I. Management's Discussion and Analysis
The Year in Review
The year 2010 was relatively challenging for
the FDIC. In addition to the normal course of
business, the Corporation continued to resolve
failed insured depository institutions (IDIs),
increasing resources as needed. The FDIC also
started initial steps in the implementation of the
Dodd-Frank Act, continued its work on highprofile
policy issues, and published numerous
Notices of Proposed Rulemaking (NPRs)
throughout the year, seeking comment from the
public. The Corporation also continued to focus
on a strong supervisory program. The FDIC made
enhancements to several versions of the Money
Smart education curriculum. The FDIC also
sponsored and co-sponsored major conferences
and participated in local and global outreach
initiatives.
Highlighted in this section are the Corporation’s
2010 accomplishments in each of its three
major business lines—Insurance, Supervision
and Consumer Protection, and Receivership
Management—as well as its program
support areas.
Insurance
The FDIC insures bank and savings association
deposits. As insurer, the FDIC must continually
evaluate and effectively manage how changes
in the economy, the financial markets, and the
banking system affect the adequacy and the
viability of the Deposit Insurance Fund (DIF).
State of the Deposit Insurance Fund
During 2009 and 2010, losses to the DIF were
high. As of December 31, 2010, both the fund
balance and the reserve ratio were negative after
reserving for probable losses for anticipated bank
failures. For the year, assessment revenue and
lower-than-anticipated bank failures resulted
in an increase in the reserve ratio to negative
0.12 percent as of December 31, 2010, up from
negative 0.39 percent at the beginning of the year.
Long-Term Comprehensive Fund
Management Plan
As a result of the Dodd-Frank Act revisions,
the FDIC developed a comprehensive, long-term
management plan for the DIF designed to reduce the pro-cyclicality in
the existing system
and achieve moderate, steady assessment rates
throughout economic and credit cycles while
also maintaining a positive fund balance even
during a banking crisis, by setting an appropriate
target fund size and a strategy for assessment rates
and dividends. The FDIC set out the plan in a
proposed rulemaking adopted in October 2010.
The plan was finalized in rulemakings adopted in
December 2010 and February 2011.
New Restoration Plan
Pursuant to the comprehensive plan, in October
2010, the FDIC adopted a new Restoration
Plan to ensure that the reserve ratio reaches 1.35
percent by September 30, 2020. Because of
lower expected losses over the next five years than
previously anticipated, and the additional time
provided by the Dodd-Frank Act to meet the
minimum (albeit higher) required reserve ratio,
the new Restoration Plan elected to forego the
uniform 3 basis point increase in assessment rates
scheduled to go into effect on January 1, 2011.
Setting the Designated Reserve Ratio
Using historical fund loss and simulated income
data from 1950 to the present, the FDIC
undertook an analysis to determine how high the
reserve ratio would have had to have been before
the onset of the two crises that occurred since the
late 1980s to have maintained both a positive fund
balance and stable assessment rates throughout
the period. The analysis concluded that a
moderate, long-term average industry assessment
rate, combined with an appropriate dividend
or assessment rate reduction policy, would have
been sufficient to have prevented the fund from
becoming negative during the crises, though the
fund reserve ratio would have had to exceed 2.0
percent before the onset of the crises.
Therefore, pursuant to provisions in the Federal
Deposit Insurance Act that require the FDIC
Board to set the DRR for the DIF annually, the
FDIC Board proposed in October 2010 to set
the 2011 Designated Reserve Ratio (DRR) at
2.0 percent of estimated insured deposits. The
Board approved a final rule adopting this DRR
on December 14, 2010. 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. However, the
FDIC’s analysis shows that a reserve ratio higher
than 2.0 percent would increase the chance that
the fund will remain positive during a future
economic and banking downturn similar to or
more severe than past crises. Thus, the 2.0 percent
DRR should not be viewed as a cap on the fund.
