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2016
ANNUAL
REPORT

FEDERAL DEPOSIT INSURANCE CORPORATION

THIS PAGE INTENTIONALLY LEFT BLANK

2016
ANNUAL
REPORT

FEDERAL DEPOSIT INSURANCE CORPORATION

ANNUAL REPORT

FEDERAL DEPOSIT INSURANCE CORPORATION
550 17th Street NW, Washington, DC 20429 	

OFFICE OF THE CHAIRMAN

February 15, 2017
Dear Sir,
In accordance with:
♦♦ the provisions of Section 17(a) of the Federal Deposit Insurance Act,
♦♦ the Chief Financial Officers Act of 1990, Public Law 101-576,
♦♦ the Government Performance and Results Act of 1993 (as amended) and the GPRA
Modernization Act of 2010,
♦♦ the provisions of Section 5 (as amended) of the Inspector General Act of 1978,
♦♦ the Reports Consolidation Act of 2000, and
♦♦ the provisions of the Fraud Reduction and Data Analytics Act of 2015,
the Federal Deposit Insurance Corporation (FDIC) is pleased to submit its 2016 Annual Report (also referred
to as the Performance and Accountability Report), which includes the audited financial statements of the Deposit
Insurance Fund and the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund.
In accordance with the Reports Consolidation Act of 2000, the FDIC assessed the reliability of the performance
data contained in this report. No material inadequacies were found, and the data are considered to be complete
and reliable.
Based on internal management evaluations, and in conjunction with the results of independent financial statement
audits, the FDIC can provide reasonable assurance that the objectives of Section 2 (internal controls) and Section
4 (financial management systems) of the Federal Managers’ Financial Integrity Act of 1982 have been achieved,
and that the FDIC has no material weaknesses. However, the U.S. Government Accountability Office did identify
information technology issues that aggregate to a significant deficiency. The FDIC has efforts underway to address
this deficiency. We are committed to maintaining effective internal controls corporate-wide in 2017.
Sincerely,

Martin J. Gruenberg
Chairman
The President of the United States
The President of the United States Senate
The Speaker of the United States House of Representatives

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2016
TA B L E O F C O N T E N T S
Message from the Chairman...............................................................................................................................5
Message from the Chief Financial Officer........................................................................................................15
	 I.	 Management’s Discussion and Analysis.................................................................................................17
The Year in Review...................................................................................................................................19
Overview............................................................................................................................................19
Implementation of Key Regulations ..................................................................................................19
Deposit Insurance...............................................................................................................................22
Supervision ........................................................................................................................................24
Community Banking Initiative...........................................................................................................33
Activities Related to Systemically Important Financial Institutions.....................................................37
Depositor and Consumer Protection..................................................................................................43
Receivership Management..................................................................................................................51
Minority and Women Inclusion.........................................................................................................53
International Outreach ......................................................................................................................55
Effective Management of Strategic Resources......................................................................................58
	 II.	 Performance Results Summary..............................................................................................................63
Summary of 2016 Performance Results by Program...........................................................................65
Performance Results by Program and Strategic Goal...........................................................................67
Prior Years’ Performance Results.........................................................................................................73
	 III.	 Financial Highlights.................................................................................................................................81
Deposit Insurance Fund Performance.................................................................................................83
	 IV.	 Budget and Spending...............................................................................................................................87
FDIC Operating Budget.....................................................................................................................89
2016 Budget and Expenditures by Program........................................................................................90
Investment Spending..........................................................................................................................91
	 V.	 Financial Section......................................................................................................................................93
Deposit Insurance Fund (DIF)...........................................................................................................94
FSLIC Resolution Fund (FRF).........................................................................................................111
Government Accountability Office Auditor’s Report.........................................................................119
Management’s Report on Internal Control Over Financial Reporting...............................................126
Management’s Response to the Auditor’s Report...............................................................................127
	 VI.	 Corporate Management Control............................................................................................................129
Fraud Reduction and Data Analytics Act of 2015.............................................................................131
Management Report on Final Actions..............................................................................................132
	VII.	 Appendices.............................................................................................................................................137
A.	 Key Statistics...............................................................................................................................139
B.	 More About the FDIC................................................................................................................152
C.	 Office of Inspector General’s Assessment of the Management and Performance
Challenges Facing the FDIC.......................................................................................................161
D.	Acronyms ...................................................................................................................................172
AN NUAL REP ORT 2016

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INSURING DEPOSITS ♦ EXAMINING AND SUPERVISING INSTITUTIONS ♦
MAKING LARGE AND COMPLEX FINANCIAL INSTITUTIONS RESOLVABLE ♦
MANAGING RECEIVERSHIPS ♦ EDUCATING CONSUMERS
In its unique role as deposit insurer of banks and savings associations, and in
cooperation with the other state and federal regulatory agencies, the FDIC
promotes the safety and soundness of the U.S. financial system and insured
depository institutions by identifying, monitoring, and addressing risks to
the Deposit Insurance Fund.
The FDIC promotes public understanding and the development of sound
public policy by providing timely and accurate financial and economic
information and analyses. It minimizes disruptive effects from the failure
of financial institutions and assures fairness in the sale of financial products
and the provision of financial services.
The FDIC’s long and continuing tradition of excellence in public service
is supported and sustained by a highly skilled and diverse workforce that
continuously monitors and responds rapidly and successfully to changes in
the financial environment.

At the FDIC, we are working together to be the best.

2016
M E S S A G E F RO M T H E C H A I R M A N
For 83 years, the FDIC has carried out its mission
of maintaining public confidence and stability in the
U.S. financial
system. The
FDIC does this
by insuring
deposits;
supervising
and examining
financial
institutions
for safety,
soundness,
and consumer
protection;
and managing
receiverships
when banks fail.
At the end of September 2016, the FDIC insured
deposits of $6.8 trillion in almost 600 million
accounts at nearly 6,000 institutions, supervised
3,827 institutions, and managed 404 active
receiverships having total assets of $3.759 billion.
The U.S. economy and the banking industry
continued to improve in 2016. After experiencing the
most severe financial crisis and economic downturn
since the 1930s, the United States is now well into the
recovery. The economy is expanding, although the
pace of economic growth has been weaker than the
long-term trend, and bank profitability remains lower
than pre-crisis levels. Still, the industry has been
strengthening balance sheets by building capital and
enhancing liquidity.
Stronger balance sheets indicate ample capacity for
FDIC-insured institutions to continue to support the
economic recovery. During the 12 months ended
September 30, loan balances at banks increased by
$591 billion, the largest 12-month dollar gain since
the year ending June 2008. Moreover, that growth
was broad-based, with all major loan categories

posting increases, and more than three-quarters of
all institutions reporting larger loan balances. Loan
growth was strongest at community banks, which
posted a 9.4 percent gain versus 6.8 percent for the
industry overall. Rising loan demand and a recent
pickup in the pace of economic activity are creating
favorable conditions for FDIC-insured institutions,
although the global economic outlook remains
uncertain and poses a potential downside risk for the
U.S. economy and financial system.
The number of both failed and problem institutions
declined again in 2016, and the Deposit Insurance
Fund (DIF) balance, which was almost $21 billion in
the red during the financial crisis, was $83.2 billion in
the black at year-end.
The FDIC is working to wind down the receiverships
of failed institutions, address emerging supervisory
challenges and cybersecurity threats, and support the
formation of new banks. This shift is indicative of the
move from a post-crisis recovery environment to one
of expanding economic growth and financial activity.
Following is an overview of the FDIC’s important
accomplishments over the past year, as well as the
strategic challenges we face.

REBUILDING THE DIF AND
RESOLVING FAILED BANKS
Under a restoration plan that reflects Dodd-Frank Act
requirements to rebuild the DIF, the fund balance
has increased every quarter since the end of 2009,
when it reached an all-time low. In 2016, the DIF
balance increased to $83.2 billion, owing primarily
to assessment income, as well as lower than estimated
losses for past bank failures. On September 30, 2016,
the reserve ratio—the ratio of the DIF balance to
estimated insured deposits—was 1.18 percent, the
highest level in more than eight years.
The Dodd-Frank Act raised the minimum reserve
ratio of the DIF from 1.15 percent to 1.35 percent,

M ESSAGE FROM THE CHAIRMAN

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ANNUAL REPORT
and requires that the reserve ratio reach that level
by September 30, 2020. The Dodd-Frank Act also
makes banks with $10 billion or more in total assets
responsible for the increase.
To ensure that the reserve ratio reaches 1.35 percent
by the statutory deadline, the FDIC adopted a rule
in March 2016 that imposes a temporary surcharge
on banks with at least $10 billion in assets. The
surcharge is 4.5 cents per $100 of each bank’s
assessment base per annum, after making certain
adjustments. The rule became effective on July 1 of
this year. As a result, the FDIC expects the reserve
ratio to reach 1.35 percent in approximately two
years, well ahead of the statutory deadline.
The FDIC also has worked to ensure that the costs
of maintaining a strong Deposit Insurance Fund
are better allocated across the industry. In early
2011, the FDIC adopted a rule that reduces regular
assessment rates for all banks when the reserve ratio
reaches 1.15 percent. In April of this year, the FDIC
reaffirmed that decision with a rule that revises the
FDIC’s methodology for determining risk-based
assessments to better reflect risks and to help ensure
that banks that take on greater risks pay more for
deposit insurance than their less risky counterparts.
The rule went into effect on July 1 of this year, after
the reserve ratio surpassed 1.15 percent, and resulted
in lower assessment rates for approximately 93 percent
of banks with less than $10 billion in assets.
Bank failures in 2016 totaled five, down dramatically
from a peak of 157 in 2010, while the number of
banks on the problem bank list (banks rated 4 or 5
on the CAMELS rating scale) fell to 132 at the end of
September 2016 from a high of 888 in March 2011.
The United States continues to approach pre-crisis
levels for failed banks and problem banks.
During 2016, the FDIC successfully used various
resolution strategies to protect insured depositors of
failed institutions at the least cost to the DIF. The
FDIC actively marketed failing institutions and sold
them to other financial institutions. These strategies
protected insured depositors and preserved banking

6

relationships in many communities, providing
depositors and customers with uninterrupted access
to essential banking services.

MANAGING FDIC RESOURCES
As the banking industry continues to recover,
the FDIC requires fewer resources. The agency’s
authorized workforce for 2016 was 6,533 full-time
equivalent positions compared with 6,886 the year
before. The 2016 FDIC Operating Budget was
$2.21 billion, a decrease of 4.7 percent from 2015.
The FDIC remains committed to fulfilling its mission
while prudently managing costs. We reduced our
budget for 2017 from the prior year by 2.4 percent
to $2.16 billion and reduced authorized staffing by
approximately 2.6 percent to 6,363 positions, in
anticipation of a further drop in bank failure activity
in the years ahead. This is the seventh consecutive
reduction in the FDIC’s annual operating budget.
However, contingent resources are included in
the budget to ensure readiness should economic
conditions unexpectedly deteriorate.

FOCUSING ON INTEREST-RATE
RISK AND CREDIT RISK
While the banking industry continues to improve,
evidence of growing interest-rate risk and credit risk
merit attention. In an effort to alleviate the impact
of low interest rates and increase net interest margins,
banks have been investing in longer-term assets and
increasing the mismatch between asset and liability
maturities. Lending in higher-risk loan categories has
been growing as well. The recent Shared National
Credits review of large syndicated loans noted that
credit risk in the portfolio remains elevated. Such risk
stems from the “high inherent risk in the leveraged
loan portfolio and growing credit risk in the oil and
gas (O&G) portfolio,” the Shared National Credits
report, issued in July 2016, said.
At the same time risk profiles have been rising,
banks have not seen corresponding growth in
overall revenue.

M ESSAGE FROM THE CHAIRMAN

2016
These examples of increasing interest-rate risk and
credit risk are noteworthy as it is during this phase of
the credit cycle when underwriting and investment
decisions are made that may lead to losses in the
future. Addressing these risks before losses materialize
will benefit banks and contribute to the stability
and resilience of the industry. We will continue to
focus our supervisory attention on these risk areas
going forward.

STRENGTHENING BANK RESILIENCE
AND PUBLIC CONFIDENCE
During the financial crisis, a number of large banking
organizations failed, or experienced serious difficulties,
in part because of severe liquidity problems. In May
2016, the FDIC and other banking agencies proposed
a rule that would reduce the vulnerability of large
banking organizations to liquidity risk. The Net
Stable Funding Ratio Rule would require certain large
banks to maintain sufficient levels of stable funding,
including capital, long-term debt, and other stable
sources over a one-year window, to account for the
liquidity risks arising from their assets, derivatives,
and off-balance-sheet activities.
In addition, the FDIC with four other federal agencies
established margin requirements for non-cleared
swaps.  The margin rule, applicable to dealers and
major participants in swaps, was finalized in October
2015 and began to be phased in starting in September
2016.  The margin requirements promote financial
stability and help ensure the safety and soundness of
banks engaging in significant swap activity.
At the same time, the FDIC must be prepared to
provide depositors with prompt access to their funds
in the event of a large bank failure. This is essential to
maintaining public confidence in the banking system.
For the typical bank resolved by the FDIC, insured
deposits are available the next business day. However,
for a bank with a large number of deposit accounts,
payment might be delayed if the bank’s records are
unclear or incomplete.

To address this type of scenario, the FDIC in
November issued a final rule requiring depository
institutions with more than two million deposit
accounts to improve the quality of their deposit
data and make certain changes to their information
systems. This rule bolsters the FDIC’s ability to
provide depositors at banks with a large number
of deposit accounts the same rapid access to their
insured funds in the case of a failure as the FDIC
does in smaller resolutions. We will work closely
with institutions as they develop new capabilities, and
intend to issue functional design assistance for system
programming prior to the effective date to aid in
this process.

ADDRESSING CYBERSECURITY RISK
The rapidly evolving nature of cybersecurity
risks reinforces the need for regulators, financial
institutions, and critical technology service providers
to have appropriate procedures to effectively respond
to cybersecurity risk. The FDIC collaborates
with other federal agencies, law enforcement, and
a number of government groups and industry
coordinating councils to analyze and respond to
emerging cyber threats, security breaches, and other
harmful or disruptive technology-related incidents.
In October 2016, the FDIC, the Board of Governors
of the Federal Reserve System, and the Office of
the Comptroller of the Currency (OCC) issued an
Advance Notice of Proposed Rulemaking inviting
comment on a proposed set of enhanced cybersecurity
risk-management and resilience standards that would
apply to large and interconnected entities under their
supervision. The standards would apply to services
provided by third parties to these firms as well.
Feedback on the notice will inform development of a
proposed rule.
Throughout the year, the FDIC added to the
cybersecurity risk-management resources it provides
to the industry.
♦♦ We produced a new video, “Vendor Management
– Outsourcing Technology Services,” to

M ESSAGE FROM THE CHAIRMAN

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ANNUAL REPORT
help community bank directors and senior
management develop a comprehensive vendormanagement program and understand their
responsibilities and regulatory requirements when
outsourcing technology services.
♦♦ We enhanced our “Cyber Challenge: A
Community Bank Cyber Exercise,” a tool that
can help start an important dialogue between
bank management and staff about operational
risk and techniques to mitigate it.
♦♦ We co-authored updates to the FFIEC
Information Technology Examination Handbook.
The new version, published in September 2016,
outlines a framework for assessing security
risks in information systems and evaluating an
information security program’s integration into
overall risk management. Other updates to the
handbook focus on risks associated with mobile
financial services.
♦♦ Finally, in conjunction with National Consumer
Protection Week, we launched an expanded
cybersecurity awareness website that provides
access to a wide range of presentations,
brochures, and tips to help consumers
understand and avoid cybersecurity risks.
The FDIC monitors cybersecurity issues on a
regular basis through on-site bank examinations.
In July 2016, we introduced the Information
Technology Risk Examination (InTREx) program
to enhance our ability to identify, assess, and
validate information technology and operations
risks in financial institutions. The program also
gathers data about information technology that the
FDIC can use to improve industry-wide safety and
soundness. The InTREx program will allow the
FDIC to provide more granular ratings with respect
to information technology, which can help financial
institutions address the most important examination
recommendations first.
Information security is critical to the FDIC’s ability
to carry out its mission of maintaining stability and
public confidence in the nation’s financial system.

8

This year, the FDIC also implemented policies and
technologies to strengthen its own cybersecurity
posture.
For example, the FDIC:
♦♦ expanded our use of multi-factor authentication
for securely downloading assessment invoices and
official FDIC correspondence, and performing
other secure file exchanges;
♦♦ discontinued individuals’ ability to copy
information to removable media such as CDs,
DVDs, external hard drives, and thumb drives;
♦♦ signed a memorandum of understanding to
migrate to an intrusion prevention, detection,
and monitoring system from the Department
of Homeland Security that will help detect and
block outside cyber threats;
♦♦ launched an Insider Threat and
Counterintelligence Program as part of
the FDIC’s efforts to safeguard employees,
information, operations, and facilities;
♦♦ implemented new controls to limit printing
of sensitive information and better monitor
information printed in the highest risk areas; and
♦♦ engaged an independent, third-party firm to
conduct an end-to-end assessment of the FDIC
IT security and privacy programs.
These actions are in addition to protections that were
already in place, such as:
♦♦ encryption of some of our most sensitive
information;
♦♦ encrypted laptop hard drives; and
♦♦ a Data Loss Prevention program that monitors
information in emails, information being
transferred to websites, and information printed. 
The FDIC requires employees to take annual security
and privacy training so they are aware of our security
standards. This is also supplemented by periodic
phishing tests to help ensure employees stay watchful
to possible outside threats.

M ESSAGE FROM THE CHAIRMAN

2016
Information security will remain a top priority at the
FDIC. We will continue to enhance our security
controls in light of the changing threat landscape.

REVIEWING REGULATION
The Economic Growth and Regulatory Paperwork
Reduction Act of 1996 (EGRPRA) requires that
regulations adopted by the Federal Financial
Institutions Examination Council (FFIEC) and the
federal banking agencies, including the FDIC, be
reviewed by the agencies at least once every 10 years.
The current cycle began in late 2014, and a report to
Congress with findings and recommendations will
be issued by the agencies soon. The purpose of this
review is to identify and eliminate, as appropriate,
outdated or otherwise unnecessary regulatory
requirements that are imposed on insured depository
institutions, while, at the same time, ensuring that
safety and soundness and consumer compliance
standards are maintained.
The regulatory review process is one we take very
seriously. Over the course of the review, the federal
banking agencies hosted six public outreach meetings
nationwide to hear firsthand from insured depository
institutions, trade associations, consumer and
community groups, and other interested parties.
The agencies received numerous oral and written
comments from panelists and the public at these
outreach meetings. In addition, the agencies sought
comment through the issuance of four Federal Register
notices, which garnered more than 230 comment
letters. The agencies have summarized and reviewed
these comments, and considered appropriate changes
to reduce regulatory burdens on institutions. The
FDIC recognizes that regulatory burden does not
result solely from statutes and regulations, so we also
explored opportunities to improve the transparency
and clarity of our supervisory policies and procedures,
especially as they apply to community banks.
Together with the other federal banking agencies
on the FFIEC, we have already taken significant
steps to reduce the regulatory burden on supervised
institutions. For example, the agencies finalized

revisions to streamline the Call Report and proposed
a new, streamlined Call Report for institutions that
do not have a foreign office and hold total assets of
less than $1 billion. This new Call Report would
take effect March 31, 2017, would be optional for
eligible small institutions, would reduce the length of
the Call Report for eligible small institutions from 85
pages to 61 pages, and would remove approximately
40 percent of the data items currently required by the
Call Report for all institutions with domestic
offices only.
In addition to streamlining the Call Report, in
December of this year, the agencies finalized a rule
to increase the number of small banks and savings
associations eligible for an 18-month examination
cycle rather than a 12-month cycle. As a result,
approximately 4,800 well-capitalized and wellmanaged banks and savings associations are now
eligible for the expanded examination cycle.
The federal banking agencies also are jointly
developing simplifications to the regulatory capital
rules, including modifications of high volatility
commercial real estate (HVCRE) and select other
revisions to the agencies’ generally applicable capital
rules, and would seek industry comment on these
changes through the notice and comment process.
In addition, the agencies are developing a proposal
to increase the threshold for requiring an appraisal
on commercial real estate loans to reduce regulatory
burden in a manner consistent with safety and
soundness.
The FFIEC agencies also revisited and issued revised
guidance on the Community Reinvestment Act
(CRA) this year. In July, the FFIEC issued the revised
guidance which aims to:
♦♦ Improve consistency of examinations across and
within the agencies,
♦♦ Clarify the activities considered to meet the test
for qualifying economic development activities,
♦♦ Distinguish between community development
services and retail products tailored to meet
the needs of low- and moderate-income
individuals, and

M ESSAGE FROM THE CHAIRMAN

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ANNUAL REPORT
♦♦ Provide examples of the types of activities that are
eligible for CRA consideration.
We are also working jointly with the other federal
banking agencies on flood insurance guidance,
amendments to the rules implementing Depository
Institution Management Interlocks Act, and guidance
on Regulation O.
The FDIC has also taken independent action this
year to reduce regulatory burden. For example, a
particular interest to the FDIC is the impact of our
regulations on new banks. In 2016, we reduced the
period of enhanced supervision for newly insured
depository institutions (i.e., de novo banks) from
seven years to three. We also issued updated guidance
on the deposit insurance application process and
identified subject matter experts in each of the
Regional Offices to assist with deposit insurance
applications.
We also implemented an electronic pre-examination
planning tool for both risk-management and
compliance examinations that allows examiners to
tailor request lists to ensure that only those items
that are necessary for the examination process are
requested from each institution, minimizing the
burden for supervised institutions and reducing
on-site examination hours.
In 2016, we also enhanced our information
technology (IT) examination procedures to require
less pre-examination information from bankers. The
revised IT Officer’s Questionnaire that is completed
by bankers prior to an examination, asks 65 percent
fewer questions, reducing the amount of time needed
to prepare for an examination. We also established
a process to allow for our institutions to submit
audit reports electronically, eliminating the need for
institutions to mail hard copies.
In addition, we issued a Financial Institution Letter
(FIL) to supervised institutions, clarifying our
treatment of requests from S-corporation institutions
to pay dividends to their shareholders to cover taxes
on their pass-through share of bank earnings. We
told banks that, unless there are significant safety and

10

soundness concerns, we will generally approve
those requests.

COMMUNITY BANKING INITIATIVE
Community banks are critically important to our
economy and the banking system. Community
banks account for 13 percent of the banking assets in
the United States, but also account for 43 percent of
the small loans to businesses and farms made by all
banks, making them key partners in supporting local
economic development and job creation. Because the
FDIC is the primary federal supervisor of the majority
of community banks in the United States, community
banking will continue to be an important focus of
FDIC supervision, technical assistance, and research.
In 2016, the FDIC hosted a conference that brought
together community bankers, regulators, researchers,
and others to discuss the community banking model,
regulatory developments affecting community banks,
management of technology challenges, and ownership
structure and succession planning. We also hosted
a Joint Mutual Forum with the OCC to promote
and support the operations of mutual depository
institutions and discuss industry trends, the economic
outlook, technology challenges, and regulatory
compliance topics. The community banking sector
continues to demonstrate resilience and innovation in
meeting new challenges and competing in an evolving
financial marketplace.
The FDIC’s Community Banking Initiative includes
an extensive technical assistance program for bank
directors, officers, and employees. We continue to
expand and enhance our series of online videos to
help community bankers better understand their
responsibilities. New or updated videos in 2016
address corporate governance, vendor management,
outsourcing technology services, interest-rate risk,
mortgage rules, and flood insurance. We also
distributed a Community Bank Resource Kit, which
includes a variety of useful tools for community
bankers, to FDIC-supervised institutions.
In addition, this year, we launched an online resource,
the Affordable Mortgage Lending Center, which

M ESSAGE FROM THE CHAIRMAN

2016
community bankers can use to understand and
compare the mortgage-lending products and services
offered by federal and state housing finance agencies,
the Federal Home Loan Banks, and governmentsponsored enterprises.
Further, in 2016, the FDIC launched a new survey
regarding banks’ small business lending practices.
This survey is designed to provide information on
the general characteristics of banks’ small business
borrowers, the types of credit offered to small
businesses, and the relative importance of commercial
lending for banks of different sizes and business
models. It is important to understand how banks
of all sizes are lending to small businesses, which is
crucial to job creation. I look forward to seeing the
results of the survey in 2017.
Finally, the FDIC’s Advisory Committee on
Community Banking is an ongoing forum for
discussing current issues and receiving valuable
feedback from the industry. The committee, which
met three times during 2016 with the FDIC Board,
is composed of 15 community bank CEOs from
around the country. It is a valuable resource for
input on a wide variety of topics, including
examination policies and procedures, capital and
other supervisory issues, credit and lending practices,
deposit insurance assessments and coverage, and
regulatory compliance issues.

Supporting De Novo Banks
De novo institutions fill important gaps in local
banking markets, provide credit and services to
communities that may be overlooked by larger
institutions, and help to preserve the vitality of the
community banking sector. The FDIC is committed
to working with, and providing support to, any
group with an interest in starting a de novo bank, and
welcomes applications for deposit insurance.
The current environment, with low interest rates
and narrow net interest margins, is challenging
for the formation of new banks. Nevertheless, we
have seen tentative signs of an uptick in de novo

formations, including increased interest from
prospective organizing groups in filing applications
for new insured depository institutions. To encourage
this interest and help organizing groups navigate
the application process, this year the FDIC hosted
outreach meetings throughout the country to discuss
FDIC requirements for new bank applications and
highlight strategies for successful business models,
supplemented its Deposit Insurance Q&As, and
issued for public comment a handbook to guide
organizing groups through the application process.
In April, the FDIC reduced from seven years to three
years the period of enhanced supervisory monitoring
of state nonmember de novo institutions. The sevenyear period was established during the financial crisis
in response to the disproportionate number of de
novo institutions that were experiencing difficulties
or failing. In the current environment, and in light
of strengthened, forward-looking supervision, it is
appropriate to return to the three-year period.

RESOLUTION OF SYSTEMICALLY
IMPORTANT FINANCIAL INSTITUTIONS
The FDIC continues to make progress toward
developing strategies to facilitate the orderly failure
of large, complex, systemically important financial
institutions without taxpayer support and market
breakdowns.

Living Wills
In 2016, the FDIC remained committed to carrying
out the statutory mandate that systemically important
financial institutions (SIFIs) demonstrate a clear path
to an orderly failure under bankruptcy at no cost to
taxpayers. Under the Dodd-Frank Act, bankruptcy is
the statutory first option for resolving a SIFI, and the
largest bank holding companies and certain non-bank
financial companies are required to prepare resolution
plans, also referred to as “living wills.” These living
wills must demonstrate that the firm could be resolved
under bankruptcy without severe adverse

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ANNUAL REPORT
consequences for the financial system or the
U.S. economy.
The FDIC and the Federal Reserve Board are charged
with reviewing and assessing each firm’s resolution
plan. In 2016, we reviewed the resolution plans
submitted by the eight U.S. SIFIs in 2015 and
provided firm-specific feedback on the plans. The
agencies jointly determined that five of those plans
were not credible or would not facilitate an orderly
resolution under the Bankruptcy Code. The agencies
issued joint notices of deficiencies in July 2016 to
the five firms detailing the deficiencies in their plans
and the actions the firms must take to address them.
Each firm was required to remedy its deficiencies
by October 1, 2016, or risk being subject to more
stringent prudential requirements or to restrictions on
activities, growth, or operations.

decision letters regarding the 2015 submissions and
remediation of the 2016 joint deficiencies, which
included the actions the eight U.S. firms are required
to take. Further, the agencies released the assessment
framework under which the Federal Reserve Board
and the FDIC review each firm’s plan and the
guidance provided by the agencies to the firms to
assist them with the development of their 2017 plans.
These actions have provided transparency to
both firms and the public regarding the agencies’
assessment framework, the important changes firms
have made to their structure and operations to
improve resolvability, and the agencies’ expectations
for further improvement in these plans. Our
expectation is that these collaborative efforts will
continue, and that the agencies will continue to
prioritize transparency for firms and the public.

The agencies received and reviewed those
submissions, and determined that four of the firms
had satisfactorily remediated their deficiencies. The
agencies jointly determined that one firm did not
adequately remedy two of the firm’s three deficiencies.
In light of the nature of the deficiencies and the
resolvability risks posed by the firm’s failure to remedy
them, the agencies jointly determined to impose
restrictions on the growth of international and nonbank activities of the firm and its subsidiaries. The
firm is expected to file a revised submission addressing
the remaining deficiencies by March 31, 2017 or risk
facing limits to the size of the firm’s non-bank and
broker-dealer assets.

Overall, the living will process has proved to be an
important means for identifying and implementing
measures to enhance SIFIs’ resolvability.  We have
seen firms make significant changes, including
restructurings, operational continuity planning,
and options for separating assets, business lines, and
entities from a failing company. Firms also have
improved their management information systems
capabilities, financial resource measurement and
process development, and resolution planning
governance, all of which are key elements for
enhancing resolvability. 

All eight SIFIs must submit their next plan in
July 2017, in which they must address identified
shortcomings and additional guidance from the
agencies.

Given the challenges and the uncertainty surrounding
any particular failure scenario, Title II of the DoddFrank Act provides the Orderly Liquidation Authority,
which is a public-sector special resolution regime, as
a backstop to the bankruptcy process for institutions
whose failure or distress would pose significant risks to
U.S. financial stability.

With the release of the joint findings, the agencies
took a number of important steps to make the
resolution planning process more transparent to the
public and the market. This is important because
it allows for the development of realistic market
expectations about how the resolution of a SIFI might
proceed. To this end, the Federal Reserve Board as
the holding company supervisor released to the public

12

Orderly Liquidation Authority

The Orderly Liquidation Authority is the mechanism
for ensuring that policymakers will not be faced with
the same poor choices they faced in 2008. Its tools
are intended to enable the FDIC to carry out the
process of winding down and liquidating the firm

M ESSAGE FROM THE CHAIRMAN

2016
in an orderly way, while ensuring that shareholders,
creditors, and culpable management are held
accountable and taxpayers do not bear losses. In the
years since enactment of Dodd-Frank, the FDIC
has made significant progress in developing the
operational capabilities to carry out a resolution if
needed.
As in the United States, the other leading jurisdictions
of the world have enacted expanded authorities for
the resolution of SIFIs. The FDIC has worked closely
with all the major financial jurisdictions, including
the United Kingdom, the European Banking Union,
Switzerland, and Japan.
In 2016, the FDIC hosted a Trilateral Principals
Level Exercise involving the United States, the United
Kingdom, and the European Banking Union. The
purpose of the exercise was to identify issues and
address obstacles to cross-border resolution. U.S.
participants included senior officials from the
Treasury Department, the Board of Governors of
the Federal Reserve System, the OCC, the Securities
and Exchange Commission, the Commodity Futures
Trading Commission, and the Federal Reserve
Bank of New York. Participants from Europe
included senior officials from HM Treasury, the
Bank of England, the U.K. Prudential Regulation
Authority, the Single Resolution Board, the
European Commission, and the European Central
Bank. Deepening our relationships with key foreign
jurisdictions is an ongoing priority for the FDIC’s
work on systemic resolution, and includes not only
this exercise, but also our continuing engagement in
cross-border Working Groups, Crisis Management
Groups, and Resolution Colleges.
In September, the FDIC Board and senior staff
from across the agency took part in an operational
exercise designed to test and enhance our policies
and protocols for the liquidation and wind down of
a systemically important financial institution. The
2016 operational exercise followed a similar event
held in 2015, and highlighted the agency’s significant
ongoing progress in this vital area.

EXPANDING ACCESS TO
BANKING SERVICES AND
PROTECTING CONSUMERS
Expanding access to mainstream banking services
helps strengthen confidence in the nation’s financial
system, a fundamental component of the FDIC’s
mission. This year, we released the 2015 FDIC
National Survey of Unbanked and Underbanked
Households, a biennial survey conducted with the
U.S. Census Bureau that provides detailed national,
state, and local data to inform economic inclusion
efforts. There were positive indications for consumers:
The unbanked rate fell to 7 percent in 2015, down
from 8.2 percent in 2011. The decline occurred
broadly, across population segments, and outpaces
what one would expect even in light of improving
economic conditions.
The survey also made significant findings about
the role of mobile banking in economic inclusion.
Underbanked households are more likely to own a
smartphone, more likely to use it to access their bank
account, and more likely to use it as their primary
means of managing their account than fully banked
households. These findings echo a report released
at a meeting of the FDIC’s Advisory Committee
on Economic Inclusion this year, which found that
mobile financial services may help banks address many
of the core financial service needs of underserved
consumers, including more timely information about
balances and transactions and more control over their
financial lives.
The FDIC is committed to ensuring that all U.S.
households have access to safe and affordable
banking services. In 2016 we provided information
and technical assistance on safe and affordable
transaction and savings accounts, otherwise known
as SAFE Accounts, to local initiatives in more than
28 communities in 23 states.  We also partnered
with the Cities for Financial Empowerment Fund
and the Bank On programs to provide outreach to
representatives of more than 300 community-based
organizations and more than 230 bankers at 14

M ESSAGE FROM THE CHAIRMAN

13

ANNUAL REPORT
outreach events across the country.  Bringing these
groups together creates opportunities to identify
strategies to reach unbanked populations by lowering
the barriers to accessing banking services.
As of the end of 2016, nearly nine out of every 10
people in the United States lives in a county with
a full-service branch of a bank that offers a SAFE
transaction account.  The Model SAFE account
can be accessed through a convenient card without
overdraft or insufficient funds fees, while including
low initial and monthly maintenance costs and
transparent disclosures.
We also continued our efforts to provide and promote
effective financial education for young people. For
example, through our Youth Savings Pilot Program,
we have been able to study the financial education
programs offered by 21 banks in partnership with
local schools over a two-year period. These programs
tie financial education with the opportunity to open
a safe, low-cost savings account at bank branches,
some of which are located in the schools and run by
students. Many of these programs employ the FDIC’s
Money Smart for Young People financial education
curriculum, as well as the Model SAFE account
template. A recent symposium brought together
representatives from banks, non-profits, and school
partners to discuss lessons learned from the pilot. We
gathered these insights for a report we plan to publish
in early 2017 that will offer a roadmap for banks and
schools that are teaming up to link financial education
with opportunities to save.
Our Money Smart program is one example of our
ongoing efforts to collaborate with other federal
agencies to develop and promote financial education.
For example, Money Smart for Older Adults, a resource
developed jointly by the FDIC and the Consumer
Financial Protection Bureau, was enhanced this
year to help people age 62 and older guard against
financial exploitation and make informed financial
decisions.
We also partnered with the U.S. Small Business
Administration to make enhancements to Money

14

Smart for Small Business, a resource that provides
practical guidance for starting and managing a
business. In response to feedback from the small
business community, three new modules were added:
managing cash flow, planning for a healthy business,
and determining if owning a business is a good
fit. The Strategic Alliance Memorandum between
the FDIC and SBA ensures this collaboration will
continue through 2018.
Money Smart for Young People, a curriculum that
involves educators, parents/caregivers, and young
people in the learning process and is available in
English and Spanish, continues to be well received.
There have been more than 39,000 downloads of the
curriculum since its launch in 2015. We also have
begun to identify how our Money Smart resources can
be helpful to workforce development organizations in
providing financial education to young people.

CONCLUSION
During 2016, the U.S. banking industry continued its
recovery from the recent financial crisis. The industry
benefited from stronger balance sheets, fewer problem
banks and bank closings, increased lending activity,
and a larger balance in the DIF. At the same time,
it remains important for bankers and supervisors to
heed the lessons of the recent crisis by maintaining a
steady focus on risk management.
In 2017, the FDIC will continue to work to fulfill its
mission of maintaining public confidence and stability
in the nation’s financial system.
The workforce of the FDIC remains committed to the
agency’s mission. I am very grateful to the dedicated
professionals of the FDIC for their commitment to
public service and for the high level at which they
carry out their important responsibilities.
Sincerely,

Martin J. Gruenberg

M ESSAGE FROM THE CHAIRMAN

2016
M E S S A G E F RO M
THE CHIEF FINANCIAL OFFICER
I am pleased to present
the FDIC’s 2016 Annual
Report (also referred to
as the Performance and
Accountability Report).
The report covers financial
and program performance
information, and
summarizes our successes
for the year. The FDIC
takes pride in providing
timely, reliable, and meaningful information to its
many stakeholders.
For 25 consecutive years, the U.S. Government
Accountability Office (GAO) has issued unmodified
(unqualified) audit opinions for the two funds
administered by the FDIC: the Deposit Insurance
Fund (DIF) and the Federal Savings and Loan
Insurance Corporation (FSLIC) Resolution Fund
(FRF). We take pride in our responsibility and
demonstrate discipline and accountability as stewards
of these funds. We remain proactive in the execution
of sound financial management and in providing
reliable financial data.
The DIF balance (the net worth of the Fund) rose
to a record $83.2 billion as of December 31, 2016,
an increase of $10.6 billion over the year-end 2015
balance of $72.6 billion.  The Fund balance increase
was primarily due to assessment revenue, interest on
U.S. Treasury securities, and reductions in estimated
losses for current and prior year bank failures.

