FDIC Board gives nod to operating budget of $2.26 billion, slightly lower from previous year

Hears report on DIF restoration plan

A $2.26 billion operating budget for 2022 – slightly lower overall (0.7%) from the previous year – was approved by the Federal Deposit insurance Corp. (FDIC) Board Tuesday.

However, the operating budget includes significant components that include ongoing operations (at $2.1 billion, a 4% increase from 2021), receivership funding ($75 million, a decrease of 57.1% from last year), and the Office of Inspector General (at $46.9 million, an increase of 4.6% from last year).

Next year’s spending plan also includes a net increase in staffing of 44 positions from last year, for a total 5,897 positions, the agency said.

The agency said its overall slight operating budget decrease was “largely due to the elimination of the increased contingency reserves approved by the Board for 2021 to ensure the FDIC’s readiness to be able to respond quickly to potential supervisory or resolutions issues related to the ongoing pandemic” from the coronavirus.

The agency said the increase in the ongoing operations component was from increases in pay and benefit costs, increases in authorized staffing in selected organizations, higher information technology (IT) costs for continuing operations (as part of the agency’s efforts to update its technology resources), and “initiation of a planned multi-year nationwide facilities modernization effort.”

A $25 million Corporate Unassigned contingency reserve is included in the ongoing operations budget, the agency said.

The receivership funding decrease, the agency said, was attributable to the elimination of the $100 million contingency reserve designed to deal with needs resulting from the financial impact of the coronavirus crisis.

The increase in the OIG budget (which is separately appropriated by Congress and not subject to FDIC Board approval) reflects a $2.7 million (7.3%) increase in salaries and compensation, which the agency said reflected “the increased cost of pay and benefits and planned hiring to fill authorized vacancies.”

In another development, the board heard an update on the restoration plan adopted by the agency last year to bring the reserve ratio of the Deposit Insurance Fund (DIF) to 1.35% of total insured deposits. Under the law, the restoration plan is for eight years.

“Extraordinary growth in insured deposits during the first and second quarters of 2020 caused the reserve ratio to decline below the statutory minimum as of June 30, 2020,” staff told the board. “Since the Board adopted the Plan, insured deposit growth decelerated compared to the extraordinary growth experienced in the first half of 2020. Banks experienced significant growth in insured deposits during the first quarter of 2021 due to subsequent additional fiscal stimulus and continued elevated savings rates.”

However, they added, since the first semiannual update was provided to the board last summer, insured deposits have grown in line with recent historical averages for the second and third quarters, resulting in a reserve ratio of 1.27% as of Sept. 30.

The agency said it expects the reserve ratio to return to the statutory mandate before the end of the eight-year period. However, in the meantime, the agency said it is monitoring deposit balance trends, potential losses, and other factors that affect the reserve ratio.

Proposed 2022 Operating Budget

Restoration Plan Semiannual Update