International Outreach Resolutions and Receiverships
Throughout 2012, the FDIC played a leading role among international standard-setting, regulatory, supervisory, and multi-lateral organizations by supporting the global development of effective deposit insurance and bank supervision systems, maintaining public confidence and financial stability, and promoting effective resolution regimes as integral components of the financial safety net. Among the key institutions the FDIC collaborated with were the Association of Supervisors of Banks of the Americas (ASBA), the Basel Committee on Banking Supervision (BCBS), the European Forum of Deposit Insurers, the Financial Stability Board (FSB), the Financial Stability Institute (FSI), the International Association of Deposit Insurers (IADI), the International Monetary Fund (IMF), the International Information Technology Supervisors Group, and the World Bank.
Key to the international collaboration was the ongoing dialogue among then-Acting FDIC Chairman Martin J. Gruenberg, other senior FDIC leaders, and a number of senior financial regulators from the United Kingdom (U.K.) about the implementation of the Dodd-Frank Act, Basel III, and how changes in U.S., U.K., and European Union financial regulations affect global information sharing, crisis management, and recovery and resolution activities. In light of the large number of cross-border operations of large, complex financial institutions, the primary areas of discussion and collaboration were the FDIC’s Orderly Liquidation Authority under Title II of the Dodd-Frank Act, and the importance of cross-border coordination in the event a SIFI begins to experience financial distress.
During 2012, the FDIC participated in both Governors and Heads of Supervision and BCBS meetings. The FDIC supported work streams, task forces, and policy development group meetings to address BCBS work on the implementation of Basel III. The FDIC also helped monitor new leverage ratio and liquidity standards, and determine surcharges on global systemically important banks. Additionally, the FDIC participated in BCBS initiatives related to standards implementation, operational risk, accounting, review of the trading book, and credit ratings and securitization. The major issues addressed by these work streams included the recalibration of risk weights for securitization exposures, the comprehensive review of capital charges for trading positions, and the review of BCBS members’ domestic rule-making processes surrounding Basel II, Basel II.5, and Basel III.
International Association of Deposit Insurers
Under the leadership of then-Acting FDIC Chairman Gruenberg, IADI celebrated its tenth anniversary in October 2012. Chairman Gruenberg served as the President of IADI and the Chair of its Executive Council from November 2007 to October 2012. Worth noting is the remarkable impact IADI has made during its relatively short history, contributing not only to the security of individual depositors but also to global financial stability. Since its founding in 2002, IADI has grown from 26 founding members to 84 participants, including 64 members, 8 associates and 12 partners, and is strongly represented on every continent. IADI is now recognized as the standard-setting body for deposit insurance by all the major public international financial institutions, including the FSB, the Group of 20 (G-20), the BCBS, the IMF, and the World Bank.
Under the FDIC’s leadership, IADI has made significant progress in advancing the 2009 IADI and BCBS Core Principles for Effective Deposit Insurance Systems (Core Principles). In February 2011, the FSB approved the Core Principles and the Core Principles Assessment Methodology for inclusion in its Compendium of Key Standards for Sound Financial Systems. The Core Principles are officially recognized by both the IMF and World Bank and are now accepted for use in their Financial Sector Assessment Program (FSAP). This represents an important milestone in the acceptance of the role of effective systems of deposit insurance in maintaining financial stability. The FDIC has also worked with senior officials at the World Bank and IMF, and formalized IADI collaboration and support of the deposit insurance review portion of the FSAP reviews. Core Principles working group meetings, regional workshops, and training sessions were held in Washington, DC; Kuala Lumpur, Malaysia; Bogota, Colombia; and Nairobi, Kenya, during 2012.
Financial Stability Board
In February 2012, the FSB issued its Thematic Review on Deposit Insurance Systems Peer Review Report. The recommendations included a request for IADI to update its guidance that pre-dated the financial crisis and to develop additional guidance to address areas where the Core Principles may need more precision to achieve effective compliance, or to better reflect leading practices. The FDIC, in partnership with the Canadian Deposit Insurance Corporation, has taken a leadership role in responding to these recommendations with a set of six focused papers. Prepared under the auspices of the IADI Research and Guidance Committee Guidance Group, two of these papers were presented during the October 2012 IADI Executive Council meeting in London, England; the remaining four papers will be presented to the Executive Council in 2013. IADI and the BCBS will use the papers to enhance the guidance supporting the Core Principles and the accompanying Core Principles Assessment Methodology.