FINANCIAL AND PROGRAM
RESULTS FOR 2016
For 2016, DIF comprehensive income totaled $10.6
billion compared to comprehensive income of $9.8
billion during 2015.  The $741 million year-over-year
increase was primarily due to a $1.2 billion increase
in assessment revenue ($10.0 billion in 2016 as
compared to $8.8 billion in 2015) and a $248 million
increase in interest revenue ($671 million in 2016 as
compared to $423 million in 2015).  These amounts
were partially offset by a $683 million lower negative
provision for insurance losses (negative $1.6 billion in
2016 as compared to negative $2.3 billion in 2015).
In 2016, the FDIC continued its efforts to reduce
operating costs and prudently manage the funds
that it administers. The FDIC Operating Budget
for 2016 totaled approximately $2.21 billion,
which represented a decrease of $108 million (5
percent) from 2015. Actual 2016 spending totaled
approximately $1.95 billion. On December 13,
2016, the FDIC Board of Directors approved a 2017
FDIC Operating Budget totaling $2.16 billion,
down $53 million (2 percent) from the 2016 budget.
Including 2017, the annual operating budget has
declined for seven consecutive years, consistent with a
steadily declining workload.
The FDIC continues to reduce staffing levels, as
conditions in the banking industry improve and
the FDIC requires fewer resources. The FDIC’s
authorized full-time equivalent staffing dropped in
2016 from 6,886 to 6,533, a 5 percent reduction.
In 2017, we project further reductions in the overall

MESSAG E FR O M THE CHIEF FINANCIAL OFFICER

15

ANNUAL REPORT
workforce. However, we will maintain a workforce
capable of handling our supervision, insurance, and
bank failure functions.
In 2016, five banks failed, down from eight in 2015.
Even though the number of bank failures is relatively
low, we will continue to prudently manage the risks
to the DIF, including interest rate, fiscal, and global
economic risks. We will remain focused on sound

16

financial management techniques, and maintain our
enterprise-wide risk management and internal control
program.
Sincerely,

Steven O. App

2016

I.

MANAGEMENT’S
DISCUSSION AND
ANALYSIS

17

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2016
THE YEAR IN REVIEW
OVERVIEW
The FDIC continued to fulfill its mission-critical
responsibilities during 2016. Insuring deposits,
examining and supervising financial institutions, and
managing receiverships are the core responsibilities of
the FDIC. The agency adopted and issued final rules
on key regulations under the Dodd-Frank Wall Street
Reform and Consumer Protection Act (Dodd-Frank
Act) and engaged in several community banking and
community development initiatives. Cybersecurity
remained a high priority for the FDIC in 2016; the
agency worked to strengthen cybersecurity oversight,
help financial institutions mitigate increasing risks,
and respond to cyber threats. The sections below
highlight these and other accomplishments during
the year.

Act, which directs each federal agency to review and
modify regulations that reference credit ratings. The
NPR would replace references to credit ratings in Part
347’s definition of “investment grade” with a standard
of creditworthiness that has been adopted in other
federal regulations. The NPR would also amend the
FDIC’s asset pledge requirement for insured U.S.
branches of foreign banks by revising the eligibility
criteria for the types of assets that may be pledged to
the FDIC.
Banking Activities and Investments
In September 2016, the FDIC, OCC, and FRB
submitted to Congress and the Financial Stability
Oversight Council (FSOC), a study required under
Section 620 of the Dodd-Frank Act of investments
and activities that a banking entity may engage in
under federal and state law. The study considers
the types of activities in which banking entities may
engage and investments they may make, associated
risks, and risk mitigation activities undertaken
by the banking entities with regard to those risks.
In addition, each of the federal banking agencies
provided recommendations and considerations for
future regulatory action or supervisory guidance.
Minimum Reserve Ratio

FDIC Chairman Martin J. Gruenberg talks with an attendee at
FDIC’s Community Banking Conference, one of several FDIC
community banking initiatives.

IMPLEMENTATION OF
KEY REGULATIONS
Alternatives to Credit Ratings in the FDIC’s
International Banking Regulations
In June 2016, the FDIC issued a Notice of Proposed
Rulemaking (NPR) to conform the FDIC’s
international banking regulations (Part 347) to the
requirements of Section 939A of the Dodd-Frank

In March 2016, the FDIC approved a final rule to
implement Section 334 of the Dodd-Frank Act,
which increased the minimum reserve ratio of the
Deposit Insurance Fund from 1.15 percent to 1.35
percent, requires that the reserve ratio reach that level
by September 30, 2020, and mandates that the FDIC
offset the effect of the increase on insured depository
institutions (IDIs) with assets of less than $10 billion.
The final rule imposes surcharges on IDIs with $10
billion or more in assets and provides credits to IDIs
with assets below $10 billion for the portion of their
regular assessments that contribute to growth in the
reserve ratio between 1.15 percent and 1.35 percent.
This rule is discussed in greater detail in the section on
Deposit Insurance.

M AN AG EMEN T’S DISCUSSION AND ANALY SIS

19

ANNUAL REPORT
Volcker Rule Frequently Asked Questions
The “Volcker Rule” is a provision of the Dodd-Frank
Act that contains restrictions and prohibitions on
the ability of banks and their affiliates to engage
in proprietary trading and have interests in, or
relationships with, a hedge fund or a private equity
fund. Banking entities that are subject to the
rule are permitted to retain investments in certain
collateralized debt obligations (CDOs) backed
primarily by trust preferred securities. In March
2016, the FDIC, Office of the Comptroller of the
Currency (OCC), Federal Reserve Board (FRB),
Securities and Exchange Commission (SEC), and
Commodity Futures Trading Commission (CFTC)
updated their Frequently Asked Questions (FAQs)
about the Volcker Rule to clarify the capital treatment
of permitted investments in those CDOs.
External Audits of Internationally
Active U.S. Financial Institutions
In January 2016, the FDIC, OCC, and FRB issued
an advisory to indicate their support for the principles
and expectations set forth in the Basel Committee
on Banking Supervision’s (BCBS) March 2014
guidance on “external audits of banks.” The advisory
also explains the agencies’ supervisory expectations
regarding how internationally active U.S. financial
institutions should address differences between the
standards and practices followed in the United States
and the principles and expectations in the BCBS
external audit guidance. For purposes of the advisory,
internationally active U.S. financial institutions
include insured depository institutions with
consolidated total assets of $250 billion or more or
consolidated total on-balance-sheet foreign exposure
of $10 billion or more.
Expanded Eligibility of
18-Month Examination Cycle
In December 2016, the FDIC, OCC, and FRB
jointly finalized the interim final rule that increased
the number of small banks and savings associations
eligible for an 18-month examination cycle rather

20

than a 12-month cycle. Under the final rules,
qualifying well-capitalized and well-managed banks
and savings associations with less than $1 billion in
total assets are eligible for an 18-month examination
cycle. Previously, only banks and savings associations
with less than $500 million in total assets could be
eligible for the expanded examination cycle. The
examination cycle changes also apply to qualifying
well-capitalized and well-managed U.S. branches and
agencies of foreign banks with less than $1 billion in
total assets.
The final rules increase the number of institutions
that may qualify for an 18-month examination cycle
by more than 600 to approximately 4,800 banks
and savings associations. In addition, the final rules
increase the number of U.S. branches and agencies
of foreign banks that may qualify for an 18-month
examination cycle by 30 branches and agencies, to a
total of 89.
Use of Evaluations in Certain Real
Estate-Related Financial Transactions
In March 2016, the FDIC, OCC, and FRB issued an
advisory to clarify expectations for the use of property
evaluations by banking institutions. The advisory
responds to questions about the use of evaluations and
appraisals that were raised during outreach meetings
held by the agencies pursuant to the Economic
Growth and Regulatory Paperwork Reduction Act.
Among other things, the advisory states that regardless
of the approach or method used to estimate the
market value of real property, an evaluation report
should contain sufficient information and analysis
to support the value conclusion and the institution’s
decision to engage in the transaction.
Issuance of Prepaid Cards
In March 2016, the FDIC, OCC, FRB, National
Credit Union Administration (NCUA), and the
Financial Crimes Enforcement Network (FinCEN)
developed and issued guidance to clarify the
requirements for customer identification programs
(CIPs) and regulatory expectations for depository

M AN AG EMEN T’S DISCUSSION AND ANALY SIS

2016
institutions that issue certain prepaid cards. The
guidance addresses the establishment of a formal
account relationship and when the depository
institution is responsible for collecting CIP
information.
Funds Transfer Pricing Related to Funding
and Contingent Liquidity Risk
In March 2016, the FDIC, OCC, and FRB issued
joint guidance on Funds Transfer Pricing (FTP)
to banks with assets of $250 billion or more. The
guidance describes four key principles that should
comprise an FTP framework and includes examples
for implementing these principles.
Net Stable Funding Ratio
In May 2016, the FDIC, OCC, and FRB jointly
issued a proposed rule that would implement a
liquidity requirement consistent with the net stable
funding ratio agreed to by the Basel Committee
on Banking Supervision and complementary to
the Liquidity Coverage Ratio rule issued by the
agencies in 2014. The proposal would require
large, internationally active banking organizations
to maintain a minimum level of stable funding
over a one-year time horizon. This measure would
reduce the likelihood that disruptions to a banking
organization’s regular sources of funding would
compromise its liquidity position. The proposal also
would promote improvements in the measurement
and management of liquidity risk and enhance
financial stability. The comment period closed on
August 5, 2016, and the agencies are collaborating on
a final rulemaking.
Margin and Capital Requirements
for Covered Swaps
In August 2016, the FDIC, OCC, FRB, Federal
Housing Finance Agency, and Farm Credit
Administration issued a final rule that exempts certain
commercial and financial end users from margin
requirements for certain swaps not cleared through
a clearinghouse. Specifically, the final rule exempts
non-cleared swaps of small banks, savings associations,

Farm Credit System institutions, and credit unions
with $10 billion or less in total assets. This exemption
parallels an exemption from a mandate in the DoddFrank Act to clear standardized swaps.
New Accounting Standard on Financial
Instruments – Credit Losses
In June 2016, the FDIC, OCC, FRB, and NCUA
issued a joint statement on the new accounting
standard released by the Financial Accounting
Standards Board (FASB) regarding Financial
Instruments – Credit Losses. The statement
summarizes key elements of the new standard,
which introduces the current expected credit losses
methodology for estimating allowances for credit
losses. It also provides initial supervisory views
regarding the implementation of the new
accounting standard.
Qualified Master Netting Agreements
In October 2016, the FDIC issued a final rule that
changes the regulatory capital and liquidity coverage
ratio (LCR) rules to ensure consistency with new
International Swaps and Derivatives Association
(ISDA) Resolution Stay Protocols. The protocols
impose a stay on cross-default and early termination
rights within standard ISDA derivatives contracts.
The final rule also revised the definition of “qualifying
master netting agreement” and other related
definitions, under the regulatory capital rules and
the LCR, to reflect the recent changes to the ISDA
Master Agreement. The FDIC action followed earlier
rulemakings by the OCC and FRB.
Fact Sheet on Foreign Correspondent Banking
In August 2016, the U.S. Department of the Treasury
issued a Fact Sheet developed jointly with the FDIC,
OCC, FRB, and NCUA that outlines the agencies’
anti-money laundering and economic sanctions
positions with respect to foreign correspondent
banking. The Fact Sheet summarizes the U.S.
regulators’ existing expectations regarding foreign
correspondent banking relationships, the supervisory

M AN AG EMEN T’S DISCUSSION AND ANALY SIS

21

ANNUAL REPORT
examination process, and instances in which
enforcement actions might be taken.
Enhanced Cyber Risk Management Standards
In October 2016, the FDIC, OCC, and FRB issued
a joint Advance Notice of Proposed Rulemaking
(ANPR) seeking comment on enhanced cybersecurity
risk-management and resilience standards that would
apply to large and interconnected entities under
their supervision. The standards also would apply
to services provided by third parties to these firms.
The agencies are considering applying the enhanced
standards to depository institutions and depository
institution holding companies with total consolidated
assets of $50 billion or more, the U.S. operations
of foreign banking organizations with total U.S.
assets of $50 billion or more, and financial market
infrastructure companies and nonbank financial
companies supervised by the FRB. The standards
would be tiered, with an additional set of higher
standards for systems that provide critical functionality
to the financial sector. For these sector-critical
systems, the agencies are considering requiring firms
to mitigate substantially the risk of a disruption or
failure due to a cyber event. The comment period
will close on February 17, 2017, and the agencies will
collaborate in the review of comments received.
Recordkeeping for Deposit Accounts
In November 2016, the FDIC approved a rule
establishing recordkeeping requirements for FDICinsured institutions with a large number of deposit
accounts to facilitate rapid payment of insured deposits
to customers if the institutions were to fail. The FDIC
anticipates that the rule will become effective on April
1, 2017. The FDIC will work closely with institutions
as they develop new capabilities, and intends to issue
functional design assistance for system programming
prior to the effective date to aid in this process.
Proposed Guidelines for Appeals of
Material Supervisory Determinations
In July 2016, the FDIC published for public
comment a proposal to amend its Guidelines for

22

Appeals of Material Supervisory Determinations.
The amendments were proposed to give institutions
additional avenues of redress with respect to
supervisory determinations and to make the FDIC’s
appeals process more consistent with those of the
other federal banking agencies. The comment period
ended on October 3, 2016. The comments have been
reviewed by the FDIC, and final action is anticipated
in early 2017.

DEPOSIT INSURANCE
As insurer of bank and savings association deposits,
the FDIC must continually evaluate and effectively
manage how changes in the economy, the financial
markets, and the banking system affect the adequacy
and the viability of the Deposit Insurance Fund (DIF).
Long-Term Comprehensive
Fund Management Plan
In 2010 and 2011, the FDIC developed a
comprehensive, long-term DIF management plan
designed to reduce the effects of cyclicality and
achieve moderate, steady assessment rates throughout
economic and credit cycles, while also maintaining
a positive fund balance, even during a banking
crisis. That plan complements the Restoration Plan,
originally adopted in 2008 and subsequently revised,
designed to ensure that the reserve ratio (the ratio of
the fund balance to estimated insured deposits) reaches
1.35 percent by September 30, 2020, as required by
the Dodd-Frank Act. The plan includes a reduction
in assessment rates to take effect when the reserve ratio
reaches 1.15 percent, which occurred in the second
quarter of 2016 (as discussed in the Deposit Insurance
Fund Reserve Ratio section).
Under the long-term DIF management plan, to
increase the probability that the fund reserve ratio
will reach a level sufficient to withstand a future crisis,
the FDIC Board set the Designated Reserve Ratio
(DRR) of the DIF at 2.0 percent. In September 2016,
the Board voted to maintain the 2.0 percent ratio
for 2017. The FDIC views the 2.0 percent DRR as
a long-term goal and the minimum level needed to

M AN AG EMEN T’S DISCUSSION AND ANALY SIS

2016
withstand future crises of the magnitude of past crises.
Additionally, as part of the long-term DIF
management plan, the FDIC has suspended dividends
indefinitely when the fund reserve ratio exceeds 1.5
percent. Instead, the plan prescribes progressively
lower assessment rates that will become effective when
the reserve ratio exceeds 2.0 percent and 2.5 percent.
These lower assessment rates serve much the same
function as dividends, but provide more stable and
predictable effective assessment rates over time.
State of the Deposit Insurance Fund
Estimated losses to the DIF from bank failures that
occurred in 2016 totaled $47 million. The fund
balance continued to grow through 2016, as it has
every quarter after the end of 2009. Assessment
revenue was the primary contributor to the increase in
the fund balance in 2016. The fund reserve ratio rose
to 1.18 percent at September 30, 2016, from 1.09
percent a year earlier.
Deposit Insurance Fund Reserve Ratio
On June 30, 2016, the DIF reserve ratio rose to 1.17
percent from 1.13 percent on March 31, 2016. FDIC
regulations provide for three major changes to deposit
insurance assessments the quarter after the reserve
ratio first reaches or exceeds 1.15 percent. Beginning
the third quarter of 2016:
♦♦ the range of initial regular assessment rates for all
institutions declined (from 5-35 basis points to
3-30 basis points) based on final rules approved
by the FDIC Board on February 7, 2011, and
April 26, 2016;
♦♦ surcharges on insured depository institutions
with total consolidated assets of $10 billion or
more (large banks) began, pursuant to a final
rule approved by the Board on March 15, 2016
(discussed in the Minimum Reserve Ratio section
below); and
♦♦ a revised method to calculate risk-based
assessment rates for established small banks went
into effect, pursuant to the final rule approved by

the FDIC Board on April 26, 2016, (discussed in
the Deposit Insurance Assessment System section).
Minimum Reserve Ratio
Section 334 of the Dodd-Frank Act, which increased
the minimum reserve ratio of the DIF from 1.15
percent to 1.35 percent, requires that the reserve ratio
reach that level by September 30, 2020. Section
334 also mandates that the FDIC “offset the effect
of [the increase in the minimum reserve ratio] on
insured depository institutions (IDIs) with total
consolidated assets of less than $10 billion.” In
March 2016, the FDIC approved a final rule to
implement these requirements. The final rule imposes
surcharges on the quarterly assessments of IDIs with
total consolidated assets of $10 billion or more.
The surcharges will continue through the quarter
in which the reserve ratio first reaches or exceeds
1.35 percent. The surcharge equals an annual rate
of 4.5 basis points applied to an institution’s regular
quarterly deposit insurance assessment base after
subtracting $10 billion, with certain exceptions for
banks with affiliated insured depository institutions.
The FDIC expects that eight quarterly surcharges will
be needed for the reserve ratio to reach 1.35 percent.
If, contrary to the FDIC’s expectations, the reserve
ratio does not reach 1.35 percent by December
31, 2018 (but is still at least 1.15 percent), under
the final rule the FDIC will impose a shortfall
assessment on IDIs with total consolidated assets
of $10 billion or more on March 31, 2019.
Because the Dodd-Frank Act requires that the FDIC
offset the effect of the increase in the reserve ratio
from 1.15 percent to 1.35 percent on IDIs with
total consolidated assets of less than $10 billion,
the final rule exempts these smaller banks from
the surcharges and provides assessment credits to
these institutions for the portion of their regular
assessments that contribute to growth in the reserve
ratio between 1.15 percent and 1.35 percent. Credits
will be automatically applied to these small banks’
assessments when the reserve ratio is at or above
1.38 percent.

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ANNUAL REPORT
Deposit Insurance Assessment System
In April 2016, the FDIC approved a final rule to
improve the risk-based deposit insurance assessment
system applicable to established small banks to reflect
risk more accurately. The final rule incorporates data
from the recent financial crisis and bases assessment
rates for all established small banks (generally, those
with less than $10 billion in total assets that have been
federally insured for at least five years) in a statistical
model that estimates a bank’s probability of failure
within three years. The revisions went into effect the
third quarter of 2016. The final rule maintains the
previously adopted ranges of assessment rates that
apply once the DIF reserve ratio reaches 1.15 percent,
2 percent, and 2.5 percent, and was implemented
so that aggregate assessment revenue collected from
established small banks under the final rule was
approximately the same as would have been collected
under the small bank pricing method being replaced.

FDIC assesses an institution’s operating condition,
management practices and policies, and compliance
with applicable laws and regulations.
As of December 31, 2016, the FDIC conducted
1,727 statutorily required risk management
examinations and all required follow-up examinations
for FDIC-supervised problem institutions within
prescribed time frames. The FDIC also conducted
1,311 statutorily required CRA/compliance
examinations (709 joint CRA/compliance
examinations, 594 compliance-only examinations,
and 8 CRA-only examinations). In addition, the
FDIC performed 3,854 specialty examinations
(which include reviews for Bank Secrecy Act (BSA)
compliance within prescribed time frames).
The table on page 25 compares the number of
examinations by type, conducted from 2014
through 2016.
Risk Management

SUPERVISION
Supervision and consumer protection are cornerstones
of the FDIC’s efforts to ensure the stability of, and
public confidence in, the nation’s financial system.
The FDIC’s supervision program promotes the
safety and soundness of FDIC-supervised financial
institutions, protects consumers’ rights, and promotes
community investment initiatives.

Examination Program
The FDIC’s strong bank examination program is the
core of its supervisory program. As of December 31,
2016, the FDIC was the primary federal regulator
(PFR) for 3,790 FDIC-insured, state-chartered
institutions that were not members of the Federal
Reserve System [generally referred to as “state
nonmember” (SNM) institutions]. Through risk
management (safety and soundness), consumer
compliance and the Community Reinvestment
Act (CRA), and other specialty examinations, the

All risk management examinations have been
conducted in accordance with statutorily-established
timeframes. As of September 30, 2016, 132 insured
institutions with total assets of $24.9 billion were
designated as problem institutions for safety and
soundness purposes (defined as those institutions
having a composite CAMELS1 rating of 4 or 5),
compared to the 203 problem institutions with total
assets of $51.1 billion on September 30, 2015. This
is a 35 percent decline in the number of problem
institutions and a 51 percent decrease in problem
institution assets. For the 12 months ending
September 30, 2016, 82 institutions with aggregate
assets of $27.1 billion were removed from the list of
problem financial institutions, while 11 institutions
with aggregate assets of $2.3 billion were added to
the list. The FDIC is the PFR for 91 of the 132
problem institutions, with total assets of $15.7 billion.
In 2016, the FDIC’s Division of Risk Management
Supervision initiated 170 formal enforcement actions

The CAMELS composite rating represents the adequacy of Capital, the quality of Assets, the capability of Management, the quality
and level of Earnings, the adequacy of Liquidity, and the Sensitivity to market risk, and ranges from “1” (strongest) to “5” (weakest).

1

24

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2016
FDIC EXAMINATIONS 2014-2016
2016

2015

2014

1,563

1,665

1,881

164

206

206

State Member Banks

0

0

0

Savings Associations

0

0

0

National Banks

0

0

0

1,727

1,871

2,087

Compliance/Community Reinvestment Act

709

859

1,019

Compliance-only

594

478

376

8

10

11

1,311

1,347

1,406

351

365

428

Information Technology and Operations

1,742

1,886

2,113

Bank Secrecy Act

1,761

1,906

2,126

Subtotal – Specialty Examinations

3,854

4,157

4,667

TOTAL

6,892

7,375

8,160

Risk Management (Safety and Soundness):
State Nonmember Banks
Savings Banks

Subtotal – Risk Management Examinations
CRA/Compliance Examinations:

CRA-only
Subtotal – CRA/Compliance Examinations
Specialty Examinations:
Trust Departments

and 121 informal enforcement actions. Enforcement
actions against institutions included, but were not
limited to, 23 actions under Section 8(b) of the FDI
Act (22 consent orders and 1 notice of charges), and
121 MOUs. Of these enforcement actions against
institutions, 20 consent orders, and 22 MOUs were
based, in whole or in part, on apparent violations
of BSA and anti-money laundering (AML) laws
and regulations. In addition, enforcement actions
were also initiated against individuals. These actions
included, but were not limited to, 95 removal and
prohibition actions under Section 8(e) of the FDI
Act (87 consent orders and 8 notices of intention to
remove/prohibit), 3 actions under Section 8(b) of
the FDI Act (1 notice of charges to pay restitution
and 2 personal cease and desist orders), and 28 civil
money penalties (CMPs) (25 orders to pay and
3 notices of assessment).

The FDIC has heightened its focus on forwardlooking supervision aimed at ensuring that risks are
mitigated before they lead to financial deterioration.
Compliance
As of December 31, 2016, 50 insured SNM
institutions, about 1 percent of all supervised
institutions, with total assets of $72 billion, were
problem institutions for compliance, CRA, or
both. All of the problem institutions for compliance
were rated “4” for compliance purposes, with none
rated “5.” For CRA purposes, the majority were
rated “Needs to Improve,” and only four were rated
“Substantial Noncompliance.” As of December
31, 2016, all follow-up examinations for problem
institutions were performed on schedule.
As of December 31, 2016, the FDIC conducted
all required compliance and CRA examinations

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ANNUAL REPORT
and, when violations were identified, completed
follow-up visits and implemented appropriate
enforcement actions in accordance with FDIC policy.
In completing these activities, the FDIC substantially
met its internally established time standards for
the issuance of final examination reports and
enforcement actions.
Overall, banks demonstrated strong consumer
compliance programs. The most significant
consumer protection issue that emerged from the
2016 compliance examinations involved banks’
failure to adequately monitor third-party vendors.
For example, the FDIC found violations involving
unfair or deceptive acts or practices relating to issues
such as failure to disclose material information
about product features and limitations, deceptive
marketing and sales practices, and misrepresentations
about the costs of products. As a result, the FDIC
issued orders requiring the payment of CMPs.
As of December 31, 2016, the FDIC’s Division
of Depositor and Consumer Protection initiated
15 formal enforcement actions and 23 informal
enforcement actions to address compliance concerns
(see chart on page 140). This included 4 consent
orders, 2 removal and prohibition orders addressing
safety and soundness concerns and breaching
fiduciary duty, 9 CMPs, and 23 MOUs. Restitution
orders are formal actions that require institutions
to pay restitution in the form of consumer refunds
for different violations of law. As of December 31,
2016, there were no restitution orders that required
institutions to refund consumers. The CMPs totaled
over $332,654.

Large Bank Supervision Program
The FDIC also established the Large Bank
Supervision Program within the Division of Risk
Management Supervision to address the growing
complexity of large banking organizations with
assets exceeding $10 billion and not assigned to the
CFI Program. This group is responsible for both
supervisory oversight and ongoing monitoring, and
resolution planning, while supporting the insurance

26

business line. For SNM banks over $10 billion, the
FDIC generally applies a continuous examination
program, whereby dedicated staff conducts ongoing
onsite supervisory examinations and institution
monitoring. At institutions where the FDIC is not
the primary federal regulator, FDIC has dedicated
onsite examination staff at select banks, working
closely with other financial institution regulatory
authorities to identify emerging risks and assess the
overall risk profile of large institutions.
The Large Insured Depository Institution (LIDI)
Program remains the primary instrument for off-site
monitoring of IDIs with $10 billion or more in total
assets. The LIDI Program provides a comprehensive
process to standardize data capture and reporting
through nationwide quantitative and qualitative risk
analysis of large and complex institutions. In 2016,
the LIDI Program covered 92 institutions with total
assets of $5.4 trillion. The comprehensive LIDI
Program supports effective large bank supervision
because it aids the Division in using individual
institution information to deploy resources most
effectively to high-risk areas, determine the need for
supervisory action, and support insurance assessments
and resolution planning.
The Shared National Credit (SNC) Program is an
interagency initiative administered jointly by the
FDIC, OCC, and FRB to ensure consistency in the
regulatory review of large, syndicated credits, as well
as identify risk in this market, which comprises a
large volume of domestic commercial lending. In
2016, outstanding credit commitments identified
in the SNC Program totaled $4.1 trillion. The
FDIC, OCC, and FRB issued a joint press release
detailing the results of the review in July 2016. The
latest review showed the level of adversely rated
assets remained higher than in previous periods of
economic expansion, raising the concern that future
losses and problem loans could rise considerably
in the next credit cycle. The elevated level of risk
observed during the recent SNC examination
stems from the high inherent risk in the leveraged
loan portfolio and growing credit risk in the oil
and gas portfolio. Notwithstanding the riskiness

M AN AG EMEN T’S DISCUSSION AND ANALY SIS

2016
of the existing portfolio, the agencies noted
improved underwriting and risk management
practices related to the most recent leveraged loan
originations, as underwriters continued to better
align practices with regulatory expectations, and
as investor risk appetite moderated away from
transactions at the lower end of the credit spectrum.

Information Technology, Cyber Fraud,
and Financial Crimes
To address the specialized nature of technologyand operations-related supervision, cyber risks, and
controls in the banking industry, the FDIC routinely
conducts information technology (IT) and operations
examinations at FDIC-supervised institutions.
IT Examinations
The FDIC conducts regular IT and operations
risk examinations at all FDIC-supervised financial
institutions and assigns an examination rating based
on the Federal Financial Institutions Examination
Council’s (FFIEC’s) Uniform Rating System for
Information Technology (URSIT). The URSIT rating
is incorporated into the Management component
of the Safety and Soundness rating in Reports
of Examination. In 2016, the FDIC conducted
1,742 IT and operations examinations at financial
institutions and technology service providers (TSPs).
In 2016, the FDIC continued to enhance its IT
supervision and improve its programs to fight cyber
fraud and financial crimes more generally. This year,
the FDIC released updated IT and operations risk
examination procedures that are more efficient and
risk-focused, include a cybersecurity preparedness
assessment, and provide more detailed examination
results to institutions. This enhanced Information
Technology Risk Examination program, or InTREx,
helps ensure that financial institution management
promptly identifies and effectively addresses IT and
cybersecurity risks. The InTREx work program and
training was completed on June 24, 2016, and fully
implemented by September 30, 2016.

Supervision for Technology Service Providers
The FDIC and other banking agencies also conduct
IT and operations risk examinations of TSPs, that
support financial institutions. During 2016, the
FDIC, OCC, and FRB piloted the newly developed
Interconnectivity Horizontal Review Program with
three of the largest TSPs. The program focused on the
IT risks of large and complex supervised institutions
and TSPs. This new program will help strengthen the
FDIC’s supervision of TSPs that present the most risk
to the banking industry.
Other Activities
The FDIC continues to provide resources to raise
awareness of cyber risks and to encourage practices
that help protect the financial institutions it
supervises. For example, in 2016, the FDIC hosted
an industry webinar titled “Cybersecurity Resources
to Help Your Customers Protect Themselves,” and
made available brochures with tips on how to conduct
business safely online. Financial institutions can
reprint these brochures for their retail banking and
business customers.
Additionally, the FDIC monitors cybersecurity
issues in the banking industry through regulatory
and intelligence reports. The FDIC works with the
Financial and Banking Information Infrastructure
Committee, the Financial Services Sector
Coordinating Council for Critical Infrastructure
Protection, Homeland Security, the Financial Services
Information Sharing and Analysis Center (FSISAC), other regulatory agencies, law enforcement,
and others to share information regarding
emerging issues and to coordinate responses.
During 2016, the FDIC served as chair of the
Cybersecurity and Critical Infrastructure Working
Group (CCIWG) of the FFIEC Task Force on
Supervision. The CCIWG serves as a forum to
address policy related to cybersecurity and critical
infrastructure, enables members to communicate
and collaborate on activities to support and
strengthen the resilience of the financial services

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ANNUAL REPORT
sector, and provides input to FFIEC principal
members regarding cybersecurity matters.
Major interagency accomplishments as a member of
the FFIEC included the following:
♦♦ Collaborated with the FRB and OCC to develop
a Cybersecurity Evaluation Tool to be used
during TSP examinations, and piloted the tool
during the first quarter of 2016.
♦♦ Served as the event manager for a conference
of IT supervisors from more than 20 countries.
Participants provided updates and national
perspectives on three IT supervision themes:
FinTech, cybersecurity, and supervision of
third-party providers.
♦♦ Conducted a workshop to consider the
value and merits of cyber insurance as a risk
transfer vehicle.
♦♦ Published a joint statement on safeguarding
the cybersecurity of interbank messaging and
wholesale payment networks.
♦♦ Issued an appendix to the Retail Payment
Systems booklet of the FFIEC Information
Technology Examination Handbook entitled
“Mobile Financial Services.” The booklet is
part of the IT Examination Handbook series.
The appendix contains guidance on the risks
associated with mobile financial services and
emphasizes an enterprise-wide risk management
approach to effectively manage and mitigate
those risks.
♦♦ Revised the Information Security booklet
of the FFIEC IT Examination Handbook to
provide an overview of information security
operations, including the need for effective threat
identification, assessment and monitoring, and
incident identification, assessment, and response.
♦♦ Hosted two industry webinars in recognition of
October as National Cybersecurity Awareness
Month. The first webinar, Mobile Financial
Services, Appendix E of the Retail Payment System
Booklet, provided information about the risks
associated with mobile financial services and risk
management approaches, and answered related

28

questions from participants. The second webinar,
Executive Leadership of Cybersecurity: Threat
Intelligence and Getting the Most Out of Your
FS-ISAC Membership, provided insight on how
financial institutions can strengthen their use of
cyber intelligence.
♦♦ Improved information sharing on technology
risks among the IT examination workforces
of the FFIEC member agencies through
discussions at the March 2016 annual
Supervisory Strategy Meeting.

Enhancing the FDIC’s IT Security
Information security is critical to the FDIC’s ability
to carry out its mission of maintaining stability
and public confidence in the nation’s financial
system. In 2016, the FDIC implemented policies
and technologies to strengthen its own cybersecurity
posture by initiating an aggressive 60-day plan to
improve information security and an FDIC IT Action
Plan to lay the foundation for modernizing the
agency’s IT services to ensure scalability and resilience.
Steps taken included:
♦♦ completely revised the Data Breach Management
Guide to incorporate policy guidance
promulgated in the Office of Management and
Budget Memorandum (M-16-03);
♦♦ phased in a new incident tracking system that
automates, centralizes, and greatly enhances
management and oversight of incident response
and breach-related activities;
♦♦ discontinued individuals’ ability to copy
information to removable media such as CD’s,
DVDs, external hard drives, and thumb drives;
♦♦ implemented new controls to limit printing
of sensitive information and better monitor
information printed in the highest risk areas;
♦♦ signed a memorandum of understanding to
migrate to an intrusion prevention, detection,
and monitoring system from the Department
of Homeland Security that will help detect and
block outside cyber threats;

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2016
♦♦ initiated efforts to implement Digital Rights
Management software to protect the most
sensitive FDIC data; and
♦♦ engaged an independent, third-party firm to
conduct an end-to-end assessment of the FDIC’s
information security and privacy programs. This
assessment encompassed key areas of the FDIC’s
information security program including network
security, software security, host security, data
protection, etc.
These actions are in addition to protections that were
already in place, such as:
♦♦ encryption of some of our most sensitive
information;
♦♦ encrypted laptop hard drives; and
♦♦ a Data Loss Prevention program that monitors
information in emails, information being
transferred to websites, and information printed. 
The FDIC requires employees to take annual security
and privacy training so they are aware of FDIC
security standards. This is supplemented by periodic
phishing tests to help ensure employees stay watchful
to possible outside threats.
The FDIC will remain alert and continue to adjust
security controls in light of the changing threat
landscape.
Access Control Program and Personal Identity
Verification Card Implementation
The FDIC’s Access Control Program (ACP) was
established to ensure the agency’s compliance with the
Homeland Security Presidential Directive 12 (HSPD12): Policy for a Common Identification Standard for
Federal Employees and Contractors. HSPD-12 requires
the use of Personal Identity Verification (PIV) cards—
smart card credentials containing data that allow
the cardholder to be granted access to facilities and
information systems—to assure appropriate levels of
security and offer enhanced protection by requiring
multifactor authentication (MFA). MFA requires two
or more of the following verification mechanisms to
access a user’s work station or network:

♦♦ something one knows (e.g., password, personal
identification number, secret question/answer),
♦♦ something one has (e.g., PIV card, security
token, cell phone), or
♦♦ something one is (e.g., biometrics such as
fingerprints, retina pattern).
In 2016, the FDIC expanded use of MFA for securely
downloading assessment invoices and official FDIC
correspondence, and performing other secure file
exchanges.
This year, the FDIC successfully issued PIV
cards to more than 5,300 eligible employees and
contractors by partnering with the General Services
Administration (GSA) USAccess program. In order to
track and manage the rollout of the PIV card issuance
effectively, the agency developed an Inventory
Executive Dashboard by division, region, and office.
By year-end 2016, approximately 94 percent of
eligible FDIC employees and contractors have been
issued a PIV card.
The FDIC also enforced the use of PIV cards to access
the FDIC network (i.e., logical access). As of yearend 2016, PIV-based authentication is required to
access the FDIC network across the agency. ACP’s
global communications and organizational change
management efforts have resulted in approximately
90 percent of FDIC staff and contractors using their
cards for logical access.
Insider Threat Program
During 2016, in support of the National Insider
Threat Policy, the FDIC established an Insider
Threat and Counterintelligence Program (ITCIP)
to strengthen and develop new processes and
technologies to combat insider threats.
An insider threat is a concern or risk posed to the
FDIC that involves an individual who misuses or
betrays, wittingly or unwittingly, his or her authorized
access to FDIC resources. This individual may have
access to sensitive, personally identifiable information
and/or privileged access to critical infrastructure and/
or business sensitive information (e.g., bank data).

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ANNUAL REPORT
The ITCIP blends both physical and logical safeguards
to minimize the risk, likelihood, and impact of an
executed insider threat.
An ITCIP Working Group was established to focus
on detecting, identifying, assessing, mitigating, and
preventing insider threat or external threat activity
through the centralized and integrated analysis of
threat information. An ITCIP Executive Committee
also was established to support planning and provide
oversight in the implementation of the program.
Further, the FDIC designated a senior Executive as
the Senior Agency Official principally responsible for
establishing a process to gather, integrate, centrally
analyze, and respond to relevant information
indicative of a potential insider threat.

Bank Secrecy Act/Anti-Money Laundering
In 2016, the Financial Action Task Force (FATF)
completed a mutual evaluation of the U.S. antimoney laundering (AML) regime. The FDIC
provided input through on-site discussions regarding
the U.S. banking industry’s AML supervision and
enforcement and provided comments on final
documents addressing the U.S. banking industry’s
compliance with the FATF AML standards.

Examiner Development
The FDIC has undertaken a multi-year project to
expand and strengthen its examiner development
programs for specialty examinations, such as
information technology, BSA/AML, trust, capital
markets, accounting, and anti-fraud. Due to the
increased complexity of institutions, specialty skills
are becoming paramount in risk assessment. In
addition, this initiative is an important component of
succession planning; proactively addressing knowledge
transfer will enable the FDIC to mitigate the impact
of the future retirement of senior technical experts.
The goal of this project is to standardize nationwide
the skills needed to examine banks of varying levels
of risk and complexity in each specialty area, and
then to develop on-the-job training programs to

30

provide opportunities for examiners to develop higher
level competencies in these specialty areas. This
initiative will:
♦♦ offer a road map to assist employees in
career planning;
♦♦ identify the skills needed for career development
and potential advancement;
♦♦ provide tools to support career development;
♦♦ deliver structured training programs that
include assignments designed to develop higher
level competencies;
♦♦ enhance the value of a subject matter expert
designation by creating a consistent definition
and application; and
♦♦ provide more observable, objective, and
measurable criteria for job descriptions in
specialty areas.
In 2016, the FDIC validated competency models
in the BSA/AML, trust, and capital markets
areas, began developing specialty on-the-job
training programs in BSA/AML and trust,
and made progress in developing information
technology and accounting competency models.

