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Annual Report Highlights
2008 Annual Report Highlights
Supervision and Consumer Protection
Supervision and consumer protection are cornerstones of the FDIC’s efforts to ensure the stability of and public confidence in the nation’s financial system. The FDIC’s supervision program promotes the safety and soundness of FDIC-supervised insured depository institutions, protects consumers’ rights, and promotes community investment initiatives.
During 2008, the Corporation conducted 2,416 statutorily required safety and soundness examinations, including a review of Bank Secrecy Act compliance, and all required follow-up examinations for FDIC-supervised problem institutions within prescribed time frames. The FDIC also conducted 1,826 CRA/compliance examinations (1,509 joint CRA/compliance examinations, 313 compliance-only examinations,4 and 4 CRA-only examinations) and 3,028 specialty examinations. All CRA/compliance examinations were also conducted within the time frames established by FDIC policy, including required follow-up examinations of problem institutions. The accompanying table compares the number of examinations, by type, conducted in 2006 – 2008.
As of December 31, 2008, there were 252 insured institutions with total assets of $159.4 billion designated as problem institutions for safety and soundness purposes (defined as those institutions having a composite CAMELS5 rating of “4” or “5”), compared to the 77 problem institutions with total assets of $22.2 billion on December 31, 2007. This constituted a 227 percent year-over-year increase in the number of problem institutions and a 618 percent increase in problem institution assets. In 2008, 67 institutions with aggregate assets of $383.3 billion were removed from the list of problem financial institutions, while 243 institutions with aggregate assets of $532.6 billion were added to the list of problem financial institutions. Washington Mutual, the single largest failure in history, with $307.0 billion in assets, was added to the list and resolved in 2008. The FDIC is the primary federal regulator for 170 of the 252 problem institutions.
During 2008, the Corporation issued the following formal and informal corrective actions to address safety and soundness concerns: 83 Cease and Desist Orders, one Temporary Cease and Desist Order, and 210 Memoranda of Understanding. Of these actions issued, 10 Cease and Desist Orders and 29 Memoranda of Understanding were issued based, in part, on apparent violations of the Bank Secrecy Act.
As of December 31, 2008, 140 FDIC-supervised institutions were assigned a “4” rating for safety and soundness and 30 institutions were assigned a “5” rating.
Of the “4”-rated institutions, 126 were examined in 2008, and formal or informal enforcement actions are in process or have been finalized to address the FDIC’s examination findings. Twenty eight “5”-rated institutions were examined and the remaining two were in the process of being examined in 2008, and completed in February 2009.
As of December 31, 2008, 16 FDIC-supervised institutions were assigned a “4” rating for compliance and no institutions were assigned a “5” rating. In total, nine of the “4”-rated institutions were examined in 2008; the remaining seven were examined prior to 2008 and involved either appeals or referrals to other agencies. These 16 institutions are under informal enforcement actions (three) or Cease and Desist Orders (six are final and six are in process), with one in process of appealing the examination. The Corporation has issued or is pursuing enforcement actions to address the examination findings for all 170 of the problem institutions for which it is the primary federal regulator. These actions include 159 Ceaseand Desist Orders and 11 Memoranda of Understanding.
Troubled Asset Relief Program’s Capital Purchase Program
Joint Examination Teams
Large Complex Financial Institution Program
In 2008, the Large Insured Depository Institution (LIDI) Program implemented a comprehensive process to standardize data capture and reporting. Under this program, supervisory staff throughout the nation performs comprehensive quantitative and qualitative risk analysis of institutions with assets over $10 billion, or under this threshold at regional discretion. This information has been instrumental in providing the basis for supervisory actions, supporting insurance assessments and resolution planning.
Money Services Business Project
Minority Depository Institution (MDI) Activities
In partnership with the Puerto Rico Bankers Association, the FDIC hosted a Compliance seminar in San Juan in December 2008. The seminar focused on pertinent compliance-related matters, including the Fair and Accurate Credit Transaction Act implementation, unfair and deceptive practices, and recent changes to the FDIC’s examination procedures.
In response to comments provided by MDIs, the FDIC launched a program for enhanced peer group reviews and comparisons, specifically targeted for MDIs. This custom peer report is designed to facilitate comparison of an institution’s performance with that of all MDIs that meet the FDIC’s definition, as well as all FDIC-insured institutions. The custom peer report contains earnings, capital, asset quality, and liquidity performance measures, which should assist MDIs in comparing performance against similar institutions.
In July of 2008, the FDIC hosted the third annual Interagency Minority Depository Institution National Conference in Chicago, Illinois. The theme of the conference was “Know Your Business, Grow Your Business.” The event drew over 250 attendees, representing an increase in participation of 47 percent from the previous year. In addition to presentations by senior officials from all federal banking regulatory authorities, industry experts and regulators, the program covered the state of the economy as it relates to mortgage markets, the current credit environment, and the process of bidding on distressed banks.
4 Compliance-only examinations are conducted for most institutions at or near the mid-point between joint compliance-CRA examinations under the Community Reinvestment Act of 1977, as amended by the Gramm-Leach-Bliley Act of 1999. CRA examinations of financial institutions with aggregate assets of $250 million or less are subject to a CRA examination no more than once every five years if they receive a CRA rating of “Outstanding” and no more than once every four years if they receive a CRA rating of “Satisfactory” on their most recent examination.
5 The CAMELS composite rating represents the adequacy of Capital, the quality of Assets, the capability of Management, the quality and level of Earnings, the adequacy of Liquidity, and the Sensitivity to market risk, and ranges from “1” (strongest) to “5” (weakest).
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