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Strategic Plans

2020 Annual Performance Plan

Last Updated: May 31, 2020

Appendices


Appendix A

Program Resource Requirements

The chart below breaks out the 2020 FDIC Operating Budget by the FDIC’s three major program areas: insurance, supervision, and receivership management. It shows the budgetary resources that the FDIC estimates it will spend on these programs during 2020 to pursue the strategic goals and objectives and the annual performance goals in this plan and to carry out other program- related activities. The estimates include each program’s share of common support services that are provided on a consolidated basis.

Supervision $1,056,272,845
Insurance $370,989,739
Receivership Management $312,076,597
Corporate Expenses $278,082,756
TOTAL $2,017,421,937

In addition, the FDIC has a total authorized 2020 staffing level of 5,755 full-time equivalent (FTE) positions.

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Appendix B

The Planning Process

The FDIC has a long-range strategic plan that identifies goals and objectives for its three major programs: insurance, supervision, and receivership management. This Annual Performance Plan identifies the goals, indicators, and targets for each strategic objective. In January 2018, the FDIC Board of Directors approved the 2018-2022 FDIC Strategic Plan, which reflects the current strategic goals and objectives of the FDIC.

In developing these plans, the FDIC uses an integrated planning process in which senior management provides guidance and direction on FDIC goals and priorities. Plans and budgets are developed to achieve those goals and priorities with input from program personnel. Business requirements, industry information, human capital, technology, and financial data are considered in preparing annual performance plans and budgets. Factors influencing the FDIC’s plans include changes in the financial services industry; the findings of program evaluations and other management studies, such as the annual Office of Inspector General’s report on the Top Management and Performance Challenges Facing the FDIC; and past performance.

The FDIC communicates its strategic goals and objectives and its annual performance goals, indicators, and targets to employees through its internal website and internal communications, such as videos, newsletters, and staff meetings. Pay and recognition programs are structured to reward employee contributions based on the achievement of the FDIC’s annual performance goals.

Throughout the year, FDIC senior management reviews progress reports. The FDIC’s Annual Report to Congress, which is posted on the FDIC’s public website (www.fdic.gov) , compares actual performance results to the performance targets for each annual performance goal. For 2019, the FDIC assessed the reliability of the performance data contained in the 2019 Annual Report. The FDIC found no material inadequacies, and the data are considered to be complete and reliable.

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Appendix C

Program Evaluation

The Risk Management and Internal Controls Branch in the Division of Finance coordinates the evaluation of the FDIC’s programs to ensure that programs are operating efficiently and effectively and accomplishing intended objectives. Program evaluations are collaborative efforts that may involve management and staff from multiple divisions and offices. Division and Office directors use the results of the program evaluations to support their annual assertions to the Chairman that operations are effective and efficient, financial data and reporting are reliable, laws and regulations are followed, and internal controls are adequate (assurance statements).

In 2020, FDIC will continue to identify opportunities to perform program evaluations to mitigate risks to division and office operations and identify opportunities for program improvement.

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Appendix D

Interagency Relationships

The FDIC has productive working relationships with agencies at the federal, state, and international levels. It leverages those relationships to achieve the goals outlined in this plan and to promote confidence in the U.S. banking system. Listed below are examples of the many important relationships the FDIC has built with other agencies and entities, seeking to promote strength, stability, and confidence in the financial services industry.

Other Federal Financial Institution Regulatory Agencies

The FDIC works closely with other federal financial institution regulators—principally the FRB and the OCC—to address issues and programs that transcend the jurisdiction of each agency. Regulations are, in many cases, interagency efforts. For example, interagency rules have been developed to address implementation of EGRRCPA; Basel III; revisions to risk-based and leverage capital requirements; the liquidity coverage ratio; credit risk retention; appraisals, Call Reports; and supervisory guidance, including policy statements, advisories, and statements addressing capital adequacy, IT and cybersecurity risks, leveraged lending, and liquidity risk management. In addition, the Comptroller of the Currency is a member of the FDIC Board of Directors, which facilitates crosscutting policy development and consistent regulatory practices between the FDIC and the OCC.

The FDIC also works closely with the CFPB to address consumer protection issues. The CFPB is responsible for issuing the majority of consumer protection rules and regulations. However, the CFPB is required to consult with the FDIC, FRB, and OCC on these matters. Enforcement jurisdiction for insured, state nonmember banks with less than $10 billion in assets remains with the FDIC, unless the institution is an affiliate of another insured institution with $10 billion or more in assets that is supervised by the CFPB. The CFPB Director is also a member of the FDIC Board of Directors, which facilitates crosscutting policy development and consistent regulatory practices among the FDIC, CFPB, and OCC.