Minority Depository Institution Activities
The preservation of minority depository institutions
(MDIs) remains a high priority for the FDIC. In
2016, the FDIC continued to support MDI and
Community Development Financial Institution
(CDFI) industry-led strategies for success. These
strategies include: increased collaboration between
MDI and CDFI bankers; partnering to share costs,
raise capital, or pool loans; and making innovative
use of federal programs. The FDIC supports this
effort by providing technical assistance to MDI and
CDFI bankers.
In 2016, the FDIC sponsored a discussion between
trade groups representing MDIs and CDFIs and
representatives of potential bank partners, focusing on
CRA partnerships. In addition, the FDIC provided
technical assistance to a group seeking to develop a

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2016
private equity fund to invest in MDIs. The FDIC’s
assistance addressed how the proposed structure might
be considered under the Basel Capital Rules as well as
the CRA. Both community banks and larger insured
financial institutions have valuable incentives under
the CRA to undertake ventures with MDIs, including
capital investment and loan participations.
In 2016, the FDIC, OCC, and FRB co-hosted
a webinar on strategic planning attended by
approximately 50 MDIs, and began planning the
2017 Interagency MDI and CDFI Bank Conference,
which the agencies will co-sponsor. The conference
will be held in Los Angeles where there is a significant
concentration of MDIs. The conference will feature
an interactive panel with FDIC Chairman Martin J.
Gruenberg, a Federal Reserve Board Governor, and
Comptroller of the Currency Thomas J. Curry.
The FDIC continued its efforts to improve
communication and interaction with MDIs and to
respond to the concerns of minority bankers. The
FDIC maintains active outreach with MDI trade
groups and offers to arrange annual meetings between
FDIC regional management and each MDI’s board
of directors to discuss issues of interest. The FDIC
routinely contacts MDIs to offer return visits and
technical assistance following the conclusion of
FDIC safety and soundness, compliance, CRA, and
specialty examinations to assist bank management
in understanding and implementing examination
recommendations. These return visits, normally
conducted 90 to 120 days after the examination,
are intended to provide useful recommendations or
feedback for improving operations, not to identify
new issues. The FDIC’s website encourages and
provides contact information for any MDI to request
technical assistance at any time.
In 2016, the FDIC provided 135 individual
technical assistance sessions on approximately 66 risk
management and compliance topics, including:
♦♦ accounting;
♦♦ Bank Secrecy Act and Anti-Money Laundering;
♦♦ Basel III Capital Rules;

♦♦
♦♦
♦♦
♦♦
♦♦
♦♦
♦♦
♦♦
♦♦
♦♦
♦♦
♦♦

brokered deposits/waivers;
capital planning;
commercial real estate concentrations;
Community Reinvestment Act;
funding and liquidity;
high volatility commercial real estate;
information technology risk management
and cybersecurity;
interest-rate risk;
loan underwriting and administration;
mortgage lending rules;
strategic planning; and
third-party risk management.

The FDIC’s regional offices also held outreach,
training, and educational programs for MDIs through
conference calls and regional banker roundtables. In
2016, topics of discussion for these sessions included
many of those listed above, as well as the FDIC’s
National MDI Program, the FDIC’s Community
Banking Initiative, and the availability of Technical
Assistance Videos on corporate governance, strategic
planning, director responsibilities, community
banking initiatives, compliance guidance,
concentration risk management, and bank merger
and acquisition.

Mutual Institutions
In August 2016, the FDIC and OCC co-hosted the
Joint Agency Mutual Forum, which was open to all
mutual banking institutions regardless of charter
type. Mutually-owned related institutions represent
about 9 percent of all FDIC-insured institutions and
are among the oldest form of depository institution.
Attended by approximately 125 participants, the
forum provided an opportunity for the mutual
bankers to learn about current trends and engage in
a dialogue on the strengths of and challenges facing
mutual institutions. The forum featured presentations
and banker panels covering topics of interest relating
to the mutual industry, including an economic
outlook, strategic planning, cyber challenges,

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ANNUAL REPORT
regulatory compliance update, and an opportunity
for each agency to hold an agency-specific session
to address other current matters and respond to
banker inquiries.

published advisory opinions and the FDIC’s Study
on Core Deposits and Brokered Deposits, issued in
July 2011.

Cyber Fraud and Financial Crimes

In April 2016, the FDIC issued guidance in the form
of supplemental “Questions and Answers” (Q&As)
to aid applicants in developing applications for
deposit insurance. The supplemental Q&As provide
additional transparency to the application process
and supplement guidance previously issued in
November 2014.

The Cyber Fraud and Financial Crimes Section
leads the FDIC’s efforts to protect the banking
industry from criminal financial activities. These
efforts include managing the FDIC’s background
investigations for banking applications, leading
financial crimes-related training programs, and
assisting financial institutions in identifying and
shutting down “phishing” websites that attempt
to obtain fraudulently and use an individual’s
confidential personal or financial information.
This Section serves a leading role in education and
outreach, including through the development of
webinars and informational publications. During
2016, the Cyber Fraud and Financial Crimes
Section hosted a banking industry webinar (titled
“Cybersecurity Resources to Help Your Customers
Protect Themselves”) held in conjunction with
National Consumer Protection Week, and authored
a special edition of the FDIC’s Consumer News
focused on consumer cybersecurity awareness. The
Department of Homeland Security shared the
Consumer News edition with more than 58,000
partners during October 2016 in observation of
National Cybersecurity Awareness Month.

Supervision Policy
Brokered Deposits
In June 2016, the FDIC finalized updates to its
FAQs regarding brokered deposits. The FAQs were
updated in response to numerous questions regarding
brokered deposit determinations. The FAQs address
supervisory expectations for identifying, accepting,
and reporting broked deposits. The answers are
based on Section 29 of the FDI Act and Section
337.6 of the FDIC Rules and Regulations, as well
as explanations provided to the industry through

32

Applications for Deposit Insurance

Prudent Risk Management of Oil
and Gas Exposures
In July 2016, the FDIC issued guidance to remind
FDIC-supervised institutions with direct or indirect
oil and gas exposures to maintain sound underwriting
standards, strong credit administration practices, and
effective risk management strategies. When oil and
gas related borrowers experience financial difficulties,
the FDIC encourages financial institutions to work
constructively with borrowers to strengthen the credits
and to mitigate losses where possible.
Third-Party Lending
In July 2016, the FDIC issued a request for public
comment on proposed guidance for third-party
lending. The proposed guidance sets forth safety and
soundness and consumer compliance measures FDICsupervised institutions should follow when lending
through a business relationship with a third party.
The proposed guidance is intended to supplement the
FDIC’s existing Guidance for Managing Third-Party
Risk, which is applicable to a number of third-party
arrangements, including lending through a third
party. Public comments are being evaluated as part of
the process of developing the final guidance.
FDIC Examination Findings
In July 2016, the FDIC issued guidance to emphasize
the importance of open communication regarding
supervisory findings. An open dialogue with bank

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2016
management is critical to ensuring the supervisory
process is effective in promoting an institution’s strong
financial condition and safe and sound operation.
The FDIC encourages bank management to provide
feedback on FDIC supervisory activities and engage
FDIC personnel in discussions to ensure a full
understanding of the FDIC’s supervisory findings and
recommendations. If an institution disagrees with
examination findings, there are several informal and
formal avenues available to raise its concerns.
Regulatory Relief
During 2016, the FDIC issued 11 financial
institution letters providing guidance to help
financial institutions and to facilitate recovery in areas
affected by tornadoes, flooding, wild fires, landslides,
mudslides, and other severe events. In these letters,
the FDIC encouraged banks to work constructively
with borrowers experiencing financial difficulties as
a result of natural disasters. The letters also clarified
that prudent extensions or modifications of loan terms
in such circumstances can contribute to the health
of communities and serve the long-term interests of
lending institutions.

COMMUNITY BANKING INITIATIVE
Community banks provide traditional, relationshipbased banking services in their local communities. As
defined in recent FDIC research, community banks
made up almost 93 percent of all FDIC-insured
institutions at mid-year 2016. While they hold just
13 percent of banking industry assets, community
banks are of critical importance to the U.S. economy
and local communities across the nation. Community
banks hold 43 percent of the industry’s small loans
to farms and businesses, making them the lifeline to
entrepreneurs and small enterprises of all types. They
also hold the majority of bank deposits in U.S. rural
counties and micropolitan counties with populations
up to 50,000. In fact, as of June 2016, community
banks held more than 75 percent of deposits in
more than 1,200 U.S. counties. In more than 600 of
these counties, the only banking offices available to
consumers were those operated by community banks.

The FDIC is the primary federal supervisor for
the majority of community banks, in addition to
being the insurer of deposits held by all U.S. banks
and thrifts. Accordingly, the FDIC has a particular
responsibility for the safety and soundness of
community banks, as well as a particular interest
in and a commitment to the role they play in the
banking system and the challenges and opportunities
they face. In 2012, the FDIC launched a Community
Banking Initiative focused on publishing new research
on issues of importance to community banks and
providing resources that will be useful to their
efforts to manage risks, enhance the expertise of
their staff, and better understand changes in the
regulatory environment.
Community Banking Research
The FDIC continues to pursue an agenda of research
and outreach focused on community banking issues.
Since the 2012 publication of the FDIC Community
Banking Study, FDIC researchers have published
10 additional studies on topics ranging from small
business financing to the factors that have driven
industry consolidation over the past 30 years. The
Community Bank Performance section of the
FDIC Quarterly Banking Profile (QBP), first
introduced in 2014, continues to provide a detailed
statistical picture of the community banking sector
that can be accessed by analysts, other regulators, and
bankers themselves. The most recent report shows
that net income at community banks continued to
grow at a healthy annual rate through the first three
quarters of 2016, while total loans and leases at these
institutions grew at a rate that was 2.9 percentage
points higher than the rate for noncommunity banks.

Community Banking Conference
In April 2016, the FDIC hosted a community
banking conference entitled “Strategies for LongTerm Success.” About 250 community bankers and
industry participants took part in a daylong discussion
about what the future holds for community banks in
the United States. In addition to addresses by FDIC
Chairman Martin J. Gruenberg and Vice Chairman

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ANNUAL REPORT
failing. In the current environment, and in light
of strengthened, forward-looking supervision, the
FDIC determined it was appropriate to return to
the three-year period.
As an outgrowth from the conference, the FDIC
expanded on existing initiatives to facilitate the
formation of de novos and undertook two new
initiatives to support the long-term success of
community banks.

FDIC Chairman Martin J. Gruenberg gave the opening and closing
remarks at the Community Banking Conference in April 2016.

Thomas M. Hoenig, the conference featured four
expert panels that covered, in turn, the community
banking model, regulatory developments, managing
technology challenges, and ownership structure and
succession planning.
De Novo Banks
The FDIC is committed to working with, and
providing support to, any group with interest in
starting a community bank. In his remarks at the
Community Banking Conference, FDIC Chairman
Gruenberg discussed the FDIC’s efforts to facilitate
the formation of de novo banks. The FDIC has:
♦♦ Designated professional staff in each regional
office to serve as subject matter experts for
deposit insurance applications. These individuals
are points of contact to FDIC staff, other
banking agencies, industry professionals, and
prospective organizing groups. These specialists
serve as an important industry resource to address
the FDIC’s processes, generally, and to respond
to specific questions.
♦♦ Reduced from seven years to three years the
period of enhanced supervisory monitoring
of newly insured depository institutions. The
FDIC had established the seven-year period
during the financial crisis in response to the
disproportionate number of newly insured
institutions that were experiencing difficulties or

34

During the fall, the FDIC held de novo outreach
meetings in San Francisco, New York, and Atlanta to
ensure that interested parties and industry participants
are well informed about the FDIC’s application
process and the tools and resources available to
assist organizing groups. Each of the outreach
meetings addressed FDIC requirements for new bank
applications, and highlighted strategies for successful
formation. Based on a recommendation from
the FDIC’s Advisory Committee on Community
Banking, the FDIC incorporated into each outreach
meeting a roundtable discussion with Chief Executive
Officers (CEOs) of successful de novo institutions.
These CEO discussions were a highlight of each
outreach meeting, as the CEOs provided the
attendees with practical advice based on their personal
experiences. Similar outreach meetings will be held in
the remaining three regions during 2017.
In December 2016, the FDIC issued for public
comment a publication entitled Applying for Deposit
Insurance – A Handbook for Organizers of De Novo
Institutions that is intended to help organizers become
familiar with the deposit insurance application process
and describe the path to obtaining deposit insurance.
The handbook incorporates information on topics
raised during the de novo outreach meetings, including
advice from the CEO panels.
Continuing Community Banking
Initiative Activities
To learn more about how educators and bankers can
partner in developing the next generation of bankers,
the FDIC hosted a roundtable discussion with
more than a dozen institutions of higher education

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2016
and other industry representatives. The roundtable
explored community banking educational programs
and discussed challenges and best practices of these
programs with the goal of exploring strategies for the
industry’s long-term success.
Community Bank Advisory Committee
The FDIC’s Advisory Committee on Community
Banking is an ongoing forum for discussing current
issues and receiving valuable feedback from the industry.
The committee, which met three times during 2016,
is composed of 13 community bank CEOs from
around the country. It is a valuable resource for input
on a wide variety of topics, including examination
policies and procedures, capital and other supervisory
issues, credit and lending practices, deposit insurance
assessments and coverage, and regulatory compliance
issues. To learn more about how community banks
could attract the next generation of customers, the
FDIC conducted a panel discussion with millennial
FDIC employees at the July 2016 meeting. The
employees discussed how community banks can
successfully address millennial preferences.

Community Bank Resource Kit
In preparation for the Community Banking
Conference, the FDIC developed a Community
Bank Resource Kit for distribution to the conference
attendees. The Resource Kit contains: a copy of the
FDIC’s Pocket Guide for Directors; Supervisory Insights
articles related to corporate governance, interest-rate
risk, and cybersecurity; two cybersecurity brochures
that banks may reprint and share with their customers
to enhance cybersecurity savvy; a copy of the FDIC’s
Cyber Challenge exercise; and several pamphlets
that provide information about the FDIC resources
available to bank management and board members.
The Community Bank Resource Kit was subsequently
distributed to all FDIC-supervised institutions.
Technical Assistance Program
As part of the Community Banking Initiative, the
FDIC continued to provide an extensive technical
assistance program for bank directors, officers, and

At the April 2016 Community Banking Conference, FDIC Chief Economist
Richard Brown (second from left) summarizes findings of a recent
FDIC study.

employees to improve communication generally and
provide technical training on a range of topics. The
technical assistance program includes Directors’
College events held across the country, industry
teleconferences, and a video program.
In 2016, the FDIC hosted Directors’ College
events in each of its six regions. These events
were typically conducted jointly with state trade
associations and addressed issues such as corporate
governance, regulatory capital, community banking,
concentrations management, consumer protection,
the Bank Secrecy Act, and interest-rate risk,
among others.
In addition, the FDIC hosted 12 industry
teleconferences or webinars on a range of topics
of interest to community bankers, including
cybersecurity, overdraft protection rules, mobile
financial services, commercial real estate, and the
Real Estate Settlement Procedures Act. In addition,
the FDIC offered 11 deposit insurance coverage
seminars for bank officers and employees in 2016.
These free seminars, which were offered nationwide,
particularly benefitted smaller institutions that have
limited training resources. The FDIC also released
three deposit insurance seminar training videos on the
FDIC’s website and YouTube channel.
The FDIC offers a series of banker events, intended
to maintain open lines of communication to keep
bank management and staff up-to-date on important
banking regulatory and emerging issues in the

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ANNUAL REPORT
compliance and consumer protection area. In
2016, the FDIC offered three interagency webinars
focused on the following topics: requirements and
best practices regarding bank overdraft programs;
interagency Community Reinvestment Act questions
and answers; and Military Lending Act regulations.
The FDIC released six videos as part of its Technical
Assistance Video Program, which offers in-depth
technical training for bank directors, officers, and
employees to view at their convenience. Updated
videos were published relating to interest-rate risk
(two videos), corporate governance, the ability-torepay/qualified mortgages rule, and flood insurance.
During 2016, the FDIC released a new video on
outsourcing technology services.

Economic Growth and Regulatory
Paperwork Reduction Act
During 2016, the FDIC, along with the other
federal banking agencies and the FFIEC, continued
a cooperative, three-year effort to review all of their
regulations. The purpose of the regulatory review,
which is mandated no less frequently than once every
10 years by the Economic Growth and Regulatory
Paperwork Reduction Act of 1996 (EGRPRA), is to
identify and eliminate, as appropriate, outdated or
otherwise unnecessary regulatory requirements that
are imposed on insured depository institutions.
To facilitate the review, the agencies categorized their
regulations into 12 separate groups. Over the course
of two years, the groups of regulations were published
for comment, through a series of Federal Register
notices, providing industry participants, consumer
and community groups, and other interested parties
an opportunity to respond and identify regulatory
requirements they believe are no longer needed or
should be modified. The agencies also held six public
outreach meetings across the country to provide
an opportunity for individual bankers, consumer
and community group representatives, and other
interested persons to present their views directly to
agency senior management and staff of the FFIEC

36

and the federal banking agencies on any of the
regulations subject to EGRPRA review.
The agencies received 234 comment letters directly
in response to the Federal Register notices and also
received a number of additional oral and written
comments from panelists and the public at the
outreach meetings. The agencies have reviewed these
comments and comments received during outreach
meetings and will summarize the significant issues
raised and the relative merits of such issues in a report
that will be issued through the FFIEC to Congress.
In addition, due in part to feedback received during
the EGRPRA review, the FDIC and the other FFIEC
member entities are undertaking a community
bank Call Report burden-reduction initiative. The
objective of this initiative, which comprises actions
in five areas, is to streamline and simplify regulatory
reporting requirements for community banks.
As an initial step, the banking agencies, under the
auspices of the FFIEC, published proposed Call
Report revisions in September 2015. The agencies
began implementing these revisions, which include a
limited set of burden-reducing changes, in the third
quarter of 2016.
As a second action, the banking agencies accelerated
the start of a statutorily mandated review of the
existing Call Report data items, which otherwise
would have commenced in 2017. In support of
this review, users of Call Report data at the FFIEC
member entities are participating in a series of nine
surveys of groups of Call Report schedules conducted
over the 19-month period from mid-July 2015 until
early February 2017. Users participating in these
surveys have been asked to explain fully the need for
each Call Report item they deem essential.
A third action for the FFIEC members is to
understand better, through industry dialogue, the
aspects of community banks’ Call Report preparation
processes that are significant sources of reporting
burden. This outreach effort included on-site visits
to nine community banks during the third quarter

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2016
of 2015. In the first quarter of 2016, two bank
trade groups organized conference call meetings
with small groups of community bankers in which
representatives from the FFIEC members participated.
During these bank visits and conference call meetings,
the bankers explained how they prepare their Call
Reports, identified which schedules or data items take
a significant amount of time or manual processes to
complete, and described the reasons for this.
Fourth, building on the outcomes of the preceding
two actions, the FFIEC and its member entities
developed a separate, shorter, and more streamlined
Call Report to be completed by eligible small
institutions, as well as certain burden-reducing
revisions to two other existing versions of the Call
Report. The banking agencies, under the auspices
of the FFIEC, published the proposal on August 15,
2016, with a proposed effective date of March 31,
2017. After considering the comments received, the
FDIC and the other FFIEC members made certain
modifications to the proposal. The FFIEC notified
institutions about the outcome of the proposal on
December 30, 2016.
Finally, the FFIEC and the agencies will offer periodic
banker training by teleconference and webinar to
explain upcoming reporting changes and provide
guidance on Call Report requirements that bankers
find challenging.
The FDIC also streamlined and clarified certain
regulations through the Office of Thrift Supervision
(OTS) rule integration process. Under Section 316(b)
of the Dodd-Frank Act, rules transferred from the
former OTS to the FDIC and other successor agencies
remain in effect “until modified, terminated, set aside,
or superseded in accordance with applicable law’’ by
the relevant successor agency, by a court of competent
jurisdiction, or by operation of law. When the
FDIC republished the transferred OTS regulations
as new FDIC regulations applicable to state savings
associations, the FDIC stated in the Federal Register
notice that its staff would evaluate the transferred
OTS rules and might later recommend incorporating
the transferred OTS regulations into other FDIC

rules, amending them, or rescinding them. This
process began in 2013 and continues, involving
publication in the Federal Register of a series of NPRs
and final rules. In 2016, the FDIC issued an NPR to
remove one transferred OTS rule, Minimum Security
Procedures, and to make technical amendments to
related FDIC rules for applicability to state savings
associations. The FDIC removed a former OTS rule,
Frequency of Safety and Soundness Examination,
because it became unnecessary after FDIC rules
were amended to bring insured state savings
associations within its scope. Finally, in November
2016, the FDIC’s Board approved the issuance of
an NPR that proposes the removal of another OTS
rule, Consumer Protection in Sales of Insurance, and
corresponding revisions to the FDIC’s rule at 12 CFR
Part 343 to ensure that Part 343 applies to FDICsupervised state banks and savings associations.

ACTIVITIES RELATED TO SYSTEMICALLY
IMPORTANT FINANCIAL INSTITUTIONS
The FDIC is committed to addressing the unique
challenges associated with the supervision, insurance
with respect to the related insured depository
institutions, and potential resolution of large and
complex financial institutions. The FDIC’s ability to
analyze and respond to risks in these institutions is
particularly important, as they comprise a significant
share of banking industry assets and deposits. The
FDIC’s programs provide for a consistent approach to
large and complex bank supervision nationwide, allow
for the identification and analysis of industry-wide
and institution-specific risks and emerging issues,
and enable a quick response to these risks. The FDIC
has segregated these activities in two groups to both
ensure that supervisory attention is risk-focused and
tailored to the risks presented by the nation’s largest
banks and meet the FDIC’s responsibilities under the
FDI Act and the Dodd-Frank Act.

Complex Financial Institutions Program
The Dodd-Frank Act expanded the FDIC’s
responsibilities pertaining to systemically important

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ANNUAL REPORT
financial institutions (SIFIs) and nonbank financial
companies designated by the FSOC.  The FDIC’s
Complex Financial Institution (CFI) program within
the Division of Risk Management Supervision
(RMS) performs ongoing risk monitoring of SIFIs
and FSOC-designated nonbank financial companies,
provides backup supervision of the firms’ related
insured depository institutions (IDIs), and evaluates
the firms’ required resolution plans.  The CFI program
also performs certain analyses that support the FDIC’s
role as an FSOC member.

Resolution Plans – Living Wills
Title I of the Dodd-Frank Act requires that certain
large banking organizations and nonbank financial
companies designated by the FSOC for supervision
by the FRB periodically submit resolution plans to
the FRB and the FDIC. Each Title I resolution plan,
commonly known as a living will, must describe the
company’s strategy for rapid and orderly resolution
under the U.S. Bankruptcy Code in the event of
material financial distress or failure of the company.
Large Bank Holding Companies with Substantial
Nonbank Assets
Companies subject to the rule are divided into three
groups: companies with $250 billion or more in
nonbank assets, companies with nonbank assets
between $100 billion and $250 billion, and all other
companies with total consolidated assets of $50 billion
or more. Companies in the first and second group
were required to submit their resolution plans by
July 1, 2015. These firms included Bank of America
Corporation, Bank of New York Mellon Corporation,
JP Morgan Chase & Co., State Street Corporation,
Wells Fargo & Company, Goldman Sachs Group,
Inc., Morgan Stanley, and Citigroup, Inc.
In April 2016, the FDIC and FRB jointly announced
determinations and provided firm-specific feedback
on the resolution plans submitted in July 2015.
The agencies also made public the Resolution Plan
Assessment Framework, which explains the resolution
plan requirement, provides further information on

38

the determinations, and demonstrates the agencies’
processes for reviewing the plans. Additionally, the
agencies released new guidance for the July 2017
submissions.
Regarding the July 2015 submissions, the FDIC and
FRB jointly determined that each of the resolution
plans of Bank of America Corporation, Bank of
New York Mellon Corporation, JP Morgan Chase
& Co., State Street Corporation, and Wells Fargo &
Company was not credible or would not facilitate an
orderly resolution under the U.S. Bankruptcy Code,
the statutory standard established in the Dodd-Frank
Act. The agencies issued joint notices of deficiencies
to these five firms detailing the deficiencies in
their plans and the actions the firms must take to
address them. Each firm was required remediate its
deficiencies by October 1, 2016. Failure to remedy
the deficiencies could subject the firms to more
stringent capital, leverage, or liquidity requirements,
or restrictions on the growth, activities, or operations
of the firms as provided in the statute.
The agencies jointly identified weaknesses in the
2015 resolution plans of Goldman Sachs Group,
Inc. and Morgan Stanley that the firms must address,
but did not make joint determinations regarding the
plans and their deficiencies. The FDIC determined
that the plan submitted by Goldman Sachs Group,
Inc. was not credible or would not facilitate an
orderly resolution under the U.S. Bankruptcy Code,
and identified deficiencies. The FRB identified a
deficiency in Morgan Stanley’s plan and found that
the plan was not credible or would not facilitate an
orderly resolution under the U.S. Bankruptcy Code.
Neither agency found that Citigroup, Inc.’s 2015
resolution plan was not credible or would not
facilitate an orderly resolution under the U.S.
Bankruptcy Code, although the agencies did identify
shortcomings that the firm must address.
All of the banking organizations that received
feedback in April provided updates to their plans in
October 2016. The FDIC and the FRB determined
in December that Bank of America Corporation,

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2016
Bank of New York Mellon Corporation, JP Morgan
Chase & Co., and State Street Corporation adequately
remediated the deficiencies cited in their 2015
resolution plans.
The agencies jointly determined that Wells Fargo
& Company did not adequately remedy two of the
firm’s three deficiencies. In light of the nature of the
deficiencies and the resolvability risks posed by the
firm’s failure to remedy them, the agencies imposed
restrictions on the growth of international and
nonbank activities of Wells Fargo & Company and
its subsidiaries. The firm is expected to file a revised
submission addressing the remaining deficiencies
by March 31, 2017. If, after reviewing the March
submission, the agencies jointly determine that the
deficiencies have not been adequately remedied, the
agencies will limit the size of the firm’s nonbank and
broker-dealer assets to levels in place on September
30, 2016. If Wells Fargo & Company has not
adequately remedied the deficiencies within two years,
the statute provides that the agencies, in consultation
with the FSOC, may jointly require the firm to divest
certain assets or operations to facilitate an orderly
resolution of the firm in bankruptcy.
Four foreign banking organizations (FBOs) also filed
resolution plans in July 2015. The FDIC and FRB
are currently reviewing those plans.
Other Large Bank Holding Company Filers
In December 2015, the third group of filers
represented by 122 firms with total consolidated assets
of $50 billion or more submitted resolution plans
to the agencies. Of these, 34 resolution plans were
either full or tailored plans that were required to take
into account guidance provided by the agencies. The
FDIC and FRB are jointly developing letters with
feedback to these firms and guidance for their next
resolution plan submissions on December 31, 2017.
The remaining 88 resolution plans were streamlined
plans that required the firms to focus on material
changes to their 2014 resolution plans, actions taken
to strengthen the effectiveness of those plans, and,
where applicable, actions to ensure any subsidiary

insured depository institution would be adequately
protected from the risk arising from the activities
of nonbank affiliates of the firm. In May 2016,
the agencies notified 84 firms that they would be
permitted to file streamlined resolution plans for yearends 2016 through 2018.
In December 2016, the agencies received 86
resolution plans from new filers or filers of
streamlined plans. These plans include four full or
tailored plans and 82 streamlined plans.
Nonbank Firms
Nonbank financial firms designated as systemically
important by FSOC also are required to submit
resolution plans for review by the FDIC and FRB.
During December 2015, three nonbank firms—
American International Group, Inc. (AIG), General
Electric Capital Corporation, Inc. (GECC), and
Prudential, Inc.— submitted their resolution plans
for review. On June 28, 2016, GECC’s systemically
important financial institution designation was
rescinded, and the joint review of its plan ceased.
The agencies are expected to provide feedback on the
remaining plans in early 2017.
In August 2016, the FDIC and FRB, in order to
afford adequate time for the agencies to provide
thorough feedback to the firms, and for the firms
to develop responsive submissions, jointly in letters
to AIG and Prudential, Inc., stated the agencies’
decision to extend their 2016 annual resolution
plan submission date to December 31, 2017, and
indicated that their 2016 resolution plan requirement
would be satisfied by the submission of the 2017
resolution plan.
MetLife, which was designated as systemically
important on December 18, 2014, challenged its
designation in federal court and won a ruling on
March 30, 2016, that rescinded its designation. The
Department of Justice on behalf of the FSOC has
appealed that decision. The U.S. Court of Appeals
heard oral arguments in October 2016. MetLife will
not be required to submit a resolution plan unless its
designation is reinstated.

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ANNUAL REPORT
Extended Deadline for Submissions
for Certain Organizations’ Plans
In April 2016, the FDIC and FRB jointly announced
determinations and provided firm-specific feedback
on the 2015 resolution plans of eight systemically
important, domestic banking institutions. The
deadline for the next full plan submission for all eight
domestic SIFIs is extended to July 1, 2017.
In July 2016, the FDIC and FRB jointly granted oneyear filing extensions to four FBOs. These FBOs will
be required to submit their next resolution plans on
July 1, 2017.
In August 2016, the FDIC and FRB jointly granted
one-year filing extensions to 36 domestic bank
holding companies and foreign banking organizations,
as well as two nonbank financial companies designated
by the FSOC. These firms will be required to submit
their next resolution plans on December 31, 2017.

Insured Depository Institution
Resolution Plans
Part 360.10 of the FDIC Rules and Regulations
requires an IDI with total assets of $50 billion or
more to periodically submit to the FDIC a plan for its
resolution in the event of its failure (IDI Rule). The
IDI Rule requires each IDI meeting the criteria to
submit a resolution plan that should allow the FDIC,
as receiver, to resolve the IDI under Sections 11 and
13 of the Federal Deposit Insurance Act (FDI Act)
in an orderly manner that enables prompt access to
insured deposits, maximizes the return from the sale
or disposition of the failed IDI’s assets, and minimizes
losses realized by creditors. The resolution plan must
also describe how a selected strategy will be least costly
to the Deposit Insurance Fund.
In September 2015, the FDIC received 10 IDI
resolution plans and in December 2015, an additional
26 resolution plans. The FDIC’s review of these
plans focused on the insolvency scenario, strategy
and funding, readiness, corporate governance, and
the guidance that the FDIC issued in December

40

2014 for resolution plans required by the IDI Rule.
Under the guidance, a covered IDI must provide a
fully developed discussion and analysis of a range of
realistic resolution strategies. To assist IDIs in writing
their plans, the guidance includes direction regarding
the elements that should be discussed in a fully
developed resolution strategy and the cost analysis,
clarification regarding assumptions made in the plan,
and a list of significant obstacles to an orderly and
least costly resolution that IDIs should address. The
guidance applies to the resolution plans of the IDIs
covered by the IDI Rule, as well as any new IDI
meeting the threshold, commencing with the 2015
resolution plan submissions.
In August 2016, the FDIC extended the deadline
for 10 IDI resolution plans from September 1, 2016
to October 1, 2017, and extended the deadline for
26 IDI resolution plans from December 31, 2016
to December 31, 2017. The FDIC is developing
letters to these firms with feedback on their plans and
guidance for their next resolution plan submissions.
In December 2016, the FDIC received two IDI plans
from banks that are new filers.

Orderly Liquidation Authority –
Resolution Strategy Development
Under the Dodd-Frank Act, failed or failing financial
companies are expected to file for reorganization or
liquidation under the U.S. Bankruptcy Code, just as
any failed or failing nonfinancial company would file.
If resolution under the Bankruptcy Code would result
in serious adverse effects to U.S. financial stability, the
Orderly Liquidation Authority (OLA) set out in Title
II of the Dodd-Frank Act provides a backup authority
to the bankruptcy process. There are strict parameters
on its use, however, and it can only be invoked
under a statutorily prescribed recommendation and
determination process, coupled with an expedited
judicial review process.
The FDIC has been developing resolution strategies
to carry out its orderly liquidation authorities. Firmspecific resolution strategies are under development

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2016
and are informed by the Title I plan submissions. In
addition, preliminary work has begun to develop
resolution strategies for the nonbank resolution plan
filers and financial market utilities, particularly central
counterparties (CCPs).
In September 2016, the FDIC conducted a second
operational exercise to validate the steps involved in
carrying out a Title II resolution.  The first operational
exercise conducted in December of 2015, focused
on the initial appointment of the FDIC as receiver
of a SIFI and the stabilization phase immediately
following appointment.  This year’s exercise covered
the operation of the bridge financial company and
the wind down and liquidation of the firm.  Both
operational exercises validated the systemic resolution
framework and identified areas for further work.

Monitoring and Measuring
Systemic Risks
The FDIC monitors risks related to SIFIs both
at the firm level and industry wide, to inform
supervisory planning and response, policy and
guidance considerations, and resolution planning
efforts. As part of this monitoring, the FDIC
analyzes each company’s risk profile, governance
and risk management capabilities, structure and
interdependencies, business operation and activities,
management information system capabilities,
and recovery and resolution capabilities.
The FDIC continues to work closely with other
Federal regulators to analyze institution-specific and
industry-wide conditions and trends, emerging risks
and outliers, risk management, and the potential risk
posed to financial stability by SIFIs and nonbank
financial companies. To support risk monitoring that
informs supervisory and resolution planning efforts,
the FDIC has developed systems and reports that
make extensive use of structured and unstructured
data. SIFI monitoring reports are prepared on a
routine and ad-hoc basis and cover a variety of aspects
that include risk components, business lines and
activity, market trends, and product analysis.

Additionally, the FDIC has implemented and
continues to expand upon various monitoring
systems, including the Systemic Monitoring System
(SMS). The SMS provides an individual risk profile
and assessment for each SIFI by evaluating the
level and change in metrics that serve as important
barometers of overall risk. The SMS supports the
identification of emerging risks within individual
firms and the prioritization of supervisory and
monitoring activities. The SMS also serves as an early
warning system of financial vulnerability by gauging
a firm’s proximity and speed to resolution event.
Information from FDIC-prepared reports and systems
are used to prioritize activities relating to SIFIs
and to coordinate and communicate with the FRB
and OCC.
The FDIC also has conducted semi-annual
“Day of Risk” meetings to present, discuss, and
prioritize the review of emerging risks. For each
major risk, executive management discussed the
nature of the risk, exposures of SIFIs, and planned
supervisory efforts.

Backup Supervision Activities for IDIs of
Systemically Important Financial Institutions
Risk monitoring is enhanced by the FDIC’s backup
supervision activities. In its backup supervisory role,
as outlined in Sections 8 and 10 of the FDI Act,
the FDIC has expanded resources and developed
and implemented policies and procedures to guide
backup supervisory activities. These activities include
performing analyses of industry conditions and
trends, insurance pricing support, participating in
supervisory activities with other regulatory agencies,
and exercising examination and enforcement
authorities when necessary. At institutions for which
the FDIC is not the primary federal regulator, staff
works closely with other regulatory authorities to
identify emerging risk and assess the overall risk
profile of large and complex institutions. The FDIC,
OCC, and FRB operate under a Memorandum
of Understanding that establishes guidelines for
coordination and cooperation to carry out their

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ANNUAL REPORT
respective responsibilities, including the FDIC’s role
as insurer. Under this agreement, the FDIC has
assigned dedicated staff to IDI subsidiaries of
systemically important financial institutions to
enhance risk-identification capabilities and facilitate
the communication of supervisory information.
These individuals work with the staff of the FRB
and OCC in monitoring risk at their assigned
institutions. In 2016, staff from the FDIC’s Division
of Risk Management Supervision participated in
102 targeted examination activities with the FRB and
53 targeted examination activities with the OCC.
The reviews included, but were not limited to,
engagement in Comprehensive Capital Analysis
and Reviews, Dodd-Frank Act Stress Testing,
quantitative model reviews, swaps margin model
reviews, credit risk-related reviews, and the Shared
National Credit Reviews.

Cross-Border Efforts
Advance planning and cross-border coordination
for the resolution of Global-SIFIs (G-SIFIs) is
essential to minimizing disruptions to global financial
markets. Recognizing that the resolution of a G-SIFI
creates complex international legal and operational
concerns, the FDIC continues to work with foreign
regulators to establish frameworks for effective crossborder cooperation.
In October 2016, the FDIC hosted the second in
an ongoing series of planned exercises to enhance
coordination on cross-border resolution. The exercise
was the culmination of planning since late 2015 and
built on ongoing work by the international authorities
in the area of cross-border resolution, including
a staff-level exercise conducted earlier in July
2016. The exercise also coincided with the annual
international meetings in Washington, DC, sponsored
by the World Bank and International Monetary Fund.
Participants in the exercise included senior financial
officials representing authorities in the United States,
United Kingdom, and Europe, including the U.S.
Department of Treasury, FRB, OCC, SEC, CFTC,
Federal Reserve Bank of New York, HM Treasury,

42

Bank of England (BOE), U.K. Prudential Regulation
Authority, the Single Resolution Board, European
Commission, and European Central Bank.
The FDIC serves as a co-chair for all of the crossborder crisis management groups (CMGs) of
supervisors and resolution authorities for the United
States. In addition, the FDIC participates as a host
authority in CMGs for foreign G-SIFIs. The FDIC
and the European Commission continued their
engagement through the joint Working Group,
which is composed of senior executives at the FDIC
and European Commission who meet to focus on
both resolution and deposit insurance issues. In
2016, the Working Group discussed cross-border
bank resolution and resolution of CCPs, among
other topics. FDIC staff also participated in the
Joint EU-US Financial Regulatory Forum (formerly
the Financial Markets Regulatory Dialogue) with
representatives of the European Commission and
other participating European Union authorities,
including the Single Resolution Board and the
European Banking Authority, and staffs of the
Treasury Department, FRB, SEC, CFTC, and other
participating U.S. agencies.
The FDIC continued to advance its working
relationships with other jurisdictions that regulate
G-SIFIs, including those in Switzerland, Japan, and
Germany. In 2016, the FDIC had significant stafflevel engagements with these countries to discuss
cross-border issues and potential impediments that
could affect the resolution of a G-SIFI.

