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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

2014 Annual Performance Plan

Insurance Program

The FDIC maintains stability and public confidence in the U.S. financial system by providing deposit insurance.  Through its industry and consumer awareness programs, the FDIC seeks to increase public awareness and understanding of deposit insurance rules and coverage.  The FDIC and other federal regulatory agencies make sure that insured depository institutions accurately disclose uninsured products.  The FDIC also informs depositors and financial institution staff about how the insurance rules and limits apply to specific deposit accounts.

Before a prospective insured depository institution can open for business, it must apply to the FDIC for federal deposit insurance.  The FDIC then evaluates an applicant’s potential risk to the Deposit Insurance Fund (DIF) by assessing the adequacy of its capital, future earnings potential, and the general character of its management.  Before granting access to the federal deposit insurance system, the FDIC also considers the needs of the community that the applicant plans to serve and obtains input from other regulatory authorities.

Communication and coordination with the other bank regulatory agencies are top priorities for the FDIC.  As the insurer, the FDIC, by statute, has back-up examination authority for all insured depository institutions.  If significant emerging risks or other serious concerns are identified for an insured depository institution for which the FDIC is not the primary federal supervisor, the FDIC and the institution’s primary supervisor work together to address those risks or concerns.1

When an insured depository institution fails, the FDIC makes sure that the institution’s customers have prompt access to their insured deposits and other services.  To keep pace with the evolving banking industry and maintain its readiness to protect insured depositors, the FDIC prepares and maintains contingency plans to respond promptly to a variety of failure scenarios for insured depository institutions.

The financial crisis and ensuing recession resulted in a large number of depository institution failures and high losses to the DIF.  The number of problem banks peaked in 2010 and has been declining since 2011.  Similarly, the number of bank failures in 2012 and 2013 was much lower than during the height of the crisis, allowing the FDIC to rebuild the DIF.  At the end of 2013, the fund balance had risen to $47.2 billion from its negative $20.9 billion low point at the end of 2009.  The reserve ratio at the end of 2013 was 0.79 percent.

The Dodd-Frank Act (DFA), which was enacted in July 2010, revised the statutory authorities governing the FDIC’s management of the DIF.  As a result of the changes mandated by DFA, the FDIC developed a comprehensive, long-term management plan for the DIF that sets a target fund reserve ratio of 2 percent and a strategy for assessment rates and dividends.  The plan is designed to reduce the pro-cyclicality in the existing system and achieve moderate, steady assessment rates throughout economic and credit cycles while maintaining a positive fund balance, even during a banking crisis.  The FDIC finalized the comprehensive plan in rulemakings adopted in December 2010 and February 2011.  A new Restoration Plan was also adopted to make sure that the reserve ratio reaches 1.35 percent by September 30, 2020 as required by the DFA.

On October 9, 2012, the FDIC Board approved a final rule to amend the definitions used to identify concentrations in higher-risk assets in the assessment system for large and highly complex institutions.  This rule, which became effective on April 1, 2013, amends the definitions of leveraged loans (renamed higher-risk C&I (commercial and industrial) loans and securities) and subprime loans (renamed higher-risk consumer loans), which are areas of significant potential risk.  The final rule resulted from concerns raised by the industry about the cost and burden of reporting under the definitions in the February 2011 rule.  The new definitions better reflect the risk that institutions pose to the DIF.


1 An institution’s charter and its Federal Reserve System membership status determine which federal banking agency is the institution’s primary federal supervisor.

The table below depicts the strategic goal, strategic objectives, and annual performance goals for the Insurance Program.

Strategic Goal

Strategic Objectives

Annual Performance Goals

Insured depositors are protected from loss without recourse to taxpayer funding.

 

Customers of failed insured depository institutions have timely access to insured funds and financial services.

Respond promptly to all insured financial institution closings and related emerging issues. (1.1-1)

The FDIC promptly identifies and responds to potential risks to the DIF.

Disseminate data and analyses on issues and risks affecting the financial services industry to bankers, supervisors, the public, and other stakeholders on an ongoing basis. (1.2-1)

The DIF and the deposit insurance system remain strong and adequately financed.

