2022-2026 Strategic Plan
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 protects deposits at banks and savings associations of all sizes. When IDIs fail, the FDIC ensures that customers have timely access to their insured deposits and other services. The basic limit of federal deposit insurance coverage is currently $250,000 per depositor. To keep pace with the evolving banking industry and maintain its readiness to protect insured depositors, the FDIC prepares and maintains contingency plans to promptly address a variety of types of IDI failures and conducts large scale simulations to test its plans.
The DIF must remain viable so that adequate funds are available to protect insured deposits in the event of an institution’s failure. The FDIC maintains a sufficient DIF balance by collecting risk-based insurance premiums from IDIs and through prudent fund investment strategies. The FDIC continually evaluates the adequacy of the DIF. It identifies risks to the insurance fund by analyzing regional, national, and global economic, financial, and financial institution developments, and by collecting and evaluating information through the supervisory process.
Strategic Goal 1
FDIC-insured deposits are protected from loss without recourse to taxpayer funding.
1.1 The FDIC provides customers of failed insured depository institutions (IDIs) timely access to insured funds and financial services.
Means and Strategies: When an institution fails, the FDIC facilitates the transfer of the institution’s insured deposits to an assuming institution or pays insured depositors directly. The FDIC’s goal is to provide customers with access to their insured deposits within one to two business days.
The FDIC continually monitors changes in financial institution operations and innovation within products and delivery channels to ensure the FDIC’s ability to handle potential financial institution failures. The FDIC develops, tests, and maintains contingency plans to ensure it is prepared to handle a wide range of potential failure scenarios, including the failure of a large financial institution; simultaneous, multiple failures; the failure of an institution with large international holdings; and the failure of an insured institution that operates primarily through digital channels. The FDIC also looks for ways to clarify deposit insurance regulations to meet industry changes and to expedite the insurance determination process.
External Factors The goal of providing customers of failed institutions with access to their insured deposits within one to two business days is well established, but might be difficult to achieve in the case of an extremely large or complex institution or a sudden and unexpected failure. Regardless of timing to complete all deposit insurance determinations, no depositor would ultimately lose any portion of an insured deposit.
1.2 The FDIC promptly identifies and responds to potential risks to the Deposit Insurance Fund (DIF).
Means and Strategies: 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, including the evolving technological landscape, 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 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 employs sophisticated predictive tools to analyze and assess 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 IDI Program and Institution Monitoring Program for LCFIs, including IDIs with assets above $100 billion for which the FDIC is not the primary federal regulator;
- Thorough and timely review of deposit insurance applications and other applications from IDIs; and
- A comprehensive framework for continually assessing risks to the banking industry.
External Factors: In spite of the comprehensive efforts undertaken by the FDIC to identify and respond to potential risks to the DIF, natural disasters, public policy changes, and sudden economic or financial market crises could cause broad losses within the financial services industry and the DIF. In addition, a fraud perpetrated on a financial institution could result in a sudden and unforeseen loss to the DIF.
1.3 The FDIC maintains a strong and adequately financed DIF.
Means and Strategies: The FDIC maintains the viability of the DIF by investing the fund, monitoring and responding to changes in the reserve ratio, collecting risk-based premiums, and evaluating the deposit insurance system in light of an evolving financial services industry. It regularly analyzes the growth or shrinkage of estimated insured deposits, the current assessment base, loss expectations, interest income earned on the fund, and operating expenses. This information is used to develop a schedule of risk-based assessment rates.
The banking industry remained resilient entering 2021, despite the extraordinary challenges of the pandemic. As of March 31, 2021, capital remained above regulatory minimums and the industry ratios for tier 1 risk-based capital and total risk-based capital exceeded the ratios reported at year-end 2007 by several percentage points.
The DIF balance has risen every quarter since the end of 2009, and stood at a record $119.4 billion on March 31, 2021, up from $110.3 billion at the end of 2019. The reserve ratio stood at 1.25 percent at March 31, 2021, down from 1.41 percent at the end of 2019.
Extraordinary growth in insured deposits during the first and second quarters of 2020 caused the reserve ratio to decline below the statutory minimum. As of June 30, 2020, the reserve ratio stood at 1.30 percent. On September 15, 2020, the Board adopted a Restoration Plan, as required by the FDI Act, to restore the DIF to at least 1.35 percent within eight years. Under the Restoration Plan, the FDIC maintained the schedule of assessment rates in place at the time for all IDIs and is monitoring deposit balance trends, potential losses, and other factors that affect the reserve ratio. Staff must update the Board at least semiannually. The most recent update was provided on June 15, 2021.
The FDIC Board of Directors is statutorily required to establish a Designated Reserve Ratio (DRR) for the DIF that is not less than 1.35 percent. But it may also establish a higher DRR and has set the DRR at 2.0 percent for every year since 2011. The FDIC views the 2.0 percent DRR as a long-term goal and the minimum level needed to withstand future crises of the magnitude of past crises.
External Factores: Projections for the DIF are subject to considerable uncertainty. The FDIC will monitor deposit balance trends, potential losses, and other factors that affect the reserve ratio. The economic outlook has strengthened, and the banking system appears better positioned to withstand losses compared to prior periods of stress. Several factors, such as slower than expected economic growth, market volatility, or additional fiscal and monetary stimulus could result in increased insured deposit growth or losses to the fund.
1.4 The FDIC resolves failed IDIs in the manner least costly to the DIF.
Means and Strategies: When an institution fails, the FDIC facilitates an orderly, least-cost resolution. Using an estimated value of the failing institution’s assets and liabilities, the FDIC markets the institution to potential bidders. After analyzing the bids received, the FDIC conducts a least-cost test determination and selects the least-cost strategy to pursue.
External Factors: In accordance with law, if a failure threatens serious adverse systemic effects on economic conditions or financial stability, resolution strategies other than the least-cost resolution may be employed.
1.5 The FDIC provides the public and IDIs access to clear and accurate information about federal deposit insurance coverage.
Means and Strategies: To inform consumers and FDIC-insured institutions about federal deposit insurance coverage, the FDIC provides financial institutions with a variety of educational tools and materials designed to help customers understand their deposit insurance coverage.
In addition, the FDIC uses several other approaches to disseminate information on deposit insurance coverage, including the following:
- Operation of a National Center for Consumer and Depositor Assistance staffed by specialists who respond to questions from depositors and bankers 3,
- Training and other educational opportunities to help bank employees better understand the FDIC’s deposit insurance rules,
- An array of web-based educational resources for consumers and bankers, and
- A wide range of publications and videos explaining how FDIC deposit insurance works.
External Factors: A significant rise in the volume of bank failures, or publicity that raises public concerns about the possibility of significant bank failures, could result in bank runs by misinformed depositors or public avoidance of IDIs. Timely, accurate, and understandable information is essential to mitigating these risks. An increased volume of bank failures and public concern about the possibility of additional failures could also result in substantial increases in the demand for information about FDIC insurance coverage that could temporarily exceed the FDIC’s capacity to provide such information. In such cases, the FDIC would augment staff resources for this function as quickly as possible.
3877-ASK-FDIC (877-275-3342); 800-925-4618 (TDD-for hearing impaired).