Systemic Resolution Advisory Committee
The FDIC created the Systemic Resolution
Advisory Committee (SRAC) in 2011 to receive
advice and recommendations on a broad range
of issues regarding the resolution of systemically
important financial companies pursuant to the
Dodd-Frank Act. Over the years, the SRAC has
provided important advice to the FDIC regarding
systemic resolutions and advised the FDIC on
a variety of issues, including the following:

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2016
♦♦ the effects on financial stability and economic
conditions resulting from the failure of a SIFI;
♦♦ the ways in which specific resolution strategies
would affect stakeholders and their customers;
♦♦ the tools available to the FDIC to wind down the
operations of a failed organization; and
♦♦ the tools needed to assist in cross-border relations
with foreign regulators and governments
when a systemically important company has
international operations.
Members of the SRAC have a wide range of
experience, including managing complex firms,
administering bankruptcies, and working in the
legal system, accounting field, and academia. The
SRAC met on April 14, 2016, and worked through
an agenda that addressed the status of Title I Living
Wills, an update on Title II Orderly Liquidation
Authority, and developments in the European Union.
The SRAC heard from Dr. Elke König, the first Chair
of the European Union’s Single Resolution Board, on
developments within the EU and efforts to collaborate
with the United States. and other jurisdictions.

Financial Stability Oversight Council
The FSOC was created by the Dodd-Frank Act in
July 2010 to promote the financial stability of the
United States. It is composed of 10 voting members,
including the Chairperson of the FDIC, and five
non-voting members.
The FSOC’s responsibilities include the following:
♦♦ identifying risks to financial stability, responding
to emerging threats in the financial system, and
promoting market discipline;
♦♦ identifying and assessing threats that institutions
may pose to financial stability and, if appropriate,
designating a nonbank financial company to be
supervised by the FRB and subject to heightened
prudential standards;
♦♦ designating financial market utilities and
payment, clearing, or settlement activities

that are, or are likely to become, systemically
important;
♦♦ facilitating regulatory coordination and
information-sharing regarding policy
development, rulemaking, supervisory
information, and reporting requirements;
♦♦ monitoring domestic and international financial
regulatory proposals and advising Congress
and making recommendations to enhance the
integrity, efficiency, competitiveness, and stability
of U.S. financial markets; and
♦♦ producing annual reports describing, among
other things, the Council’s activities and potential
emerging threats to financial stability.
In 2016, the FSOC issued its sixth annual report.
Generally, at each of its meetings, the FSOC discusses
various risk issues. In 2016, the FSOC meetings
addressed, among other topics, U.S. fiscal issues,
interest-rate risk, credit risk, the FRB and European
bank stress tests, the United Kingdom’s vote to leave
the European Union (i.e., Brexit), cybersecurity,
nonbank financial company designations, and
housing reform.

DEPOSITOR AND
CONSUMER PROTECTION
A major component of the FDIC’s mission is to
ensure that financial institutions treat consumers
and depositors fairly and operate in compliance with
federal consumer protection, anti-discrimination,
and community reinvestment laws. The FDIC
also promotes economic inclusion to build and
strengthen positive connections between insured
financial institutions and consumers, depositors,
small businesses and communities.

Guidance
Loans in Areas Having Special Flood Hazards
In April 2016, the FDIC, OCC, FRB, NCUA, and
Farm Credit Administration jointly issued interagency

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ANNUAL REPORT
examination procedures pertaining to force placement
of flood insurance, escrowing of flood insurance
premiums and fees, exemptions to the mandatory
flood insurance purchase requirement for detached
structures, and civil money penalties.
Uniform Interagency Consumer
Compliance Rating System
In 2016, the FFIEC finalized changes to the Uniform
Interagency Consumer Compliance Rating System
to reflect regulatory, supervisory, technological, and
market changes since the system was established.
The Consumer Compliance Rating System is a
supervisory policy for evaluating financial institutions’
adherence to consumer compliance requirements.
The revisions are designed to align the rating system
more fully with the FFIEC agencies’ current riskbased, tailored examination approaches. The FFIEC
new rating system will apply to all exams starting after
March 31, 2017.
Interagency Guidance on
Deposit-Reconciliation Practices
In May 2016, the FDIC, OCC, FRB, NCUA, and
Consumer Financial Protection Bureau (CFPB) issued
guidance to alert financial institutions to supervisory
expectations regarding deposit-reconciliation practices
that may be detrimental to customers. This guidance
addresses a set of situations in which customers
make deposits to accounts and the dollar amount
that the financial institution credits to that account
differs from the total of the items deposited. Such
discrepancies may arise in a variety of situations,
including inaccuracies on the deposit slip, encoding
errors, or poor image-capture. The result may be
a detriment to the customer and a benefit to the
financial institution if not appropriately reconciled.
Community Reinvestment Act
In July 2016, the FDIC, OCC, and FRB (i.e., the
federal bank regulatory agencies with responsibility
for CRA rulemaking) published final revisions to
“Interagency Questions and Answers Regarding

44

Community Reinvestment.” The Q&A provides
additional guidance to financial institutions and the
public regarding the agencies’ CRA regulations in
the following areas: availability and effectiveness of
retail banking services; innovative or flexible lending
practices; community development-related issues; and
responsiveness and innovativeness of an institution’s
loans, qualified investments, and community
development services.
Privacy of Consumer Financial Information
In October 2016, the FDIC released revised
interagency examination procedures for privacy
of consumer financial information that reflect
the statutory amendments made by the Fixing
America’s Surface Transportation Act (FAST Act)
to the Gramm-Leach-Bliley Act annual privacy
notice requirements. The procedures contain new
guidance on an exception to the annual privacy
notice requirement.
Military Lending Act
In October 2016, the FDIC released revised
interagency examination procedures that reflect the
Department of Defense’s 2015 amendments to the
implementing regulations of the Military Lending
Act of 2006 (MLA) and its August 2016 interpretive
rule that provides guidance on compliance with the
MLA rule. The FDIC also provided accompanying
guidance on its initial supervisory expectations
in connection with its examinations of financial
institutions for compliance with the MLA rule.

Promoting Economic Inclusion
The FDIC is strongly committed to promoting
consumer access to a broad array of banking products
to meet consumer financial needs. To promote
financial access to responsible and sustainable
products offered by IDIs, the FDIC:
♦♦ conducts research on the unbanked
and underbanked;

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2016
♦♦ engages in research and development on
models of products meeting the needs of
lower-income consumers;
♦♦ supports partnerships to promote consumer
access and use of banking services;
♦♦ advances financial education and literacy; and
♦♦ facilitates partnerships to support community
and small business development.
Advisory Committee on Economic Inclusion
The Advisory Committee on Economic Inclusion
(ComE-IN) provides the FDIC with advice and
recommendations on important initiatives focused on
expanding access to mainstream banking services to
underserved populations. This may include reviewing
basic retail financial services such as low-cost, safe
transaction accounts, affordable small-dollar loans,
savings accounts, and other services that promote
individual asset accumulation and financial stability.
In May 2016, ComE-IN met to discuss payment
system modernization, banks’ efforts to serve the
unbanked and underbanked, new savings accounts
designed to assist individuals with disabilities, and
next steps planned to explore the potential of mobile
financial services to further economic inclusion.
FDIC National Survey of Unbanked and
Underbanked Households and Related Research
As part of its ongoing commitment to expanding
economic inclusion in the United States, the FDIC
works to fill the research and data gap regarding
household participation in mainstream banking and
the use of nonbank financial services. In addition,
Section 7 of the Federal Deposit Insurance Reform
Conforming Amendments Act of 2005 mandates that
the FDIC regularly report on underserved populations
and bank efforts to bring individuals and families
into the conventional banking system. In response,
the FDIC regularly conducts and reports on surveys
of households and banks to inform the public and
enhance the understanding of financial institutions,
policymakers, regulators, researchers, academics,
and others.

At the 16th Annual Bank Research Conference, FDIC Chairman
Martin J. Gruenberg presented findings from the 2015 National Survey
of Unbanked and Underbanked Households.

During 2016, the FDIC prepared a report on
the 2015 FDIC National Survey of Unbanked and
Underbanked Households, in partnership with the U.S.
Census Bureau. The survey focused on basic checking
and savings account ownership, but it also explored
household use of alternative financial services to better
understand the extent to which families are meeting
their financial needs outside of mainstream financial
institutions. In addition, the survey incorporated
questions designed to assess the typical monthly
financial services consumption patterns and to better
understand households’ use of bank and nonbank
consumer credit instruments. A full report was issued
by the FDIC to the public on October 20, 2016.
Those results are available on economicinclusion.gov.
In 2016, the FDIC also published two qualitative
research projects to develop further understanding of
this area. In the first, the FDIC studied the economic
inclusion potential of mobile financial services. The
findings confirmed and provided more detailed
insights into the opportunity of mobile financial
services to improve the sustainability of banking
relationships. As a follow-up to this report, the FDIC
requested comments on opportunities to demonstrate
empirically the benefits of mobile financial services.
In the second project, the FDIC interviewed bankers

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ANNUAL REPORT
and other stakeholders to understand better the
programs, products, and strategies that banks are
finding useful for attracting and retaining unbanked
households as customers. In addition to summarizing
findings from these interviews, the paper suggests
several implications that banks and their partners can
use to enhance these efforts.

Community and Small Business Development
and Affordable Mortgage Lending
In 2016, the FDIC provided technical assistance
to banks and community organizations through
61 outreach events designed to increase shared
knowledge and support collaboration between
financial institutions and other community, housing,
and small business development resources and
to improve knowledge about the Community
Reinvestment Act.
The FDIC’s work particularly emphasized sharing
information to support bank efforts to provide
prudent access to responsible, affordable mortgage
credit. In 2016, the FDIC released the Affordable
Mortgage Lending Guide and launched the Affordable
Mortgage Lending Center, an online resource. These
resources are designed to provide a comprehensive
overview of the programs and services available to
community banks to support affordable mortgage
lending, particularly to low- and moderate-income
borrowers. By year-end 2016, the Guide had already
been downloaded more than 3,500 times, and
more than 20,000 visitors have viewed the online
Affordable Mortgage Lending Center.
Also in 2016, the FDIC, other federal regulators,
and federal and state housing agencies hosted 10
affordable mortgage lending forums to offer technical
assistance to help expand access to mortgage credit
for low-or moderate-income (LMI) households.
During these events, banks and program managers
shared experiences with federal mortgage guarantee
and secondary market programs and state and local
down payment assistance and counseling programs.
They offered details of their work so that audiences

46

could gain a better understanding of how to address
challenges and identify opportunities for expanding
participation in these programs.
In addition, the FDIC sponsored sessions with
interagency partners covering basic and advanced
CRA training for banks. The agencies also offered
CRA basics for community-based organizations
as well as seminars on establishing effective
bank-community collaborations for community
development in more than 45 communities. The
FDIC had a particular focus on encouraging
community development initiatives in rural
communities, including workshops that highlighted
housing needs and programs, economic development
programs, and community development financial
institution collaborations, including those serving
Native American communities.

Advancing Financial Education
Financial education helps consumers understand
and use bank products effectively and sustain
a banking relationship over time. The FDIC
continued to be a leader in developing high-quality,
free financial education resources and pursuing
collaborations to use those tools to educate the
public. The FDIC’s work during 2016 dealt
primarily with young people, consistent with the
Financial Literacy and Education Commission
focus on Starting Early for Financial Success.
Money Smart for Young People
Money Smart for Young People, a standards-aligned
curriculum designed to involve teachers, students,
and parents/caregivers in the learning process about
money, was downloaded more than 39,000 times
since its launch. In addition, 189 educators from 26
school districts received professional development
training to assist them in using Money Smart for Young
People as part of a small pilot project. The FDIC used
stakeholder input to enhance the curriculum, such as
by making it available to download on a lesson-bylesson basis.

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2016
Money Smart for Older Adults
The FDIC also worked with the CFPB to launch an
enhanced version of Money Smart for Older Adults, a
free financial education curriculum first released in
2013 to help prevent elder financial exploitation. The
2016 enhancements include technical updates and
revisions to the material based on input from trainers.
The newly updated resource includes an expanded
discussion on common types of elder financial
exploitation such as tax, charity, debt collection,
and grandchild imposter scams. The resource also
incorporates federal resources that can be helpful on
topics such as how to research an investment advisor.
Money Smart for Small Business
The FDIC continues to strengthen collaboration with
the Small Business Administration (SBA) and other
small business resources beyond training. In 2016,
each of the six FDIC regional Community Affairs
teams sponsored regional events for banks, the SBA,
and the SBA Resource Partner Network (comprised
of SCORE, Small Business Development Centers,
Women’s Business Centers, and Veteran’s Business
Outreach Centers) to convene and collaborate or
provide technical assistance to small business leaders.
Moreover, new training resources were released to
encourage expanded use of Money Smart for Small
Business, and the group of training providers identified
as Money Smart for Small Business Alliance members
continued to grow, reaching 143 at year-end.
Youth Savings Pilot Program
The FDIC continues to collaborate with the CFPB
to promote youth financial capability by giving
teachers trusted resources to teach financial education,
empowering parents and caregivers to discuss financial
topics with their children, and emphasizing hands-on
activities. To promote hands-on learning, the FDIC
completed a report on the two-year Youth Savings
Pilot Program in 2016. The pilot was designed
to identify and highlight promising approaches
to linking financial education to opportunities
for school-aged children to open safe, low-cost

savings accounts. The report, which draws from
the experiences of 21 participating banks, describes
three model approaches that have been used to build
financial education programs and can be a resource for
banks, schools, and others. Lessons learned from the
pilot also were presented at the October 20 meeting of
ComE-IN. In addition, FDIC hosted a symposium
on October 21 to bring together representatives
of the banks, schools, and non-profit partners that
participated in the Youth Savings Pilot to discuss
lessons learned and promising practices.
The FDIC also developed and began to implement
strategies to improve financial education and access to
mainstream financial services for youth participating
in youth employment programs funded through the
Workforce Innovation and Opportunity Act (WIOA).
For workforce providers and their partners teaching
financial education, FDIC developed a tool to map
Money Smart to WIOA’s financial education element,
and drafted a Money Smart supplement to prepare
youth to open their first accounts. The FDIC also led
three webinars in collaboration with the Department
of Labor to increase awareness of Money Smart among
organizations that receive federal funding for youth
employment. In addition, FDIC participated in three
regional events in collaboration with the Department
of Labor and FRB to strengthen the capacity of
workforce development organizations to work with
financial institutions on financial capability initiatives.
Financial Education Webinars for Teachers
In 2016, the FDIC enhanced its Teacher Online
Resource Center, a repository of resources from the
FDIC and CFPB, to help teachers provide youth
financial education. Five new videos that overview
the key features of the curriculum were added.
There were more than 27,000 visits to the site during
the year. The FDIC continued to collaborate with
strategic partners to increase awareness of the FDIC’s
free resources. For example, more than 600 people
participated in four conference call/webinars held in
collaboration with the Jump$tart Coalition to make
educators feel more comfortable using the curriculum.

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ANNUAL REPORT
Partnerships for Access to
Mainstream Banking
The FDIC supports broadening access to mainstream
banking for consumers and small business through
work with the Alliances for Economic Inclusion
(AEI), Bank On initiatives, local and state
governments, and in collaboration with federal
partners and many local and national organizations.
The FDIC also collaborates with other financial
regulatory agencies to provide information and
technical assistance on community development to
banks and community leaders across the country. 
Local collaborations are many and diverse. The FDIC
sponsored or co-sponsored more than 125 events
during 2016 that provided opportunities for partners
to collaborate on increasing access to bank accounts
and credit services, opportunities to build savings and
improve credit histories, and initiatives to strengthen
significantly the financial capability of community
service providers who directly serve LMI consumers
and very small businesses.
During 2016, the FDIC helped convene financial
institutions, community organizations, local, state,
and federal agencies, and other partners to support
coalitions that bring unbanked and underbanked
consumers and owners of small businesses into
the financial mainstream through a wide range
of partnership organizations. In the 14 AEI
communities and in other areas, the FDIC helped
committees and working groups of bankers and
community leaders develop responses to the financial
capability and services needs in their communities. To
integrate financial capability into community services
more effectively, the FDIC supported seminars and
training sessions for community service providers and
asset building organizations, workshops for financial
coaches and counselors, promotion of savings
opportunities for LMI people and communities,
initiatives to expand access to savings accounts
for all ages, outreach to bring larger numbers of
people to expanded tax preparation assistance sites,
and education for business owners to help them
become bankable.

48

The FDIC also provided information and technical
assistance in the development of safe and affordable
transaction and savings accounts and worked to
connect unbanked consumers to those accounts. The
FDIC provided technical assistance to local Bank
On initiatives and asset-building coalition activities
designed to reduce barriers to banking and increase
access to the financial mainstream in more than
28 communities and in 23 states. For example, the
FDIC collaborated with the Cities for Financial
Empowerment Fund to support its national efforts
to work with local government and other partners
to increase the access of LMI consumers to safe and
affordable financial products and services. During
2016, in collaboration with Cities for Financial
Empowerment and local coalitions, the FDIC
worked in seven Bank On cities to convene 14 forums
and roundtables designed to advance strategies to
expand access to safe deposit accounts. The FDIC
also supported efforts to link consumers to financial
education and savings through activities organized for
designated Money Smart or “financial fitness” weeks
or months, involving hundreds of consumer outreach
events. Moreover, working with the national, local,
state, and targeted (i.e., youth, military, and minority
consumer-focused) America Saves campaigns, the
FDIC continued to link banking companies to active
efforts for engaging consumers with setting savings
goals at tax time and year-round.
The FDIC designed strategies to reach two particular
segments of the population that the National Survey
of Unbanked and Underbanked Consumers revealed
are disproportionately unbanked and underbanked:
people with disabilities and low- and moderateincome young people. The Advisory Committee
on Economic Inclusion was engaged in discussions
of financial education and outreach initiatives
to promote economic inclusion of people with
disabilities. The FDIC discussed its efforts to work
with federal, nonprofit, and bank partners on the
tax-advantaged savings accounts (known as ABLE
Accounts), being launched by state governments.
The FDIC also expanded efforts with local
partners through 14 community events to bring

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2016
banks and organizations representing people with
disabilities together at the state and local level.
Youth benefiting from employment programs under
the WIOA, who are generally low- or moderateincome, are required to be offered financial education.
To support grantees of the Department of Labor
and local initiatives, the FDIC developed trainthe-trainer resources and delivered webinars to
enhance the capability of youth-serving employment
organizations. Workforce development organizations,
banks, the FRB and other partners convened in two
communities to expand opportunities for young
people to become financially capable and banked.

Consumer Complaints and Inquiries
The FDIC helps consumers by receiving,
investigating, and responding to consumer complaints
about FDIC-supervised institutions and answering
inquiries about banking laws and regulations, FDIC
operations, and other related topics. In addition, the
FDIC provides analytical reports and information
on complaint data for internal and external use, and
conducts outreach activities to educate consumers.
The FDIC recognizes that consumer complaints and
inquiries play an important role in the development
of strong public and supervisory policy. Assessing
and resolving these matters helps the agency identify
trends or problems affecting consumer rights,
understand the public perception of consumer
protection issues, formulate policy that aids
consumers, and foster confidence in the banking
system by educating consumers about the protection
they receive under certain consumer protection laws
and regulations.
Consumer Complaints by Product and Issue
The FDIC receives complaints and inquiries by
telephone, fax, U.S. mail, email, and online through
the FDIC’s website. In 2016, the FDIC handled
19,251 written and telephonic complaints and
inquiries. Of this total, 10,884 related to FDICsupervised institutions. The FDIC responded

to nearly 98 percent of these complaints within
time frames established by corporate policy, and
acknowledged 100 percent of all consumer complaints
and inquiries within 14 days. As part of the
complaint and inquiry handling process, the FDIC
works with the other federal financial regulatory
agencies to ensure that complaints and inquiries are
forwarded to the appropriate agencies for response.
The FDIC carefully analyzes the products and issues
involved in complaints about FDIC-supervised
institutions. The number of complaints received
about a specific bank product and issue can serve as a
red flag to prompt further review of practices that may
raise consumer protection or supervisory concerns.
In 2016, the four most frequently identified consumer
product complaints and inquiries about FDICsupervised institutions concerned credit cards
(24 percent), consumer loans (14 percent), residential
real estate (12 percent), and checking accounts
(11 percent). Credit card complaints and inquiries
most frequently described issues with collection
practices and billing disputes, while the issues most
commonly cited in correspondence about consumer
loans were concerns with the reporting of erroneous
information. Complaints and inquiries on residential
real estate related to repossession/foreclosure and loan
modification. The largest share of correspondence
about checking accounts cited discrepancies in
deposit accounts and refusal to cash checks or
provide services.
The FDIC also investigated 84 Fair Lending
complaints alleging discrimination during 2016. The
number of discrimination complaints investigated
has fluctuated over the past several years but averaged
approximately 84 complaints per year between 2011
and 2016. Over this period, nearly 45 percent of
the complaints investigated alleged discrimination
based on the race, color, national origin, or ethnicity
of the applicant or borrower; 24 percent related to
discrimination allegations based on age; nearly 9
percent involved the sex of the borrower or applicant;
and roughly 5 percent concerned disability.

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ANNUAL REPORT
Consumer refunds generally involve the financial
institution offering a voluntary credit to the
consumer’s account, often as a direct result of
complaint investigations and identification of a
banking error or violation of law. In 2016, consumers
received more than $531,349 in refunds from
financial institutions as a result of the assistance
provided by the FDIC’s Consumer Affairs Program.

Public Awareness of Deposit
Insurance Coverage
An important part of the FDIC’s deposit insurance
mission is to ensure that bankers and consumers have
access to accurate information about the FDIC's
rules for deposit insurance coverage. The FDIC has
an extensive deposit insurance education program
consisting of seminars for bankers, electronic tools for
estimating deposit insurance coverage, and written
and electronic information targeted to both bankers
and consumers.
The FDIC continued its efforts to educate bankers
and consumers about the rules and requirements for
FDIC insurance coverage during 2016. For example,
as of December 31, 2016, the FDIC conducted six
telephone seminars for bankers on deposit insurance
coverage, reaching an estimated 5,282 bankers
participating at approximately 1,509 bank sites
throughout the country. The FDIC also created

FDIC Division of Insurance Director Diane Ellis opens the 16th Annual
Bank Reserch Conference.

deposit insurance training videos that are available on
the FDIC’s website and YouTube channel.
As of December 31, 2016, the FDIC received and
answered approximately 90,412 telephone inquiries
from consumers and bankers regarding deposit
insurance-related inquiries. The FDIC Call Center
addressed 40,374 of these inquiries, and deposit
insurance subject matter experts handled the other
50,038. In addition to telephone inquiries about
deposit insurance coverage, the FDIC received 1,966
written inquiries from consumers and bankers. Of
these inquiries, 99 percent received responses within
two weeks, as required by corporate policy.

Center for Financial Research
The FDIC’s Center for Financial Research (CFR)
encourages and supports innovative research on topics
that are important to the FDIC’s roles as deposit
insurer and bank supervisor. Research from CFR
staff was accepted during the year for publication in
leading banking, finance, and economics journals,
and was presented at banking and finance seminars
at major conferences, regulatory institutions, and
universities.

During the height of the financial crisis, more than three million copies of
the brochure “Your Insured Deposits” were distributed across the nation.

50

In 2016, the CFR and the Journal of Financial
Services Research jointly sponsored the 16th Annual
Bank Research Conference. The conference

M AN AG EMEN T’S DISCUSSION AND ANALY SIS

2016
organizers received more than 550 submissions for the
20 available presentation slots. Douglas Diamond,
the Merton H. Miller Distinguished Service Professor
of Finance at the University of Chicago, was the
keynote speaker. CFR researchers also produced a
number of new working papers in 2016. In addition,
the CFR is administering the Small Business Lending
Survey. Analysis and results of this survey will be
made available in 2017.

RECEIVERSHIP MANAGEMENT
The FDIC has the unique mission of protecting
depositors of insured banks and savings associations.
No depositor has ever experienced a loss on the
insured amount of his or her deposits in an FDICinsured institution due to a failure. When an
institution closes, its chartering authority—the state
for state-chartered institutions and the OCC for
national banks and federal savings associations—
typically appoints the FDIC receiver, responsible for
resolving the failed institution.
The FDIC employs a variety of strategies and
business practices to resolve a failed institution.
These strategies and practices are typically associated
with either the resolution process or the receivership
process. Depending on the characteristics of
the institution, the FDIC may utilize several of
these methods to ensure the prompt and smooth
payment of deposit insurance to insured depositors,
to minimize the impact on the DIF, and to speed
dividend payments to uninsured depositors and other
creditors of the failed institution.
The resolution process involves evaluating and
marketing a failing institution, soliciting and
accepting bids for the sale of the institution,
determining which bid (if any) is least costly to the
DIF, and working with the acquiring institution
through the closing process.
To minimize disruption to the local community,
the resolution process must be performed as quickly
and efficiently as possible. The FDIC uses two
basic resolution methods: purchase and assumption
transactions and deposit payoffs.

The purchase and assumption (P&A) transaction
is the most commonly used resolution method.
Typically, in a P&A transaction, a healthy institution
purchases certain assets and assumes certain liabilities
of the failed institution. However, a variety of P&A
transactions can be used. Because each failing bank
situation is different, P&A transactions provide
flexibility to structure deals that result in obtaining
the highest value for the failed institution. For each
possible P&A transaction, the acquirer may acquire
either all of the failing institution’s deposits or only
the insured portion of the deposits.
From 2008 through 2013, loss sharing was offered by
the FDIC in connection with P&A transactions. In
a loss-share transaction, the FDIC, as receiver, agrees
to share losses on certain assets with the acquirer,
absorbing a significant portion (typically 80 percent)
of future losses on assets that have been designated
as “shared-loss assets” for a specific period of time
(e.g., five to 10 years). The economic rationale
for these transactions is that keeping assets in the
banking sector and resolving them over an extended
period of time can produce a better net recovery
than the FDIC’s immediate liquidation of these
assets. However, in recent years, as the markets have
improved and begun to function more normally with
both capital and liquidity returning to the banking
industry, acquirers have become more comfortable
with bidding on failing bank franchises without the
protection of loss share.
The FDIC continues to monitor compliance
with shared-loss agreements by validating the
appropriateness of loss-share claims; reviewing
acquiring institutions’ efforts to maximize recoveries;
ensuring consistent application of policies and
procedures across both shared-loss and legacy
portfolios; and confirming that the acquirers have
sufficient internal controls, including adequate staff,
reporting, and recordkeeping systems. At year-end
2016, there were 148 receiverships with active
shared-loss agreements and $20.8 billion in total
shared-loss covered assets remained.

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ANNUAL REPORT
Deposit payoffs are only executed if all bids received
for a P&A transaction (if any) are more costly to
the DIF than liquidation. In the instance where no
acceptable bids are received, the FDIC in its corporate
capacity, makes sure that the customers of the failed
institution receive the full amount of their insured
deposits “as soon as possible.”
The receivership process involves performing
the closing functions at the failed institution;
liquidating any remaining failed institution assets;
and distributing any proceeds of the liquidation to
the FDIC, uninsured depositors, and other creditors
of the receivership. In its role as receiver, the FDIC
uses a wide variety of strategies and tools to manage
and sell retained assets. These include, but are not
limited to, asset sales, securitizations, and structured
transactions.

Asset Management and Sales
As part of its resolution process, the FDIC tries to
sell as many assets-in-liquidation as possible to an
assuming institution. Assets that are retained by
the receivership are promptly valued and liquidated
in order to maximize the return to the receivership
estate. For 95 percent of failed institutions, at least
90 percent of the book value of marketable assets is
marketed for sale within 90 days of an institution’s
failure for cash sales and within 120 days for
structured sales.
Cash sales of assets for banks that failed in 2016
totaled $28.0 million in book value.
As a result of the FDIC’s marketing and collection
efforts, the book value of assets in inventory decreased
by $1.5 billion (31 percent) in 2016.
The following chart shows the assets-in-liquidation
inventory of these assets by asset type.

Financial Institution Failures
During 2016, there were five institution failures
compared to eight failures in 2015. 

ASSETS-IN-LIQUIDATION INVENTORY
BY ASSET TYPE

In all five transactions, the FDIC successfully
contacted all known, qualified, and interested bidders
to market these institutions, and also made insured
funds available to all depositors within one business
day of the failure. There were no losses on insured
deposits, and no appropriated funds were required to
pay insured deposits.
The following chart provides a comparison of failure
activity over the past three years.
Dollars in Billions
2016

2015

2014

5

8

18

Total Assets of
Failed Institutions*

$0.3

$6.7

$2.9

Total Deposits of
Failed Institutions*

$0.3

$4.9

$2.7

$0.05

$0.9

$0.4

Estimated Loss to the DIF

*Total assets and total deposits data are based on the last quarterly
Call Report or Thrift Financial Report (TFR) filed by the institution prior
to failure.

52

Asset Type

Securities

12/31/16

12/31/15

12/31/14

$183

$393

$470

8

22

36

Commercial Loans

19

62

123

Real Estate Mortgages

85

173

697

Other Assets/
Judgments

268

398

957

Owned Assets

40

113

120

100

122

123

2,614

3,524

5,150

$3,317

$4,807

$7,676

Consumer Loans

Net Investments
in Subsidiaries

FAILURE ACTIVITY 2014–2016

Total Institutions

Dollars in Millions

Structured and
Securitized Assets
TOTAL

Receivership Management Activities
The FDIC, as receiver, manages failed banks and their
subsidiaries with the goal of expeditiously winding up
their affairs. The oversight and prompt termination
of receiverships help to preserve value for the

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2016
uninsured depositors and other creditors by reducing
overhead and other holding costs. Once the assets of
a failed institution have been sold and its liabilities
extinguished, the final distribution of any proceeds is
made, and the FDIC terminates the receivership. In
2016, the number of receiverships under management
decreased by 68 (15 percent) to 378. The significant
increase in termination activity from 2015 was driven
by the early termination of shared-loss agreements.
The following chart shows overall receivership activity
for the FDIC in 2016.

RECEIVERSHIP ACTIVITY
Active Receiverships as of 12/31/15
New Receiverships

446

Receiverships Terminated
Active Receiverships as of 12/31/16

73

5
378

Protecting Insured Depositors
The FDIC’s ability to attract healthy institutions
to assume deposits and purchase assets of failed
banks and savings associations at the time of failure
minimizes the disruption to customers and allows
assets to be returned to the private sector immediately.
Assets remaining after resolution are liquidated by
the FDIC in an orderly manner, and the proceeds
are used to pay receivership creditors, including
depositors whose accounts exceeded the insurance
limit. During 2016, the FDIC paid dividends of
$1.0 million to depositors whose accounts exceeded
the insurance limit.

Professional Liability and
Financial Crimes Recoveries
The FDIC works to identify potential claims against
directors, officers, securities underwriters and issuers,
fidelity bond insurance carriers, appraisers, attorneys,
accountants, mortgage loan brokers, title insurance
companies, and other professionals who may have
caused losses to an insured depository institution.
Once a claim is determined to be meritorious and

is expected to be cost-effective, the FDIC pursues
those claims against the appropriate parties.
During 2016, the FDIC recovered $463 million from
professional liability claims and settlements. The
FDIC also authorized lawsuits related to one failed
institutions against six individuals for director and
officer liability, and authorized another lawsuit for
fidelity bond, liability insurance, attorney malpractice,
appraiser malpractice, and securities law violations
for residential mortgage-backed securities. As of
December 31, 2016, the FDIC’s caseload included
28 professional liability lawsuits (down from 50 at
year-end 2015), 42 residential mortgage malpractice
and fraud lawsuits (down from 87), and 173 open
investigations (down from 264). The FDIC seeks
to complete professional liability investigations and
make decisions expeditiously on whether to pursue
potential professional liability claims. During 2016,
it completed investigations and made decisions on 91
percent of the investigations related to failures that
reached the 18-month point after the institution’s
failure date, exceeding its annual performance target.
As part of the sentencing process for those convicted
of criminal wrongdoing against an insured institution
that later failed, a court may order a defendant to
pay restitution or to forfeit funds or property to the
receivership. The FDIC, working with the U.S.
Department of Justice, collected $7.1 million from
criminal restitution and forfeiture orders through
December 31, 2016. Also as of that date, there were
3,991 active restitution and forfeiture orders (up from
3,831 at year-end 2015). This includes 111 orders
held by the Federal Savings and Loan Insurance
Corporation (FSLIC) Resolution Fund, (i.e., orders
arising out of failed financial institutions that were in
receivership or conservatorship by the FSLIC or the
Resolution Trust Corporation).

MINORITY AND WOMEN INCLUSION
Consistent with the provisions of the Dodd-Frank
Act, the FDIC continues to enhance its longstanding
commitment to promote diversity and inclusion in

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ANNUAL REPORT
employment opportunities and all business areas
of the agency. The Office of Minority and Women
Inclusion supports the FDIC’s mission through
outreach efforts to ensure the fair inclusion and
utilization of minority- and women-owned businesses,
law firms, and investors in contracting and investment
opportunities.
The FDIC relies on contractors to help meet
its mission. In 2016, the FDIC awarded 287
(24 percent) contracts to minority- and womenowned businesses (MWOBs) out of a total of
1,181 issued. The FDIC awarded contracts with a
combined value of $509 million in 2016, of which
18 percent ($94 million) were awarded to MWOBs,
compared to 25 percent for all of 2015. The FDIC
paid $112 million of its total contract payments
(27 percent) to MWOBs, under 461 active contracts.
Referrals to minority- and women-owned law firms
(MWOLFs) accounted for 44 percent of all legal
referrals in 2016. Total payments to MWOLFs
were $11 million in 2016 which is 14 percent of all
payments to outside counsel, compared to 12 percent
for all of 2015.
In 2016, the FDIC participated in five minority bar
association conferences and two stakeholder events in
support of maximizing the participation of MWOLFs
in FDIC legal contracting. Pursuant to Section 342
of the Dodd-Frank Act, which requires an assessment
of legal contractors’ internal workforce diversity
practices, the Legal Division refined and continued
to implement a system of compliance reviews of
the top ten billing law firms (both majority-owned
and MWOLFs). In addition, the FDIC advised
the National Association of Credit Unions, the
Federal Home Loan Bank Board, and State Farm
Life Insurance Company on developing MWOLF
outreach programs that mirror the FDIC’s.
In 2016, the FDIC participated in a total of 38
business expos, one-on-one matchmaking sessions,
and panel presentations. At these events, FDIC
staff provided information and responded to
inquiries regarding FDIC business opportunities
for minorities and women. In addition to targeting

54

MWOBs and MWOLFs, these efforts also targeted
veteran-owned and small, disadvantaged businesses.
Vendors were provided with the FDIC’s general
contracting procedures, prime contractors’ contact
information, and forecasts of possible upcoming
solicitations. Also, vendors were encouraged
to register through the FDIC’s Contractor
Resource List (a principal database for vendors
interested in doing business with the FDIC).
During 2016, the FDIC’s Office of Minority and
Women Inclusion (OMWI) and the Division of
Resolutions and Receiverships (DRR) collaborated
to present three FDIC-sponsored asset purchaser
workshops that were marketed extensively to
minority- and women-owned investors and companies
interested in learning about DRR’s sales processes.
DRR speakers with strong backgrounds in their
respective programs provided details on the various
tools used by DRR to market assets and presented
information to attendees on how to participate in the
transactions and bid on assets offered for sale.
The asset purchaser workshops were held in San
Juan, PR, Memphis, TN, and Jackson, TN. The
events were attended by 76 prospective investors and
included a special focus on owned real estate (ORE)
investment opportunities to support a DRR auction
of real estate properties scheduled after the outreach
workshop. A segment regarding contracting services
was also part of the event. Information regarding
the Minority and Women Outreach Program can be
found on the FDIC’s website at www.fdic.gov/mwop.
In addition, OMWI worked closely with the
OMWIs of the OCC, FRB, CFPB, NCUA, and
SEC to implement further Section 342(b)(2)(C) of
the Dodd-Frank Act, which requires the agencies to
develop standards to assess the diversity policies and
practices of the entities they regulate. After finalizing
of the Interagency Policy Statement Establishing Joint
Standards for Assessing the Diversity Policies and
Practices of Entities Regulated by the Agencies, the
OMWI agencies received approval from the Office
of Management and Budget (OMB) on February
18, 2016, as required by the Paperwork Reduction

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2016
Act of 1995, to collect information from their
regulated entities. Regulated entities were notified of
the collection approval through the Federal Register
on July 13, 2016, and they may now submit selfassessments of their diversity policies and practices to
the OMWI Director of their primary federal financial
regulator.
To facilitate uniform and systematic collection of
information, OMWI developed and sought public
comment on a diversity self-assessment template for
regulated entities to use as they voluntarily assess
their diversity policies and practices. When the
comment period closed, OMWI requested approval
to use the template from OMB. In the meantime,
some regulated entities began submitting voluntary
self-assessments to the FDIC OMWI Director in
October 2016. The FDIC plans to use self-assessment
information provided by its regulated entities to
monitor progress and trends in the financial services
industry, and to identify and publicize promising
diversity policies and practices.