 

Adjust assessment rates, as necessary, to achieve a DIF reserve ratio of at least 1.35 percent of estimated insured deposits by September 30, 2020. (1.3-1)

 

Expand and strengthen the FDIC’s participation and leadership role in supporting robust international deposit insurance systems. (1.3-2)

 

The FDIC resolves the failure of insured depository institutions in the manner least costly to the DIF.

Market failing institutions to all known qualified and interested potential bidders.
(1.4-1)

 

The public and FDIC-insured depository institutions have access to accurate and easily understood information about federal deposit insurance coverage.

Provide educational information to insured depository institutions and their customers to help them understand the rules for determining the amount of insurance coverage on deposit accounts. (1.5-1)

 



STRATEGIC GOAL 1:

Insured depositors are protected from loss without recourse to taxpayer funding.


STRATEGIC OBJECTIVE 1.1

Customers of failed insured depository institutions have timely access to insured funds and financial services.

Annual Performance Goal 1.1-1

Respond promptly to all insured financial institution closings and related emerging issues.

Indicators and Targets

  1. Number of business days after an institution failure that depositors have access to insured funds
    • Depositors have access to insured funds within one business day if the failure occurs on a Friday.
    • Depositors have access to insured funds within two business days if the failure occurs on any other day of the week.
  1. Insured depositor losses resulting from a financial institution failure
    • Depositors do not incur any losses on insured deposits.
    • No appropriated funds are required to pay insured depositors.

Means and Strategies

Operational Processes (initiatives and strategies):  When an insured institution is identified as a potential failure, the FDIC prepares a plan to handle the possible resolution of the institution.  The FDIC begins the resolution process by assessing the institution’s assets and liabilities.  The FDIC then develops an information package that is used as a marketing tool and is provided to all interested potential assuming institutions.  The FDIC solicits proposals from approved bidders to find a buyer for the deposit franchise.

If the federal or state supervisor chooses to close the institution, the FDIC is named receiver, takes control of the failed institution, and determines which deposits are insured.  Once the FDIC is appointed receiver, it initiates the resolution process for the failed institution.

If the failed institution is sold to another insured institution, the FDIC works with the assuming institution so that the insured deposit accounts are transferred to it as soon as possible.  If no assuming institution is found during the resolution process, the FDIC disburses insured deposit balances directly to customers of the failed institution.  In either case, the FDIC provides the insured depositors with access to their accounts within one or two business days.

As banking industry practices and technologies evolve, the FDIC continues to review and enhance existing plans, processes, and systems in response to potential risks that might affect the resolution process.

Human Resources (staffing and training):  The FDIC has authorized 2014 staffing of 916 employees dedicated to handling the failure of insured financial institutions and the management of ensuing receiverships.  This includes 405 permanent positions and 511 non-permanent positions.  The number of authorized non-permanent positions is lower than in 2013, reflecting a continuing decline in the number of insured institution failures and assets under management. However, the completion of residual, non-asset related receivership management responsibilities for the large number of open receiverships established as a result of prior-year failures will continue to be substantial workload drivers for several years to come.

Information Technology:  Technology is critical to the efficiency of deposit insurance determinations and payments.  The FDIC uses the Claims Administration System (CAS) to identify depositors’ insured and uninsured funds in failing and failed banks.  For every failing bank, CAS is used before the failure to estimate the amount of uninsured deposits for the least cost test.  When an insured deposit transaction is the least cost resolution, CAS is used to determine the amount of the depositors’ funds that are insured.  For all failures, CAS is the system of record for the deposits of the failed bank and subsequent claims processing and tracking.  During 2014, FDIC will complete an update to the documents and forms used in CAS and complete a data optimization effort which will enhance the loading and quality of the data.

Verification and Validation

If insured deposits are transferred to a successor institution, the number of business days before depositors have access to their insured funds is verified by comparing the date of failure to the date that the successor insured depository institution opens for business and makes insured funds available to the failed institution’s depositors.  For a depositor payout, the availability of funds is verified by comparing the date of failure with the date that deposit insurance checks are mailed to depositors or made available for pickup at the premises of the failed institution.