In November 2011, the G-20 endorsed the FSB’s Key Attributes of Effective Resolution Regimes for Financial Institutions (Key Attributes). The Key Attributes set out the core elements that the FSB considers necessary for an effective resolution regime and includes the ability to manage the failure of large, complex, and internationally active financial institutions in a way that minimizes systemic disruption and avoids the exposure of taxpayers to the risk of loss. During 2012, a number of initiatives were launched by the FSB related to operationalizing the Key Attributes. In January 2012, a special working group under the auspices of the Resolutions Steering Group was formed to draft an assessment methodology for the Key Attributes. The FDIC is actively participating in this effort alongside IADI, a number of FSB member jurisdictions, and international organizations such as the World Bank and the European Commission, and has participated extensively in drafting team meetings in Basel, Switzerland. In the second half of 2012, the FDIC participated in the drafting of a consultative document, entitled “Recovery and Resolution Planning: Making the Key Attributes Requirements Operational.” The document was released for public comment. The FDIC also hosted meetings for the Legal Entity Identifier Working Group, and co-hosted a series of Crisis Management Group meetings for the five U.S.-based G-SIFIs at the Seidman Center in Arlington, Virginia, and the Federal Reserve Bank of New York. FDIC representatives also participated in Crisis Management Group meetings hosted by foreign regulatory authorities in a number of jurisdictions.
In mid-2012, then-acting Chairman Gruenberg was appointed to chair a Thematic Peer Review on Resolution Regimes under the auspices of the FSB’s Standing Committee on Standards Implementation (SCSI). This Peer Review was tasked with conducting a survey of the existing regulatory and legislative landscape; identifying gaps in implementation of the Key Attributes; and providing guidance to the Key Attributes assessment methodology drafting team. A questionnaire was developed and sent to FSB member jurisdictions over the summer, with jurisdictions providing responses to the Peer Review Team in the fall. The Peer Review Team, comprising 20 members from multiple G-20 jurisdictions and multinational bodies, will develop a report for the SCSI in early 2013 on its findings.
Association of Supervisors of Banks of the Americas
With the goal of contributing to sound banking supervision and resilient financial systems in the Americas, the FDIC has been a member of ASBA since its founding in 1999. In recognition of the FDIC’s leadership in ASBA, the General Assembly elected the FDIC’s Director of Risk Management Supervision, Sandra Thompson, to serve a two-year term as Vice Chairman. Director Thompson was named Acting Chairman of ASBA until November 2012, upon the resignation of ASBA’s Chairman. In these capacities, Director Thompson presided over meetings of the technical committee, the assembly, and the board.
The FDIC led three ASBA technical assistance training missions in 2012, including a Financial Institution Analysis training program in Quito, Ecuador; a Credit Risk Management training program in Asuncion, Paraguay; and a Supervision of Operational Risk training program in Miami, Florida. The FDIC continued to provide subject-matter experts as instructors and speakers to support ASBA-sponsored training programs, seminars, and conferences. In addition, the FDIC participated in the ASBA working group on the Liquidity Coverage Ratio and Net Stable Funding Ratio Overview and established the FDIC-ASBA secondment program. Two ASBA members from the Central Bank of Barbados and the Superintendencia de Bancos de Guatemala were hosted by the FDIC under the inaugural program for eight weeks during the fall of 2012.
Supporting best practices through ASBA, the FDIC chaired the Basel III Liquidity Working Group and participated in several ASBA Working Groups concerning enterprise risk management, effective consumer protection frameworks, and corporate governance. The FDIC also led an internal review of ASBA’s Secretary General’s office in Mexico City Mexico, led the development of the 2013–2018 ASBA Strategic and Business Plans, developed the first handbook for the Board of Directors, and approved the external audit program.