INTERNATIONAL OUTREACH
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.

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ANNUAL REPORT
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 selfassessments 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

56

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

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2016

Participants in the FDIC 101 class held in October 2016.

♦♦
♦♦
♦♦
♦♦
♦♦
♦♦
♦♦
♦♦
♦♦

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

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ANNUAL REPORT
countries with financial regulation development.
While at Treasury, FDIC detailees lend expertise in
supervision, resolutions, deposit insurance, policymaking, and regulation for international banking.
FSVC programs are often funded by other U.S.
government offices and included project work on antimoney 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).

EFFECTIVE MANAGEMENT OF
STRATEGIC RESOURCES
The FDIC recognizes that it must effectively manage
its human, financial, and technological resources

58

to carry out its mission successfully and meet the
performance goals and targets set forth in its annual
performance plan. The FDIC must align these
strategic resources with its mission and goals and
deploy them where they are most needed to enhance
its operational effectiveness and minimize potential
financial risks to the DIF. Following are the FDIC’s
major accomplishments in improving operational
efficiency and effectiveness during 2016.

Human Capital Management
The FDIC’s human capital management programs
are designed to attract, train and develop, reward,
and retain a highly skilled, diverse, and resultsoriented workforce. In 2016, the FDIC workforce
planning initiatives emphasized the need to plan for
employees to fulfill current and future capabilities
and leadership needs. This focus ensures that the
FDIC has a workforce positioned to meet today’s core
responsibilities and prepared to fulfill its mission in
the years ahead.
Strategic Workforce Planning and Readiness
During 2016, the FDIC continued to develop and
implement the Workforce Development Initiative,
an integrated strategy to address workforce challenges
and opportunities. The effort is focused on four
broad objectives:
1.	 attract and develop talented employees across
the agency;
2.	 enhance the capabilities of employees through
training and diverse work experiences;
3.	 encourage employees to engage in active career
development planning and seek leadership roles
in the FDIC; and
4.	 build on and strengthen the FDIC’s operations
to support these efforts.
In 2016, the FDIC continued to develop the
infrastructure, governance, programs, and processes
to help meet its long-term workforce and leadership
needs. The FDIC is committed to building and

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2016

FDIC’s Workplace Development Initiative Ambassadors meet at headquarters, joining a nationwide outreach effort.

expanding its talent pipeline to ensure succession
challenges are met. To that end, the agency expanded
its succession planning review process in 2016
to include all managers. The effort began with a
survey to assess the level of aspiration among current
managers. More than two-thirds of current managers
reported that they were interested in seeking higherlevel positions at the FDIC, demonstrating their
ongoing interest in leadership development. Senior
FDIC leaders from across the agency then convened
to discuss leadership needs and strategies to address
them, including efforts to develop the pipeline of the
FDIC’s aspiring leadership pool.
As a result of the succession planning review process,
FDIC managers received recommendations to
participate in diverse programs to enhance their
leadership capabilities, including the Leadership
Mentoring Program, external educational
opportunities through Harvard’s Kennedy School
of Government, executive coaching, and enriched
management training.
The FDIC also continued to focus on ensuring the
availability of a workforce equipped to meet today’s
responsibilities, while simultaneously preparing
for future capability needs. The FDIC furthered
development of a Career Paths initiative, targeted
at non-supervisory employees at all levels, to
promote the acquisition of cross-organizational skills
and knowledge. Additional support is provided

to employees seeking professional development
opportunities through expanded career management
services.
The FDIC’s strategic workforce planning initiatives
require a long-term and sustained focus to identify
future workforce and leadership needs, assess current
capabilities, support aspiration to management and
leadership roles, and develop and source the talent
to meet emerging workforce needs. Through further
development of its human capital strategies, the FDIC
will work to ensure that the future FDIC workforce
is as prepared, capable, and dedicated as the one it
has today.
Corporate Employee Program
The FDIC’s Corporate Employee Program (CEP)
sponsors the development of newly hired Financial
Institution Specialists (FISs) in entry-level positions.
The CEP encompasses major FDIC divisions where
FISs are trained to become part of a highly effective
workforce. During the first-year rotation within the
program, FISs gain experience and knowledge in the
core business of the FDIC, including the Division
of Depositor and Consumer Protection (DCP), the
Division of Risk Management Supervision (RMS),
the Division of Resolutions and Receiverships
(DRR), and the Division of Insurance (DIR). At
the conclusion of the rotation period, FISs are placed
within RMS, DCP, or DRR, where they continue

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ANNUAL REPORT
their career path to become commissioned examiners
or resolutions and receiverships specialists.
The CEP is an essential part of the FDIC’s ability
to provide continual cross-divisional staff mobility.
Since the CEP’s inception in 2005, 1,600 individuals
have joined the FDIC through this multi-discipline
program, and more than 770 have become
commissioned examiners after successfully completing
the program’s requirements.
The FDIC continues to sponsor the Financial
Management Scholars Program (FMSP), an
additional hiring source for the CEP. Participants
in the FMSP complete an internship with the
FDIC the summer following the conclusion of
their junior year in college. The program serves
as an additional venue to recruit talent.
Employee Learning and Development
The FDIC is committed to the learning and
development of its employees throughout their
careers to enrich technical proficiency and leadership
capacity, supporting career progression and succession
management. In 2016, the FDIC focused on
developing and implementing comprehensive
curricula for its business lines to prepare employees to
meet new challenges. Such training, which includes
both classroom and online instruction for maximum
flexibility, is a critical part of workforce and succession
planning as more experienced employees become
eligible for retirement.
The FDIC also offers a comprehensive leadership
development program that combines core courses,
electives, and other enrichment opportunities to
develop employees at all levels. From new employees
to new executives, the FDIC provides employees
with targeted leadership development opportunities
that align with key leadership competencies. In
addition to a broad array of internally developed
and administered courses, the FDIC also provides its
employees with funds and/or time to participate in
external training to support their career development.

60

Corporate Risk Management
During 2016, the Office of Corporate Risk
Management (OCRM) worked with divisions and
offices to advance common agency-wide processes
for identifying, managing, and mitigating risks
to the FDIC. OCRM assisted and supported the
Enterprise Risk Committee, Executive Management
Committee, External Risk Forum, and Management
Risk Roundtable in reviewing risks across the agency.
OCRM monitors material risks and mitigation
activities, including the following:
♦♦ Risks posed by national and international
economic, regulatory, and technological trends
and developments that could potentially affect
consumers, depositors, and the safety and
soundness of the financial services industry.
♦♦ Risks to the agency’s ability to conduct its
mission essential functions under all threats and
conditions, as described in its Continuity of
Operations Plan and Business Continuity Plan.
♦♦ Risks to the financial system posed by the
extended current low level of interest rates.
♦♦ Risks posed by the analytical models used by
the FDIC in identifying and managing risk.
During 2016, OCRM and FDIC model owners
developed tailored validation programs for all
corporate models and began a series of model
validations to assure soundness and mitigate
model risk.
♦♦ Risks associated with governance and
development of large-scale IT projects.
♦♦ Risks posed to the agency and to the financial
services industry by concerted attempts to
penetrate, compromise, and disrupt the
information systems that are essential to their
effective operation.
Employee Engagement
The FDIC continually evaluates its human capital
programs and strategies to ensure that the agency
remains an employer of choice and that all of its

M AN AG EMEN T’S DISCUSSION AND ANALY SIS

2016
survey. In December 2016, the FDIC received an
award from the Partnership for Public Service for
being ranked number one among mid-sized federal
agencies on the Best Places to Work in the Federal
Government® list. Effective leadership is the primary
factor driving employee satisfaction and commitment
in the federal workplace, according to a report by the
Partnership for Public Service.

Photo credit: Audrey Lew Photography

Director of the Division of Administration Arleas Upton Kea and Deputy
to the Chairman and Chief Operating Officer Barbara A. Ryan accept
the award for Best Places to Work in the Federal Government for midsized federal agencies from Max Stier, President and CEO of Partnership
for Public Service.

employees are fully engaged and aligned with the
mission. The FDIC uses the Federal Employee
Viewpoint Survey mandated by Congress to solicit
information from employees, and takes an agencywide approach to address key issues identified in the

The FDIC’s Workplace Excellence (WE) program
plays an important role in helping the FDIC engage
employees. The WE program is composed of a
national-level WE Steering Committee and Division/
Office WE Councils that are focused on maintaining,
enhancing, and institutionalizing a positive workplace
environment throughout the agency. In addition
to the WE program, the FDIC-National Treasury
Employees Union Labor Management Forum serves
as a mechanism for the union and employees to have
pre-decisional input on workplace matters. The WE
program and Labor Management Forum enhances
communication, provides additional opportunities
for employee input and engagement, and improves
employee empowerment.

M AN AG EMEN T’S DISCUSSION AND ANALY SIS

61

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2016

II.

PERFORMANCE
RESULTS
SUMMARY

63

THIS PAGE INTENTIONALLY LEFT BLANK

2016
SUMMARY OF 2016 PERFORMANCE RESULTS BY PROGRAM
The FDIC successfully achieved all of the 37 annual
performance targets established in its 2016 Annual
Performance Plan. There were no instances in which
2016 performance had a material adverse effect on

the successful achievement of the FDIC’s mission or
its strategic goals and objectives regarding its major
program responsibilities.
Additional key accomplishments are noted below.

Program Area

Performance Results

Insurance

♦♦ Updated the FDIC Board of Directors on loss, income, and reserve ratio
projections for the Deposit Insurance Fund (DIF) at the March and September
meetings.
♦♦ Briefed the FDIC Board of Directors in March and September on progress in
meeting the goals of the Restoration Plan.
♦♦ Published a final rule, which was adopted by the FDIC Board of Directors,
to increase the reserve ratio of the DIF from 1.15 percent to 1.35 percent by
September 30, 2020, by imposing a surcharge on insured depository institutions
with assets of $10 billion or more.
♦♦ Published a revenue-neutral final rule, which was adopted by the FDIC Board of
Directors, to improve the risk-based deposit insurance assessment system applicable
to established small banks to more accurately reflect risk.
♦♦ Completed reviews of the recent accuracy of the contingent loss reserves.
♦♦ Researched and analyzed emerging risks and trends in the banking sector, financial
markets, and the overall economy to identify issues affecting the banking industry
and the DIF.
♦♦ Provided policy research and analysis to FDIC leadership in support of the
implementation of financial industry regulation, as well as support for testimony
and speeches.
♦♦ Published economic and banking information and analyses through the FDIC
Quarterly, FDIC Quarterly Banking Profile (QBP), FDIC State Profiles, and the
Center for Financial Research Working Papers.
♦♦ Operated the Electronic Deposit Insurance Estimator (EDIE), which had 691,375
user sessions in 2016.

PER FO R M ANCE RESULTS SUMMARY

65

ANNUAL REPORT
Program Area

Performance Results

Supervision

♦♦ A total of 395 institutions were assigned a composite CAMELS rating of 2 and had
Matters Requiring Board Attention (MRBAs) identified in the examination reports.
To ensure that MRBAs are being appropriately addressed at these institutions, the
FDIC timely reviews progress reports and follows up with bank management as
needed. More specifically, within six months of issuing the examination reports,
the FDIC conducted appropriate follow up and review of these MRBAs at 381
(96 percent) of these institutions. Follow up and review of the MRBAs at the
remaining 14 institutions (4 percent) occurred more than six months after issuing
the examination reports primarily due to delayed responses from some banks as
well as the need for additional information in order to complete a full review.
♦♦ Participated in the examinations of selected financial institutions, for which the
FDIC is not the primary federal regulator, to assess risk to the DIF.
♦♦ Implemented the strategy outlined in the work plan approved by the Advisory
Committee on Economic Inclusion to support the expanded availability of
SAFE accounts and the responsible use of technology, to expand banking services
to the underbanked.
♦♦ Published an edition of Supervisory Insights that included information on strategic
planning in an evolving earnings environment, new requirements related to
investments in securitizations as a result of the Dodd-Frank Act, and recently
released regulations and supervisory guidance.

Receivership Management

♦♦ Terminated at least 75 percent of new receiverships that are not subject to lossshare agreements, structured sales, or other legal impediments, within three years
of the date of failure.
♦♦ Continued to enhance the FDIC’s ability to administer deposit insurance claims
at large insured deposit institutions.
♦♦ Evaluated within 120 days all termination offers from Limited Liability
Corporation (LLC) managing members to determine whether to pursue dissolution
of those LLCs that are determined to be in the best overall economic interest of
the participating receiverships.

66

PER FO R MANCE RESULTS SUMMARY

2016
PERFORMANCE RESULTS BY PROGRAM AND STRATEGIC GOAL
2016 INSURANCE PROGRAM RESULTS
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
#

ANNUAL
PERFORMANCE GOAL

INDICATOR

TARGET

RESULTS

2

3

Number of business
days after an institution
failure that depositors
have access to insured
funds.

Depositors have access to insured
funds within one business day if the
failure occurs on a Friday.

ACHIEVED.
SEE PG. 52.

Depositors have access to insured
funds within two business days if
the failure occurs on any other day
of the week.

ACHIEVED.
SEE PG. 52.

Insured depositor
losses resulting from
a financial institution
failure.

1

Depositors do not incur any losses on
insured deposits.

ACHIEVED.
SEE PG. 52.

No appropriated funds are required to
pay insured depositors.

ACHIEVED.
SEE PG. 52.

Disseminate data and
analyses on issues and
risks affecting the financial
services industry to bankers,
supervisors, the public, and
other stakeholders on an
ongoing basis.

Scope and timeliness
of information
dissemination on
identified or potential
issues and risks.

Disseminate results of research and
analyses in a timely manner through
regular publications, ad hoc reports,
and other means.

ACHIEVED.
SEE PG. 65.

Undertake industry outreach
activities to inform bankers and other
stakeholders about current trends,
concerns, and other available FDIC
resources.

ACHIEVED.
SEE PG. 65.

Adjust assessment rates, as
necessary, to achieve a DIF
reserve ratio of at least 1.35
percent of estimated insured
deposits by September 30,
2020.

Updated fund balance
projections and
recommended changes
to assessment rates.

Provide updated fund balance
projections to the FDIC Board of
Directors by June 30, 2016, and
December 31, 2016.

ACHIEVED.
SEE PG. 65.

Recommend changes to deposit
insurance assessment rates to the
FDIC Board of Directors as necessary.

ACHIEVED.
SEE PG. 65.

Respond promptly to all
insured financial institution
closings and related
emerging issues.

Demonstrated progress Provide progress reports to the FDIC
in achieving the goals of Board of Directors by June 30, 2016,
the Restoration Plan.
and December 31, 2016.

PER FO R M ANCE RESULTS SUMMARY

ACHIEVED.
SEE PG. 65.

67

ANNUAL REPORT
2016 INSURANCE PROGRAM RESULTS (continued)
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
INDICATOR

TARGET

RESULTS

Expand and strengthen the
FDIC’s participation and
leadership role in supporting
robust and effective deposit
insurance programs,
resolution strategies, and
banking systems worldwide.

Activities to expand
and strengthen
engagement with
foreign jurisdictions
and advance the FDIC’s
global leadership and
participation.

Foster strong relationships with
international banking regulators,
deposit insurers, and other relevant
authorities by engaging with
strategically important jurisdictions
and organizations on key international
financial safety net issues.

ACHIEVED.
SEE PGS. 55-58.

ACHIEVED.
SEE PGS. 56-58.

Promote continued enhancement of
international standards and expertise
in financial regulatory practices and
stability through the provision of
technical assistance and training to
global financial system authorities.

ACHIEVED.
SEE PGS. 55-56.

Develop and foster closer relationships
with bank supervisors in the reviews
through the provision of technical
assistance and by leading governance
efforts in the Association of
Supervisors of Banks of the Americas
(ASBA).

4

ANNUAL
PERFORMANCE GOAL

Continue to play leadership roles
within key international organizations
and associations and promote sound
deposit insurance, bank supervision,
and resolution practices.

#

ACHIEVED.
SEE PGS. 56-57.

Provision of technical
assistance to foreign
counterparts.

5

Scope of qualified
and interested bidders
solicited.

Contact all known qualified and
interested bidders.

ACHIEVED
SEE PG. 52.

6

68

Market failing institutions
to all known qualified and
interested potential bidders.
Provide educational
information to insured
depository institutions and
their customers to help
them understand the rules
for determining the amount
of insurance coverage on
deposit accounts.

Timeliness of responses
to deposit insurance
coverage inquiries.

Respond within two weeks to 95
percent of written inquiries from
consumers and bankers about FDIC
deposit insurance coverage.

ACHIEVED.
SEE PG. 50.

Initiatives to increase
public awareness of
deposit insurance
coverage changes.

Conduct at least four telephone or
in-person seminars for bankers on
deposit insurance coverage.

ACHIEVED.
SEE PG. 50.

PER FO R MANCE RESULTS SUMMARY

2016
2016 SUPERVISION PROGRAM RESULTS
Strategic Goal: FDIC-insured institutions are safe and sound.
#

ANNUAL
PERFORMANCE GOAL

INDICATOR

TARGET

RESULTS

Conduct on-site risk
management examinations
to assess the overall financial
condition, management
practices and policies, and
compliance with applicable
laws and regulations of
FDIC-supervised depository
institutions. When
problems are identified,
promptly implement
appropriate corrective
programs, and follow up
to ensure that identified
problems are corrected.

Percentage of required
examinations conducted
in accordance with
statutory requirements
and FDIC policy.

Conduct all required risk
management examinations within the
time frames prescribed by statute and
FDIC policy.

ACHIEVED.
SEE PG. 24.

Follow-up actions on
identified problems.

For at least 90 percent of institutions
that are assigned a composite
CAMELS rating of 2 and for which
the examination report identifies
“Matters Requiring Board Attention”
(MRBAs), review progress reports
and follow up with the institution
within six months of the issuance of
the examination report to ensure that
all MRBAs are being addressed.

ACHIEVED.
SEE PG. 66.

2

Assist in protecting the
infrastructure of the U.S.
banking system against
terrorist financing, money
laundering, and other
financial crimes.

Percentage of required
examinations conducted
in accordance with
statutory requirements
and FDIC policy.

Conduct all Bank Secrecy Act
examinations within the time
frames prescribed by statute and
FDIC policy.

ACHIEVED.
SEE PG. 24.

3

More closely align regulatory U.S. implementation of
capital standards with risk
internationally agreed
and ensure that capital is
regulatory standards.
maintained at prudential
levels.

Publish in 2016, a Notice of
(proposed) Rulemaking on the Basel
III Net Stable Funding Ratio.

ACHIEVED.
SEE PG. 21.

4

Implement strategies
to promote enhanced
information security,
cybersecurity, and business
continuity within the
banking industry.

Establish a horizontal review program
that focuses on the IT risks in large
and complex supervised institutions
and Technology Service Providers
(TSPs).

ACHIEVED.
SEE PG. 27.

Complete by June 30, 2016,
examiner training and implement
by September 30, 2016, the new
IT examination work program
to enhance focus on information
security, cybersecurity, and business
continuity.

ACHIEVED.
SEE PG. 27.

1

Enhancements to IT
supervision program.

PER FO R M ANCE RESULTS SUMMARY

69

ANNUAL REPORT
2016 SUPERVISION PROGRAM RESULTS (continued)
Strategic Goal: Consumers’ rights are protected and FDIC-supervised
institutions invest in their communities.
#
1

ANNUAL
PERFORMANCE GOAL

Conduct on-site CRA
and consumer compliance
examinations to assess
compliance with applicable
laws and regulations by
FDIC-supervised depository
institutions. When
violations are identified,
promptly implement
appropriate corrective
programs and follow up
to ensure that identified
problems are corrected.

INDICATOR

TARGET

RESULTS

Percentage of
examinations conducted
in accordance with the
time frames prescribed
by FDIC policy.

Conduct all required examinations
within the time frames established by
FDIC policy.

ACHIEVED.
SEE PGS. 25-26.

Implementation of
corrective programs.

Conduct visits and/or follow-up
examinations in accordance with
established FDIC policies to ensure
that the requirements of any required
corrective program have been
implemented and are effectively
addressing identified violations.

ACHIEVED.
SEE PGS. 25-26.

2

Respond to 95 percent of written
consumer complaints and inquiries
within time frames established by
policy, with all complaints and
inquiries receiving at least an initial
acknowledgement within two weeks.

ACHIEVED.
SEE PG. 49.

3

Promote economic inclusion Completion of planned
and access to responsible
initiatives.
financial services through
supervisory, research, policy,
and consumer/community
affairs initiatives.

Publish the results of the 2015 FDIC
National Survey of Unbanked and
Underbanked Households.

ACHIEVED.
SEE PGS. 45-46.

Promote broader awareness of the
availability of low-cost transaction
accounts consistent with the FDIC’s
Model SAFE transaction account
template.

ACHIEVED.
SEE PG. 48.

Complete and present to the
Advisory Committee on Economic
Inclusions (ComE-IN) a report on
the pilot Youth Savings Program
(YSP) conducted jointly with
the CFPB.

70

Effectively investigate and
Timely responses to
respond to written consumer written consumer
complaints and inquiries
complaints and inquiries.
about FDIC-supervised
financial institutions.

ACHIEVED.
SEE PG. 47.

PER FO R MANCE RESULTS SUMMARY

2016
2016 SUPERVISION PROGRAM RESULTS (continued)
Strategic Goal: Large and complex financial institutions are resolvable in an orderly manner under bankruptcy.
#
1

ANNUAL
PERFORMANCE GOAL

INDICATOR

RESULTS

Completion of
statutory and regulatory
requirements under Title
I of the DFA and Section
360.10 of the FDIC
Rules and Regulations.

In collaboration with the FRB
continue to review all resolution plans
subject to the requirements of Section
165(d) of the DFA to ensure their
conformance to statutory and other
regulatory requirements. Identify
potential impediments in those plans
to resolution under the Bankruptcy
Code.

ACHIEVED.
SEE PGS. 38-39.

Continue to review all resolution
plans subject to the requirements of
Section 360.10 of the IDI rule to
ensure their conformance to statutory
and other regulatory time frames.
Identify potential impediments
to resolvability under the Federal
Deposit Insurance (FDI) Act.

Identify and address risks
in large, complex financial
institutions, including those
designated as systemically
important.

TARGET

ACHIEVED.
SEE PG. 40.

Conduct ongoing risk analysis
and monitoring of large, complex
financial institutions to understand
and assess their structure, business
activities, risk profiles, and resolution
and recovery plans.

ACHIEVED.
SEE PG. 39.

Risk monitoring of
large, complex financial
institutions, bank
holding companies and
designated nonbanking
firms.

PER FO R M ANCE RESULTS SUMMARY

71

ANNUAL REPORT
2016 RECEIVERSHIP MANAGEMENT
PROGRAM RESULTS
Strategic Goal: Resolutions are orderly and receiverships are managed effectively.
#

ANNUAL
PERFORMANCE GOAL

INDICATOR

TARGET

RESULTS

1

Value, manage, and market
assets of failed institutions
and their subsidiaries in a
timely manner to maximize
net return.

Percentage of the assets
marketed for each failed
institution.

For at least 95 percent of insured
institution failures, market at least
90 percent of the book value of the
institution’s marketable assets within
90 days of the failure date (for cash
sales) or 120 days of failure date (for
structured sales).

ACHIEVED
SEE PG. 52.

2

Manage the receivership
estate and its subsidiaries
toward an orderly
termination.

Timely termination of
new receiverships.

Terminate at least 75 percent of new
receiverships that are not subject to
loss-share agreements, structured
sales, or other legal impediments,
within three years of the date of
failure.

ACHIEVED.
SEE PG. 66.

3

Conduct investigations into
all potential professional
liability claim areas for all
failed insured depository
institutions, and decide
as promptly as possible,
to close or pursue each
claim, considering the
size and complexity of the
institution.

Percentage of
investigated claim areas
for which a decision has
been made to close or
pursue the claim.

For 80 percent of all claim areas,
make a decision to close or pursue
professional liability claims within 18
months of the failure of an insured
depository institution.

ACHIEVED.
SEE PG. 53.

4

Ensure the FDIC’s
operational readiness to
administer the resolution of
large, financial institutions,
including those designated
as systemically important.

Establishment of
resolution plans and
strategies.

Refine plans to ensure the FDIC’s
operational readiness to administer
the resolution of large financial
institutions including those
designated as systemically important.

ACHIEVED.
SEE PGS. 40-41.

ACHIEVED.
SEE PGS. 42-43.

Enhanced cross-border
Continue to deepen and strengthen
coordination and
bilateral working relationships with
cooperation in resolution key foreign jurisdictions.
planning.

72

Meetings of the Systemic Hold a meeting of the Systemic
Resolution Advisory
Resolution Advisory Committee in
early 2016 to obtain feedback on
Committee (SRAC).
resolving SIFIs.

ACHIEVED.
SEE PG. 42.

PER FO R MANCE RESULTS SUMMARY

2016
PRIOR YEARS’ PERFORMANCE RESULTS
Refer to the respective full Annual Report of prior years, located on the FDIC’s website for more information on
performance results for those years. Shaded areas indicate no such target existed for that respective year.

INSURANCE PROGRAM RESULTS
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
Annual Performance Goals and Targets

2015

2014

2013

♦♦ Depositors have access to insured funds within one business day
if the failure occurs on a Friday.

ACHIEVED.

ACHIEVED.

ACHIEVED.

♦♦ Depositors have access to insured funds within two business days
if the failure occurs on any other day of the week.

ACHIEVED.

ACHIEVED.

ACHIEVED.

♦♦ Depositors do not incur any losses on insured deposits.

ACHIEVED.

ACHIEVED.

ACHIEVED.

♦♦ No appropriated funds are required to pay insured depositors.

ACHIEVED.

ACHIEVED.

ACHIEVED.

♦♦ Disseminate results of research and analyses in a timely manner
through regular publications, ad hoc reports, and other means.

ACHIEVED.

ACHIEVED.

ACHIEVED.

♦♦ Undertake industry outreach activities to inform bankers and
other stakeholders about current trends, concerns, and other
available FDIC resources.

ACHIEVED.

ACHIEVED.

ACHIEVED.

1.	 Respond promptly to all financial institution closings and related
emerging issues.

2.	 Disseminate data and analyses on issues and risks affecting the
financial services industry to bankers, supervisors, the public,
and other stakeholders on an ongoing basis.

3.	 Adjust assessment rates, as necessary, to achieve a DIF reserve
ratio of at least 1.35 percent of estimated insured deposits by
September 30, 2020.
♦♦ Provide updated fund balance projections to the FDIC
Board of Directors by June 30, 2015, and December 31, 2015.

ACHIEVED.

♦♦ Provide updated fund balance projections to the FDIC
Board of Directors by June 30, 2014, and December 31, 2014.

ACHIEVED.

♦♦ Provide updated fund balance projections to the FDIC
Board of Directors by June 30, 2013, and December 31, 2013.
♦♦ Provide progress reports to the FDIC Board of Directors
by June 30, 2015, and December 31, 2015.

ACHIEVED.
ACHIEVED.

♦♦ Provide progress reports to the FDIC Board of Directors
by June 30, 2014, and December 31, 2014.

ACHIEVED.

♦♦ Provide progress reports to the FDIC Board of Directors
by June 30, 2013, and December 31, 2013.
♦♦ Recommend changes to deposit insurance assessment rates
to the FDIC Board of Directors as necessary.

ACHIEVED.
ACHIEVED.

PER FO R M ANCE RESULTS SUMMARY

ACHIEVED.

ACHIEVED.

73

ANNUAL REPORT
INSURANCE PROGRAM RESULTS (continued)
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
Annual Performance Goals and Targets

2015

2014

4.	 Expand and strengthen the FDIC’s participation and leadership role in
supporting robust and effective deposit insurance programs, resolution
strategies, and banking systems worldwide.
♦♦ Maintain open dialogue with counterparts in strategically important
jurisdictions, international financial organizations and institutions,
and partner U.S. agencies; and actively participate in bilateral
interagency regulatory dialogues.

ACHIEVED.

♦♦ Maintain a leadership position in the International Association of
Deposit Insurers (IADI) by conducting workshops and performing
assessments of deposit insurance systems based on the methodology
for assessment of compliance with the IADI Core Principles for
Effective Deposit Insurance Systems (Core Principles), developing and
conducting training on priority topics identified by IADI members,
and actively participating in IADI’s Executive Council and Standing
Committees.

ACHIEVED.

♦♦ Maintain open dialogue with the Association of Supervisors of Banks
of the Americas (ASBA) to develop and foster relationships with bank
supervisors in the region by providing assistance when necessary.

ACHIEVED.

♦♦ Engage with authorities responsible for resolutions and resolutions
planning in priority foreign jurisdictions and contribute to the
resolution-related agenda of the Financial Stability Board (FSB)
through active participation in the FSB’s Resolution Steering
Group (ReSG).

ACHIEVED.

♦♦ Support visits, study tours, secondments, and longer-term technical
assistance and training programs for representatives for foreign
jurisdictions to strengthen their deposit insurance organizations,
central banks, bank supervisors, and resolution authorities.

ACHIEVED.

ACHIEVED.

♦♦ Maintain open dialogue with counterparts in strategically important
countries as well as international financial institutions and partner
U.S. agencies.
♦♦ Engage with authorities responsible for resolutions and resolutions
planning in priority foreign jurisdictions.

ACHIEVED.

♦♦ Contribute to the resolution-related agenda of the Financial Stability
Board (FSB) through active participation in the FSB’s Resolution
Steering Group and its working groups.

ACHIEVED.

♦♦ Actively participate in bilateral interagency regulatory dialogues.

ACHIEVED.

♦♦ Support visits, study tours, and longer-term technical assistance
and training programs for foreign jurisdictions to strengthen their
deposit insurance organizations, central banks, bank supervisors, and
resolution authorities.

74

ACHIEVED.

ACHIEVED.

PER FO R MANCE RESULTS SUMMARY

2013

2016
INSURANCE PROGRAM RESULTS (continued)
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
Annual Performance Goals and Targets

2015

2014

2013

5.	 Expand and strengthen the FDIC’s participation and leadership role in
supporting robust international deposit insurance and banking systems.
♦♦ Maintain open dialogue with counterparts in strategically important
countries as well as international financial institutions and partner
U.S. agencies.

ACHIEVED.

♦♦ Conduct workshops and assessments of deposit insurance systems
based on the methodology for assessment of compliance with the
Basel Committee on Bank Supervision (BCBS) and the International
Association of Depositor Insurers (IADI) Core Principles for Effective
Deposit Insurance Systems.

ACHIEVED.

♦♦ Support visits, study tours, and longer-term technical assistance and
training programs for foreign jurisdictions to strengthen their deposit
insurance organizations, central banks, and bank supervisors.

ACHIEVED.

6.	 Provide educational information to insured depository institutions and
their customers to help them understand the rules for determining the
amount of insurance coverage on deposit accounts.
♦♦ Respond within two weeks to 95 percent of written inquiries from
consumers and bankers about FDIC deposit insurance coverage.

ACHIEVED.

♦♦ Conduct at least 4 telephone or in-person seminars for bankers on
deposit insurance coverage.

ACHIEVED.

♦♦ Complete and post on the FDIC website videos for bankers and
consumers on deposit insurance coverage.

ACHIEVED.

♦♦ Conduct at least 12 telephone or in-person seminars for bankers on
deposit insurance coverage.
♦♦ Conduct at least 15 telephone or in-person seminars for bankers on
deposit insurance coverage.

PER FO R M ANCE RESULTS SUMMARY

ACHIEVED.

ACHIEVED.

ACHIEVED.
ACHIEVED.

75

ANNUAL REPORT
SUPERVISION PROGRAM RESULTS
Strategic Goal: FDIC-insured institutions are safe and sound.
Annual Performance Goals and Targets

2015

2014

2013

♦♦ Conduct all required risk management examinations within the time
frames prescribed by statute and FDIC policy.

ACHIEVED.

ACHIEVED.

ACHIEVED.

♦♦ For at least 90 percent of institutions that are assigned a composite
CAMELS rating of 2 and for which the examination report identifies
“Matters Requiring Board Attention” (MRBAs), review progress
reports and follow up with the institution within six months of the
issuance of the examination report to ensure that all MRBAs are
being addressed.

ACHIEVED.

SUBSTANTIALLY
ACHIEVED.

SUBSTANTIALLY
ACHIEVED.1

ACHIEVED.

ACHIEVED.

1.	 Conduct on-site risk management examinations to assess the
overall financial condition, management practices and policies, and
compliance with applicable laws and regulations of FDIC-supervised
depository institutions. When problems are identified, promptly
implement appropriate corrective programs, and follow up to ensure
that identified problems are corrected.

♦♦ Implement formal or informal enforcement actions within 60 days for
at least 90 percent of all institutions that are newly downgraded to a
composite Uniform Financial Institutions Rating of 3, 4, or 5.
2.	 Assist in protecting the infrastructure of the U.S. banking system
against terrorist financing, money laundering, and other financial
crimes.
♦♦ Conduct all Bank Secrecy Act examinations within the time frames
prescribed by statute and FDIC policy.

ACHIEVED.

3.	 More closely align regulatory capital standards with risk and ensure
that capital is maintained at prudential levels.
♦♦ Publish by December 31, 2015, an interagency Notice of Proposed
Rulemaking on implementation of the Basel III Net Stable Funding
Ratio.

NOT
ACHIEVED.

♦♦ Finalize Basel III reporting instructions in time to ensure that
institutions that are using the advanced approaches can implement
Basel III in the first quarter of 2014 and that all IDIs can implement
the standardized approach in the first quarter of 2015.
♦♦ Publish a final Basel Liquidity Coverage Rule, in collaboration with
other regulators by December 31, 2014.

ACHIEVED.

♦♦ Finalize, in collaboration with other regulators, an enhanced U.S.
supplementary leverage ratio standard by December 31, 2014.

76

ACHIEVED.

♦♦ Publish a final rule implementing the Basel III capital accord in
collaboration with other regulators, by December 31, 2014.

1

ACHIEVED.

ACHIEVED.

Erroneously reported as “Achieved” in the 2013 Annual Report.

PER FO R MANCE RESULTS SUMMARY

2016
SUPERVISION PROGRAM RESULTS (continued)
Strategic Goal: FDIC-insured institutions are safe and sound.
Annual Performance Goals and Targets

2015

2014

2013

♦♦ Complete by June 30, 2013, the review of comments and impact
analysis of June 2012 proposed interagency changes to regulatory
capital rules.

ACHIEVED.

♦♦ Issue by December 31, 2013, final regulatory capital rules.

ACHIEVED.

4.	 Implement strategies to promote enhanced information security,
cybersecurity, and business continuity within the banking industry.
♦♦ Enhance the technical expertise of the IT supervisory workforce.

ACHIEVED.

♦♦ Working with FFIEC counterparts, update and strengthen IT
guidance to the industry on cybersecurity preparedness.

ACHIEVED.

♦♦ Working with the FFIEC counterparts, update and strengthen IT
examination work programs for institutions and technology service
providers (TSPs) to evaluate cybersecurity preparedness and cyber
resiliency.

ACHIEVED.

♦♦ Improve information sharing on identified technology risks among the
IT examination workforces of FFIEC member agencies.

ACHIEVED.

5.	 Identify and address risks in financial institutions designated as
systemically important.
♦♦ Conduct ongoing risk analysis and monitoring of SIFIs to understand
their structure, business activities and risk profiles, and their resolution
and recovery capabilities.

ACHIEVED.

♦♦ Complete, in collaboration with the Federal Reserve Board and in
accordance with statutory and regulatory time frames, all required
actions associated with the review of resolution plans submitted by
financial companies subject to the requirements of Section 165(d) of
the Dodd-Frank Act.

ACHIEVED.

♦♦ Hold at least one meeting of the Systemic Resolution Advisory
Committee to obtain feedback on resolving SIFIs.

ACHIEVED.

♦♦ Complete, in collaboration with the Federal Reserve Board and in
accordance with statutory and regulatory time frames, all required
actions associated with the review of Section 165(d) resolution plans
submitted under Title 1 of DFA.

ACHIEVED.

♦♦ Hold at least one meeting of the Systemic Resolution Advisory
Committee to obtain feedback on resolving systemically important
financial companies.

ACHIEVED.

6.	 Implement strategies to promote enhanced cybersecurity within the
banking industry.
♦♦ In coordination with the FFIEC, implement recommendations to
enhance the FDIC’s supervision of the IT risks at insured depository
institutions and their technology service providers.

PER FO R M ANCE RESULTS SUMMARY

ACHIEVED.

77

ANNUAL REPORT
SUPERVISION PROGRAM RESULTS (continued)
Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in their communities.
Annual Performance Goals and Targets

2015

2014

2013

SUBSTANTIALLY
ACHIEVED.

ACHIEVED.

1.	 Conduct on-site CRA and consumer compliance examinations to assess
compliance with applicable laws and regulations by FDIC-supervised
depository institutions. When violations are identified, promptly
implement appropriate corrective programs and follow up to ensure
that identified problems are corrected.
♦♦ Conduct all required examinations within the time frames established
by FDIC policy.

ACHIEVED.

♦♦ Conduct 100 percent of required examinations within the time frames
established by FDIC policy.
♦♦ Conduct visits and/or follow-up examinations in accordance
with established FDIC policies to ensure that the requirements of
any required corrective program have been implemented and are
effectively addressing identified violations.

ACHIEVED.