2013 Performance Results

This annual performance goal and its associated performance indicators and targets are unchanged from 2013.  Twenty-four insured financial institutions failed during 2013.  The FDIC successfully met the performance targets for each failure.



STRATEGIC OBJECTIVE 1.2

The FDIC promptly identifies and responds to potential risks to the DIF.

Annual Performance Goal 1.2-1

Disseminate data and analyses on issues and risks affecting the financial services industry to bankers, supervisors, the public, and other stakeholders on an ongoing basis.

Indicator and Targets

  1. Scope and timeliness of information dissemination on identified or potential issues and risks
    • Disseminate results of research and analyses in a timely manner through regular publications, ad hoc reports, and other means.
    • Undertake industry outreach activities to inform bankers and other stakeholders about current trends, concerns, and other available FDIC resources.

Means and Strategies

Operational Processes (initiatives and strategies):  The FDIC maintains a vigorous research and publications program on issues and topics of importance to the banking industry.  Much of this research is conducted with the academic community through the Center for Financial Research (CFR).  Research findings are disseminated through CFR Working Papers, articles in professional journals, and presentations at conferences and other events.  The FDIC also disseminates information and analyses on industry risks through periodic reports, publications (e.g., the FDIC Quarterly Banking Profile and the FDIC Quarterly), Financial Institution Letters (FILs), and participation in industry events and other outreach activities.

The FDIC conducts outreach sessions several times each year throughout the country.  In addition, FDIC employees regularly attend conferences and meet with industry analysts and trade groups to exchange views and analyses.  They also present Directors’ College outreach sessions to local bank board members.  During these sessions, FDIC employees share information with bank directors on current risks, new regulations, and emerging issues.  In addition, local FDIC offices nationwide conduct banker roundtable events that provide a forum for bankers to receive information and raise questions about new regulatory guidance or emerging risks.

Human Resources (staffing and training):  The FDIC employs economists, financial analysts, and other staff members who monitor risks within the banking industry and communicate those risks to FDIC management, other regulators, the industry, the public, and other stakeholders through a variety of media and forums.

Visiting scholars also participate in the Corporation’s risk analysis program, and risk-focused examination training has been incorporated into the FDIC’s examination schools.
In addition, the FDIC also uses examiners and other staff located throughout the country to conduct banker outreach sessions as a collateral duty.

Information Technology:  The FDIC’s Web site (www.fdic.gov) is a centralized source of information on FDIC research and analysis on potential areas of risk for the industry, the public, and other regulators.  Databases and reports provide comprehensive financial and structural information about every FDIC-insured institution.  The data are provided in multiple formats, including eXtensible Business Reporting Language (XBRL), to provide faster access to financial institution information for all users of the data, including financial institutions, bank regulators, and the public.

Verification and Validation

Timely analyses of banking industry risks are included in regular publications or issued as ad hoc reports.  Industry outreach activities aimed at the banking community and industry trade groups promote discussion of current trends and concerns and inform bankers about available FDIC resources.  Publications and outreach events are documented through established reporting processes.

2013 Performance Results

This annual performance goal and its associated indicator and targets are unchanged from 2013. The FDIC successfully met the performance targets for this annual performance goal in 2013.


STRATEGIC OBJECTIVE 1.3    

The DIF and the deposit insurance system remain strong and adequately financed.

Annual Performance Goal 1.3-1

Adjust assessment rates, as necessary, to achieve a DIF reserve ratio of at least 1.35 percent of estimated insured deposits by September 30, 2020.

Indicators and Targets

  1. Updated fund balance projections and recommended changes to assessment rates
    • Provide updated fund balance projections to the FDIC Board of Directors by June 30, 2014, and December 31, 2014.
    • Recommend changes to deposit insurance assessment rates to the FDIC Board of Directors as necessary.
  1. Demonstrated progress in achieving the goals of the Restoration Plan
    • Provide progress reports to the FDIC Board of Directors by June 30, 2014, and December 31, 2014.

