
Under the Orderly Liquidation Authority (OLA) of the Dodd-Frank Act, the FDIC may also be called upon to resolve the failure of a large, systemically important financial company. OLA provides a backup authority to place a failed or failing financial company into an FDIC receivership process if no viable private-sector alternative is available to prevent the default of the company and if a resolution through the bankruptcy process would have a serious adverse effect on U.S. financial stability.
To ensure that the resolution of the failure of a large, complex financial institution could be carried out under bankruptcy in an orderly manner, the FDIC assesses the resolution plans submitted by bank holding companies, other covered companies, and IDIs. These plans must be able to be transmitted through the FDIC's secure communication channel with financial institutions and must be maintained in a secure environment.