FDIC Board gives thumbs up to $2.04B budget, down 2.3% from previous year; no bank failures so far in 2018

An operating budget that is 2.3% lower than the previous year was approved for 2019 by the Federal Deposit Insurance Corp. (FDIC) Board Tuesday, continuing a downward trend for the agency that started after the height of the financial crisis in 2010.

The peak of the agency’s operating budget, according to FDIC, was in 2010 during the apex of the financial crisis when the agency approved a financial plan of just more than $3 billion.

The 2019 operating budget of $2.04 billion also includes a net reduction of 182 staff positions from 2018, bringing the staffing at the insurer of deposits in banks and thrifts to 5,901 positions, the agency said.

FDIC Board Chairman Jelena McWilliams, in a statement, pointed out the 2019 budget is the ninth in a row of lower annual operating budgets and staffing levels for the agency. “This reflects, in large part, the continuing steady recovery of the banking industry from the recent financial crisis,” she said. She added that the budget:

  • Creates 23 new positions for information technology (IT) examiners and specialists to augment FDIC’s resources for conducting IT exams of large banks and technology service providers.
  • Adds 23 new positions for large bank supervision. “Today, 40 FDIC-supervised institutions have assets greater than $10 billion,” she said. “Ten years ago, only 23 institutions were that large; 20 years ago, only seven. The additional staff will help us address the unique challenges these large banks present.”
  • Funds completion of a new, $60 million backup data center in Dallas, scheduled to go online in mid 2019.
  • Provides $37 million for new technology.

In a memo, FDIC Deputy to the Chairman and Chief Financial Officer Steven O. App noted that budget and staffing authorizations are based on an analysis of projected workload associated with the FDIC’s responsibilities, including risk management and consumer protection, and resolution and receivership (among other things).

He reported that the agency projects the number of risk management examinations is projected to decline by 6.6% in 2019 (from 1,580 in 2018 to 1,476 in 2019), due primarily, he said, “to continuing institutional consolidation and a decrease in the frequency of examinations for most institutions with total assets between $1 billion to $3 billion.” But he also said the reduction workload is offset, at least partially, by growth in size and complexity of institutions being examined.

He also said that compliance and Community Reinvestment Act (CRA) examination workload is expected to drop by 5.5% (from 1,249 in 2018 to 1,180 in 2019). “Although institutional consolidation is also gradually reducing the number of compliance and CRA exams to be conducted each year, the impact of consolidation is partially offset by variation in the number of exams that must be conducted from year to year under FDIC policy,” he stated.

App also pointed out that, so far, “no insured financial institutions have failed in 2018.” (If that zero total holds for the year, it will be the first year since 2006 – the first year before the financial crisis began to ramp up – that there have been no FDIC-insured financial institution failures.) In the 10-year period 2007-2017, there were 527 insured-institution failures, according to FDIC records. Most of those (465) occurred between 2008 and 2012.

The chief financial officer also noted that receivership management workload at the agency is “projected to remain somewhat elevated due to the continuing work associated with post-failure receiverships and loss share agreements being managed by the FDIC from prior years.” He said the FDIC was still managing 279 active receiverships emanating from insured-institution failures, compared with 338 receiverships at the beginning of 2018. “Historically, a high level of residual receivership management work continues for several years beyond an institution’s failure date,” he noted.

FDIC Board Approves 2019 Operating Budget