2016 Annual Report
I. Management’s Discussion and Analysis
The Year in Review
In 2016, the FDIC continued to play a leading role in supporting and promoting the global development of effective deposit insurance, bank supervision, and resolution regimes as integral components of the financial safety net. The FDIC worked with several standard-setting, regulatory, supervisory, and multi-lateral organizations, such as the Association of Supervisors of Banks of the Americas (ASBA), BCBS, Financial Services Volunteer Corps (FSVC), Financial Stability Board (FSB), International Association of Deposit Insurers (IADI), International Monetary Fund (IMF), and World Bank. FDIC staff also: facilitated training for several hundred participants from counterpart agencies around the world; participated in technical assistance missions to several countries; and conducted secondment programs to further the international community’s understanding and implementation of best practices in deposit insurance, bank supervision, and failure resolutions.
International Association of Deposit Insurers
The IADI contributes to global financial stability by promoting international cooperation in the field of deposit insurance; providing guidance for establishing new, and enhancing existing, deposit insurance systems; and encouraging wide international contact among deposit insurers and other interested parties. IADI is now recognized as the standard-setting body for deposit insurance by major international financial institutions, including the FSB, BCBS, IMF, World Bank, and the European Community. Since its founding in 2002, IADI has grown from 26 members to 83 deposit insurers from nearly 80 jurisdictions. FDIC Chairman Martin J. Gruenberg served as the President of IADI and Chair of its Executive Council from November 2007 to October 2012. In October 2015, FDIC Vice Chairman Thomas M. Hoenig was elected to a two-year term to serve as President of IADI and Chair of its Executive Council.
IADI and the BCBS jointly issued the Core Principles for Effective Deposit Insurance Systems in 2009 and completed the accompanying Compliance Assessment Methodology for the Core Principles in 2010 (together, the Core Principles ). The FSB later included the Core Principles as part of its Compendium of Key Standards for Sound Financial Systems. During the fall of 2014, IADI’s Executive Council and the FSB approved a revised set of Core Principles that replaced the original (2009) version.
Subsequently, an IADI drafting team, led by FDIC staff, revised the Handbook for the Assessment of Compliance with the Core Principles. The handbook, which was approved by IADI in early 2016, is designed as a “how-to” guide, providing additional guidance on assessing a jurisdiction’s compliance with the Core Principles and includes lessons learned from collaboration with IMF and World Bank Financial Sector Assessment Program (FSAP) review teams, IADI Core Principles Regional Workshops, and IADI Self-Assessment Technical Assistance Program (SATAP) reviews.
The IMF and World Bank use the Core Principles and handbook in the context of the FSAP reviews, to assess the effectiveness of jurisdictions’ deposit insurance systems and practices. This represents an important milestone in the growing global acceptance of the role of effective deposit insurance systems in maintaining financial stability. IADI, under FDIC leadership of the Training and Conference Committee, has trained more than 300 staff members from more than 74 jurisdictions in conducting self- assessments for compliance with the Core Principles. FDIC executives and subject-matter experts partnered with IADI to develop and deliver several international programs in 2016. In April 2016, for example, Vice Chairman Thomas M. Hoenig joined global bank resolution and deposit insurance leaders at a conference jointly hosted by IADI’s North American, Latin American, and Caribbean Regional Committees entitled the “First Americas Deposit Insurance Forum.” The conference explored key issues related to safety net relationships and resolution. In addition, as IADI President and Chair of its Executive Council, the Vice Chairman led IADI’s 15th Annual General Meeting and Conference in October 2016, in Seoul, Korea. In supporting the Vice Chairman in this role, FDIC staff provides strategic guidance and leadership to multiple IADI standing committees, subcommittees, and working groups.
Association of Supervisors of Banks of the Americas
The FDIC has been a member of ASBA since its founding in 1999 and supports ASBA’s mission of promoting sound bank supervision and regulation throughout the Western Hemisphere. ASBA represents bank supervisors from 36 jurisdictions. The FDIC strives to lead the development of strong supervisory policies in this hemisphere through actively engaging with the ASBA Board, chairing ASBA’s Training and Technical Committee, and providing leadership in many of the Association’s research and guidance working groups.
In 2016, senior FDIC staff chaired the ASBA Training and Technical Committee, which is responsible for designing and implementing ASBA’s training strategy that advances the adoption of sound bank supervision policies and practices among members. ASBA’s training program reaches more than 600 members annually, with FDIC support, both as chair and training provider.