The FDIC, FRB, and OCC also work closely with the National Credit Union Administration (NCUA), which supervises and insures credit unions; the CSBS, which represents the state regulatory authorities; and individual state regulatory agencies. The FDIC also collaborates with the FHFA, which is the rule-writer and supervisor for the government-sponsored enterprises and the Federal Home Loan Banks. Finally, the FDIC coordinates with the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) on issues related to central counterparty (CCP) recovery and resolution planning.

The Federal Financial Institutions Examination Council (FFIEC)

The FFIEC is a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions and to make recommendations to promote uniformity in the supervision of financial institutions. The member agencies of the FFIEC are the FDIC, FRB, OCC, NCUA, and CFPB.

In addition, the Chair of the FFIEC State Liaison Committee serves as a member of the FFIEC (the State Liaison Committee is composed of five representatives of state supervisory agencies). To foster interagency cooperation, the FFIEC has established interagency task forces on consumer compliance, examiner education, information sharing, regulatory reports, surveillance systems, and supervision. The FFIEC has statutory responsibilities to facilitate public access to data that depository institutions must disclose under the Home Mortgage Disclosure Act of 1975 (HMDA) and the aggregation of annual HMDA data for each metropolitan statistical area. It also publishes handbooks, catalogs, and databases that provide uniform guidance and information to promote a consistent examination process among the agencies and make information available to the public. This includes maintenance of a central data repository for CRA ratings and public evaluations. The FFIEC also provides an online Consumer Help Center that connects consumers with the appropriate federal regulator for a particular financial institution.

State Banking Departments

The FDIC, FRB, and OCC work with the CSBS and with individual state regulatory agencies to make the bank examination process more efficient and uniform. In most states, alternating examination programs reduce the number of examinations that are conducted at insured financial institutions, thereby reducing regulatory burden. Joint examinations of larger financial institutions also optimize the use of state and FDIC resources in the examination of large, complex, and problem state nonmember banks and state-chartered thrift institutions.

Advisory Committee of State Regulators (ACSR)

On November 19, 2019, the FDIC Board approved the establishment of ACSR. The Committee will provide advice and recommendations to the FDIC on a broad range of policy issues regarding the regulation of state-chartered financial institutions throughout the United States, including its territories. The Committee will provide a forum where state regulators and the FDIC can discuss a variety of current and emerging issues that have potential implications regarding the regulation and supervision of state-chartered financial institutions.

Basel Committee on Banking Supervision (BCBS)

The FDIC is a member of the BCBS, a forum for international cooperation on matters relating to financial institution supervision, and on numerous subcommittees of the BCBS. The BCBS aims to improve the consistency of capital regulations internationally, ensure that the regulatory capital framework for internationally active institutions is risk-sensitive and includes appropriate constraints on the use of financial leverage, and promote enhanced risk management practices among large, internationally active banking organizations. Other areas of significant focus include liquidity and funds management, market risk exposure, and derivatives activities. The FDIC and the other federal banking agencies have worked closely with the BCBS to improve the Basel III Capital Accord to strengthen the resiliency of the banking sector and improve liquidity risk management.

International Colleges of Regulators

The FDIC participates in several groups of international regulators to address international consistency in the implementation of over-the-counter (OTC) derivatives reforms. The OTC Derivatives Regulators’ Forum is a college of regulators that discuss initiatives on derivative reforms mandated by the G-20 and FSB.

The group is heavily involved in assuring international consistency on the development of trade repositories and CCP clearing. It makes recommendations to standing committees, including the Committee on Payment and Settlement Systems, International Organization of Securities Commissions, BCBS, and FSB, for rulemakings.

The OTC Supervisors’ Group is primarily involved in changing the infrastructure of the largest dealer banks. The group is composed of supervisors of the G-SIFIs. Current efforts are focused on data repositories, dispute resolution, and client clearing. The group obtains commitments from the dealer community to make recommended changes and monitors implementation.

Interagency Country Exposure Review Committee (ICERC)

The ICERC was established by the FDIC, FRB, and OCC to ensure consistent treatment of the transfer risk associated with the exposure of banks to both public and private sector entities outside the United States. The ICERC assigns ratings based on its assessment of the degree of transfer risk inherent in U.S. banks’ foreign exposure.