Long-Term Assessment Rate Schedules and
Dividend Policies
Once the reserve ratio reaches 1.15 percent,
the FDIC believes that assessment rates can be
reduced to a moderate level. Therefore, pursuant
to its statutory authority to set assessments, in
October 2010, the FDIC Board proposed a lower
assessment rate schedule to take effect when
the fund reserve ratio exceeds 1.15 percent. To
increase the probability that the fund reserve
ratio will reach a level sufficient to withstand a
future crisis, the FDIC also proposed suspending
dividends permanently when the fund reserve
ratio exceeds 1.5 percent. In lieu of dividends,
the FDIC Board proposed to adopt progressively
lower assessment rate schedules when the reserve
ratio exceeds 2.0 percent and 2.5 percent.
These lower assessment rate schedules will serve
much the same function as dividends, but will
provide more stable and predictable effective
assessment rates. The FDIC finalized these long-term
assessment rate and dividend changes in
February 2011 in concert with the changes to the
assessment base and large-bank pricing system
described below.
Change in the Deposit Insurance Assessment Base
Change in the Assessment Base
The Dodd-Frank Act requires the FDIC to amend
its regulations to define the assessment base as
average consolidated total assets minus average
tangible equity, rather than total domestic deposits
(which, with minor adjustments, it has been since
1935). The Act allows the FDIC to modify the
assessment base for banker’s banks and custodial
banks. In November 2010, the FDIC approved a proposed rulemaking that
would implement
these changes to the assessment base. The FDIC
finalized this rulemaking in February 2011.
The Dodd-Frank Act also requires that, for at
least five years, the FDIC must make available
to the public the reserve ratio and the DRR
using both estimated insured deposits and the
new assessment base. As of December 31, 2010,
the FDIC estimates that the reserve ratio would
have been negative 0.06 percent using the new
assessment base (as opposed to negative 0.12
percent using estimated insured deposits) and
that the 2.0 percent DRR using estimated insured
deposits would have been 1.0 percent using the
new assessment base.
Conforming Changes to Risk-Based Premium
Rate Adjustments
The changes to the assessment base necessitated
changes to existing risk-based assessment rate
adjustments. The current assessment rate schedule
incorporates adjustments for types of funding that
either pose heightened risk to the DIF or that help
to offset risk to the DIF. Because the magnitude of
these adjustments and the cap on the adjustments
have been calibrated to a domestic deposit assessment
base, the rule changing the assessment base
also recalibrates the unsecured debt and brokered
deposit adjustments. Since secured liabilities
will be included in the assessment base, the rule
eliminates the secured liability adjustment.
The assessment rate of an institution would also
increase if it holds unsecured debt issued by other
IDIs. The issuance of unsecured debt by an IDI
lessens the potential loss to the DIF in the event of
the institution’s failure; however, when the debt is
held by other IDIs, the overall risk in the system is
not reduced.
Conforming Changes to Assessment Rates
The new assessment base under the Dodd-Frank
Act will be larger than the current assessment
base. Applying the current rate schedule to
the new assessment base would result in larger
total assessments than are currently collected.
Accordingly, the rule changing the assessment
base also established new rates to take effect in
the second quarter of 2011 that will result in
collecting approximately the same amount of
assessment revenue under the new base as under
the current rate schedule using the existing
(domestic deposit) base. These schedules also
incorporate the changes from the proposed large
bank pricing rule that was finalized in February
2011 along with the change in the assessment
base. The initial base rates for all institutions will
range from 5 to 35 basis points.
The initial base assessment rates, range of possible
rate adjustments, and minimum and maximum
total base rates are shown in the table below.
Changes to the assessment base, assessment
rate adjustments, and assessment rates will take
effect April 1, 2011. As explained above, the rate
schedules will decrease when the reserve ratio
reaches 1.15, 2.0, and 2.5 percent.