Means and Strategies

Operational Processes (initiatives and strategies):  This goal reflects a requirement of DFA. 
At the end of 2013, the fund balance had risen to $47.2 from its negative $20.9 billion low point at the end of 2009.  The reserve ratio at the end of 2013 was 0.79 percent.  The fund is projected to reach 1.15 percent of estimated insured deposits in 2018 and achieve the required 1.35 percent of estimated insured deposits by 2020 under the Restoration Plan adopted by the FDIC Board of Directors.

The FDIC’s Financial Risk Committee (FRC) develops quarterly failure projections and loss estimates to establish contingent loss reserves for the DIF.  The FRC consults with the other federal banking agencies in its deliberations.  Models that forecast failures and failure resolution costs are maintained and enhanced, as necessary.  The FRC regularly reviews adverse events to identify lessons or implications for monitoring and addressing risks.  Based on an analysis of projected failed bank assets and other pertinent information, the FRC recommends to the Chief Financial Officer (CFO) the level of the contingent loss reserve for the DIF.

FDIC staff use the FRC’s projections on insurance losses to help determine the level of assessment revenue necessary to maintain adequate funding in the DIF.  Projected insurance losses, as well as projections of investment revenue, operating expenses, and insured deposit growth, are key elements in estimating assessment revenue needs.  In addition, the FDIC continues to enhance the techniques and methodologies used to analyze the nature of risk exposure, including scenario analysis and stress testing.

Human Resources (staffing and training):  FDIC staff performs the analytical work associated with deposit insurance pricing.  The FDIC will continue to expand its ties to the academic community to broaden the information and analytical perspectives available to it as steward of the DIF.

Information Technology:  The Risk-Rated Premium System (RRPS), the information system supporting the assessment process, calculates the premiums that financial institutions are assessed for deposit insurance.  RRPS is updated and tested when there are changes to the insurance assessment pricing structure.

Verification and Validation

To ensure that the RRPS identifies higher risk institutions and appropriately assesses higher insurance premiums, a Federal Information Security Management Act (FISMA) self-assessment of RRPS is conducted annually.  In addition, the Government Accountability Office (GAO) reviews annually the methodology used to determine the contingent loss reserve.
In 2014, the FRC will again conduct semiannual reviews of the contingent loss reserve methodology by analyzing the variance between projected and actual losses.  In addition, FDIC staff will report semi-annually to the FDIC Board of Directors on progress made in meeting the goals of the Restoration Plan.

2013 Performance Results

This annual performance goal and its associated performance indicators and targets have been updated for 2013.  The FDIC successfully met the performance targets established for the related 2013 annual performance goal.


Annual Performance Goal 1.3-2

Expand and strengthen the FDIC’s participation and leadership role in supporting robust and effective deposit insurance programs, resolution strategies, and banking systems worldwide.

Indicator and Targets

  1. Initiatives to advance the FDIC’s global leadership and participation
    • Maintain open dialogue with counterparts in strategically important jurisdictions, international financial organizations and institutions, and partner U.S. agencies.
    • Maintain a leadership position in the International Association of Deposit Insurers (IADI) by conducting workshops and performing assessments of deposit insurance systems based on the methodology for assessment of compliance with the IADI Core Principles for Effective Deposit Insurance Systems (Core Principles), developing and conducting training on priority topics identified by IADI members, and actively participating in IADI’s Executive Council and Standing Committees.
    • Engage with authorities responsible for resolutions and resolutions planning in priority foreign jurisdictions.
    • Contribute to the resolution-related agenda of the Financial Stability Board (FSB) through active participation in the FSB’s Resolution Steering Group and its working groups.
    • Actively participate in bilateral interagency regulatory dialogues.
  1. Provision of technical assistance to foreign counterparts
    • Support visits, study tours, secondments, and longer-term technical assistance and training programs for representatives of foreign jurisdictions to strengthen their deposit insurance organizations, central banks, bank supervisors, and resolution authorities.