International Association of Deposit Insurers (IADI)

The FDIC has played a leading role in developing IADI into a global standard setter and the world’s premier provider of technical assistance and training for deposit insurance since the association was formed in 2002. IADI contributes to the stability of the financial system by promoting international cooperation in the field of deposit insurance. Through IADI, the FDIC builds strong bilateral and multilateral relationships with foreign deposit insurers, resolution authorities, and international organizations. The FDIC also provides technical assistance and conducts outreach activities with foreign entities to help develop and maintain sound banking and deposit insurance systems.

Association of Supervisors of Banks of the Americas (ASBA)

The FDIC plays a leadership role in the ASBA and participates in the organization’s activities. ASBA develops, disseminates, and promotes sound bank supervisory practices and resilient financial systems throughout the Americas and the Caribbean in line with international standards. The FDIC supports the organization’s mission and activities by contributing to ASBA’s research and guidance initiatives, technical training and cooperative endeavors, and leadership building programs.

Shared National Credit Program

The FDIC participates with the other federal financial institution regulatory agencies in the Shared National Credit Program, an interagency program that performs a uniform credit review twice annually of financial institution loans that exceed $100 million and are shared by three or more financial institutions. The results of these reviews are used to identify trends in industry sectors and the credit risk management practices of banks.

The reviews are published in December of each year and include findings from both semi-annual reviews to help the industry better understand economic and credit risk management trends.

Joint Agency Task Force on Discrimination in Lending

The FDIC participates on the Joint Agency Task Force on Discrimination in Lending with several other federal financial institution regulators (i.e., the FRB, OCC, and NCUA) along with the CFPB, the Department of Housing and Urban Development, the FHFA, the Department of Justice, and the Federal Trade Commission (FTC). The agencies exchange information about fair lending issues, examination and investigation techniques, and interpretations of statutes, regulations, and case precedents.

European Forum of Deposit Insurers

The FDIC and the European Forum of Deposit Insurers share similar interests, and the FDIC supports the organization’s mission to contribute to the stability of financial systems by promoting European cooperation in the field of deposit insurance. The FDIC openly shares its expertise and experience in deposit insurance and failed bank resolution through discussions and exchanges on issues that are of mutual interest and concern (e.g., cross-border issues, bilateral and multilateral relations, and customer protection).

Financial and Banking Information Infrastructure Committee (FBIIC)

The FDIC works with the Department of Homeland Security and the Office of Cyberspace Security through the FBIIC to improve the reliability and security of the financial industry’s infrastructure. Other federal government members of the FBIIC include the CFPB, FHFA, FRB, NCUA, OCC, CFTC, SEC, Department of the Treasury, and the FCA.

Bank Secrecy Act (BSA), Anti-Money Laundering (AML), Counter-Financing of Terrorism (CFT), and Anti-Fraud Working Groups

The FDIC participates in several interagency, public-private, and intergovernmental groups, described below, to help combat money laundering, terrorist financing, and fraud.

  • The BSA Advisory Group is a public/private partnership of agencies and organizations that meets to discuss strategies and industry efforts to address money laundering, terrorist financing, and other illicit financial activities. Areas of focus include: rulemaking related to the BSA/AML Compliance Program, Customer Identification Program requirements, and suspicious activity reporting requirements; a possible examination pilot program that would consider possible changes to the referenced rules; innovative approaches to suspicious activity and currency transaction filing requirements; vendor-developed technology to help meet BSA compliance requirements including suspicious activity monitoring; and other emerging risks.
  • The FFIEC BSA/AML Working Group, in consultation with the Financial Crimes Enforcement Network, coordinates BSA/AML policy matters and training and to improve communications among the agencies. The BSA/AML working group builds on existing activities and works to strengthen the ongoing initiatives of other formal and informal interagency groups that oversee various BSA/AML issues. This working group meets monthly and invites other agencies, such as the SEC, CFTC, Treasury, Internal Revenue Service (IRS), and OFAC, on a quarterly basis to ensure broader coordination of BSA/AML and sanctions efforts.
  • The Basel Anti-Money Laundering/Counter-Financing of Terrorism (AML/CFT) Expert Group is responsible for monitoring AML/CFT issues that have a bearing on banking supervision, coordinating with the FSB, and serving as a forum for AML/CFT experts from banking supervisory agencies.
  • The Financial Action Task Force (FATF) is an intergovernmental body that sets standards and promotes effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system.
  • The Fraud Risk-Management Interagency Working Group is composed of representatives from the federal banking agencies to strengthen relationships and better understand the fraud threat environment to depository institutions. The group also provides a forum for developing consistent interagency programs for combating financial institution fraud.