Proposed Initial and Total Base Assessment Rates¹
|
Risk Category I |
Risk Category II |
Risk Category III |
Risk Category IV |
Large and Highly Complex Institutions |
Initial base assessment rate |
5–9 |
14 |
23 |
35 |
5-35 |
Unsecured debt adjustment² |
(4.5)–0 |
(5)–0 |
(5)–0 |
(5)–0 |
(5)–0 |
Brokered deposit adjustment |
…… |
0–10 |
0–10 |
0–10 |
0–10 |
Total Base Assessment Rate |
2.5–9 |
9–24 |
18–33 |
30-45 |
2.5–45 |
|
Changes to the Large Bank Assessment System
The FDIC continued its efforts to reduce the
pro-cyclicality of the deposit insurance assessment
system by issuing a proposed rule in November
2010, that was finalized in February 2011, and
revises the assessment system applicable to large
IDIs to better reflect risk at the time a large
institution assumes the risk, to better differentiate
large institutions during periods of good economic
conditions, and to better take into account
the losses that the FDIC may incur if such an
institution fails.
The rule eliminates risk categories for large
institutions. As required by the Dodd-Frank Act,
under the rule, the FDIC will no longer use long-term
debt issuer ratings to calculate assessment
rates for large institutions. The rule combines
CAMELS¹ ratings and financial measures into two
scorecards—one for most large institutions and
another for the remaining very large institutions
that are structurally and operationally complex or
that pose unique challenges and risks in case of
failure (highly complex institutions). In general, a
highly complex institution is an institution (other
than a credit card bank) with more than $50
billion in total assets that is controlled by a parent
or intermediate parent company with more than
$500 billion in total assets, or a processing bank
or trust company with at least $10 billion in
total assets.
Both scorecards use quantitative measures that
are readily available and useful in predicting an
institution’s long-term performance to produce
two scores—a performance score and a loss
severity score—that will be combined and
converted to an initial assessment rate. The
performance score measures an institution’s
financial performance and its ability to withstand
stress. The loss severity score quantifies the relative
magnitude of potential losses to the FDIC in the
event of the institution’s failure. The rule will take
effect in the second quarter of 2011.
Temporary Liquidity Guarantee Program
On October 14, 2008, the FDIC announced
and implemented the Temporary Liquidity
Guarantee Program (TLGP). The TLGP consists
of two components: (1) the Debt Guarantee
Program (DGP)—an FDIC guarantee of certain
newly issued senior unsecured debt; and (2)
the Transaction Account Guarantee Program
(TAGP)—an FDIC guarantee in full of
noninterest-bearing transaction accounts.
Under the DGP, the FDIC initially guaranteed
in full, through maturity or June 30, 2012,
whichever came first, the senior unsecured debt
issued by a participating entity between October
14, 2008, and June 30, 2009, although in 2009
the issuance period was extended through October
31, 2009. The FDIC’s guarantee on each debt
instrument also was extended in 2009 to the
earlier of the stated maturity date of the debt or
December 31, 2012.
The FDIC charged a fee based on the amount
and term of the debt issued. Fees ranged from 50
basis points on an annualized basis for debt with
a maturity of 180 days or less, increasing to 75
basis points on an annualized basis for debt with a
maturity of 181 to 364 days and 100 basis points
on an annualized basis for debt with maturities
of 365 days or greater. In conjunction with the
program extension in 2009, the FDIC assessed
an additional surcharge on debt with a maturity
of one year or greater issued after April 1, 2009.
Unlike the other TLGP fees, which were reserved
for possible TLGP losses and not generally
available for DIF purposes, the surcharge was
deposited into the DIF and used by the FDIC
when calculating the reserve ratio of the Fund.
The surcharge varied depending on the type of
institution issuing the debt, with IDIs paying the
lower fees.
The TAGP initially guaranteed in full all domestic
noninterest-bearing transaction deposits held at
participating banks and thrifts through December
31, 2009. This deadline was extended twice and expired on December 31,
2010. The
guarantee also covered negotiable order of
withdrawal (NOW) accounts at participating
institutions—provided the institution initially
committed to maintain interest rates on the
accounts of no more than 0.50 percent (later
reduced to 0.25 percent) for the duration of
the program—and Interest on Lawyers Trust
Accounts (IOLTAs) and functional equivalents.