♦♦ Conduct visits and/or follow-up examinations in accordance with
established FDIC policies and ensure that the requirements of
any required corrective program have been implemented and are
effectively addressing identified violations.

ACHIEVED.

ACHIEVED.

2.	 Effectively investigate and respond to written consumer complaints and
inquiries about FDIC-supervised financial institutions.
♦♦ Respond to 95 percent of written consumer complaints and inquiries
within time frames established by policy, with all complaints
and inquiries receiving at least an initial acknowledgment within
two weeks.

ACHIEVED.

ACHIEVED.

3.	 Promote economic inclusion and access to responsible financial
services through supervisory, research, policy, and consumer/
community affairs initiatives.
♦♦ Revise, test, and administer the 2015 FDIC National Survey of
Unbanked and Underbanked Households.

ACHIEVED.

♦♦ Support the Advisory Committee on Economic Inclusion in
expanding the availability and awareness of low-cost transaction
accounts, consistent with the FDIC’s SAFE account template.

ACHIEVED.

♦♦ In partnership with the Consumer Financial Protection Bureau,
enhance financial capability among school-age children through
(1) development and delivery of tailored financial education materials;
(2) resources and outreach targeted to youth, parents, and teachers;
and (3) implementation of a pilot youth savings program.

ACHIEVED.

♦♦ Publish the results of the 2013 FDIC National Survey of
Unbanked and Underbanked Households (conducted jointly
with the U.S. Census Bureau).

78

PER FO R MANCE RESULTS SUMMARY

ACHIEVED.

ACHIEVED.

2016
SUPERVISION PROGRAM RESULTS (continued)
Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in their communities.
Annual Performance Goals and Targets

2015

2014

♦♦ Implement the strategy outlined in the work plan approved by the
Advisory Committee on Economic Inclusion to support the expanded
availability of Safe accounts and the responsible use of technology, to
expand banking services to the underbanked.

ACHIEVED.

♦♦ Facilitate opportunities for banks and community stakeholders to
address issues concerning access to financial services, community
development, and financial education.

2013

ACHIEVED.

♦♦ Conduct the third biennial FDIC National Survey of Unbanked
and Underbanked Households (conducted jointly with the
U.S. Census Bureau).

ACHIEVED.

♦♦ Initiate work on the Survey of Banks’ Efforts to Serve the Unbanked
and Underbanked.

DEFERRED.

♦♦ Implement the strategy outlined in the work plan approved by
the Advisory Committee on Economic Inclusion to support
the responsible use of technology to expand banking services to
the unbanked.

ACHIEVED.

Strategic Goal: Large and complex financial institutions are resolvable in an orderly manner under bankruptcy.
1.	 Identify and address risks in large and complex financial institutions
designated as systemically important.
♦♦ Conduct ongoing risk analysis and monitoring of large, complex
financial institutions to understand and assess their structure, business
activities, risk profiles, and resolution and recovery plans.

ACHIEVED.

♦♦ Complete, in collaboration with the FRB and in accordance
with statutory and regulatory time frames, a review of resolution
plans submitted by individual financial companies subject to the
requirements of section 165 (d) of DFA and Part 360.10 of the FDIC
Rules and Regulations.

ACHIEVED.

PER FO R M ANCE RESULTS SUMMARY

79

ANNUAL REPORT
RECEIVERSHIP MANAGEMENT PROGRAM RESULTS
Strategic Goal: Resolutions are orderly and receiverships are managed effectively.
Annual Performance Goals and Targets

2015

2014

2013

ACHIEVED.

ACHIEVED.

ACHIEVED.

ACHIEVED.

ACHIEVED.

ACHIEVED.

ACHIEVED.

ACHIEVED.

ACHIEVED.

ACHIEVED.

ACHIEVED.

ACHIEVED.

1.	 Market failing institutions to all known qualified and interested
potential bidders.
♦♦ Contact all known qualified and interested bidders.
2.	 Value, manage, and market assets of failed institutions and their
subsidiaries in a timely manner to maximize net return.
♦♦ For at least 95 percent of insured institution failures, market at least
90 percent of the book value of the institution’s marketable assets
within 90 days of the failure date (for cash sales) or 120 days of the
failure date (for structured sales).
3.	 Manage the receivership estate and its subsidiaries toward an
orderly termination.
♦♦ Terminate at least 75 percent of new receiverships that are not subject
to loss-share agreements, structured sales, or other legal impediments,
within three years of the date of failure.
4.	 Conduct investigations into all potential professional liability claim
areas for all failed insured depository institutions, and decide as
promptly as possible to close or pursue each claim, considering the
size and complexity of the institution.
♦♦ For 80 percent of all claim areas, make a decision to close or pursue
professional liability claims within 18 months of the failure date of an
insured depository institution.
5.	 Ensure the FDIC’s operational readiness to resolve a large, complex
financial institution using the orderly liquidation authority in Title II
of the DFA
♦♦ Update and refine firm-specific resolutions plans and strategies
and develop operational procedures for the administration of a
Title II receivership.
♦♦ Prepare for an early 2016 meeting of the Systemic Resolution
Advisory Committee to obtain feedback on resolving SIFIs.

ACHIEVED.

♦♦ Continue to deepen and strengthen bilateral working relationships
with key foreign jurisdictions.

80

ACHIEVED.

ACHIEVED.

PER FO R M ANCE RESULTS SUMMARY

2016

III.

FINANCIAL
HIGHLIGHTS

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2016
In its role as deposit insurer of financial institutions,
the FDIC promotes the safety and soundness of
IDIs. The following financial highlights address the
performance of the Deposit Insurance Fund.

DEPOSIT INSURANCE FUND
PERFORMANCE
The DIF balance was $83.2 billion at year-end 2016,
an increase of $10.6 billion from $72.6 billion at yearend 2015. The DIF’s comprehensive income totaled
$10.6 billion for 2016 compared to comprehensive
income of $9.8 billion during 2015. The $741
million year-over-year increase was primarily due
to a $1.2 billion increase in assessment revenue and
a $248 million increase in interest revenue, partially
offset by a $683 million lower negative provision for
insurance losses.
Assessment revenue was $10.0 billion for 2016, as
compared to $8.8 billion for 2015. The combination
of assessment surcharges on larger institutions and
lower regular assessment rates for all IDIs resulted in
the net increase in assessment revenue of $1.2 billion.
The DIF’s interest revenue on U.S. Treasury securities
for 2016 was $671 million compared to interest
revenue of $423 million in 2015. The $248 million
year-over-year increase reflects not only a larger
investment portfolio balance, but also new, higheryielding investments. The DIF’s cash and U.S.
Treasury investment portfolio balance was $74.8
billion at year-end 2016, an increase of $11.4 billion

from the year-end 2015 balance of $63.4 billion that
was primarily due to assessment collections of $9.5
billion and recoveries from resolutions of $3.6 billion,
less operating expenses paid of $1.7 billion and
resolution disbursements of $503 million.
The provision for insurance losses was negative
$1.6 billion for 2016, compared to negative $2.3
billion for 2015. The negative provision for 2016
primarily resulted from a decrease of $1.7 billion
in the estimated losses for institutions that failed
in current and prior years, partially offset by an
increase of $97 million in the contingent liability
for anticipated failures. The $1.7 billion decrease
in the estimated losses from failures was primarily
attributable to (1) unanticipated recoveries of $545
million in litigation settlements, professional liability
claims, and tax refunds by the receiverships; (2) a
$584 million decrease in the receiverships’ sharedloss liability; (3) a $406 million decrease in projected
future receivership expenses and receivership legal
and representation and warranty liabilities; and
(4) a $231 million decrease resulting from greaterthan-anticipated collections from receiverships’ asset
sales and updated estimated recovery rates applied
to the remaining assets in liquidation. For the
receiverships’ shared-loss liability, the decrease in 2016
was primarily due to both the early termination of
numerous shared-loss agreements (SLAs) during the
period, which resulted in lower-than-anticipated losses
on covered assets, and the unanticipated recoveries
from SLAs where the commercial loss coverage has
expired but the recovery period remains active.

FIN ANCIAL HIGHLIGHTS

83

ANNUAL REPORT
ESTIMATED DIF INSURED DEPOSITS
8,000
7,000

Dollars in Billions

6,000
5,000
4,000
3,000
2,000
1,000
0

3-11 6-11 9-11 12-11 3-12 6-12 9-12 12-12 3-13 6-13 9-13 12-13 3-14 6-14 9-14 12-14 3-15 6-15 9-15 12-15 3-16 6-16 9-16

SOURCE: Commercial Bank Call and Thrift Financial Reports
Note: Beginning in fourth quarter 2010 through fourth quarter 2012, estimated insured deposits include the entire balance of
noninterest-bearing transaction accounts.

Fund Balance as a Percent of Estimated Insured Deposits

DEPOSIT INSURANCE FUND RESERVE RATIOS

84

1.2
1.0
0.8
0.6
0.4
0.2
0.0
-0.2

3-11 6-11 9-11 12-11 3-12 6-12 9-12 12-12 3-13 6-13 9-13 12-13 3-14 6-14 9-14 12-14 3-15 6-15 9-15 12-15 3-16 6-16 9-16

FIN ANCIAL HIGHLIGHTS

2016
DEPOSIT INSURANCE FUND SELECTED STATISTICS
Dollars in Millions
For the years ended December 31
2016

2015

2014

Financial Results

 

 

 

Revenue

	$10,674

	$9,304

	$8,965

Operating Expenses

	1,715

	1,687

	1,664

Insurance and Other Expenses (includes provision for losses)

	(1,564)

	(2,240)

	(8,299)

Net Income

	10,524

	9,857

	15,600

Comprehensive Income

	10,561

	9,820

	15,589

Insurance Fund Balance

	$83,162

	$72,600

	$62,780

Fund as a Percentage of Insured Deposits (reserve ratio)

	1.18%³

	1.11%

	1.01%

Total DIF-Member Institutions1

	5,980³

	6,182

	6,509

Problem Institutions

	132³

	183

	291

Total Assets of Problem Institutions

	$24,917³

	$46,780

	$86,712

Institution Failures

	5

	8

	18

Total Assets of Failed Institutions in Year2

	$277

	$6,706

	$2,914

Number of Active Failed Institution Receiverships

	378

	446

	481

Selected Statistics

1

Commercial banks and savings institutions. Does not include U.S. insured branches of foreign banks.

2

Total Assets data are based upon the last Call Report filed by the institution prior to failure.

3

As of September 30, 2016.

FIN ANCIAL HIGHLIGHTS

85

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2016

IV.

BUDGET AND
SPENDING

87

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2016
FDIC OPERATING BUDGET
The FDIC segregates its operating budget and
expenses into two discrete components: ongoing
operations and receivership funding. The receivership
funding component represents expenses resulting
from financial institution failures and is, therefore,
largely driven by external forces, while the ongoing
operations component accounts for all other
operating expenses and tends to be more controllable
and estimable. FDIC operating expenses totaled
$1.9 billion in 2016, including $1.7 billion in
ongoing operations and $260 million in receivership
funding. This represented approximately 93 percent
of the approved budget for ongoing operations and
65 percent of the approved budget for receivership
funding for the year.3
The approved 2017 FDIC Operating Budget of
approximately $2.2 billion is segregated into three
components, consisting of $1.8 billion for ongoing
operations, $300 million for receivership funding,

and $37 million for the Office of Inspector General
(OIG). The level of approved ongoing operations
budget for 2017 is approximately $45 million
(3 percent) higher than the 2016 ongoing operations
budget excluding the OIG, while the approved
receivership funding budget is $100 million
(25 percent) lower than the 2016 receivership
funding budget.
As in prior years, the 2017 budget was formulated
primarily on the basis of an analysis of projected
workload for each of the Corporation’s three major
business lines and its program support functions. The
most significant factor contributing to the decrease in
the FDIC Operating Budget is the improving health
of the industry and the resultant reduction in failure
related workload. Although savings in this area are
being realized, the 2017 receivership funding budget
provides resources for contractor support as well as
non-permanent staffing for DRR, the Legal Division,
and other organizations should workload in these
areas require an immediate response.

FDIC EXPENDITURES 2007–2016
Dollars in Millions

$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

The numbers in this paragraph will not agree with the DIF and FRF financial statements because of differences in how items
are classified.

3

BU DGET AND SP ENDING

89

ANNUAL REPORT
The FDIC’s Strategic Plan and Annual Performance
Plan provide the basis for annual planning and
budgeting for needed resources. The 2016 aggregate
budget (for corporate, receivership, and investment
spending) was $2.2 billion, while actual expenditures
for the year were under $2.0 billion, about $0.1
billion less than 2015 expenditures.

Over the past decade the FDIC’s expenditures have
varied in response to workload. During the last
several years, expenditures have fallen, largely due to
decreasing resolution and receivership activity. To a
lesser extent decreased expenses have resulted from
supervision-related costs associated with the oversight
of fewer troubled institutions.

2016 BUDGET AND EXPENDITURES BY PROGRAM
(including Allocated Support)
Dollars in Millions

$1,200
$900
$600
$300
$0

Supervision
and Consumer
Protection
Program
Budget

Receivership
Management
Program

General and
Administrative

Expenditures

2016 BUDGET AND EXPENDITURES
BY PROGRAM
(Excluding Investments)
The FDIC budget for 2016 totaled $2.2 billion.
Budget amounts were allocated as follows: $1.1 billion
or 49 percent, to the Supervision and Consumer
Protection program; $575 million or 26 percent, to
the Receivership Management program; $331 million,
or 15 percent, to the Insurance program; and $221

90

Insurance
Program

million, or 10 percent, to Corporate General and
Administrative expenditures.
Actual expenditures for the year totaled $1.9
billion. Actual expenditures amounts were allocated
as follows: $995 million, or 51 percent, to the
Supervision and Consumer Protection program;
$468 million, or 24 percent, to the Receivership
Management program; $292 million, or 15 percent,
to the Insurance program; and $195 million, or 10
percent, to Corporate General and Administrative
expenditures.

BU DGET AND SPENDING

2016
INVESTMENT SPENDING
The FDIC instituted a separate Investment Budget
in 2003 to provide enhanced governance of major
multi-year development efforts. The FDIC has a
disciplined process for reviewing proposed new
investment projects and managing the construction
and implementation of approved projects. Proposed
IT projects are carefully reviewed to ensure that
they are consistent with the Corporation’s enterprise

architecture. The project approval and monitoring
processes also enable the FDIC to be aware of risks
to the major capital investment projects and facilitate
appropriate, timely intervention to address these risks
throughout the development process. An investment
portfolio performance review is provided to the
FDIC’s Board of Directors on a quarterly basis.
From 2007-2016 investment spending totaled $130
million, and is estimated at $11 million for 2017.

INVESTMENT SPENDING 2007 - 2016
Dollars in Millions

$30
$25
$20
$15
$10
$5
$0

2007

2008

2009

2010

2011

2012

2013

BU DGET AND SPENDING

2014

2015

2016

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2016

V.

FINANCIAL
SECTION

93

ANNUAL REPORT
DEPOSIT INSURANCE FUND (DIF)
Federal Deposit Insurance Corporation

Deposit Insurance Fund Balance Sheet

As of December 31

2016

(Dollars in Thousands)

2015

ASSETS
Cash and cash equivalents

$

Investment in U.S. Treasury securities (Note 3)

1,332,966 $

876,344

73,511,953
2,666,267

Property and equipment, net (Note 5)
Total Assets

$

11,578,079

357,575

Receivables from resolutions, net (Note 4)

417,871

7,790,403

Interest receivable on investments and other assets, net

2,172,472

526,195

Assessments receivable, net (Note 9)

62,496,959

378,250

86,185,359 $

77,919,975

LIABILITIES
Accounts payable and other liabilities

$

Liabilities due to resolutions (Note 6)

238,322 $

272,571

2,073,375

4,419,195

232,201

233,000

477,357

394,588

2,589

386

3,023,844

5,319,740

83,166,991

72,643,474

Unrealized gain (loss) on U.S. Treasury securities, net (Note 3)

20,271

(9,191)

Unrealized postretirement benefit loss (Note 12)

(25,747)

(34,048)

(5,476)

(43,239)

Postretirement benefit liability (Note 12)
Contingent liabilities:
Anticipated failure of insured institutions (Note 7)
Litigation losses and other (Notes 7 and 8)
Total Liabilities
Commitments and off-balance-sheet exposure (Note 13)
FUND BALANCE
Accumulated Net Income
ACCUMULATED OTHER COMPREHENSIVE INCOME

Total Accumulated Other Comprehensive Income (Loss)
Total Fund Balance

83,161,515

Total Liabilities and Fund Balance

$

The accompanying notes are an integral part of these financial statements.

94

FINANCIAL SECTION

72,600,235

86,185,359 $

77,919,975

2016
DEPOSIT INSURANCE FUND (DIF)
Federal Deposit Insurance Corporation

Deposit Insurance Fund Statement of Income and Fund Balance

For the Years Ended December 31

2016

(Dollars in Thousands)

2015

9,986,615 $

8,846,843

REVENUE
Assessments (Note 9)

$

Interest on U.S. Treasury securities

671,377

422,782

16,095

33,913

10,674,087

9,303,538

Operating expenses (Note 10)

1,715,011

1,687,234

Provision for insurance losses (Note 11)

(1,567,950)

(2,251,320)

Other revenue
Total Revenue
EXPENSES AND LOSSES

Insurance and other expenses

3,509
150,570

Total Expenses and Losses
Net Income

10,936
(553,150)

10,523,517

9,856,688

OTHER COMPREHENSIVE INCOME
Unrealized gain (loss) on U.S. Treasury securities, net

29,462
8,301

Total Other Comprehensive Income (Loss)

23,703

37,763

Unrealized postretirement benefit gain (Note 12)

(60,333)
(36,630)

Comprehensive Income

10,561,280

9,820,058

Fund Balance - Beginning

72,600,235

62,780,177

83,161,515 $

72,600,235

Fund Balance - Ending

$

The accompanying notes are an integral part of these financial statements.

FINANCIAL SECTION

95

ANNUAL REPORT
DEPOSIT INSURANCE FUND (DIF)
Federal Deposit Insurance Corporation

Deposit Insurance Fund Statement of Cash Flows

For the Years Ended December 31

2016

2015

9,488,215 $

8,677,795

Interest on U.S. Treasury securities

1,523,215

2,064,836

Recoveries from financial institution resolutions

3,601,149

6,329,454

16,057

147,001

(1,671,768)

(1,631,297)

(502,716)

(2,282,721)

(8,998)

(107,478)

(Dollars in Thousands)

OPERATING ACTIVITIES
Provided by:
Assessments

$

Miscellaneous receipts
Used by:
Operating expenses
Disbursements for financial institution resolutions
Miscellaneous disbursements
Net Cash Provided by Operating Activities

12,445,154

13,197,590

26,517,122

19,590,780

(38,474,320)

(33,766,067)

INVESTING ACTIVITIES
Provided by:
Maturity of U.S. Treasury securities
Used by:
Purchase of U.S. Treasury securities
Purchase of property and equipment

(31,334)

(60,479)

(11,988,532)

Net Cash (Used) by Investing Activities

(14,235,766)

Net Increase (Decrease) in Cash and Cash Equivalents

456,622

(1,038,176)

Cash and Cash Equivalents - Beginning

876,344

1,914,520

Cash and Cash Equivalents - Ending

$

The accompanying notes are an integral part of these financial statements.

96

FINANCIAL SECTION

1,332,966 $

876,344

2016
DEPOSIT INSURANCE FUND

NOTES TO THE FINANCIAL STATEMENTS
December 31, 2016 and 2015

1.

Operations of the Deposit Insurance Fund

OVERVIEW
The Federal Deposit Insurance Corporation (FDIC) is the
independent deposit insurance agency created by Congress
in 1933 to maintain stability and public confidence in the
nation’s banking system. Provisions that govern the FDIC’s
operations are generally found in the Federal Deposit
Insurance (FDI) Act, as amended (12 U.S.C. 1811, et seq). In
accordance with the FDI Act, the FDIC, as administrator of
the Deposit Insurance Fund (DIF), insures the deposits of
banks and savings associations (insured depository
institutions). In cooperation with other federal and state
agencies, the FDIC promotes the safety and soundness of
insured depository institutions (IDIs) by identifying,
monitoring, and addressing risks to the DIF. Commercial
banks, savings banks and savings associations (known as
“thrifts”) are supervised by either the FDIC, the Office of the
Comptroller of the Currency, or the Federal Reserve Board.
In addition to being the administrator of the DIF, the FDIC
is the administrator of the FSLIC Resolution Fund (FRF). The
FRF is a resolution fund responsible for the sale of the
remaining assets and the satisfaction of the liabilities
associated with the former Federal Savings and Loan
Insurance Corporation (FSLIC) and the former Resolution
Trust Corporation. The FDIC maintains the DIF and the FRF
separately to support their respective functions.
Pursuant to the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (Dodd-Frank Act), the
FDIC also manages the Orderly Liquidation Fund (OLF).
Established as a separate fund in the U.S. Treasury
(Treasury), the OLF is inactive and unfunded until the FDIC
is appointed as receiver for a covered financial company. A
covered financial company is a failing financial company
(for example, a bank holding company or nonbank financial
company) for which a systemic risk determination has been
made as set forth in section 203 of the Dodd-Frank Act.
The Dodd-Frank Act (Public Law 111-203) granted the FDIC
authority to establish a widely available program to
guarantee obligations of solvent IDIs or solvent depository
institution holding companies (including affiliates) upon the
systemic risk determination of a liquidity event during times
of severe economic distress. The program would not be
funded by the DIF but rather by fees and assessments paid
by all participants in the program. If fees are insufficient to
cover losses or expenses, the FDIC must impose a special

assessment on participants as necessary to cover the
shortfall. Any excess funds at the end of the liquidity event
program would be deposited in the General Fund of the
Treasury.
The Dodd-Frank Act also created the Financial Stability
Oversight Council (FSOC) of which the Chairman of the
FDIC is a member and expanded the FDIC’s responsibilities
to include supervisory review of resolution plans (known as
living wills) and backup examination authority for
systemically important bank holding companies and
nonbank financial companies. The living wills provide for
an entity’s rapid and orderly resolution in the event of
material financial distress or failure.
OPERATIONS OF THE DIF
The primary purposes of the DIF are to (1) insure the
deposits and protect the depositors of IDIs and (2) resolve
failed IDIs upon appointment of the FDIC as receiver in a
manner that will result in the least possible cost to the DIF.
The DIF is primarily funded from deposit insurance
assessments. Other available funding sources, if necessary,
are borrowings from the Treasury, the Federal Financing
Bank (FFB), Federal Home Loan Banks, and IDIs. The FDIC
has borrowing authority of $100 billion from the Treasury
and a Note Purchase Agreement with the FFB, not to
exceed $100 billion, to enhance the DIF’s ability to fund
deposit insurance.
A statutory formula, known as the Maximum Obligation
Limitation (MOL), limits the amount of obligations the DIF
can incur to the sum of its cash, 90 percent of the fair
market value of other assets, and the amount authorized to
be borrowed from the Treasury. The MOL for the DIF was
$182.1 billion and $171.0 billion as of December 31, 2016
and 2015, respectively.
OPERATIONS OF RESOLUTION ENTITIES
The FDIC is responsible for managing and disposing of the
assets of failed institutions in an orderly and efficient
manner. The assets held by receiverships, pass-through
conservatorships, and bridge institutions (collectively,
resolution entities), and the claims against them, are
accounted for separately from the DIF assets and liabilities
to ensure that proceeds from these entities are distributed
according to applicable laws and regulations. Therefore,

1

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ANNUAL REPORT
DEPOSIT INSURANCE FUND

income and expenses attributable to resolution entities are
accounted for as transactions of those entities. The FDIC
bills resolution entities for services provided on their behalf.

2.

Summary of Significant Accounting Policies

GENERAL
The financial statements include the financial position,
results of operations, and cash flows of the DIF and are
presented in accordance with U.S. generally accepted
accounting principles (GAAP). These statements do not
include reporting for assets and liabilities of resolution
entities because these entities are legally separate and
distinct, and the DIF does not have any ownership or
beneficial interests in them. Periodic and final accounting
reports of resolution entities are furnished to courts,
supervisory authorities, and others upon request.
USE OF ESTIMATES
The preparation of the financial statements in conformity
with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, revenue and expenses, and disclosure of
contingent liabilities. Actual results could differ from these
estimates. Where it is reasonably possible that changes in
estimates will cause a material change in the financial
statements in the near term, the nature and extent of such
potential changes in estimates have been disclosed. The
more significant estimates include the assessments
receivable and associated revenue; the allowance for loss
on receivables from resolutions (which considers the impact
of shared-loss agreements); the guarantee obligations for
structured transactions; the postretirement benefit
obligation; and the estimated losses for anticipated failures
and representations and indemnifications.
CASH EQUIVALENTS
Cash equivalents are short-term, highly liquid investments
consisting primarily of U.S. Treasury Overnight Certificates.
INVESTMENT IN U.S. TREASURY SECURITIES
The FDI Act requires that the DIF funds be invested in
obligations of the United States or in obligations
guaranteed as to principal and interest by the United
States. The Secretary of the Treasury must approve all such
investments in excess of $100,000 and has granted the FDIC
approval to invest the DIF funds only in U.S. Treasury
obligations that are purchased or sold exclusively through
the Bureau of the Fiscal Service’s Government Account
Series program.
The DIF’s investments in U.S. Treasury securities are
classified as available-for-sale (AFS). Securities designated
as AFS are shown at fair value. Unrealized gains and losses
are reported as other comprehensive income. Realized

98

gains and losses are included in the Statement of Income
and Fund Balance as components of net income. Income
on securities is calculated and recorded daily using the
effective interest or straight-line method depending on the
maturity of the security (see Note 3).
REVENUE RECOGNITION FOR ASSESSMENTS
Assessment revenue is recognized for the quarterly period
of insurance coverage based on an estimate. The estimate
is derived from an institution’s regular risk-based
assessment rate and assessment base for the prior quarter
adjusted for the current quarter’s available assessment
credits, certain changes in supervisory examination ratings
for larger institutions, as well as modest assessment base
growth and average assessment rate adjustment factors.
Beginning July 1, 2016, the estimate includes a surcharge
for institutions with greater than $10 billion in total
consolidated assets (see Note 9). At the subsequent
quarter-end, the estimated revenue amounts are adjusted
when actual assessments for the covered period are
determined for each institution.
CAPITAL ASSETS AND DEPRECIATION
The FDIC buildings are depreciated on a straight-line basis
over a 35- to 50-year estimated life.
Building
improvements are capitalized and depreciated over the
estimated useful life of the improvements. Leasehold
improvements are capitalized and depreciated over the
lesser of the remaining life of the lease or the estimated
useful life of the improvements, if determined to be
material. Capital assets depreciated on a straight-line basis
over a five-year estimated useful life include mainframe
equipment; furniture, fixtures, and general equipment; and
internal-use software. Computer equipment is depreciated
on a straight-line basis over a three-year estimated useful
life (see Note 5).
PROVISION FOR INSURANCE LOSSES
The provision for insurance losses primarily represents
changes in the allowance for losses on receivables from
closed banks and the contingent liability for anticipated
failures of insured institutions (see Note 11).
REPORTING ON VARIABLE INTEREST ENTITIES
The FDIC receiverships engaged in structured transactions,
some of which resulted in the issuance of note obligations
that were guaranteed by the FDIC, in its corporate capacity.
As the guarantor of note obligations for several structured
transactions, the FDIC, in its corporate capacity, holds an
interest in many variable interest entities (VIEs). The FDIC
conducts a qualitative assessment of its relationship with
each VIE as required by the Financial Accounting Standards
Board (FASB) Accounting Standards Codification (ASC)
Topic 810, Consolidation. These assessments are conducted
to determine if the FDIC, in its corporate capacity, has (1)
power to direct the activities that most significantly affect

FINANCIAL SECTION

2

2016
NOTES TO THE FINANCIAL STATEMENTS
the economic performance of the VIE and (2) an obligation
to absorb losses of the VIE or the right to receive benefits
from the VIE that could potentially be significant to the VIE.
When a variable interest holder has met both of these
characteristics, the enterprise is considered the primary
beneficiary and must consolidate the VIE.
In accordance with the provisions of FASB ASC Topic 810,
an assessment of the terms of the legal agreement for each
VIE was conducted to determine whether any of the terms
had been activated or modified in a manner that would
cause the FDIC, in its corporate capacity, to be
characterized as a primary beneficiary. In making that
determination, consideration was given to which, if any,
activities were significant to each VIE. Often, the right to
service collateral, to liquidate collateral, or to unilaterally
dissolve the VIE was determined to be the most significant
activity.
In other cases, it was determined that the
structured transactions did not include such significant
activities and that the design of the entity was the best
indicator of which party was the primary beneficiary.
The conclusion of these analyses was that the FDIC, in its
corporate capacity, has not engaged in any activity that
would cause the FDIC to be characterized as a primary
beneficiary to any VIE with which it was involved as of
December 31, 2016 and 2015. Therefore, consolidation is
not required for the 2016 and 2015 DIF financial
statements. In the future, the FDIC, in its corporate
capacity, may become the primary beneficiary upon the
activation of provisional contract rights that extend to the
FDIC if payments are made on guarantee claims. Ongoing
analyses will be required to monitor consolidation
implications under FASB ASC Topic 810.
The FDIC’s involvement with VIEs is fully described in Note
8 under FDIC Guaranteed Debt of Structured Transactions.

In February 2016, the FASB issued ASU 2016-02, Leases
(Topic 842). The new guidance requires that substantially
all leases will be reported on the balance sheet through the
recognition of a right-of-use asset and a corresponding
lease liability. The ASU also requires lessees and lessors to
expand qualitative and quantitative disclosures and key
information regarding their leasing arrangements. The
standard is effective for the DIF on January 1, 2020, with
early adoption allowed. The FDIC does not expect the ASU
to have a material effect on the DIF’s financial position or
its results of operations. The FDIC will continue analyzing
the full impact of the ASU.
In June 2016, the FASB issued ASU 2016-13, Financial
Instruments—Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments. The ASU will replace
the incurred loss impairment model with a new expected
credit loss model for financial assets measured at amortized
cost and for off-balance-sheet credit exposures. The
guidance also amends the AFS debt securities impairment
model by requiring the use of an allowance to record
estimated credit losses (and subsequent recoveries) related
to AFS debt securities. The ASU is effective for the DIF on
January 1, 2021. The FDIC is assessing the effect the ASU
will have on the DIF’s financial position and results of
operations.
Other recent accounting pronouncements have been
deemed not applicable or material to the financial
statements as presented.

3. Investment in U.S. Treasury Securities
The “Investment in U.S. Treasury securities” line item on the
Balance Sheet consisted of the following components by
maturity (in millions).

RELATED PARTIES
The nature of related parties and a description of related
party transactions are discussed in Note 1 and disclosed
throughout the financial statements and footnotes.
DISCLOSURE ABOUT RECENT RELEVANT ACCOUNTING
PRONOUNCEMENTS
In January 2016, the FASB issued Accounting Standards
Update (ASU) 2016-01, Financial Instruments—Overall
(Subtopic 825-10): Recognition and Measurement of
Financial Assets and Financial Liabilities. The ASU addresses
certain aspects of recognition, measurement, presentation,
and disclosure of financial instruments through targeted
changes to existing guidance. The FDIC has determined
that the ASU, which is effective for the DIF beginning on
January 1, 2019, will not have a material effect on the
financial position of the DIF or its results of operations.

FINANCIAL SECTION

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ANNUAL REPORT
DEPOSIT INSURANCE FUND

securities and is not likely to be required to sell them before their maturity date, thus, the
FDIC does not consider these securities to be other than temporarily impaired at
December 31, 2015. The aggregate related fair value of securities with unrealized losses
was $38.7 billion as of December 31, 2015.

December 31, 2016
Net
Yield at
Maturity

Purchase

Unrealized Unrealized

Face

Holding

Holding

Fair

Value

a

Carrying
Amount

Gains

Losses

Value

U.S. Treasury notes and bonds
Within 1 year
After 1 year
through 5 years

$

1.38%

32,031 b $ 32,365 $

25 $

40,525

0.87%

92

40,707

Subtotal
$ 72,556 $ 73,072 $
U.S. Treasury Inflation-Protected Securities
After 1 year
through 5 years

-0.14%

117 $

(5) $ 32,385
(94)

40,705

(99) $ 73,090

400

Subtotal

$

Total

$

420

2

0

400 $

420 $

2$

0 $

72,956 $ 73,492 $

119 $

422
422

c

(99) $ 73,512

(a) The Treasury Inflation-Protected Securities (TIPS) are indexed to increases or decreases
in the Consumer Price Index for All Urban Consumers (CPI-U). For TIPS, the yields in the
above table are stated at their real yields at purchase, not their effective yields. Effective
yields on TIPS include a long-term annual inflation assumption as measured by the CPI-U.
The long-term CPI-U consensus forecast is 2.0 percent, based on figures issued by the
Congressional Budget Office and Blue Chip Economic Indicators in early 2016.

Receivables from closed banks

Net

Maturity

Purchase

Total

Unrealized Unrealized

Face

Carrying

Holding

Holding

Fair

Value

a

Amount

Gains

Losses

Value

U.S. Treasury notes and bonds
Within 1 year
After 1 year
through 5 years

0.54%

$ 21,495 $

1.19%

39,881

21,816 $
39,952

$ 61,376 $ 61,768 $
Subtotal
U.S. Treasury Inflation-Protected Securities
Within 1 year
After 1 year
through 5 years
Subtotal
Total

3$

(18) $ 21,801

55

(44)

39,963

58 $

(62) $ 61,764

-0.80% $

300 $

324 $

0$

(2) $

322

-0.14%

400

414

0

(3)

411

700 $

738 $

0$

(5) $

733

$ 62,076 $ 62,506 $

58 $

$

(67) b $ 62,497

(a) The Treasury Inflation-Protected Securities (TIPS) are indexed to increases or decreases
in the Consumer Price Index for All Urban Consumers (CPI-U). For TIPS, the yields in the
above table are stated at their real yields at purchase, not their effective yields. Effective
yields on TIPS include a long-term annual inflation assumption as measured by the CPI-U.
The long-term CPI-U consensus forecast is 1.8 percent, based on figures issued by the
Congressional Budget Office and Blue Chip Economic Indicators in early 2015.
(b) These unrealized losses occurred over a period of less than a year as a result of
temporary changes in market interest rates. The FDIC does not intend to sell the

100

$

Allowance for losses

December 31

2016

(c) These unrealized losses occurred over a period of less than a year as a result of
temporary changes in market interest rates. The FDIC does not intend to sell the
securities and is not likely to be required to sell them before their maturity date, thus, the
FDIC does not consider these securities to be other than temporarily impaired at
December 31, 2016. The aggregate related fair value of securities with unrealized losses
was $31.4 billion as of December 31, 2016.

Yield at

The receivables from resolutions result from DIF payments
to cover obligations to insured depositors (subrogated
claims), advances to resolution entities for working capital,
and administrative expenses paid on behalf of resolution
entities. Any related allowance for loss represents the
difference between the funds advanced and/or obligations
incurred and the expected repayment. Estimated future
payments on losses incurred on assets sold to an acquiring
institution under a shared-loss agreement (SLA) are
factored into the computation of the expected repayment.
Assets held by DIF resolution entities (including structured
transaction-related assets; see Note 8) are the main source
of repayment of the DIF’s receivables from resolutions. The
“Receivables from resolutions, net” line item on the Balance
Sheet consisted of the following components (in
thousands).

December 31

(b) Includes two Treasury notes totaling $3.4 billion which matured on Saturday,
December 31, 2016. Settlements occurred the next business day, January 3, 2017.

December 31, 2015

4. Receivables from Resolutions, Net

2015

80,314,038

$

88,858,877

(72,523,635)
$

(77,280,798)

7,790,403

$ 11,578,079

As of December 31, 2016, the FDIC had 378 active
receiverships, including five established in 2016. The DIF
resolution entities held assets with a book value of $14.9
billion as of December 31, 2016, and $20.8 billion as of
December 31, 2015 (including $11.6 billion and $16.0
billion, respectively, of cash, investments, receivables due
from the DIF, and other receivables). Ninety-nine percent
of the current asset book value of $14.9 billion is held by
resolution entities established since the beginning of 2008.
Estimated cash recoveries from the management and
disposition of assets that are used to determine the
allowance for losses are based on asset recovery rates from
several sources, including actual or pending institutionspecific asset disposition data, failed institution-specific
asset valuation data, aggregate asset valuation data on
several recently failed or troubled institutions, sampled
asset valuation data, and empirical asset recovery data
based on failures since 1990.
Methodologies for
determining the asset recovery rates incorporate estimating
future cash recoveries, net of applicable liquidation cost
estimates, and discounting based on market-based risk
factors applicable to a given asset’s type and quality. The
resulting estimated cash recoveries are then used to derive
the allowance for loss on the receivables from these
resolutions.