Means and Strategies

Operational Processes (initiatives and strategies):  As a recognized global leader in promoting sound deposit insurance, bank supervision, and resolution practices, the FDIC provides technical guidance, training, consulting services, and information to governmental banking and deposit insurance organizations around the world.  This is achieved, in part, through the FDIC’s relationships with international financial institutions and regulatory agencies, and its leadership roles and participation in IADI, the FSB and the Association of Supervisors of Banks of the Americas (ASBA).  In 2014, the FDIC will continue to support IADI in the advancement of the IADI Core Principles and lead the IADI effort to develop training seminars for deposit insurers and safety-net participants.  The FDIC will also continue to support ASBA governance, guidance, and training initiatives.

In addition, the FDIC will engage bilaterally and multilaterally in 2014 with priority foreign authorities to develop resolution strategies for globally systemically important financial institutions (G-SIFIs) in the U.S. and foreign G-SIFIs with a substantial presence in the U.S.  This will include participation in the EC-FDIC working group, tabletops, principal level events, joint papers, hosting of foreign delegations, and support for missions to foreign authorities.  The FDIC will continue to support the FSB in its resolution-related efforts, including the development and presentation of proposals to be addressed by the G20 at the Brisbane Summit.  The FDIC’s efforts will also include the conduct of Crisis Management Group (CMGs) meetings for G-SIFIs (G-SIFIs) based in the U.S; attendance at CMGs for non-U.S. G-SIFIs with significant U.S. operations; and participation in assessments of the implementation of the Key Attributes of Effective Resolution Regimes for Financial Institutions (Key Attributes)

The FDIC will support study tours, long term secondments, and technical assistance for foreign counterparts that serve to strengthen bank supervision and regulation, and promote the adoption of sound deposit insurance and resolution frameworks.  The FDIC will continue to promote the adoption of sound bank supervisory principles and practices in the Americas by providing subject matter experts as instructors for ASBA-sponsored training, ASBA- led research and guidance initiatives, and the ASBA secondment program.

The FDIC will support the IMF and World Bank in their Financial Sector Assessment Program (FSAP) and Reports on the Observance of Standards and Codes as subject matter experts for deposit insurance program reviews and resolution-related matters.  The FDIC will work with the FSB in the development of an assessment methodology for the Key Attributes.

Human Resources (staffing and training):  Available resources include an international affairs team dedicated to promoting the adoption of sound bank supervision and deposit insurance principles and coordinating the FDIC’s global outreach and technical assistance programs, as well as a core staff focused upon cross-border resolution matters, each supplemented by other subject matter experts within the FDIC to support technical assistance missions overseas and study tour visits in the United States. 

Information Technology:  Information about international governmental bank regulatory and deposit insurance agencies and activities, as well as the FDIC’s international outreach program, is communicated through the FDIC’s external website.  

Verification and Validation

Progress in meeting this annual goal is reported to the FDIC’s International Affairs Working Group through established processes.  Quarterly statistical reports document trends in the number of foreign visitors, foreign officials trained, technical assistance missions, and FDIC participation and leadership in key international organizations.
2013 Performance Results

2013 Performance Results

This annual performance goal and its associated performance targets have been updated and broadened for 2014 to cover the FDIC’s international activities related to resolution strategies.  The performance targets for this goal were successfully met in 2013.

STRATEGIC OBJECTIVE 1.4

The FDIC resolves the failure of insured depository institutions in the manner least costly to the DIF.

Annual Performance Goal 1.4-1

Market failing institutions to all known qualified and interested potential bidders.

Indicator and Target

  1. Scope of qualified and interested bidders solicited
    • Contact all known qualified and interested bidders.

Means and Strategies

Operational Processes (initiatives and strategies):  The FDIC markets the deposits and assets of failing institutions to all known qualified and interested potential bidders to stimulate as much competition as possible.  The FDIC maintains an inventory of qualified financial institutions that may potentially be interested in bidding to purchase a failing institution.  In preparing a list of potential bidders for each failing institution, the FDIC takes into account the failed institution’s geographic location, competitive environment, minority-owned status, financial condition, asset size, capital level, and regulatory ratings.  Potential bidders are then given the opportunity to perform due diligence on the failing institution’s assets and liabilities before determining whether to submit bids.