Participating institutions were initially assessed a
10 basis point surcharge on the portion of covered
accounts that were not otherwise insured. The fees
for the TAGP were increased at the first extension
to either 15 basis points, 20 basis points, or 25
basis points, depending on the institution’s deposit
insurance assessment category.
Program Statistics
Institutions were initially required to elect whether
to participate in one or both of the programs.
More than half of the over 14,000 eligible entities
elected to opt in to the DGP, while over 7,100
banks and thrifts, or 86 percent of FDIC-insured
institutions, initially opted in to the TAGP. Most
of the institutions that opted out of the DGP
had less than $1 billion in assets and issued no
appreciable amount of senior unsecured debt.
Over the course of the DGP’s existence, 121
entities issued TLGP debt. At its peak, the
DGP guaranteed almost $350 billion of debt
outstanding (see chart below). As of December
31, 2010, the total amount of remaining FDIC-guaranteed
debt outstanding was $267 billion.
The FDIC collected $10.4 billion in fees and
surcharges under the DGP. As of December 31,
2010, the FDIC paid $8 million on seven claims
that were filed when four participating entities
(all holding companies) defaulted on debt issued
under the DGP. Further claims on notes issued by
one entity are expected, since some of the notes
issued by this entity have not yet matured. Losses
through the end of the DGP guarantee period in
2012 are expected to be limited.
OUTSTANDING TLGP DEBT BY MONTH |
|
|
Transaction Account Guarantee
Program Phase-Out
The TAGP was designed to eliminate potentially
disruptive shifts in deposit funding and thus
preserve bank lending capacity. The program
proved effective. However, because bank failures
continued to grow during 2009 and 2010, the
FDIC remained concerned that terminating the
TAGP too quickly could reverse the progress made
in restoring financial markets to more normal
conditions. To help transition institutions out of
the TAGP, therefore, the FDIC Board, on August
26, 2009, approved a final rule that extended
the TAGP for an additional six months, through
June 30, 2010, with higher assessment fees for
institutions participating in the extension period.
The final rule also provided an opportunity for
participating entities to opt out of the TAGP
extension. Over 6,400 institutions (or 93 percent
of institutions participating at year-end) elected to
continue in the TAGP.
In June 2010, the FDIC remained concerned that,
because of the lingering effects of the financial
crisis and recession, terminating the TAGP too
quickly could lead to liquidity problems for a
number of community banks. The Board therefore
approved a final rule authorizing another six-month
extension, until December 31, 2010, of
the TAGP. The FDIC did not increase assessment
fees with the second extension, but the final rule
reduced the permissible interest rate for the NOW
accounts covered by the guarantee to no higher
than 0.25 percent in order to better align the
program with prevailing market rates. The FDIC
provided institutions still participating in the
TAGP in the second quarter of 2010 with a one-time
opportunity to opt out of the second TAGP
extension, effective July 1, 2010. Almost 6,000
institutions (or 93 percent of those institutions
that were participating at the time) remained in
the TAGP. The final rule authorizing the second
extension also gave the FDIC Board the authority
to further extend the TAGP, without further
rulemaking, should economic conditions warrant
an additional extension, for a period of time not
to extend beyond December 31, 2011. However,
the passage of the Dodd-Frank Act eliminated the
need for such an extension of the TAGP.
Temporary Unlimited Coverage for
Noninterest-Bearing Transaction Accounts
under the Dodd-Frank Act
The Dodd-Frank Act provides temporary
unlimited deposit insurance coverage for
noninterest-bearing transaction accounts from
December 31, 2010 through December 31, 2012,
regardless of the balance in the account and the
ownership capacity of the funds. The unlimited
coverage is available to all depositors, including
consumers, businesses, and government entities.
The coverage is separate from, and in addition
to, the standard insurance coverage provided for
a depositor’s other accounts held at an FDIC-insured
bank.