Basel Committee on Banking Supervision
The FDIC supported the development of sound regulatory policy through effective participation in the BCBS and its relevant groups, subgroups, and task forces. Major work areas for the BCBS include those conducted by the:
- Policy Development Group (PDG) and its:
- Coherence and Calibration Task Force
- Working Group on Capital
- Trading Book Group
- Leverage Ratio Group
- Working Group on Liquidity
- Risk Measurement Group
- Ratings and Securitization Work Stream
- Task Force on Standardized Approaches
- Task Force on Interest Rate Risk in the Banking Book
- Task Force on Scope of Regulatory Consolidation
- Research Task Force
- Quantitative Impact Study Working Group
- Supervision and Implementation Group and its:
- Working Group on Operational Risk
- Standards Implementation Group – Banking Book
- Standards Implementation Group – Trading Book
- Task Force on Supervisory Colleges
- Task Force on Pillar 2
- Macroprudential Supervision Group
- Accounting Experts Group and its:
- Audit Subgroup
- Anti-Money Laundering Expert Group
- Task Force on Simplicity and Comparability
- Task Force on Sovereign Exposures
- Working Group on Margining Requirements
- Over-the-Counter (OTC) Derivatives Regulators’ Forum
- OTC Derivatives Supervisor Group
- OTC Derivatives Assessment Team
- Joint Central Counterparties Task Force
- Task Force on Securitization Markets
International Derivatives Work
For many years, the FDIC has been actively engaged, in cooperation with market, prudential, and financial stability authorities, in policy development and regulatory activities in the derivatives markets. The FDIC also participates in the work of Derivatives Regulators’ Forum and the OTC Derivatives Supervisors Group.
International Capacity Building
The FDIC’s international efforts supporting the development of effective deposit insurance systems, bank supervisory practices, and bank resolution strategies continued to grow in 2016. FDIC staff contributed to international capacity building by providing study tours, secondments, and technical assistance to foreign counterparts. These engagements resulted in an enhanced dialogue between the FDIC and foreign counterparts in significant areas such as bank supervision and regulatory developments post crisis, the legal framework and operations for bank resolutions, and optimal funding strategies for deposit insurers.
FDIC management and staff hosted study tours for 267 individuals representing 28 jurisdictions during the year. In addition, the FDIC’s Corporate University provided training in bank supervision and information technology to 78 foreign delegates from 16 jurisdictions. In 2015, the FDIC launched a new training program for foreign regulatory officials, FDIC 101: An Introduction to Deposit Insurance, Bank Supervision, and Resolutions (FDIC 101), designed to provide a structured and comprehensive view of how the FDIC executes its key business functions. The FDIC held two sessions of FDIC 101 in 2016, which were attended by 62 students representing 31 jurisdictions and the World Bank.
The FDIC contributes to global and domestic bank supervision, deposit insurance, and resolution initiatives by providing staff to support long-term projects and technical assistance missions led by the IMF, U.S. Treasury Department, FSVC, and World Bank. The FDIC continued longstanding programs for staffing details with the Treasury Department’s Office of International Banking and Securities Markets and secondments with FSVC to assist other countries with financial regulation development. While at Treasury, FDIC detailees lend expertise in supervision, resolutions, deposit insurance, policy-making, and regulation for international banking. FSVC programs are often funded by other U.S. government offices and included project work on anti- money laundering during the year.
The FDIC also completed short-term technical assistance missions to Greece and Kosovo to provide consultative assistance. The FDIC partnered with the World Bank to provide technical assistance to the Indonesia Deposit Insurance Corporation and with the Association of Supervisors of Banks of the Americas to provide training in deposit insurance and resolution systems to ASBA member countries.
The FDIC expands and strengthens international engagement by providing secondment opportunities to foreign officials to engage in long-term consultation with FDIC subject matter experts in areas related to bank supervision, deposit insurance, and resolutions. In 2016, two officials from the Deposit Insurance Corporation of Japan and the Korea Deposit Insurance Corporation concluded their secondments to the FDIC, and two new secondees from these agencies joined the FDIC, each for one-year assignments. Singapore also began a secondment with the FDIC in 2016.
Key International Engagements
The FDIC continued to advance policy making priorities and strengthen its relationships with key jurisdictions worldwide through its participation in a number of interagency dialogues in 2016. Jurisdictions participating in these dialogues included China, India, and member countries of the North American Free Trade Agreement (NAFTA).