Lack of full board complement, staff retirements among top challenges for FDIC, says IG

Nine top management and performance challenges were identified by the inspector general of the federal bank deposit insurer in an annual report released Friday – with the lack of a full complement of agency board members, trends in staff retirements as well as inconsistency in the agency’s approach to regulatory cost-benefit analyses among them.

Federal inspectors general are required to report on their agencies’ top challenges each year. The report Friday from the Federal Deposit Insurance Corp. (FDIC) Office of Inspector General (OIG) is based on the OIG’s experience and observations from its oversight work, reports by other oversight bodies, review of academic and other relevant literature, perspectives from government agencies and officials, and information from private-sector entities.

In a section on “strengthening governance of the FDIC,” the report points out that the FDIC Board has operated without a full membership since 2015 (currently, one seat of the five remains vacant; one board member – Martin Gruenberg – is serving in a holdover capacity, so two seats are currently eligible to be filled by new appointees).

From FDIC OIG report on top challenges

The report also notes that 42% of current FDIC employees (on board as of July 31, 2019) are eligible to retire within the next five years. These retirement figures include retirement eligibility of 60% for FDIC executives and 58% for its managers. While some might not retire on their eligibility dates, “this wave of potential retirements could deplete the FDIC’s institutional experience and knowledge, especially during a crisis,” the IG stated. It also pointed out that as of July 31, 2019, 47% of FDIC employees were classified as examiners, and 14% of examiners were eligible to retire at the end of 2019; that retirement-eligibility figure rises to 25% in three years (2022) and 33% in five years (2024).

The report also noted that the agency’s 2019 budget marked the ninth consecutive year of lower annual staffing levels and operating budgets, reflecting the FDIC’s reduced bank failure workload. The FDIC’s authorized staffing level at the beginning of 2019 of 5,901 positions represented a net reduction of 182 positions from 2018 (approximately 3.1%) and the operating budget was reduced by 2.3%.

Regarding cost-benefit analysis of regulations, the report said the agency “does not have criteria in place to distinguish among rules which are sufficiently ‘significant’ to require cost benefit analysis.” It added that the agency does not conduct retrospective cost benefit analyses on existing rules. “Performing such analyses would help the FDIC ensure that its rules are effective and achieve their intended objectives/outcomes,” it said.

The other six top challenges are:

  • Keeping Pace with Emerging Financial Technologies;
  • Enhancing the FDIC’s Information Technology Security Program;
  • Ensuring the FDIC’s Readiness for Crises;
  • Sharing Threat Information with Banks and Examiners;
  • Keeping FDIC Facilities, Information, and Personnel Safe and Secure;
  • Administering the Acquisition Process

FDIC OIG report: Top Management and Performance Challenges Facing the Federal Deposit Insurance Corporation (February 2020)