A noninterest-bearing transaction account is a
deposit account where:
- Interest is neither accrued nor paid;
- Depositors are permitted to make transfers
and withdrawals; and
- The bank does not reserve the right to require
advance notice of an intended withdrawal.
The Act’s temporary unlimited coverage also
includes trust accounts established by an attorney
or law firm on behalf of clients, commonly known
as IOLTAs, or functionally equivalent accounts.
Money market deposit accounts (MMDAs) and
NOW accounts are not eligible for this temporary
unlimited insurance coverage, regardless of the
interest rate, even if no interest is paid.
Complex Financial Institution Program
The FDIC’s Complex Financial Institution
(CFI) Program addresses the unique challenges
associated with the supervision, insurance,
and potential resolution of large and complex
insured institutions. The FDIC’s ability to
analyze and respond to risks in these institutions
is of particular importance, as they make up a
significant share of the banking industry’s assets.
The Program provides for a consistent approach
to large-bank supervision nationwide, allows
for the analysis of financial institution risks
on an individual and comparative basis, and
enables a quick response to risks identified at
large institutions. The Program’s objectives are
achieved through extensive cooperation with the
FDIC’s regional offices, other FDIC divisions and
offices, and the other bank and thrift regulators.
Given the heightened risk levels stemming
from continued adverse economic and market
conditions, the FDIC has expanded its presence at
the nation’s largest and most complex institutions
through additional and enhanced on-site and off-site
monitoring.
The Program expanded coverage at large and
complex institutions from eight to ten in 2010
and increased its on-site presence, as designated
by the FDIC Board, to assess risk, monitor
liquidity, and participate in targeted reviews with
the primary federal regulators. In July 2010, the
FDIC entered into an interagency memorandum
of understanding (MOU) which allows FDIC
examiners to conduct special examinations of
certain institutions covered by the MOU. The
MOU should enhance the FDIC’s access to those
institutions and encourage ongoing effective
communication among the federal regulators.
The Large Insured Depository Institution (LIDI)
Program remains the primary instrument for
off-site monitoring of IDIs with $10 billion or
more in total assets, or under this threshold at
regional discretion. The LIDI Program provides a
comprehensive process to standardize data capture
and reporting through nationwide quantitative
and qualitative risk analysis of large and complex
institutions. As of June 30, 2010, the LIDI
Program encompassed 110 institutions with
total assets of $10.3 trillion. The LIDI Program
was refined again in 2010 to better quantify risk
to the insurance fund in all large banks. This
was accomplished, in collaboration with other
divisions and offices, through a revision to the
LIDI Scorecard, which better aligns with and
supports the FDIC’s large-bank deposit insurance
pricing responsibilities. The LIDI Scorecard is
designed to weigh key risk areas and provide a risk
ranking and measurement system that compares
IDIs on the basis of both the probability of failure
and exposure to loss at failure. The comprehensive
LIDI Program is essential to effective large bank
supervision by capturing information on the risks
and utilizing that information to best deploy
resources to high-risk areas, determine the need
for supervisory action, and support insurance
assessments and resolution planning.
Office of Complex Financial Institutions
The Office of Complex Financial Institutions
(OCFI) was created in 2010 to focus on the
expanded responsibilities of the FDIC by the
Dodd-Frank Act for the assessment of risk in
the largest, systemically important financial
institutions. The OCFI is responsible for oversight
and monitoring of large, systemically important
financial institutions (SIFIs). Specifically, through
both on-site and off-site monitoring, OCFI
will develop an in-depth understanding of the
operations and risk profiles of all IDIs and bank
holding companies with assets over $100 billion
and other companies designated as systemically
important by the Financial Stability Oversight
Council (FSOC).
Additionally, in conjunction with the Federal
Reserve, OCFI will develop regulations governing
the preparation, approval, and monitoring of resolution and recovery
plans developed by SIFIs
commonly referred to as “living wills.” OCFI will
be responsible for developing detailed resolutions
plans and strategies for assigned institutions.