Financial Literacy and Education Commission (FLEC)

The FDIC is a member of FLEC, which was established by the Fair and Accurate Credit Transactions Act of 2003. The FDIC actively supports FLEC’s efforts to improve financial literacy in America by assigning experienced staff to provide leadership and support for FLEC initiatives, including leadership of FLEC workgroups emphasizing integrating financial education into youth programs and those engaged in workforce development initiatives.

Financial Education Partnerships

The FDIC collaborates with other federal, state, and local government agencies to promote financial education and capability initiatives for consumers and small businesses. These include the CFPB, SBA, and other federal and state agencies. The FDIC also promotes initiatives combining youth accounts and financial education through collaboration with local financial institutions, governmental entities, workforce development and education organizations, and other non-profit organizations.

Alliance for Economic Inclusion (AEI)

The FDIC established and leads the AEI, a national initiative to bring all unbanked and underserved populations into the financial mainstream. The AEI is composed of broad-based coalitions of financial institutions, community-based organizations, and other partners in 14 markets across the country. These coalitions work to increase banking services for underserved consumers in low-and moderate-income neighborhoods, minority and immigrant communities, and rural areas. These services include savings accounts, affordable remittance products, targeted financial education programs, small-dollar loan programs, alternative delivery channels, and other asset-building programs.

The Financial Stability Board (FSB)

The FDIC actively participates in the work of the FSB, an international body established by the G-20 leaders in 2009. As a member of the FSB’s Resolution Steering Group and its Cross-Border Crisis Management Group, the FDIC has helped develop international standards and guidance on issues relating to the resolution of G-SIFIs. Much of this work has related to the operationalization of the FSB’s Key Attributes.

Federal Trade Commission (FTC), National Association of Insurance Commissioners (NAIC), and the Securities and Exchange Commission (SEC)

The Gramm-Leach-Bliley Act (GLBA), which was enacted in 1999, permits insured financial institutions to expand the products they offer to include insurance and securities. GLBA also includes increased security requirements and disclosures to protect consumer privacy. The FDIC and other FFIEC agencies coordinate with the FTC, SEC, and NAIC to develop industry research and guidelines relating to these products.

GLBA also requires the SEC to consult and coordinate with the appropriate federal banking agencies on certain loan-loss allowance matters involving public bank and thrift holding companies. The SEC and the agencies have an established consultation process designed to fully comply with this requirement while avoiding unnecessary delays in processing holding company filings with the SEC and providing these institutions access to the securities markets.

In addition, the accounting policy staffs of the FDIC and the other FFIEC agencies and the SEC’s Office of the Chief Accountant (OCA) meet quarterly to discuss accounting matters of mutual interest and maintain ongoing communications on accounting issues relevant to financial institutions. Other meetings are held with the OCA, as necessary, either on an individual agency or interagency basis.

U.S. Small Business Administration (SBA) Strategic Alliance Memorandum (SAM)

The FDIC partners with the SBA to encourage financial institutions to prudently serve entrepreneurs and small business owners. Through a SAM, the FDIC and SBA collaborate by co-sponsoring events and activities to help banks become fully aware of SBA capital access programs and connect banks to opportunities to address small business training, counseling, and financial service needs.

Internal Revenue Service (IRS)

The FDIC works with high-ranking officials at the IRS primarily to simplify the failed bank receivership federal tax filing process and to ensure efficient audit examinations. Gaining a mutual understanding of each agency’s tax compliance procedures has reduced the amount of resources needed to accurately process and file timely receivership federal tax returns. Similarly, establishing joint federal tax audit procedures has increased uniformity and significantly reduced regulatory burden for both agencies. Ongoing collaboration with the IRS also remediates ad-hoc, unintended tax consequences that arise during a bank failure, such as protecting the depositors’ interests in the event of a payout of IRA accounts.

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Appendix E

External Factors: The Economy and its Impact on the Banking Industry and the FDIC

Economic conditions at the national, regional, and local levels affect banking strategies and the industry’s overall performance. Business and household activity tends to be cyclical and influences loan growth and credit performance for the banking industry. Business conditions and macroeconomic policies combine to determine the rate of inflation, domestic interest rates, equity market valuations, and the exchange value of the dollar. These, in turn, influence the lending, funding, and off-balance-sheet activities of IDIs.

