I am pleased to present the Federal Deposit Insurance Corporation’s (FDIC) 2002
Annual Report. It was a productive year at the FDIC. We met all of our major
statutory responsibilities, conducting over 2,500 safety and soundness examinations
and over 1,800 compliance examinations of FDIC-supervised institutions
and resolving the failure of 11 FDIC-insured institutions. In addition, we made
substantial progress toward our goal of strengthening the Corporation and
positioning it to carry out its responsibilities more efficiently and effectively
in the future.
I would like to highlight just a few of our most significant accomplishments
We moved deposit insurance reform from a concept to Capitol Hill. The
House of Representatives overwhelmingly passed deposit insurance reform
legislation in 2002, and we are looking forward to passing deposit insurance
reform out of the House and Senate before the end of 2003.
We implemented a new streamlined organizational structure that is based on
our three major lines of business insurance, supervision, and receivership
management and substantially reduced the number of management and
support positions within the Corporation. In conjunction with these changes,
we put in place a new management team committed to transforming corporate
operations for the future, and we delegated increased authority and responsibility
to lower organizational levels in order to move decision-making closer
to the bankers and other stakeholders with whom we work.
We largely completed the staffing reductions that were required to bring the
size of our workforce into line with the decline in our workload resulting from
institutional consolidation within the banking industry, and the completion
of residual work from the banking and thrift crises of the late 1980s and early
1990s. This ongoing effort will continue to be a priority at the FDIC as we
seek to be more efficient and better stewards of the insurance funds. The
centerpiece of this effort was a highly successful buyout program in which
approximately 700 employees accepted buyout packages that were
targeted to eliminate employee surpluses and address skills imbalances.
We continued to shift our use of resources to pay even greater attention
to the institutions that represent the greatest potential risk to the insurance
funds. Two new major programs were initiated in 2002 to address this
Dedicated Examiner Program
We, with the cooperation of our fellow regulators, have assigned
"dedicated" examiners to each of the eight largest insured banking
institutions to monitor their operations and provide more timely information
about emerging risks. Our examiners will work closely with their counterparts
at the federal financial regulatory agencies that are the primary
supervisors of those institutions and provide real-time access to information
on those institutions.
The new Maximum Efficiency, Risk-Focused, Institution-Targeted (MERIT)
Guidelines Program provides for the use of risk-focused examination
procedures at FDIC-supervised institutions with assets of less than
$250 million that are well-managed, well-capitalized and meet other
program criteria. The program ensures that our resources are focused
on those institutions that pose the greatest risk to the insurance funds,
while preserving the integrity of the examination process.
We expanded our "Money Smart" program through alliances with over
300 national and regional organizations and have recently focused on
measurement of the results of these programs. Money Smart is a financial
education program developed to address growing national concern over the
proliferation of predatory lending practices, and to help bring people with little
or no banking experience into the financial mainstream.
We expanded our efforts to disseminate information, stimulate discussion,
and address the risks facing the financial services industry by hosting
three symposia on some of the most important issues now facing the banking
industry. These symposia brought together some of the best minds in the
business to discuss financial transparency and disclosure, risk management,
deposit insurance pricing, and other factors affecting the economic landscape
for banks and the insurance funds. We also launched an electronic news
bulletin called FYI to provide insured institutions and other interested parties
high-quality analysis of emerging risks and other issues of concern to the
We continued to be vigilant concerning the adequacy of corporate governance.
As such, we initiated various measures designed to mitigate the risk of
increased public concern regarding accounting practices and oversight and
the adequacy of corporate governance, which in part, prompted passage
of the Sarbanes-Oxley Act of 2002. We are reviewing board activities, ethics
policies and practices of the banks the FDIC supervises and auditor independence
requirements. In early 2003, we issued guidance to institutions about
the Sarbanes-Oxley Act, including the actions the FDIC encourages institutions
to take to ensure sound corporate governance.
We established an Advisory Committee on Banking Policy that will give
us the benefit of some of the most talented and experienced people in
government, business and banking as we attempt to reshape the FDIC
for the future.
We will build on this solid record of accomplishments in 2003. We will continue
to fulfill our stewardship responsibilities to the insurance funds through an
effective supervisory program that promptly identifies and addresses emerging
risks and a receivership management program that minimizes, to the extent
possible, the cost of insured institution failures. We will continue to disseminate
high-quality information and analysis on major issues and to provide leadership
for the adoption of appropriate policy and regulatory changes. And, we will
continue to strive to contain our operational costs and to improve our operational
efficiency and effectiveness.
It has been an honor to serve as Chairman of the FDIC during this past year.
As a former banker, I know how important the FDIC’s work is to the stability
of our economy and to the peace of mind of depositors who rely on the promise
represented by the FDIC seal displayed at insured institutions all across the
We at the FDIC will continue to do everything possible to give the financial
institutions the best value for their contributions to the deposit insurance funds,
to diligently play our part in ensuring economic stability through good stewardship
of those funds and forward-thinking policy solutions, and to remain a symbol
of confidence upon which American consumers can depend.