OCFI will also identify and manage international
and cross-border issues that might complicate the
resolution process, and, accordingly, will build
and maintain relationships with key international
stakeholders.
In 2010, OCFI focused on creating and staffing
senior management positions. Work also began
on developing resolution strategies for specific
SIFIs and more broadly scoping a process,
strategies, and data needs for ongoing risk
assessment at SIFIs.
Center for Financial Research
The Center for Financial Research (CFR) was
founded by the Corporation in 2004 to encourage
and support innovative research on topics
important to the FDIC’s role as deposit insurer
and bank supervisor. During 2010, the CFR co-sponsored
three major conferences.
The 20th Annual Derivatives Securities and
Risk
Management Conference, which the FDIC
co-sponsored with Cornell University’s Johnson
Graduate School of Management and the
University of Houston’s Bauer College of Business,
was held in April 2010 at the Seidman Center.
The two-day conference attracted over 100
researchers from around the world. Conference
presentations focused on issues such as credit risk
measurement, equity option pricing, commodity
market speculation, and risk management.
In October 2010, the FDIC and the Federal
Reserve hosted a two-day symposium on
mortgages and the future of housing finance.
Over 300 experts from the public, private, and
academic sectors participated in discussions of
mortgage finance, foreclosures, loan modifications,
and securitizations. Federal Reserve Chairman Ben
Bernanke and FDIC Chairman Sheila Bair spoke
at the symposium regarding the need for reform
to restore stability to the housing finance system
and to aggressively examine the incentives of the
U.S. system of mortgage finance to ensure that the
problems that contributed to the financial crisis
are addressed.
The CFR and the Journal for Financial Services
Research (JFSR) hosted the 10th Annual Bank
Research Conference: Finance and Sustainable
Growth in October. The two-day conference
included the presentation of 17 papers and
was attended by over 100 participants. Experts
discussed a range of topics, including the global
financial crisis, credit derivatives and the default
risk of large complex financial institutions, and
bank capital adequacy.
International Outreach
The past year has been defined by broad
international efforts to respond effectively to the
causes of the global financial crisis. One of the
important lessons of the crisis is that effective
systems of deposit insurance are important not
only for the protection of individual depositors
but also for overall financial stability. Inadequate
systems of deposit insurance place individual
depositors at risk and can have a significant
negative impact on public confidence in the
financial system as a whole. The FDIC has
provided leadership and support to international
standard-setting organizations and international
financial institutions, and has established bilateral
agreements with other bank supervisory and
deposit insurance governmental organizations,
resulting in significant advancements in
promoting sound financial systems.
In 2009, the International Association of Deposit
Insurers (IADI) and the Basel Committee on
Banking Supervision (BCBS) jointly published
Core Principles for Effective Deposit Insurance
Systems (Core Principles). The Core Principles were
later adopted by the Financial Stability Board
(FSB), which added them to its Compendium of
Standards. Under the FDIC’s leadership, IADI,
BCBS, the International Monetary Fund (IMF),
the European Forum of Deposit Insurers (EFDI),
the World Bank, and the European Commission
collaborated in developing a methodology for
assessing compliance with the Core Principles.
The methodology was submitted for approval by the executive governing boards of IADI,
EFDI, and BCBS and presented to the FSB in
December 2010. Together, the Core Principles
and the methodology will be considered for
inclusion among the FSB’s 12 Key Standards
for Sound Financial Systems. Once adopted,
the Core Principles methodology is expected
to be used to assess deposit insurance systems
by the IMF in its Financial Sector Assessment
Program, and by the FSB in its peer review of
deposit insurance systems, which is scheduled for
2011. The leadership of IADI under Martin J.
Gruenberg, the Vice Chairman of the FDIC, has
been instrumental in advancing the establishment
of the Core Principles as the standards for deposit
insurance. Vice Chairman Gruenberg was re-elected
to serve as President of IADI and Chair
of the Executive Council in November 2010.