FINANCIAL SECTION

4

2016
NOTES TO THE FINANCIAL STATEMENTS
For failed institutions resolved using a whole bank purchase
and assumption transaction with an accompanying SLA, the
projected future shared-loss payments on the covered
residential and commercial loan assets sold to the acquiring
institution under the agreement are considered in
determining the allowance for loss on the receivables from
these resolutions. The shared-loss cost projections are
based on the covered assets’ intrinsic value, which is
determined using financial models that consider the quality,
condition and type of covered assets, current and future
market conditions, risk factors, and estimated asset holding
periods. For year-end 2016, the shared-loss cost estimates
were updated for all 148 receiverships with active SLAs.
The updated shared-loss cost projections for the larger
residential shared-loss agreements were primarily based on
third-party valuations estimating the cumulative loss of
covered assets. The updated shared-loss cost projections
on the remaining residential shared-loss agreements were
based on a stratified random sample of institutions selected
for third-party loss estimations, and valuation results from
the sampled institutions were aggregated and extrapolated
to the non-sampled institutions by asset type and
performance status. For the remaining commercial covered
assets, shared-loss cost projections were based on the
FDIC’s historical loss experience that also factors in the time
period based on the life of the agreement.
Also reflected in the allowance for loss calculation are endof-agreement SLA “true-up” recoveries. True-up recoveries
are projected to be received at expiration in accordance
with the terms of the SLA, if actual losses at expiration are
lower than originally estimated.
Note that estimated asset recoveries are regularly evaluated
during the year, but remain subject to uncertainties
because of potential changes in economic and market
conditions, which may cause the DIF’s actual recoveries to
vary significantly from current estimates.
WHOLE
BANK
PURCHASE
AND
ASSUMPTION
TRANSACTIONS WITH SHARED-LOSS AGREEMENTS
Since the beginning of 2008 through 2013, the FDIC
resolved 304 failures using whole bank purchase and
assumption resolution transactions with accompanying
SLAs on total assets of $216.5 billion purchased by the
financial institution acquirers.
The acquirer typically
assumed all of the deposits and purchased essentially all of
the assets of a failed institution. The majority of the
commercial and residential loan assets were purchased
under an SLA, where the FDIC agreed to share in future
losses and recoveries experienced by the acquirer on those
assets covered under the agreement.
Losses on the covered assets of failed institutions are
shared between the acquirer and the FDIC, in its
receivership capacity, when losses occur through the sale,

foreclosure, loan modification, or charge-off of loans under
the terms of the SLA. The majority of the agreements cover
commercial and single-family loans over a five- to ten-year
shared-loss period, respectively, with the receiver covering
80 percent of the losses incurred by the acquirer and the
acquiring institution covering 20 percent. Prior to March
26, 2010, most SLAs included a threshold amount, above
which the receiver covered 95 percent of the losses
incurred by the acquirer. Recoveries by the acquirer on
covered commercial and single-family SLA losses are also
shared over an eight- to ten-year period, respectively. Note
that future recoveries on SLA losses are not factored into
the DIF allowance for loss calculation because the amount
and timing of such receipts are not determinable.
The estimated shared-loss liability is accounted for by the
receiver and is included in the calculation of the DIF’s
allowance for loss against the corporate receivable from the
resolution. As shared-loss claims are asserted and proven,
DIF receiverships satisfy these shared-loss payments using
available liquidation funds and/or by drawing on amounts
due from the DIF for funding the deposits assumed by the
acquirer (see Note 6).
Shared-loss transactions are summarized as follows (in
thousands).

December 31 December 31
2016
Payments for shared-loss agreements to date

2015

$ 34,149,990 $ 33,475,276

Recoveries from shared-loss agreements to date

(5,161,366)

(4,468,296)

Net shared-loss payments made to date

$ 28,988,624 $ 29,006,980

Projected shared-loss payments, net of "true-up" recoveries

$

Total remaining shared-loss covered assets

$ 20,807,196 $ 31,478,451

966,063 $

1,560,124

The $10.7 billion reduction in the remaining shared-loss
covered assets from 2015 to 2016 is primarily due to the
liquidation of covered assets from active SLAs, expiration of
loss coverage for 42 commercial loan SLAs, and early
termination of SLAs impacting 67 receiverships during
2016.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the DIF to
concentrations of credit risk are receivables from
resolutions. The repayment of these receivables is primarily
influenced by recoveries on assets held by DIF receiverships
and payments on the covered assets under SLAs. The
majority of the remaining assets in liquidation ($3.3 billion)
and current shared-loss covered assets ($20.8 billion), which
together total $24.1 billion, are concentrated in commercial
loans ($1.0 billion), residential loans ($19.8 billion), and
structured transaction-related assets ($2.6 billion) as

FINANCIAL SECTION

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ANNUAL REPORT
DEPOSIT INSURANCE FUND

described in Note 8. Most of the assets originated from
failed institutions located in California ($11.7 billion), Florida
($2.6 billion), Puerto Rico ($2.5 billion), Ohio ($2.3 billion),
Texas ($1.5 billion), and Illinois ($0.7 billion).

5. Property and Equipment, Net
Depreciation expense was $50 million and $52 million for
2016 and 2015, respectively. The “Property and equipment,
net” line item on the Balance Sheet consisted of the
following components (in thousands).

December 31
2016
Land

$

December 31
2015

37,352 $

37,352

Buildings (including building and leasehold improvements)

348,008

342,267

Application software (includes work-in-process)
Furniture, fixtures, and equipment
Accumulated depreciation

127,113
69,624
(224,522)

132,280
73,432
(207,081)

357,575 $

378,250

Total

$

6. Liabilities Due to Resolutions
As of December 31, 2016 and 2015, the DIF recorded
liabilities totaling $2.1 billion and $4.4 billion, respectively,
to resolution entities representing the agreed-upon value
of assets transferred from the receiverships, at the time of
failure, to the acquirers/bridge institutions for use in
funding the deposits assumed by the acquirers/bridge
institutions. Seventy-eight percent of these liabilities are
due to failures resolved under whole-bank purchase and
assumption transactions, most with an accompanying SLA.
The DIF satisfies these liabilities either by sending cash
directly to a receivership to fund shared-loss and other
expenses or by offsetting receivables from resolutions when
a receivership declares a dividend.

7. Contingent Liabilities
ANTICIPATED FAILURE OF INSURED INSTITUTIONS
The DIF records a contingent liability and a loss provision
for DIF-insured institutions that are likely to fail when the
liability is probable and reasonably estimable, absent some
favorable event such as obtaining additional capital or
merging. The contingent liability is derived by applying
expected failure rates and loss rates to the institutions
based on supervisory ratings, balance sheet characteristics,
and projected capital levels.

102

The banking industry’s financial condition and performance
were generally positive in 2016. According to the quarterly
financial data submitted by DIF-insured institutions, the
industry’s capital levels continued to improve, and the
percentage of total loans that were noncurrent at
September 30 fell to its lowest level since year-end 2007.
The industry reported total net income of $128 billion for
the first nine months of 2016, an increase of 3.8 percent
over the comparable period one year ago.
Losses to the DIF from failures that occurred in 2016 were
lower than the contingent liability at the end of 2015, as the
aggregate number and cost of institution failures were less
than anticipated. However, the contingent liability
increased from $395 million at December 31, 2015 to $477
million at December 31, 2016, due to the deterioration in
the financial condition of certain troubled institutions.
In addition to the recorded contingent liabilities, the FDIC
has identified risks in the financial services industry that
could result in additional losses to the DIF, should
potentially vulnerable insured institutions ultimately fail. As
a result of these risks, the FDIC believes that it is reasonably
possible that the DIF could incur additional estimated
losses of approximately $919 million as of December 31,
2016, as compared to $800 million as of year-end
2015. The actual losses, if any, will largely depend on future
economic and market conditions and could differ materially
from this estimate.
During 2016, five institutions failed with combined assets of
$265 million at the date of failure. Recent trends in
supervisory ratings and market data suggest that the
financial performance and condition of the banking
industry should continue to improve over the coming
year. However, the operating environment remains
challenging for banks.
Interest rates have been
exceptionally low for an extended period, and there are
signs of growing credit and liquidity risk. Revenue growth
has been modest and margins continue to narrow despite
banks’ investments in longer-term assets to mitigate the
effect of low rates. Additionally, key risks to the U.S.
economic outlook include the effect of increases in interest
rates on economic growth; weakness in energy and
commodity prices; and slowing growth in several advanced
and emerging market economies. The FDIC continues to
evaluate ongoing risks to affected institutions in light of
existing economic and financial conditions, and the extent
to which such risks may put stress on the resources of the
insurance fund.
LITIGATION LOSSES
The DIF records an estimated loss for unresolved legal
cases to the extent that those losses are considered
probable and reasonably estimable. The FDIC recorded
probable litigation losses of $200 thousand and $386

FINANCIAL SECTION

2016
NOTES TO THE FINANCIAL STATEMENTS
thousand for the DIF as of December 31, 2016 and 2015,
respectively. In addition, the FDIC has determined that
there are $1 million of reasonably possible losses from
unresolved cases as of year-end 2016, compared to $555
thousand at year-end 2015.

8. Other Contingencies
INDYMAC FEDERAL BANK REPRESENTATION AND
INDEMNIFICATION CONTINGENT LIABILITY
On March 19, 2009, the FDIC as receiver for IndyMac
Federal Bank (IMFB) and certain subsidiaries (collectively,
Sellers) sold substantially all of the assets, which included
mortgage loans and servicing rights, to OneWest Bank
(following a merger is now known as CIT Bank) and its
affiliates (collectively, Acquirers). The Sellers made certain
representations customarily made by commercial parties in
similar transactions.
Under the sale agreements, the
Acquirers have rights to assert claims to recover losses
incurred as a result of third-party claims and breaches of
representations.
The FDIC, in its corporate capacity,
guaranteed the Sellers’ indemnification obligations under
the sale agreements. Until all indemnification claims are
asserted, quantified and paid, losses could continue to be
incurred by the receivership and in turn, the DIF.
The unpaid principal balances of loans in the servicing
portfolios sold subject to representation and warranty
indemnification totaled $171.6 billion at the time of sale.
The IndyMac receivership has paid cumulative claims
totaling $30 million and $21 million through December 31,
2016 and 2015, respectively. Quantified claims asserted
and under review have been accrued in the amount of $18
million and $1 million as of December 31, 2016 and 2015,
respectively.
The Sellers and Acquirers have been conducting
negotiations with Fannie Mae regarding the terms of a
financial settlement to address indemnification obligations
for conventional and reverse mortgage loan portfolios. The
settlement for the conventional mortgage loans in the
Fannie Mae portfolio has been concluded, but negotiations
for the reverse mortgage portfolio continue. The
receivership’s payment for settlement of the conventional
loans and the estimated loss for the reverse mortgage
loans are reflected in the “Receivables from resolutions,
net” line item on the Balance Sheet.
The FDIC is evaluating the likelihood of additional losses
that may arise as a result of indemnification claims based
upon breaches or third party claims. As the Acquirers or
Government Sponsored Entities (GSEs) – Fannie Mae,
Freddie Mac and Ginnie Mae incur or expect to incur losses,
they will assert claims. These claims will be reviewed to
determine whether there is a basis for indemnification or

reimbursement and, if so, whether any Acquirer may have
liability for any portion of the claimed loss as a result of its
acts or omissions. While many loans are subject to notices
of alleged breaches and a number of third party claims
have been asserted, not all breach allegations or third party
claims will result in a loss and certain losses may be
allocable to the Acquirers. As a result, potential losses, and
the Sellers’ share of such losses, cannot be estimated.
However, it is probable that future losses will be incurred
given the following:


The Acquirers’ ability to submit breach notices was
subject to contractual bar dates that have passed.
In addition, their entitlement to reimbursement for
certain third party claims is dependent upon those
claims having been submitted prior to other
contractual dates, some of which have also
passed. However, the Acquirers retain the right to
assert indemnification claims for losses over the
life of those loans for which breach notices were
timely submitted.



The Acquirers retain the right to seek
reimbursement for losses incurred as a result of
claims alleging breaches of loan seller
representations asserted by Fannie Mae or Ginnie
Mae on or prior to March 19, 2019, for their
reverse mortgage servicing portfolios (unpaid
principal balance of $11.7 billion at December 31,
2016, compared to $12.9 billion at December 31,
2015).



The GSEs have the right to assert certain claims
directly against the Sellers for the mortgage
servicing portfolios without regard to any
contractual claims bar date.



Potential losses could be incurred for failures by
the Sellers to initiate and pursue foreclosure within
prescribed timeframes for certain government
guaranteed loans, resulting in the refusal of the
guarantor to pay interest owed to the investors.
Fannie Mae has asserted a claim for $64 million of
interest curtailments with respect to reverse loans.
Any amounts paid to Fannie Mae will be allocated
between the Sellers and the Acquirers. A review of
the causes of this claimed loss as well as an
allocation of this loss between the Sellers and the
Acquirers is in the initial stages.

For all these reasons, the FDIC believes it is likely that
additional losses will be incurred. However, quantifying the
contingent liability associated with the liabilities to
investors and the Acquirers is subject to a number of
uncertainties, including market conditions, the occurrence
of borrower defaults and resulting foreclosures and losses,

FINANCIAL SECTION

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ANNUAL REPORT
DEPOSIT INSURANCE FUND

and the allocation of liability between the Sellers and the
Acquirers. Because of the uncertainties the FDIC has
determined that, while additional losses are probable, the
amount is not currently estimable.
PURCHASE AND ASSUMPTION INDEMNIFICATION
In connection with purchase and assumption agreements
for resolutions, the FDIC, in its receivership capacity,
generally indemnifies the purchaser of a failed institution’s
assets and liabilities in the event a third party asserts a
claim against the purchaser unrelated to the explicit assets
purchased or liabilities assumed at the time of failure. The
FDIC, in its corporate capacity, is a secondary guarantor if a
receivership is unable to pay. These indemnifications
generally extend for a term of six years after the date of
institution failure. The FDIC is unable to estimate the
maximum potential liability for these types of guarantees as
the agreements do not specify a maximum amount and any
payments are dependent upon the outcome of future
contingent events, the nature and likelihood of which
cannot be determined at this time. During 2016 and 2015,
the FDIC, in its corporate capacity, made no indemnification
payments under such agreements, and no amount has
been accrued in the accompanying financial statements
with respect to these indemnification guarantees.
FDIC
GUARANTEED
DEBT
OF
STRUCTURED
TRANSACTIONS
The FDIC, as receiver, uses three types of structured
transactions to dispose of certain performing and nonperforming residential mortgage loans, commercial loans,
construction loans, and mortgage-backed securities held by
the receiverships.
The three types of structured
transactions are limited liability companies (LLCs),
securitizations, and structured sale of guaranteed notes
(SSGNs).
Under the LLC structure, the FDIC, in its receivership
capacity, contributed a pool of assets to a newly formed
LLC and offered for sale, through a competitive bid process,
some of the equity in the LLC. Since 2009, private investors
purchased a 40- to 50-percent ownership interest in the
LLC structures for $1.6 billion in cash. The LLCs issued
notes of $4.4 billion to the receiverships to partially fund
the purchase of the assets; these notes were guaranteed by
the FDIC, in its corporate capacity. As of December 31,
2016 and 2015, no guaranteed LLC notes remain.
Securitizations and SSGNs (collectively, trusts) are
transactions in which certain assets or securities from failed
institutions are pooled and transferred into a trust
structure. The trusts issue senior and/or subordinated debt
instruments and owner trust or residual certificates
collateralized by the underlying mortgage-backed securities
or loans.

104

Since 2010, private investors purchased the senior notes
issued by the trusts for $6.2 billion in cash and the
receiverships hold the subordinated debt instruments and
owner trust or residual certificates. In exchange for a fee,
the FDIC, in its corporate capacity, guarantees the timely
payment of principal and interest due on the senior notes,
the latest maturity of which is 2050. If the FDIC is required
to perform under its guarantees, it acquires an interest in
the cash flows of the trust equal to the amount of
guarantee payments made plus accrued interest. The
subordinated note holders and owner trust or residual
certificate holders receive cash flows from the entity only
after all expenses have been paid, the guaranteed notes
have been satisfied, and the FDIC has been reimbursed for
any guarantee payments.
All Structured Transactions with FDIC Guaranteed Debt
Through December 31, 2016, the receiverships have
transferred a portfolio of loans with an unpaid principal
balance of $16.4 billion and mortgage-backed securities
with a book value of $8.8 billion to 14 LLCs and 11 trusts.
The LLCs and trusts subsequently issued notes guaranteed
by the FDIC in an original principal amount of $10.6 billion.
Since March 2013, there have been no new guarantee
transactions. As of December 31, 2016 and 2015, the DIF
collected guarantee fees totaling $275 million and $265
million, respectively, and recorded a receivable for
additional guarantee fees of $14 million and $26 million,
respectively, included in the “Interest receivable on
investments and other assets, net” line item on the Balance
Sheet. All guarantee fees are recorded as deferred revenue,
included in the “Accounts payable and other liabilities” line
item on the Balance Sheet, and recognized as revenue
primarily on a straight-line basis over the term of the notes.
As of December 31, 2016 and 2015, the amount of deferred
revenue recorded was $14 million and $26 million,
respectively. Except as discussed below, the DIF records no
other structured transaction-related assets or liabilities on
its balance sheet.
Any estimated loss to the DIF from the guarantees is based
on an analysis of the expected guarantee payments by the
FDIC, reimbursements to the FDIC for guarantee payments,
and guarantee fee collections. As of December 31, 2016,
the FDIC recorded a contingent liability for guarantee
payments totaling $2 million for an SSGN transaction
beginning in November 2019 up to note maturity in
December 2020, and an offsetting receivable due to
expected reimbursements. The contingent liability and
related receivable are included in the “Contingent liabilities:
Litigation losses and other” and “Interest receivable on
investments and other assets, net” line items, respectively,
on the Balance Sheet. For the same SSGN transaction, as of
December 31, 2016, it is reasonably possible that the DIF
would be required to make a final guarantee payment of
$28 million at note maturity, as compared to payments of

FINANCIAL SECTION

8

2016
NOTES TO THE FINANCIAL STATEMENTS
Act. Accordingly, in September 2016, the FDIC
adopted a final rule maintaining the DRR at 2
percent for 2017. The DRR is an integral part of
the
FDIC’s
comprehensive,
long-term
management plan for the DIF and is viewed as a
long-range, minimum target for the reserve ratio.

$25 million through note maturity as of December 31, 2015.
The FDIC expects that all guarantee payments made would
be fully reimbursed from the proceeds of the liquidation of
the SSGN’s underlying collateral.
For all of the remaining transactions, the estimated cash
flows from the trust assets provide sufficient coverage to
fully pay the debts. To date, the FDIC, in its corporate
capacity, has not provided, and does not intend to provide,
any form of financial or other type of support for structured
transactions that it was not previously contractually
required to provide.
As of December 31, 2016 and 2015, the maximum loss
exposure was zero for LLCs and $1.1 billion and $1.6 billion
for trusts, respectively, representing the sum of all
outstanding debt guaranteed by the FDIC.



The FDIC adopted a final rule that suspends
dividends indefinitely, and, in lieu of dividends,
adopts lower assessment rate schedules when the
reserve ratio reaches 1.15 percent, 2 percent, and
2.5 percent.

As of June 30, 2016, the reserve ratio of the DIF reached
1.17 percent. As a result of the ratio exceeding 1.15
percent, assessment rates were modified as follows,
beginning with the quarter ending September 30, 2016.


Lower regular assessment rates became effective
for all IDIs pursuant to final rules published in
February 2011 and May 2016.



A new risk-based method for calculating
assessment rates became effective for institutions
with less than $10 billion in total assets (small
banks) pursuant to the final rule published in May
2016. The revised method is designed to be
revenue-neutral, but helps ensure that banks that
take on greater risks pay more for deposit
insurance.

9. Assessments
The FDIC deposit insurance assessment system is mandated
by section 7 of the FDI Act and governed by part 327 of
title 12 of the Code of Federal Regulations (12 CFR Part
327). The risk-based system requires the payment of
quarterly assessments by all IDIs.
In response to the Dodd-Frank Act, the FDIC implemented
several changes to the assessment system, amended its
Restoration Plan (which is required when the ratio of the
DIF balance to estimated insured deposits (reserve ratio) is
below the statutorily mandated minimum), and developed
a comprehensive, long-term fund management plan. The
plan is designed to restore and maintain a positive fund
balance for the DIF even during a banking crisis and
achieve moderate, steady assessment rates throughout any
economic cycle. Summarized below are actions taken to
implement requirements of the Dodd-Frank Act and
provisions of the comprehensive, long-term fund
management plan.

Additionally, the Dodd-Frank Act requires that the FDIC
offset the effect of increasing the minimum reserve ratio
from 1.15 percent to 1.35 percent on small banks. To
implement this requirement, the FDIC imposed a surcharge
to the regular quarterly assessments of IDIs with $10 billion
or more in assets (larger institutions), beginning with the
quarter ending September 30, 2016. Pursuant to a final rule
published in March 2016:






The FDIC amended the Restoration Plan, which is
intended to ensure that the reserve ratio reaches
1.35 percent by September 30, 2020, as required
by the Dodd-Frank Act, in lieu of the previous
statutory minimum of 1.15 percent by the end of
2016. The FDIC updates, at least semiannually, its
loss and income projections for the fund and, if
needed, increases or decreases assessment rates,
following notice-and-comment rulemaking, if
required.
The FDIC Board of Directors designates a reserve
ratio for the DIF and publishes the designated
reserve ratio (DRR) before the beginning of each
calendar year, as required by the FDI

The surcharge generally equals an annual rate of
4.5 basis points applied to a larger institution’s
regular quarterly assessment base (with certain
adjustments). The FDIC projects that surcharges
will last eight quarters.



The FDIC will impose a shortfall assessment on
larger institutions to achieve the minimum reserve
ratio of 1.35 percent by the September 30, 2020
statutory deadline, if the reserve ratio has not
reached 1.35 percent by the end of 2018.



The FDIC will provide assessment credits to small
banks for the portion of their assessments that
contribute to the growth in the reserve ratio
between 1.15 percent and 1.35 percent to ensure

FINANCIAL SECTION

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ANNUAL REPORT
DEPOSIT INSURANCE FUND

that the effect of reaching 1.35 percent is fully
borne by the larger institutions. The assessment
credits will be determined and allocated as soon
as practicable after the reserve ratio reaches 1.35
percent. In each quarter that the reserve ratio is at
least 1.38 percent, the credits will be used to fully
offset a small institution’s quarterly insurance
assessment, until credits are exhausted.
ASSESSMENT REVENUE
Annual assessment rates averaged approximately 6.6 cents
per $100 of the assessment base through June 30, 2016.
Annual assessment rates averaged approximately 7.4 cents
per $100 for the second half of 2016, reflecting both lower
regular assessment rates for all IDIs and assessment
surcharges on larger institutions. While the assessment
rate schedule applicable to all IDIs decreased, some IDIs’
rates increased because of the small bank pricing method
change and/or the deterioration of their financial condition.
Annual assessment rates averaged approximately 6.5 cents
per $100 of the assessment base during 2015. The
assessment base is generally defined as average
consolidated total assets minus average tangible equity
(measured as Tier 1 capital) of an IDI during the assessment
period.
The “Assessments receivable, net” line item on the Balance
Sheet of $2.7 billion and $2.2 billion represents the
estimated premiums due from IDIs for the fourth quarter of
2016 and 2015, respectively. The actual deposit insurance
assessments for the fourth quarter of 2016 will be billed
and collected at the end of the first quarter of 2017. During
2016 and 2015, $10.0 billion and $8.8 billion, respectively,
were recognized as assessment revenue from institutions,
including $2.4 billion in surcharges from large IDIs in 2016.
RESERVE RATIO
As of September 30, 2016 and December 31, 2015, the DIF
reserve ratio was 1.18 percent and 1.11 percent,
respectively.
ASSESSMENTS RELATED TO FICO
Assessments continue to be levied on institutions for
payments of the interest on obligations issued by the
Financing Corporation (FICO). The FICO was established as
a mixed-ownership government corporation to function
solely as a financing vehicle for the former FSLIC. The
annual FICO interest obligation of approximately $790
million is paid on a pro rata basis using the same rate for
banks and thrifts. The FICO assessment has no financial
impact on the DIF and is separate from deposit insurance
assessments. The FDIC, as administrator of the DIF, acts
solely as a collection agent for the FICO. As of December
31, 2016 and 2015, approximately $794 million and $798
million, respectively, was collected and remitted to the
FICO.

106

10. Operating Expenses
The “Operating expenses” line item on the Statement of
Income and Fund Balance consisted of the following
components (in thousands).

December 31
2016
Salaries and benefits

$

Outside services

1,235,244 $

December 31
2015
1,248,146

265,492

280,050

Travel

92,126

97,819

Buildings and leased space

93,518

90,945

Software/Hardware maintenance

64,757

62,604

Depreciation of property and equipment

50,403

52,233

Other

26,191

28,314

1,827,731

1,860,111

(112,720)

(172,877)

Subtotal
Less: Expenses billed to resolution
entities and others
Total

$

1,715,011 $

1,687,234

11. Provision for Insurance Losses
The provision for insurance losses was a negative $1.6
billion for 2016, compared to negative $2.3 billion for 2015.
The negative provision for 2016 primarily resulted from a
decrease of $1.7 billion in the estimated losses for
institutions that failed in current and prior years, partially
offset by an increase of $97 million in the contingent
liability for anticipated failures.
As described in Note 4, the estimated recoveries from
assets held by receiverships and estimated payments
related to assets sold by receiverships to acquiring
institutions under shared-loss agreements (SLAs) are used
to derive the loss allowance on the receivables from
resolutions. The $1.7 billion decrease in the estimated
losses from failures was primarily attributable to four
components.
The first component was unanticipated
recoveries of $545 million in litigation settlements,
professional liability claims, and tax refunds by the
receiverships. These are typically not recognized until the
cash is received since significant uncertainties surround
their recovery.
The second component was a decrease of $584 million in
the receiverships’ shared-loss liability primarily due to both
the early termination of numerous SLAs during the period,
which resulted in lower-than-anticipated losses on covered
assets, and the unanticipated recoveries from SLAs where
the commercial loss coverage has expired but the recovery
period remains active. The third component was a $406

FINANCIAL SECTION

10

2016
NOTES TO THE FINANCIAL STATEMENTS
million decrease in the estimated losses from failures that
resulted from a reduction in projected future receivership
expenses and legal and representation and warranty
liabilities. The final component was a $231 million decrease
resulting from greater-than-anticipated collections from
receiverships’ asset sales and updated estimated recovery
rates applied to the remaining assets in liquidation.

dental insurance coverage are those who have qualified
due to (1) immediate enrollment upon appointment or five
years of participation in the plan and (2) eligibility for an
immediate annuity. The life insurance program provides
basic coverage at no cost to retirees and allows converting
optional coverage to direct-pay plans. For the dental
coverage, retirees are responsible for a portion of the
premium.

12. Employee Benefits

The FDIC has elected not to fund the postretirement life
and dental benefit liabilities. As a result, the DIF recognized
the underfunded status (the difference between the
accumulated postretirement benefit obligation and the plan
assets at fair value) as a liability. Since there are no plan
assets, the plan’s benefit liability is equal to the
accumulated postretirement benefit obligation.

PENSION BENEFITS AND SAVINGS PLANS
Eligible FDIC employees (permanent and term employees
with appointments exceeding one year) are covered by the
federal government retirement plans, either the Civil
Service Retirement System (CSRS) or the Federal Employees
Retirement System (FERS). Although the DIF contributes a
portion of pension benefits for eligible employees, it does
not account for the assets of either retirement system. The
DIF also does not have actuarial data for accumulated plan
benefits or the unfunded liability relative to eligible
employees. These amounts are reported on and accounted
for by the U.S. Office of Personnel Management (OPM).
Under the Federal Thrift Savings Plan (TSP), the FDIC
provides FERS employees with an automatic contribution of
1 percent of pay and an additional matching contribution
up to 4 percent of pay.
CSRS employees also can
contribute to the TSP, but they do not receive agency
matching contributions. Eligible FDIC employees may also
participate in an FDIC-sponsored tax-deferred 401(k)
savings plan with matching contributions up to 5 percent.
The expenses for these plans are presented in the table
below (in thousands).

Postretirement benefit obligation, gain and loss, and
expense information included in the Balance Sheet and
Statement of Income and Fund Balance are summarized as
follows (in thousands).

December 31

2016
Civil Service Retirement System

$

Federal Employees Retirement System (Basic Benefit)

December 31
2015

3,230 $

3,949

111,368

108,056

Federal Thrift Savings Plan

34,966

35,140

FDIC Savings Plan

37,499

39,767

Total

$

187,063 $

186,912

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The DIF has no postretirement health insurance liability
since all eligible retirees are covered by the Federal
Employees Health Benefits (FEHB) program. The FEHB is
administered and accounted for by the OPM. In addition,
OPM pays the employer share of the retiree’s health
insurance premiums.

2015

$

232,201 $

233,000

$

(24,212) $

(31,938)

(1,535)

(2,110)

Accumulated postretirement benefit
obligation recognized in Postretirement
benefit liability
Amounts recognized in accumulated other
comprehensive income: Unrealized
postretirement benefit loss
Cumulative net actuarial loss

December 31

December 31

2016

Prior service cost
Total

$

(25,747) $

(34,048)

$

7,726 $

23,193

Amounts recognized in other comprehensive
income: Unrealized postretirement benefit
gain
Actuarial gain
Prior service credit
Total

575

510

$

8,301 $

23,703

$

1,567 $

3,842

Net amortization out of other comprehensive
income included in net periodic benefit cost

The FDIC provides certain life and dental insurance
coverage for its eligible retirees, the retirees’ beneficiaries,
and covered dependents. Retirees eligible for life and

FINANCIAL SECTION

11

107

ANNUAL REPORT
DEPOSIT INSURANCE FUND

Expected
amortization
of
accumulated
other
comprehensive income into net periodic benefit cost is
summarized as follows (in thousands).

adjustments, usually on an annual basis. Future minimum
lease commitments are as follows (in thousands).

2017

December 31, 2017
Prior service costs

$

575

Net actuarial loss
Total

$

79
654

The annual postretirement contributions and benefits paid
are included in the table below (in thousands).

December 31
2016
Employer contributions
Plan participants' contributions
Benefits paid

$
$
$

December 31
2015

6,388 $
739 $
(7,126) $

6,064
728
(6,792)

The expected contributions for the period ending
December 31, 2017, are $7.5 million. Expected future
benefit payments for each of the next 10 years are
presented in the following table (in thousands).

2017

2018

2019

2020

2021

2022-2026

$6,720

$7,195

$7,686

$8,226

$8,780

$53,075

Assumptions used to determine the amount of the
accumulated postretirement benefit obligation and the net
periodic benefit costs are summarized as follows (in
thousands).

2018

2019

2020

2021 2022/Thereafter

$43,715 $34,262 $30,681 $16,283 $11,632

$28,337

OFF-BALANCE-SHEET EXPOSURE:
Deposit Insurance
Estimates of insured deposits are derived primarily from
quarterly financial data submitted by IDIs to the FDIC and
represent the accounting loss that would be realized if all
IDIs were to fail and the acquired assets provided no
recoveries. As of September 30, 2016 and December 31,
2015, estimated insured deposits for the DIF were $6.8
trillion and $6.5 trillion, respectively.

14. Disclosures about the Fair Value of Financial
Instruments
Financial assets recognized and measured at fair value on a
recurring basis at each reporting date include cash
equivalents (see Note 2) and the investment in U.S.
Treasury securities (see Note 3). The DIF’s financial assets
measured at fair value consisted of the following
components (in millions).

December 31, 2016
Quoted Prices
in Active
Markets for
Identical Assets

Significant
Unobservable
Inputs

(Level 1)

December 31 December 31

Significant
Other
Observable
Inputs
(Level 2)

(Level 3)

2016

2015

Discount rate for future benefits (benefit obligation)

4.67%

4.29%

Assets

Rate of compensation increase

3.90%

3.70%

Discount rate (benefit cost)

4.29%

4.00%

Cash equivalents1
$
Available-for-Sale Debt Securities
Investment in U.S. Treasury

Total
Assets at
Fair Value

2

1,326

$

1,326

Assumed for next year

4.50%

4.70%

securities
Total Assets

Ultimate

4.50%

4.50%

(1) Cash equivalents are Special U.S. Treasury Certificates with overnight maturities
valued at prevailing interest rates established by the Bureau of the Fiscal Service.

Year rate will reach ultimate

2017

2017

Dental health care cost-trend rate

$

73,512
74,838 $

0$

73,512
0 $ 74,838

(2) The investment in U.S. Treasury securities is measured based on prevailing market
yields for federal government entities.

13. Commitments and Off-Balance-Sheet Exposure
COMMITMENTS:
Leased Space
The DIF leased space expense totaled $48 million and $47
million for 2016 and 2015, respectively. The FDIC’s lease
commitments total $165 million for future years. The lease
agreements contain escalation clauses resulting in

108

FINANCIAL SECTION

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2016
NOTES TO THE FINANCIAL STATEMENTS
15. Information Relating to the Statement of Cash
Flows

December 31, 2015
Quoted Prices
in Active
Markets for
Identical

Significant
Other
Observable
Inputs

Significant
Unobservable
Inputs

(Level 1)

(Level 2)

(Level 3)

Total
Assets at
Fair Value

Assets
1

Cash equivalents
$
Available-for-Sale Debt Securities
Investment in U.S. Treasury
2

securities
Total Assets

$

862

62,497
63,359 $

$

0$

0 $

862

62,497
63,359

(1) Cash equivalents are Special U.S. Treasury Certificates with overnight maturities
valued at prevailing interest rates established by the Bureau of the Fiscal Service.
(2) The investment in U.S. Treasury securities is measured based on prevailing market
yields for federal government entities.

Some of the DIF’s financial assets and liabilities are not
recognized at fair value but are recorded at amounts that
approximate fair value due to their short maturities and/or
comparability with current interest rates. Such items
include assessments receivable, interest receivable on
investments, other short-term receivables, and accounts
payable and other liabilities.
The net receivables from resolutions primarily include the
DIF’s subrogated claim arising from obligations to insured
depositors. The resolution entity assets that will ultimately
be used to pay the corporate subrogated claim are valued
using discount rates that include consideration of market
risk. These discounts ultimately affect the DIF’s allowance
for loss against the receivables from resolutions. Therefore,
the corporate subrogated claim indirectly includes the
effect of discounting and should not be viewed as being
stated in terms of nominal cash flows.
Although the value of the corporate subrogated claim is
influenced by the valuation of resolution entity assets (see
Note 4), such valuation is not equivalent to the valuation of
the corporate claim. Since the corporate claim is unique,
not intended for sale to the private sector, and has no
established market, it is not practicable to estimate a fair
value.
The FDIC believes that a sale to the private sector of the
corporate claim would require indeterminate, but
substantial, discounts for an interested party to profit from
these assets because of credit and other risks. In addition,
the timing of resolution entity payments to the DIF on the
subrogated claim does not necessarily correspond with the
timing of collections on resolution entity assets. Therefore,
the effect of discounting used by resolution entities should
not necessarily be viewed as producing an estimate of fair
value for the net receivables from resolutions.

The following table presents a reconciliation of net income
to net cash from operating activities (in thousands).

December 31
2016
Operating Activities
Net Income:

Increase in contingent liabilities - litigation losses and other
(Decrease) in liabilities due to resolutions

977,245
(5,578)

1,411,376
12,465
52,233
2,415
(2,251,320)
23,703

(169,048)
242,128
7,425,888
(18,435)
(10,419)

2,389

Change in Assets and Liabilities:
(Increase) in assessments receivable
(Increase) Decrease in interest receivable and other assets
Decrease in receivables from resolutions
(Decrease) in accounts payable and other liabilities
(Decrease) in postretirement benefit liability

9,856,688

(493,795)
(107,749)
5,437,632
(34,249)
(799)

Depreciation on property and equipment
Loss on retirement of property and equipment
Provision for insurance losses
Unrealized gain on postretirement benefits

10,523,517 $

50,403
1,607
(1,567,950)
8,301

$

Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of U.S. Treasury securities
Treasury Inflation-Protected Securities inflation adjustment

Net Cash Provided by Operating Activities

December 31
2015

0

(2,345,820)
$

(3,380,084)

12,445,154 $

13,197,590

16. Subsequent Events
Subsequent events have been evaluated through February
8, 2017, the date the financial statements are available to
be issued.
FDIC v. BANK OF AMERICA, N.A.
On January 9, 2017, the FDIC filed suit in the United States
District Court for the District of Columbia alleging that Bank
of America, N.A. (BoA) underpaid its insurance assessment
from the second quarter of 2013 through the fourth quarter
of 2014 by approximately $542 million, inclusive of interest.
During this period, the FDIC alleges that BoA understated
its counterparty exposure which resulted in the significant
underpayment of insurance assessments.
The FDIC
reserved its right to amend the complaint to include
additional monies believed to be owed for periods prior to
this time frame. As of December 31, 2016 and 2015, the
impacts of this pending litigation are not reflected in the
financial statements of the DIF.

FINANCIAL SECTION

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109

ANNUAL REPORT
DEPOSIT INSURANCE FUND

2017 FAILURES THROUGH FEBRUARY 8, 2017
Through February 8, 2017, two insured institutions failed in
2017 with total losses to the DIF estimated to be $80
million.

110

FINANCIAL SECTION

14

2016
FSLIC RESOLUTION FUND (FRF)
Federal Deposit Insurance Corporation

FSLIC Resolution Fund Balance Sheet

As of December 31
2016

(Dollars in Thousands)

2015

ASSETS
Cash and cash equivalents

$

Other assets, net

874,174 $
4,391

Total Assets

871,037
760

$

878,565 $

871,797

$

26 $

624

26

624

Contributed capital

125,489,317

125,489,317

Accumulated deficit

(124,610,778)

(124,618,144)

LIABILITIES
Accounts payable and other liabilities
Total Liabilities
RESOLUTION EQUITY (NOTE 5)

Total Resolution Equity

878,539

Total Liabilities and Resolution Equity

$

871,173

878,565 $

871,797

The accompanying notes are an integral part of these financial statements.