Human Resources (staffing and training):  Franchise marketing is carried out primarily by specialized FDIC personnel with support, as needed, from staff in other disciplines.  The FDIC’s Resolutions and Receiverships Commissioning Program ensures the future availability of trained and qualified personnel to handle this and other aspects of the resolutions and receivership management functions.  Staffing requirements are continually assessed within the context of current and projected workload to ensure that the FDIC is appropriately staffed.  The FDIC also uses contractor support, non-permanent employees, and employees temporarily assigned from divisions and offices throughout the organization to meet workload demands and mission responsibilities in this area.

Information Technology:  The FDIC documents franchise marketing activities through its automated Franchise Marketing System (FMS), which is supported by the 4C system.

Verification and Validation

Data from FMS are used to report on marketing and sales progress.

2013 Performance Results

This annual performance goal and its associated performance indicator and target are unchanged from 2013.  The performance target was successfully met for the 24 insured institution failures that occurred in 2013.


STRATEGIC OBJECTIVE 1.5    

The public and FDIC-insured depository institutions have access to accurate and easily understood information about federal deposit insurance coverage.

Annual Performance Goal 1.5-1

Provide educational information to insured depository institutions and their customers to help
them understand the rules for determining the amount of insurance coverage on deposit accounts.

Indicators and Targets

  1. Timeliness of responses to deposit insurance coverage inquiries
    • Respond within two weeks to 95 percent of written inquiries from consumers and bankers about FDIC deposit insurance coverage.
  1. Initiatives to increase public awareness of deposit insurance coverage changes
    • Conduct at least 12 telephone or in-person seminars for bankers on deposit insurance coverage.

Means and Strategies

Operational Processes (initiatives and strategies):  The FDIC uses various means to educate insured financial institution employees and depositors about FDIC deposit insurance coverage.  In addition to conducting seminars for bank employees, the FDIC encourages the dissemination of educational information through the banking industry and the media.

The FDIC also (1) operates a toll-free call center (877-ASK-FDIC) to answer questions about FDIC deposit insurance coverage, (2) maintains educational and informational resources on its Web site, (3) publishes articles on deposit insurance coverage in the FDIC Consumer News (a quarterly newsletter for consumers published by the FDIC), and (4) works to raise awareness of deposit insurance coverage through the national and regional news media.  The call center is staffed by contractors who are trained to provide answers to many different questions about deposit insurance coverage.  Complex or unique issues, or those requiring additional analysis and review, are referred by the call center for research and response to FDIC employees who specialize in deposit insurance issues.

In addition, the FDIC administers a public education program that includes developing and distributing a wide range of written materials, videos, electronic calculators, and other tools to help consumers and bank employees understand how FDIC deposit insurance works.  The FDIC also provides training to employees of insured financial institutions.

Human Resources (staffing and training):  The FDIC has a dedicated staff of deposit insurance specialists and contract employees who respond to tens of thousands of telephone and written inquiries from consumers and bankers about deposit insurance coverage.  The call center is staffed by contractors and a dedicated staff of subject matter experts on deposit insurance issues.

The FDIC regularly reviews staffing and training needs to ensure that the resources supporting deposit insurance educational initiatives are adequate and that employees possess the skills and knowledge to implement this program effectively and successfully.

Information Technology:  The FDIC tracks the receipt of and response to written banker and consumer inquiries about its deposit insurance program through the Specialized Tracking and Reporting System (STARS).  The FDIC also provides the Electronic Deposit Insurance Estimator (EDIE) on its Web site for use by consumers and bankers to estimate deposit insurance coverage.  The FDIC continues to use the Internet and the latest multi-media technology delivery mechanisms to reach large audiences of financial institution employees and to deliver deposit insurance educational tools and materials to the banking community and the public.

Verification and Validation

Progress in meeting the performance targets for this goal will be tracked through STARS and established reporting processes.

2013 Performance Results

This annual performance goal and one performance target are unchanged from 2013.  The other performance target was revised from 15 to 12 seminars.  The FDIC successfully met the performance targets for this annual performance goal in 2013.