During his tenure as President, the membership
of IADI has grown from 48 to 62 deposit
insurance members, including new members from
Germany, Italy, Poland, Belgium, Switzerland,
Australia, and Paraguay.
The FDIC is integrally involved with the FSB’s
Cross Border Crisis Management Working
Group (CBCM). The group has been tasked with
evaluating options and making recommendations
on how to address issues related with the too-big-to-fail issue. In particular, the CBCM has been
focused on recovery and resolution (R&R) for
SIFIs. FSB member countries have been working
on preparing R&R plans for SIFIs domiciled in
their jurisdictions. The FDIC has been involved
in R&R planning for the top five U.S. firms and
has participated in Crisis Management Group
meetings hosted by foreign regulators. The
FDIC has also provided input and leadership
to the CBCM’s development of technical work
streams related to obstacles encountered in a
SIFI resolution. These work streams are focused
on booking practices, intragroup guarantees,
payments and settlement systems and legal
entities/management information systems.
Since January 2009, international regulators have
been meeting periodically to exchange views and
share information on developments related to
central counterparties (CCPs) for over-the-counter
(OTC) credit derivatives. Based on the success of
this cooperation, the OTC Derivatives Regulators’
Forum was formed to provide regulators with a
means to cooperate, exchange views, and share
information related to OTC derivatives, CCPs,
and trade repositories. FDIC staff has an active
role in the OTC Derivatives Regulators’ Forum
and the OTC Derivative Supervisors’ Group.
Work streams of particular interest include
collateral safekeeping practices, dispute resolution,
and the build out of the central clearing platforms.
Additionally, staff is completing a data access/user
agreement MOU to assure ready access to data in
trade repositories.
Throughout 2010, the FDIC participated in
Governors and Heads of Supervision and BCBS
meetings and contributed to the work streams,
task forces, and the Policy Development Group
that developed and refined regulatory forms to
address a new definition of capital, treatment of
counterparty credit risk, an international leverage
ratio, capital conservation and countercyclical
buffers, liquidity requirements, and surcharges
on SIFIs. The BCBS published the final capital
and liquidity reforms in December 2010,
along with the results of the comprehensive
quantitative impact study and an assessment of
the macroeconomic impact of the transition to
stronger capital and liquidity requirements. In
addition to these capital and liquidity reforms,
the FDIC also participated in BCBS initiatives
related to surveillance standards, remuneration,
supervisory colleges, operational risk, accounting
issues for consistency, and corporate governance.
The FDIC finalized a resolution and crisis
management MOU with the China Banking
Regulatory Commission (CBRC) in 2010. The
FDIC is currently in the process of negotiating
a similar MOU with the Swiss Financial Market
Supervisory Authority (FINMA). The MOU
with FINMA is expected to be finalized by the
end of 2011. The FDIC has reached out to other
strategic countries including India, and has been
met with enthusiasm by Indian officials. In 2011,
the FDIC will review its resolution MOU with
the Bank of England to determine what, if any, changes need to be made
in light of regulatory
developments both in the U.S. and the United
Kingdom.
The 2010 Strategic and Economic Dialogue
(S&ED) was held in Beijing, China, in May and
was the second such event held under President
Obama’s administration. President Barack Obama
and Chinese President Hu Jintao agreed to the
S&ED in April 2009 to deepen and promote
mutually beneficial cooperation between the U.S.
and China in key economic and strategic areas.
Chairman Bair and staff participated in this year’s
S&ED and also met with leaders of the People’s
Bank of China and the CBRC in side meetings to
further strengthen the FDIC’s relationship with
these bank regulatory agencies. During the
meeting with the CBRC, CBRC Chairman Liu
and Chairman Bair signed an MOU enhancing
cooperation in times of financial instability and in
cases of cross-border resolution.
