Report finds workplace environment (in wake of sexual harassment charges), examiner attrition as key challenges for agency

Improving the workplace environment and addressing increasing worker attrition – especially among the examiner workforce – are among the top challenges facing the federal insurer of bank deposits, according to a report issued late Friday.

In its Top Management and Performance Challenges Facing the Federal Deposit Insurance Corporation (FDIC) – the annual assessment of the top management and performance challenges facing the FDIC – the agency’s office of inspector general said staff attrition and workplace environment improvement are updates from the previous year’s report.

Further, the report found that failures last year by two, large regional banks (Signature Bank of New York, N.Y., and First Republic Bank of San Francisco) “demonstrated the need for the FDIC to escalate supervisory actions when risks are identified, consistent with the FDIC’s forward-looking supervision initiative.”

The report also asserted that the FDIC should consider emerging risks in its failure estimation process and “ensure that the FDIC can execute its orderly liquidation resolution authority.”

On workplace environment, the report noted that in its 2020 evaluation of the agency’s efforts on preventing and addressing sexual harassment, low responses to a survey on sexual harassment complaints and misconduct allegations suggested that there may have been underreporting of sexual harassment allegations.

The report also highlights the November 2023 reporting in the The Wall Street Journal of several articles outlining a toxic work environment at the FDIC over 10 years that alleged sexual harassment, a heavy drinking culture, improper behavior by FDIC senior leaders, and an unwillingness of employees to file sexual harassment complaints because of the fear of retaliation.

The report then notes that later that month, the FDIC Board established a committee co-chaired by FDIC Director Jonathan McKernan and FDIC Director (and Acting Comptroller of the Currency) Michael Hsu to oversee a third-party review of the agency’s workplace culture.

Further, the OIG’s office said it has “work ongoing” to follow up on its assessment of the agency’s sexual harassment prevention program. The OIG also has, it said, a “special inquiry” to report on the leadership climate at the FDIC “with regard to all forms of harassment and inappropriate behavior.”

Regarding staff attrition, the report said that the agency has faced increasing rates of erosion of its worker rolls and has been “unable to close the attrition gap through hiring.”

In fact, the report found, the staff attrition rate remained higher than the pre-pandemic rates of 6.3% in 2018 and 7% in 2019. “In part, the attrition increased in 2021 and 2022 because of the FDIC’s Voluntary Early Retirement and Separation Incentive Program, which began in early March 2020, was suspended in mid- March 2020 as a result of the pandemic, and reintroduced in February 2021 for certain positions,” the report states.

The exam cadre has been especially hit hard by attrition, the report stated. The report notes that overall attrition among all FDIC examiners increased in 2021 and 2022 after the pandemic but began to contract in 2023.

“Although overall attrition rates trended lower in 2023, examiner resignations continued to increase,” the report found. “For 2020, examiner attrition equaled about 4% of all FDIC examination staff with 38 examiners resigning. In 2021, examiner attrition rose to about 6% with 83 examiners resigning. In 2022, about 7% of examiners left the FDIC with 85 examiners resigning. The examiner attrition rate in 2023 was 6% with 100 examiners resigning.”

The report also notes that turnover rates for new examiners are greater than those for new employees throughout the agency. It states that the FDIC’s March 2023 Baseline Organizational Assessment found that early career examiners with 2 years of training had a 15.4% turnover rate, but the turnover rate for non-examiner FDIC workers with 2 years of service was 4.3%.

The report asserts that examiner departures are costly for the agency in both funding and time, especially since the agency commits about four years of training for new examiners from the time they are hired until they take the field as commissioned examiners.

The report lists the top nine challenges for the agency as:

  • Strategic human capital management at the FDIC
  • Identifying and addressing emerging financial sector risk
  • Ensuring readiness to execute resolutions and receiverships
  • Identifying cybersecurity risks in the financial sector
  • Assessing crypto-asset risk
  • Protecting consumer interests and promoting economic inclusion
  • Fortifying IT security at the FDIC
  • Strengthening FDIC contract and supply chain management
  • Fortifying governance of FDIC programs and data

Top Management and Performance Challenges Facing the Federal Deposit Insurance Corporation