Foreign Visitors Program
The FDIC continued its global role in supporting the development of effective deposit insurance and banking supervision systems through the provision of training, consultations, and briefings to foreign bank supervisors, deposit insurance authorities, international financial institutions, partner U.S. agencies, and other governmental officials. In 2012, the FDIC hosted 80 visits with over 565 visitors from approximately 42 jurisdictions. Many of these visits were multi-day study tours, enabling delegations to receive in-depth consultations on a wide range of deposit insurance issues. Officials from the Polish Bank Working Group, the Deposit Insurance of Vietnam, the National Bank of Ethiopia, the Deposit Protection Agency of the Kyrgyz Republic, and the Central Bank of Kenya benefited from these extended visits.
During 2012, the FDIC provided subject-matter experts to participate in seven FSI seminars around the world. The topics included risk-focused supervision, financial stability and stress testing, liquidity risk, Basel III, risk management, and regulating and supervising systemic banks. Additionally, 199 students from 13 countries attended FDIC examiner training classes through the FDIC’s Corporate University.
The FDIC continued its strong relationship with Chinese public institutions in 2012. The FDIC participated in the Fourth U.S.-China Strategic and Economic Dialogue on May 3, 2012, in Beijing, China, along with counterparts from all of the U.S. financial sector regulatory agencies, in a delegation led by the U.S. Treasury Secretary. The U.S. delegation met with counterparts from the Chinese regulatory agencies to discuss regulatory reforms and progress towards rebalancing their respective economies. The FDIC met separately with the People’s Bank of China (PBoC) concerning revisions to the current FDIC-PBoC Technical Assistance Memorandum of Understanding, and also about progress toward implementing a deposit insurance scheme in China. The FDIC held meetings with the China Banking Regulatory Commission (CBRC) to discuss further cooperation on SIFI-related matters. The U.S.-CBRC Bank Supervisors Bilateral Meeting, hosted by the FDIC, was held on October 15, 2012. This meeting involved the three U.S. banking agencies and the CBRC in discussions on a wide range of supervisory issues. In addition, the China delegation met with representatives from the FDIC’s Legal Division and Division of Resolutions and Receiverships to obtain guidance on drafting rules for bank resolution in China. The FDIC subsequently hosted a delegation from the CBRC, providing an overview of information technology (IT) examination, supervision and resolution processes, and the roles and responsibilities of the FDIC in the U.S. bank regulatory system.
Financial Services Volunteer Corps
June 1, 2012, marked the five-year anniversary of the secondment program agreed upon by the Financial Services Volunteer Corps (FSVC) and the FDIC to place one or more FDIC employees full-time in the FSVC’s Washington, DC, office on an annual basis. The FDIC provided support to several FSVC projects including participation in the U.S. Agency for International Development’s Partners for Financial Stability project in the Balkan region. The purpose of this consultation was to develop strategies for resolving problem loans in response to the Eurozone crisis.
FSVC support also included multiple FDIC-led training sessions with the Bank of Albania (the central bank). Follow-up consultations with the Albanian Deposit Insurance Agency, Bank of Albania, and the Ministry of Finance regarding bank liquidation processes, training sessions for examiners, an assessment of the legal framework, operational capabilities to manage a failure, and the implementation of an automated bank reporting and pay-out system were also completed. FDIC subject-matter experts also advised Albanian Financial Supervisory Authority leadership on the effective use of communications to foster relationships with foreign regulators and Albanian institutions, and public outreach and media relations strategies.
FDIC secondees also provided a study tour in New York for members of the Egyptian Banking Institute; traveled to Cairo to support the Egyptian Financial Supervisory Authority’s Institute for Financial Services in its assessment and development of a strategic plan for financial inclusion; and conducted a one-week training program on IT risk supervision for the National Bank of Serbia in partnership with the World Bank. In Tunisia, FDIC secondees advised an association of banking and financial experts on techniques used by U.S. regulators for collecting data and best practices of financial institutions for improving the quality and timeliness of data. Finally, the FDIC continued to lead the research and development of a strategy for targeting technical assistance for low-income countries in Sub-Saharan Africa.