Chairman Bair and staff visited New Delhi and
Mumbai, India, in June to meet with senior
representatives of public and private sector
organizations, including the Ministry of Finance,
the Reserve Bank of India (RBI), the Deposit
Insurance and Credit Guarantee Corporation,
and the National Bank for Agriculture and Rural
Development to discuss financial inclusion efforts
in the U.S. and India and to explore possible areas
of future cooperation between the two countries.
Chairman Bair was the keynote speaker at an
event hosted by the RBI, which was attended
by senior RBI officials, bankers, and financial
industry representatives. The Chairman’s speech
addressed U.S. financial regulatory reform, the
importance of promoting financial inclusion and
education, and the efforts made by both the U.S.
and India to reach their unbanked population.
Chairman Bair also announced plans to translate
the FDIC’s Money Smart program into Hindi for
use in India.
The FDIC continued to provide technical
assistance through training, consultations, and
briefings to foreign bank supervisors, deposit
insurance authorities, and other governmental
officials.
- The FDIC, on behalf of IADI, provided the
content and technical subject matter expertise
in the development of four tutorials released
through the Financial Stability Institute’s FSI
Connect: Premiums and Fund Management,
Deposit Insurance – Reimbursing Depositors
– Parts I and II, and Liquidation of Failed
Bank Assets. FDIC hosted two IADI executive
training seminars: Resolution of Problem
Banks (April) and Claims Management:
Reimbursement to Insured Depositors
(July). Over 125 deposit insurance and
bank regulatory officials from more than 35
countries attended the training programs. The
FDIC developed the IADI Capacity Building
Program website for organizations to use
for identifying available technical expertise
resources from IADI members. The website
was released in the fall of 2010.
- The FDIC hosted 87 visits with 580 visitors
from approximately 60 countries in 2010.
In July, Chairman Bair met with members
of the European Parliament’s Committee on
Economic and Monetary Affairs to discuss
U.S. financial regulatory reform and the
FDIC’s new authorities, SIFIs, and Basel II
reform. FDIC staff met with representatives
of Chinese authorities and banks on multiple
occasions throughout the year. Topics of
these meetings included discussions about
the health of the U.S. banking industry,
financial reform, FDIC supervision of banks,
the bank resolution process, and the FDIC’s
management of the distressed assets of failed
banks. The FDIC hosted a multi-day study
tour for the Board of Directors of the Nigeria
Deposit Insurance Corporation (NDIC) in
October. NDIC guests also traveled to the
New York Regional Office to learn about
the role of the regional offices and their
relationship with headquarters. The FDIC
hosted secondees, one from each of the
following organizations during 2010: the
Korea Deposit Insurance Corporation, the
Financial Services Commission in Korea, and
the Savings Deposit Insurance Fund of Turkey.
- June marked the three-year anniversary of the
secondment program agreed upon between the
Financial Services Volunteer Corps (FSVC)
and the FDIC to place one or more FDIC
employees full-time in FSVC’s Washington,
DC, office. Between September 2009 and
August 2010, FSVC hosted four secondees
who participated in 20 projects that took place
in Albania, Algeria, Egypt, Jordan, Malawi,
and Morocco. Additionally, the secondees
provided services for their counterparts in
Albania, Egypt, Libya, and Malawi from
Washington, DC, and completed a project
for the Central Bank of Iraq in Jordan. The
secondees worked directly with eight overseas
regulatory counterparts and trained almost
440 individuals. In these efforts, they spent
over 1,850 hours providing direct technical
assistance.
- The FDIC continues to support the work and
mission of the Association of Supervisors of
Banks of the Americas (ASBA). In furtherance
of the FDIC’s commitment to ASBA
leadership and strategic development, in July
2010, FDIC staff participated in ASBA’s
board of directors and technical committee
meetings. To facilitate ASBA’s research and
guidance initiatives, a senior bank examiner
will participate in ASBA’s Stress Testing
Working Group, and FDIC staff is responding
to ASBA’s review of the implementation of
International Financial Reporting Standards.
These research and guidance efforts are
intended to promote sound bank supervisory
practices among ASBA members.
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