U.S. economic growth moderated in 2019 and global developments pose downside risks to the economic and banking outlook. The U.S. economy entered its tenth year of expansion in 2019 and economic growth moderated to its trend rate, after temporary factors boosted economic growth in 2018. Consumer spending remained strong and continued to support the economy, helped by a strong labor market with the unemployment rate at its historic low. Business investment slowed in 2019 and manufacturing declined, particularly in export dependent sectors, reflecting the slowdown in international trade and the uncertainty of its outlook. Financial market conditions were generally supportive to the economy. Both short and long-term interest rates declined and the yield curve steepened towards the end of the year. The FRB reduced interest rates three times in 2019, reversing a rate-hike cycle that started in 2015. Lower interest rates helped support the housing market, which contributed to economic growth during the second half of the year. However, lower interest rates continued to challenge the banking sector. Risks to the economic and banking outlook are primarily from global developments. Financial markets remain sensitive to adverse economic or policy developments, and may continue to encounter periods of volatility, which may adversely affect bank profitability.

Insured institutions’ fundamentals remain strong despite a decline in net income in 2019. The 5,177 FDIC-insured commercial banks and savings institutions that filed financial results in fourth quarter 2019 reported annual net income of $233.2 billion, down $3.6 billion (1.5 percent) from a year ago. The decrease in net income was largely due to an increase in both noninterest expenses and provisions for loan and lease losses. Net interest income increased modestly during the year.

The average return on assets ratio was 1.20 percent for 2019, down 13 basis points from 2018. Net operating revenue was $811 billion, up $3.8 billion from a year earlier. Declines in interest rates caused net interest margins to contract as yields on assets declined more than funding costs.

Noninterest expenses were $6.6 billion (1.4 percent) higher, than in 2018, as salary expenses increased by $6.0 billion (2.8 percent). Noninterest expense also increased due to write-downs of intangible assets, such as mortgage servicing assets and goodwill, rising merger and acquisition costs, and litigation costs at some banks.

Loan loss provisions were higher in 2019 than in 2018. Insured institutions set aside $55 billion in provisions for loan and lease losses in 2019, a $5.0 billion (9.9 percent) increase from a year earlier.

Asset quality indicators continued to improve in 2019 for the banking industry overall. The total noncurrent loan rate declined 8 basis points during the last year to 0.91 percent in 2019. Noncurrent loan balances declined by $4.8 billion (4.8 percent) between 2018 and 2019. Noncurrent 1-to-4 family residential mortgage loans fell by $4.7 billion (10.7 percent) and noncurrent nonfarm nonresidential real estate loans declined by $574 million (6.9 percent). However, noncurrent commercial and industrial loans increased by $2.8 billion (19.2 percent) and noncurrent construction and development loans rose by $25 million (1.6 percent).

Net charge-offs of loans and leases totaled $52.1 billion as of year-end 2019, up $4.6 billion (9.7 percent) from a year earlier. Net loan charge-offs increased in several portfolios, including credit card loans ($2.1 billion, or 6.5 percent), commercial and industrial loans ($1.9 billion, or 32.9 percent), and other consumer loans ($474 million, or 6.1 percent). Conversely, aggregate recoveries exceeded charge-offs for the 1-to-4 family residential mortgage and construction and development portfolios.

Asset growth was relatively strong in 2019. As of year-end 2019, total assets of insured institutions were $702 billion (3.9 percent) higher than a year earlier. Total loan and lease balances increased by $366 billion (3.6 percent), led by a $95 billion (5.4 percent) increase in consumer loans. Growth in real estate loans also contributed to the overall increase, including loans secured by one-to-four family residences (up $82 billion, 3.9 percent) and nonfarm nonresidential properties (up $69 billion, 4.8 percent). Banks’ investment securities portfolios increased by $259 billion (6.9 percent) from a year ago, driven by an increase in holdings of mortgage-backed securities of $207 billion (9.5 percent). Insured institutions decreased FRB balances by $814 million (0.1 percent).

Increased deposit balances funded much of the growth in assets. Deposits in domestic offices increased by $607 billion (4.8 percent) from year-end 2018 to year-end 2019. Equity capital rose by $91.9 billion (4.6 percent).

As of December 31, 2019, 51 insured institutions were on the FDIC’s “Problem Bank List,” down from 60 institutions at year-end 2018. Total assets of institutions on the FDIC’s Problem Bank List increased slightly during the year from $48 billion to $49 billion. Problem banks are those institutions with financial, operational, or managerial weaknesses that threaten their viability, although historical analysis shows that most institutions on the Problem Bank List do not fail.

Four banks failed in 2019. The DIF balance stood at $110.3 billion with a reserve ratio of 1.41 percent on December 31, 2019, up from $102.6 billion and a reserve ratio of 1.36 percent at year-end 2018.

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Appendix F

Organizational Chart

FDIC Organizational Chart, including the Board of Directors and FDIC Senior Leaders