FINANCIAL SECTION

111

ANNUAL REPORT
FSLIC RESOLUTION FUND (FRF)
Federal Deposit Insurance Corporation

FSLIC Resolution Fund Statement of Income and Accumulated Deficit

For the Years Ended December 31
2016

(Dollars in Thousands)

2015

REVENUE
Interest on U.S. Treasury securities

$

Other revenue

2,070 $

298

3,278
5,348

2,607

2,725

3,064

0

Total Revenue

2,309

157,161

EXPENSES AND LOSSES
Operating expenses
Goodwill litigation expenses (Note 3)
Losses related to thrift resolutions (Note 6)

(993)

(153)

Recovery of tax benefits

(3,750)

0

Total Expenses and Losses

(2,018)

160,072

7,366

(157,465)

Net Income (Loss)
Accumulated Deficit - Beginning

(124,618,144)

Accumulated Deficit - Ending
The accompanying notes are an integral part of these financial statements.

112

(124,460,679)

$ (124,610,778) $ (124,618,144)

FINANCIAL SECTION

2016
FSLIC RESOLUTION FUND (FRF)
Federal Deposit Insurance Corporation

FSLIC Resolution Fund Statement of Cash Flows

For the Years Ended December 31
2016

(Dollars in Thousands)

2015

OPERATING ACTIVITIES
Provided by:
Interest on U.S. Treasury securities

$

2,070 $

298

Recoveries from thrift resolutions

2,270

Department of Justice's return of unused goodwill legal expense funds (Note 3)

2,162

0

0

24

Miscellaneous receipts

2,555

Used by:
Operating expenses

(3,363)

Payments for goodwill litigation (Note 3)

0

Miscellaneous disbursements

(2)

Net Cash Provided (Used) by Operating Activities

(2,783)
(513,616)
0

3,137

(513,522)

0

513,616

Net Cash Provided by Financing Activities

0

513,616

Net Increase in Cash and Cash Equivalents

3,137

94

871,037

870,943

874,174 $

871,037

FINANCING ACTIVITIES
Provided by:
U.S. Treasury payments for goodwill litigation (Note 3)

Cash and Cash Equivalents - Beginning
Cash and Cash Equivalents - Ending

$

The accompanying notes are an integral part of these financial statements.

FINANCIAL SECTION

113

ANNUAL REPORT
FSLIC RESOLUTION FUND

NOTES TO THE FINANCIAL STATEMENTS
December 31, 2016 and 2015

1.

Operations/Dissolution of the FSLIC Resolution Fund

OVERVIEW
The Federal Deposit Insurance Corporation (FDIC) is the
independent deposit insurance agency created by Congress
in 1933 to maintain stability and public confidence in the
nation’s banking system. Provisions that govern the FDIC’s
operations are generally found in the Federal Deposit
Insurance (FDI) Act, as amended (12 U.S.C. 1811, et seq). In
accordance with the FDI Act, the FDIC, as administrator of
the Deposit Insurance Fund (DIF), insures the deposits of
banks and savings associations (insured depository
institutions). In cooperation with other federal and state
agencies, the FDIC promotes the safety and soundness of
insured depository institutions (IDIs) by identifying,
monitoring, and addressing risks to the DIF.
In addition to being the administrator of the DIF, the FDIC is
the administrator of the FSLIC Resolution Fund (FRF). As
such, the FDIC is responsible for the sale of remaining assets
and satisfaction of liabilities associated with the former
Federal Savings and Loan Insurance Corporation (FSLIC) and
the former Resolution Trust Corporation (RTC). The FDIC
maintains the DIF and the FRF separately to support their
respective functions.
The FSLIC was created through the enactment of the
National Housing Act of 1934. The Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (FIRREA)
abolished the insolvent FSLIC and created the FRF. At that
time, the assets and liabilities of the FSLIC were transferred
to the FRF – except those assets and liabilities transferred to
the newly created RTC – effective on August 9, 1989.
Further, the FIRREA established the Resolution Funding
Corporation (REFCORP) to provide part of the initial funds
used by the RTC for thrift resolutions.
The RTC Completion Act of 1993 terminated the RTC as of
December 31, 1995. All remaining assets and liabilities of
the RTC were transferred to the FRF on January 1, 1996.
Today, the FRF consists of two distinct pools of assets and
liabilities: one composed of the assets and liabilities of the
FSLIC transferred to the FRF upon the dissolution of the
FSLIC (FRF-FSLIC), and the other composed of the RTC assets
and liabilities (FRF-RTC). The assets of one pool are not
available to satisfy obligations of the other.

OPERATIONS/DISSOLUTION OF THE FRF
The FRF will continue operations until all of its assets are
sold or otherwise liquidated and all of its liabilities are
satisfied. Any funds remaining in the FRF-FSLIC will be paid
to the U.S. Treasury. Any remaining funds of the FRF-RTC
will be distributed to the REFCORP to pay the interest on the
REFCORP bonds. In addition, the FRF-FSLIC has available
until expended $602 million in appropriations to facilitate, if
required, efforts to wind up the resolution activity of the
FRF-FSLIC.
The FDIC has extensively reviewed and cataloged the FRF's
remaining assets and liabilities. Some of the unresolved
issues are:


criminal restitution orders (generally have from 1 to
21 years remaining to enforce);



collections of judgments obtained against officers
and directors and other professionals responsible
for causing or contributing to thrift losses
(generally have up to 10 years remaining to
enforce, unless the judgments are renewed or are
covered by the Federal Debt Collections Procedures
Act, which will result in significantly longer periods
for collection of some judgments);



liquidation/disposition of residual assets purchased
by the FRF from terminated receiverships;



two remaining issues related to assistance
agreements entered into by the former FSLIC (FRF
could continue to receive or refund overpayments
of tax benefits sharing in future years);



goodwill litigation (reimbursement of a potential
tax liability; see Note 3); and



Affordable
Housing
Disposition
Program
monitoring (the last agreement expires no later
than 2045; see Note 4).

The FRF could realize recoveries from tax benefits sharing,
criminal restitution orders, and professional liability claims.
However, any potential recoveries are not reflected in the
FRF’s financial statements, given the significant uncertainties
surrounding the ultimate outcome.

1

114

FINANCIAL SECTION

2016
FSLIC RESOLUTION FUND

On April 1, 2014, the FDIC concluded its role as receiver of
FRF receiverships when the last active receivership was
terminated. In total, 850 receiverships were liquidated by
the FRF and the RTC. To facilitate receivership terminations,
the FRF, in its corporate capacity, acquired the remaining
receivership assets. These assets are included in the “Other
assets, net” line item on the Balance Sheet.
During the years of receivership activity, the assets held by
receivership entities, and the claims against them, were
accounted for separately from the FRF’s assets and liabilities
to ensure that receivership proceeds were distributed in
accordance with applicable laws and regulations. Also, the
income and expenses attributable to receiverships were
accounted for as transactions of those receiverships. The
FDIC billed receiverships for services provided on their
behalf.

2.

Summary of Significant Accounting Policies

GENERAL
The financial statements include the financial position,
results of operations, and cash flows of the FRF and are
presented in accordance with U.S. generally accepted
accounting principles (GAAP).
During the years of
receivership activity, these statements did not include
reporting for assets and liabilities of receivership entities
because these entities were legally separate and distinct, and
the FRF did not have any ownership or beneficial interest in
them.

CASH EQUIVALENTS
Cash equivalents are short-term, highly liquid investments
consisting primarily of U.S. Treasury Overnight Certificates.
RELATED PARTIES
The nature of related parties and a description of related
party transactions are discussed in Note 1 and disclosed
throughout the financial statements and footnotes.
DISCLOSURE ABOUT RECENT RELEVANT ACCOUNTING
PRONOUNCEMENTS
In June 2016, the Financial Accounting Standards Board
issued Accounting Standards Update (ASU) 2016-13,
Financial Instruments – Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments. The
ASU will replace the incurred loss impairment model with a
new expected credit loss model for financial assets measured
at amortized cost and for off-balance-sheet credit exposures.
The ASU is effective for the FRF on January 1, 2021. The
FDIC is assessing the effect the ASU will have on the FRF’s
financial position and results of operations.
Other recent accounting pronouncements have been
deemed not applicable or material to the financial
statements as presented.
RECLASSIFICATION
Reclassifications have been made in 2015 financial
statements to conform to the presentation used in 2016.

3. Goodwill Litigation
The FRF is a limited-life entity, however, it does not meet the
requirements for presenting financial statements using the
liquidation basis of accounting. According to Accounting
Standards Codification Topic 205, Presentation of Financial
Statements, a limited-life entity should apply the liquidation
basis of accounting only if a change in the entity’s governing
plan has occurred since its inception. By statute, the FRF is a
limited-life entity whose dissolution will occur upon the
satisfaction of all liabilities and the disposition of all
assets. No changes to this statutory plan have occurred
since inception of the FRF.
USE OF ESTIMATES
The preparation of the financial statements in conformity
with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, revenue and expenses, and disclosure of
contingent liabilities. Actual results could differ from these
estimates. Where it is reasonably possible that changes in
estimates will cause a material change in the financial
statements in the near term, the nature and extent of such
potential changes in estimates have been disclosed. The
valuation estimate for other assets is considered significant.

In United States v. Winstar Corp., 518 U.S. 839 (1996), the
Supreme Court held that when it became impossible
following the enactment of FIRREA in 1989 for the federal
government to perform certain agreements to count
goodwill toward regulatory capital, the plaintiffs were
entitled to recover damages from the United States. The
contingent liability associated with the nonperformance of
these agreements was transferred to the FRF on August 9,
1989, upon the dissolution of the FSLIC.
The FRF can draw from an appropriation provided by Section
110 of the Department of Justice Appropriations Act, 2000
(Public Law 106-113, Appendix A, Title I, 113 Stat. 1501A-3,
1501A-20), such sums as may be necessary for the payment
of judgments and compromise settlements in the goodwill
litigation. This appropriation is to remain available until
expended. Because an appropriation is available to pay such
judgments and settlements, any estimated liability for
goodwill litigation will have a corresponding receivable from
the U.S. Treasury and therefore have no net impact on the
financial condition of the FRF.

FINANCIAL SECTION

2

115

ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
In 2015, the FRF paid $513.6 million to resolve the remaining
active goodwill case using appropriations from the U.S.
Treasury. For another case fully adjudicated in 2012, an
estimated loss of $8 million for the court-ordered
reimbursement of potential tax liabilities to the plaintiff is
reasonably possible.
The FRF-FSLIC paid goodwill litigation expenses incurred by
the Department of Justice (DOJ), the entity that defended
these lawsuits against the United States, based on a
Memorandum of Understanding (MOU) dated October 2,
1998, between the FDIC and the DOJ. These expenses were
paid in advance by the FRF-FSLIC and any unused funds
were carried over by the DOJ and applied toward the next
fiscal year charges. In September 2016, the DOJ returned $2
million of unused funds to the FRF-FSLIC and retained $250
thousand to cover future administrative expenses. The
returned funds were recognized in the “Other revenue” line
item on the Statement of Income and Accumulated Deficit.

4. Guarantees
TAX LIABILITY INDEMNIFICATION
Similar to the goodwill cases discussed in Note 3, there were
additional cases alleging that the government breached
agreements regarding tax benefits associated with certain
FSLIC-assisted acquisitions. All eight of those cases have
been settled. A case settled in 2006 obligated the FRF-FSLIC
as a guarantor for potential tax liabilities. The Internal
Revenue Service (IRS) audited the relevant tax return and
during the audit did not raise concerns of taxability for the
settlement receipts covered under the indemnification
agreement. The normal audit period for the IRS to propose
adjustments expired in 2016 and the FDIC has no
expectation of any further audit or related exposure
concerning this matter.
FANNIE MAE GUARANTEE
On May 21, 2012, the FDIC, in its capacity as administrator of
the FRF, entered into an agreement with Fannie Mae for the
release of $13 million of credit enhancement reserves to the
FRF in exchange for indemnifying Fannie Mae from all future
losses incurred on 76 multi-family mortgage loans. The
former RTC supplied Fannie Mae with the credit
enhancement reserves in the form of cash collateral to cover
future losses on these mortgage loans through 2020. Based
on the most current data available, as of September 30,
2016, the maximum exposure on this indemnification is the
current unpaid principal balance of the remaining 33 multifamily loans totaling $2 million. Based on a contingent
liability assessment of this portfolio as of September 30,
2016, the majority of the loans are at least 86 percent
amortized, and all are scheduled to mature within one to
four years. Since all of the loans are performing and no
losses have occurred since 2001, future payments on this

indemnification are not expected. No contingent liability for
this indemnification has been recorded as of December 31,
2016 and 2015.
AFFORDABLE HOUSING DISPOSITION PROGRAM
Required by FIRREA under section 501, the Affordable
Housing Disposition Program (AHDP) was established in
1989 to ensure the preservation of affordable housing for
low-income households.
The FDIC, in its capacity as
administrator of the FRF-RTC, assumed responsibility for
monitoring property owner compliance with land use
restriction agreements (LURAs). To enforce the property
owners’ LURA obligation, the RTC, prior to its dissolution,
entered into Memoranda of Understanding with 28
monitoring agencies to oversee these LURAs. The FDIC,
through the FRF, has agreed to indemnify the monitoring
agencies for all losses related to LURA legal enforcement
proceedings.
Since 2006, the FDIC entered into two litigations against
property owners and paid $23 thousand in legal expenses,
which was fully reimbursed due to successful litigation. The
maximum potential exposure to the FRF cannot be
estimated as it is contingent upon future legal proceedings.
However, loss mitigation factors include: (1) the
indemnification may become void if the FDIC is not
immediately informed upon receiving notice of any legal
proceedings and (2) the FDIC is entitled to reimbursement of
any legal expenses incurred for successful litigation against a
property owner. AHDP guarantees will continue until the
termination of the last LURA, or 2045 (whichever occurs first).
As of December 31, 2016 and 2015, no contingent liability
for this indemnification has been recorded.

5. Resolution Equity
As stated in the Overview section of Note 1, the FRF is
composed of two distinct pools: the FRF-FSLIC and the FRFRTC. The FRF-FSLIC consists of the assets and liabilities of
the former FSLIC. The FRF-RTC consists of the assets and
liabilities of the former RTC. Pursuant to legal restrictions,
the two pools are maintained separately and the assets of
one pool are not available to satisfy obligations of the other.
Contributed capital, accumulated deficit, and resolution
equity consisted of the following components by each pool
(in thousands).

3

116

FINANCIAL SECTION

2016
FSLIC RESOLUTION FUND

December 31, 2016
FRF
Consolidated

FRF-FSLIC

FRF-RTC

43,864,980 $

81,624,337 $

Contributed capital beginning

$

125,489,317

Contributed
capital - ending

43,864,980

81,624,337

125,489,317

Accumulated deficit

(43,029,200)

(81,581,578)

(124,610,778)

Total Resolution
Equity

$

835,780 $

42,759 $

878,539

December 31, 2015

the FDIC returned $2.6 billion to the U.S. Treasury on behalf
of the FRF-FSLIC in 2013. These actions reduced contributed
capital.
ACCUMULATED DEFICIT
The accumulated deficit represents the cumulative excess of
expenses and losses over revenue for activity related to the
FRF-FSLIC and the FRF-RTC. Approximately $29.8 billion and
$87.9 billion were brought forward from the former FSLIC
and the former RTC on August 9, 1989, and January 1, 1996,
respectively. Since the dissolution dates, the FRF-FSLIC
accumulated deficit increased by $13.2 billion, whereas the
FRF-RTC accumulated deficit decreased by $6.3 billion.

FRF
Consolidated

FRF-FSLIC

FRF-RTC

43,707,819 $

81,624,337 $

Contributed capital beginning

$

125,332,156

Losses related to thrift resolutions represent changes in the
estimated losses on assets acquired from terminated
receiverships, as well as expenses for the disposition and
administration of these assets.
These losses were a negative $993 thousand for 2016
compared to negative $153 thousand for 2015. The 2016
balance primarily resulted from a $1 million reduction in the
estimated losses due to better-than-anticipated recoveries
upon disposition of an asset during 2016.

Add: U.S. Treasury
payment in excess
of prior year
157,161

0

157,161

capital - ending

43,864,980

81,624,337

125,489,317

Accumulated deficit

(43,036,684)

(81,581,460)

(124,618,144)

receivable
Contributed

Total Resolution
Equity

$

828,296 $

42,877 $

6. Losses Related to Thrift Resolutions

871,173

CONTRIBUTED CAPITAL
The FRF-FSLIC and the former RTC received $43.5 billion and
$60.1 billion from the U.S. Treasury, respectively, to fund
losses from thrift resolutions prior to July 1, 1995.
Additionally, the FRF-FSLIC issued $670 million in capital
certificates to the Financing Corporation (a mixed-ownership
government corporation established to function solely as a
financing vehicle for the FSLIC) and the RTC issued $31.3
billion of these instruments to the REFCORP. FIRREA
prohibited the payment of dividends on any of these capital
certificates.
The FRF-FSLIC received $513.6 million in U.S. Treasury
payments for goodwill litigation in 2015, of which $356.4
million was accrued as a receivable at year-end 2014. The
$157.2 million difference increased contributed capital in
2015. Through December 31, 2016, the FRF received a total
of $2.3 billion in goodwill appropriations, the effect of which
increased contributed capital.
Through December 31, 2016, the FRF-RTC had returned $4.6
billion to the U.S. Treasury and made payments of $5.1
billion to the REFCORP. The most recent payment to the
REFCORP was in July of 2013 for $125 million. In addition,

7.
Disclosures about the Fair Value of Financial
Instruments
At December 31, 2016 and 2015, the FRF’s financial assets
measured at fair value on a recurring basis are cash
equivalents of $831 million and $828 million, respectively.
Cash equivalents are Special U.S. Treasury Certificates with
overnight maturities valued at prevailing interest rates
established by the Bureau of the Fiscal Service.
The
valuation is considered a Level 1 measurement in the fair
value hierarchy, representing quoted prices in active markets
for identical assets.
Accounts payable and other liabilities are not recognized at
fair value but are recorded at amounts that approximate fair
value due to their short maturities and/or comparability with
interest rates.
Assets purchased by the FRF from terminated receiverships
(see Note 1) and included in the “Other assets, net” line item
on the Balance Sheet are primarily valued using projected
cash flow analyses; however, these valuations do not
represent an estimate of fair value. These assets (ranging in
age between 22 to 27 years) could not be liquidated during
the life of the receiverships due to restrictive clauses and
other impediments. Because these impediments remain,

FINANCIAL SECTION

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ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS
there is no market for these assets. Consequently, it is not
practicable to provide an estimate of fair value.

8. Information Relating to the Statement of Cash Flows
The following table presents a reconciliation of net
income/(loss) to net cash from operating activities (in
thousands).

December 31

December 31

2016

2015

Operating Activities
Net Income (Loss):

$

7,366

$

(157,465)

Adjustments to reconcile
net income (loss) to net
cash provided (used) by
operating activities:
Losses related to thrift
resolutions (only includes
provision for losses)
Change in Assets and

0

(260)

(3,631)

404

(598)

254

0

(356,455)

Liabilities:
(Increase) Decrease in
other assets
(Decrease) Increase in
accounts payable and
other liabilities
(Decrease) in contingent
liabilities for goodwill
litigation
Net Cash Provided (Used)
by Operating Activities

$

3,137

$

(513,522)

9. Subsequent Events
Subsequent events have been evaluated through February 8,
2017, the date the financial statements are available to be
issued, and management determined that there are no items
to disclose.

118

FINANCIAL SECTION

5

2016
GOVERNMENT ACCOUNTABILITY OFFICE
AUDITOR’S REPORT

441 G St. N.W.
Washington, DC 20548

Independent Auditor’s Report
To the Board of Directors
The Federal Deposit Insurance Corporation
In our audits of the 2016 and 2015 financial statements of the Deposit Insurance Fund (DIF) and
of the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund (FRF), both of
which are administered by the Federal Deposit Insurance Corporation (FDIC), 1 we found
•

the financial statements of the DIF and of the FRF as of and for the years ended
December 31, 2016, and 2015, are presented fairly, in all material respects, in accordance
with U.S. generally accepted accounting principles;

•

although internal controls could be improved, FDIC maintained, in all material respects,
effective internal control over financial reporting relevant to the DIF and to the FRF as of
December 31, 2016; and

•

with respect to the DIF and to the FRF, no reportable noncompliance for 2016 with
provisions of applicable laws, regulations, contracts, and grant agreements we tested.

The following sections discuss in more detail (1) our report on the financial statements and on
internal control over financial reporting and other information 2 included with the financial
statements; (2) our report on compliance with laws, regulations, contracts, and grant
agreements; and (3) agency comments.
Report on the Financial Statements and on Internal Control over Financial Reporting
In accordance with Section 17 of the Federal Deposit Insurance Act, as amended, 3 and the
Government Corporation Control Act, 4 we have audited the financial statements of the DIF and
of the FRF, both of which are administered by FDIC. The financial statements for the DIF
comprise the balance sheets as of December 31, 2016, and 2015; the related statements of
income and fund balance and of cash flows for the years then ended; and the related notes to
the financial statements. The financial statements for the FRF comprise the balance sheets as
of December 31, 2016, and 2015; the related statements of income and accumulated deficit and
of cash flows for the years then ended; and the related notes to the financial statements. We
also have audited FDIC’s internal control over financial reporting relevant to the DIF and to the
FRF as of December 31, 2016, based on criteria established under 31 U.S.C. § 3512(c), (d),
commonly known as the Federal Managers’ Financial Integrity Act (FMFIA).
1
A third fund managed by FDIC, the Orderly Liquidation Fund, established by Section 210(n) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376, 1506 (July 21, 2010), is unfunded
and did not have any transactions from its inception in 2010 through 2016.
2

Other information consists of information included with the financial statements, other than the auditor’s report.

3

Act of September 21, 1950, Pub. L. No. 797, § 2[17], 64 Stat. 873, 890, classified as amended at 12 U.S.C. § 1827.

4

31 U.S.C. §§ 9101-9110.

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ANNUAL REPORT
GOVERNMENT ACCOUNTABILITY OFFICE
AUDITOR’S REPORT (continued)
We conducted our audits in accordance with U.S. generally accepted government auditing
standards. We believe that the audit evidence we obtained is sufficient and appropriate to
provide a basis for our audit opinions.
Management’s Responsibility
FDIC management is responsible for (1) the preparation and fair presentation of these financial
statements in accordance with U.S. generally accepted accounting principles; (2) preparing and
presenting other information included in documents containing the audited financial statements
and auditor’s report, and ensuring the consistency of that information with the audited financial
statements; (3) maintaining effective internal control over financial reporting, including the
design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to
fraud or error; (4) evaluating the effectiveness of internal control over financial reporting based
on the criteria established under FMFIA; and (5) providing its assessment about the
effectiveness of internal control over financial reporting as of December 31, 2016, included in
the accompanying Management’s Report on Internal Control over Financial Reporting in
appendix I.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements and opinions on FDIC’s
internal control over financial reporting relevant to the DIF and to the FRF based on our audits.
U.S. generally accepted government auditing standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free from
material misstatement, and whether effective internal control over financial reporting was
maintained in all material respects. We are also responsible for applying certain limited
procedures to other information included with the financial statements.
An audit of financial statements involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures selected depend on
the auditor’s judgment, including the auditor’s assessment of the risks of material misstatement
of the financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances. An audit of financial statements also involves evaluating the appropriateness of
the accounting policies used and the reasonableness of significant accounting estimates made
by management, as well as evaluating the overall presentation of the financial statements.
An audit of internal control over financial reporting involves performing procedures to obtain
evidence about whether a material weakness exists. 5 The procedures selected depend on the
auditor’s judgment, including the assessment of the risk that a material weakness exists. An
audit of internal control over financial reporting also includes obtaining an understanding of
internal control over financial reporting, evaluating the design and operating effectiveness of
internal control over financial reporting based on the assessed risk, and testing relevant internal
5
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be
prevented, or detected and corrected, on a timely basis. A deficiency in internal control exists when the design or
operation of a control does not allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, misstatements on a timely basis.

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GOVERNMENT ACCOUNTABILITY OFFICE
AUDITOR’S REPORT (continued)
control over financial reporting. Our audit of internal control also considered the entity’s process
for evaluating and reporting on internal control over financial reporting based on criteria
established under FMFIA. Our audits also included performing such other procedures as we
considered necessary in the circumstances.
We did not evaluate all internal controls relevant to operating objectives as broadly established
under FMFIA, such as those controls relevant to preparing performance information and
ensuring efficient operations. We limited our internal control testing to testing controls over
financial reporting. Our internal control testing was for the purpose of expressing an opinion on
whether effective internal control over financial reporting was maintained, in all material
respects. Consequently, our audit may not identify all deficiencies in internal control over
financial reporting that are less severe than a material weakness.
Definition and Inherent Limitations of Internal Control over Financial Reporting
An entity’s internal control over financial reporting is a process effected by those charged with
governance, management, and other personnel, the objectives of which are to provide
reasonable assurance that (1) transactions are properly recorded, processed, and summarized
to permit the preparation of financial statements in accordance with U.S. generally accepted
accounting principles, and assets are safeguarded against loss from unauthorized acquisition,
use, or disposition, and (2) transactions are executed in accordance with provisions of
applicable laws, regulations, contracts, and grant agreements, noncompliance with which could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent, or
detect and correct, misstatements due to fraud or error. We also caution that projecting any
evaluation of effectiveness to future periods is subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
Opinions on Financial Statements
In our opinion:
•

The DIF’s financial statements present fairly, in all material respects, the DIF’s financial
position as of December 31, 2016, and 2015, and the results of its operations and its cash
flows for the years then ended, in accordance with U.S. generally accepted accounting
principles.

•

The FRF’s financial statements present fairly, in all material respects, the FRF’s financial
position as of December 31, 2016, and 2015, and the results of its operations and its cash
flows for the years then ended, in accordance with U.S. generally accepted accounting
principles.

Opinions on Internal Control over Financial Reporting
In our opinion, although certain internal controls could be improved,
•

FDIC maintained, in all material respects, effective internal control over financial reporting
relevant to the DIF as of December 31, 2016, based on criteria established under FMFIA.

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GOVERNMENT ACCOUNTABILITY OFFICE
AUDITOR’S REPORT (continued)
•

FDIC maintained, in all material respects, effective internal control over financial reporting
relevant to the FRF as of December 31, 2016, based on criteria established under FMFIA.

As discussed in greater detail later in this report, our 2016 audit identified deficiencies in FDIC’s
information systems controls that collectively represent a significant deficiency in FDIC’s internal
control over financial reporting. 6
Although the significant deficiency in internal control did not affect our opinions on the 2016
financial statements of the DIF and of the FRF, misstatements may occur in other financial
information reported by the DIF and the FRF and not be prevented or detected and corrected on
a timely basis because of this significant deficiency.
In addition to the significant deficiency in information systems controls, we identified other
deficiencies in FDIC’s internal control over financial reporting that we do not consider to be
material weaknesses or significant deficiencies. Nonetheless, these deficiencies warrant FDIC
management’s attention. We have communicated these matters to FDIC management and,
where appropriate, will report on them separately.
Significant Deficiency in Information Systems Controls
During our 2016 audit, we identified new deficiencies in information systems controls that along
with unresolved control deficiencies from prior audits, collectively represent a significant
deficiency in FDIC’s internal control over financial reporting. Specifically, the deficiencies relate
to general information systems controls in the areas of access and configuration management
controls.
FDIC did not sufficiently implement controls to limit or detect access to computer resources.
Specifically, FDIC did not have sufficient boundary protection controls on its network to fully
isolate sensitive financial systems from other parts of its network. According to FDIC, a plan to
fully isolate sensitive systems on a secure network segment had been made, but
implementation of the plan had been delayed because of other competing priorities. Until it
appropriately isolates its sensitive financial systems, FDIC faces increased risk that
unauthorized or malicious attempts to communicate with its financial systems could go
undetected.
FDIC did not consistently implement configuration management controls. Configuration
management controls are intended to prevent unauthorized changes to information system
resources and provide reasonable assurance that systems are configured and operating
securely and as intended. Effective configuration management depends on the maintenance of
a complete, accurate inventory of information system components. However, we identified
deficiencies in FDIC’s implementation of these controls, placing its information and systems at
increased risk of modification, loss, or disclosure. Specifically, see the following:
•

Although FDIC used multiple data sources to keep track of its inventory of network assets, it
did not have a single, authoritative, complete, and accurate inventory of all network assets in
its environment. This occurred because FDIC had not established a process to reasonably
assure that a complete, accurate inventory was developed and maintained. Until FDIC
develops and implements a process to maintain a complete, accurate inventory of its

6
A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a
material weakness, yet important enough to merit the attention of those charged with governance.

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GOVERNMENT ACCOUNTABILITY OFFICE
AUDITOR’S REPORT (continued)
network assets, its ability to identify potential vulnerabilities in unidentified assets may be
limited, posing unnecessary risks to information systems.
•

FDIC did not consistently scan its servers for vulnerabilities. FDIC policy states that servers
are scanned for vulnerabilities weekly, vulnerability reports are produced monthly, and
systems may not go unscanned for more than 2 consecutive months. However, FDIC had
not scanned 51 servers in one of its general support systems during the 3-month time period
(July, August, and September 2016) that we reviewed. According to FDIC officials, this
occurred because FDIC did not have an authoritative or complete inventory of its network
assets and also because its legacy scanning and discovery tool failed to identify all servers.
Officials also stated that the scanning and discovery tool has been replaced. In addition, the
FDIC Office of Inspector General (OIG) has identified similar concerns. In its November
2016 report on the effectiveness of FDIC’s information security program in accordance with
the requirements of the Federal Information Security Modernization Act of 2014, 7 the OIG
reported that at the time of its audit, FDIC was not performing vulnerability scans for more
than 900 production servers within another of its general support systems. 8 Without
regularly scanning all servers, FDIC cannot reasonably assure that vulnerabilities in its
servers are identified and corrected in a timely manner, increasing the risk that FDIC’s
systems and information may be compromised.

During 2016, FDIC made progress addressing previously reported control deficiencies related to
its information systems. Key corrective actions included improving controls for authorizing users’
access to financial applications and for logging and monitoring financial applications to detect
potentially malicious activity. However, other previously reported control deficiencies in FDIC’s
information security continued to exist. For example, FDIC (1) had not fully implemented
agency-wide configuration baselines and (2) did not always effectively monitor changes to
critical server files. 9
The cumulative effect of the control risks created by FDIC’s new and previously reported
information security control deficiencies, while not collectively considered a material weakness,
is important enough to merit the attention of those charged with governance of FDIC and
therefore represents a significant deficiency in FDIC’s internal control over financial reporting as
of December 31, 2016. Continued and consistent management commitment and attention will
be essential to addressing existing deficiencies and continually improving FDIC’s information
system controls. Until FDIC takes the necessary steps to address these new and previously
reported control deficiencies, its sensitive financial information and resources will remain at
increased risk of inadvertent or deliberate misuse, improper modification, unauthorized
disclosure, or destruction.

7

Pub. L. No. 113-283, 128 Stat. 3073 (Dec. 18, 2014), codified as amended at 44 U.S.C. §§ 3551-3558.

8
Federal Deposit Insurance Corporation, Office of Inspector General, Audit of the FDIC’s Information Security
Program—2016, AUD-17-001 (Arlington, Va.: November 2016).
9
GAO, Information Security: FDIC Implemented Controls over Financial Systems, but Further Improvements Are
Needed, GAO-16-605 (Washington, D.C.: June 29, 2016).

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ANNUAL REPORT
GOVERNMENT ACCOUNTABILITY OFFICE
AUDITOR’S REPORT (continued)
Other Matters
Other Information
FDIC’s other information contains a wide range of information, some of which is not directly
related to the financial statements. This information is presented for purposes of additional
analysis and is not a required part of the financial statements. We read the other information
included with the financial statements in order to identify material inconsistencies, if any, with
the audited financial statements. Our audit was conducted for the purpose of forming opinions
on the DIF and the FRF financial statements. We did not audit and do not express an opinion or
provide any assurance on the other information.
Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements
In connection with our audits of the financial statements of the DIF and of the FRF, both of
which are administered by FDIC, we tested compliance with selected provisions of applicable
laws, regulations, contracts, and grant agreements consistent with our auditor’s responsibility
discussed below. We caution that noncompliance may occur and not be detected by these
tests. We performed our tests of compliance in accordance with U.S. generally accepted
government auditing standards.
Management’s Responsibility
FDIC management is responsible for complying with applicable laws, regulations, contracts, and
grant agreements.
Auditor’s Responsibility
Our responsibility is to test compliance with selected provisions of applicable laws, regulations,
contracts, and grant agreements that have a direct effect on the determination of material
amounts and disclosures in the financial statements of the DIF and of the FRF, and perform
certain other limited procedures. Accordingly, we did not test FDIC’s compliance with all
applicable laws, regulations, contracts, and grant agreements.
Results of Our Tests for Compliance with Laws, Regulations, Contracts, and Grant Agreements
Our tests for compliance with selected provisions of applicable laws, regulations, contracts, and
grant agreements disclosed no instances of noncompliance for 2016 that would be reportable,
with respect to the DIF and to the FRF, under U.S. generally accepted government auditing
standards. However, the objective of our tests was not to provide an opinion on compliance with
applicable laws, regulations, contracts, and grant agreements. Accordingly, we do not express
such an opinion.
Intended Purpose of Report on Compliance with Laws, Regulations, Contracts, and Grant
Agreements
The purpose of this report is solely to describe the scope of our testing of compliance with
selected provisions of applicable laws, regulations, contracts, and grant agreements, and the
results of that testing, and not to provide an opinion on compliance. This report is an integral
part of an audit performed in accordance with U.S. generally accepted government auditing
standards in considering compliance. Accordingly, this report on compliance with laws,
regulations, contracts, and grant agreements is not suitable for any other purpose.

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GOVERNMENT ACCOUNTABILITY OFFICE
AUDITOR’S REPORT (continued)
Agency Comments
In commenting on a draft of this report, FDIC stated that it was pleased to receive unmodified
opinions on the DIF’s and the FRF’s financial statements, and noted that we reported that FDIC
had effective internal control over financial reporting and that there was no reportable
noncompliance with tested provisions of applicable laws, regulations, contracts, and grant
agreements.
FDIC also noted that we reported deficiencies in FDIC’s information systems controls that
collectively represent a significant deficiency. FDIC stated that it will work to improve its internal
control environment and will focus additional management attention to address and remediate
the identified information system control deficiencies, recognizing the essential role a strong
internal control program plays in achieving an agency’s mission. Further, FDIC stated that
dedication to sound financial management has been and will remain a top priority. The complete
text of FDIC’s response is reprinted in appendix II.

James R. Dalkin
Director
Financial Management and Assurance
February 8, 2017

FINANCIAL SECTION

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ANNUAL REPORT
Appendix I

MANAGEMENT’S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING

126

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2016
Appendix II

MANAGEMENT’S RESPONSE TO THE AUDITOR’S REPORT

FINANCIAL SECTION

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2016

VI.

CORPORATE
MANAGEMENT
CONTROL

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2016
The FDIC uses several means to maintain
comprehensive internal controls, ensure the overall
effectiveness and efficiency of operations, and
otherwise comply as necessary with the following
federal standards, among others:
♦♦ Chief Financial Officers’ Act (CFO Act)
♦♦ Federal Managers’ Financial Integrity Act
(FMFIA)
♦♦ Federal Financial Management Improvement Act
(FFMIA)
♦♦ Government Performance and Results Act
(GPRA)
♦♦ Federal Information Security Management Act
(FISMA)
♦♦ OMB Circular A-123
♦♦ GAO’s Standards for Internal Control in the
Federal Government
As a foundation for these efforts, the Division of
Finance Corporate Management Control Branch
oversees a corporate-wide program of relevant
activities by establishing policies and working with
management in each division and office in the FDIC.
The FDIC has made a concerted effort to ensure that
financial, reputational, and operational risks have been
identified and that corresponding control needs are
being incorporated into day-to-day operations. The
program also requires that comprehensive procedures
be documented, employees be thoroughly trained,
and supervisors be held accountable for performance
and results. Compliance monitoring is carried out
through periodic management reviews and by the
distribution of various activity reports to all levels of
management. Conscientious attention is also paid to
the implementation of audit recommendations made
by the FDIC Office of Inspector General, the
GAO, and other providers of external/audit scrutiny.
The FDIC has received unmodified/unqualified
opinions on its financial statement audits for 25
consecutive years, and these and other positive results
reflect the effectiveness of the overall management
control program.

In 2016, efforts were focused on failed bank data;
the Identity, Credential and Access Control Program;
systems development associated with the Capital
Investment Review Committee; the Workforce
Development Initiative; and systems security.
Considerable energy was devoted to ensuring that the
FDIC’s processes and systems of control have kept
pace with the workload, and that the foundation of
controls throughout the FDIC remained strong.
During 2017, among other things, program
evaluation activities will focus on data mining,
continuity of operations, process mapping, process
improvements, internal controls of outsourced service
providers, continuation of efforts on failed bank
data, and systems security. Continued emphasis
and management scrutiny also will be applied to the
accuracy and integrity of transactions and oversight of
systems development efforts in general.

FRAUD REDUCTION AND DATA
ANALYTICS ACT OF 2015
The Fraud Reduction and Data Analytics Act of
2015 was signed into law on June 30, 2016. The law
is intended to improve federal agency financial and
administrative controls and procedures to assess and
mitigate fraud risks, and to improve federal agencies’
development and use of data analytics for the purpose
of identifying, preventing, and responding to fraud,
including improper payments.
The FDIC’s enterprise risk management and internal
control program considers the potential for fraud and
incorporates elements of Principle 8 – Assess Fraud
Risk, of the GAO Standards of Internal Control in
the Federal Government. The FDIC implemented
a Fraud Risk Assessment Framework as a basis for
identifying potential financial fraud risks and schemes,
ensuring that preventive and detective controls are
present and working as intended. Examples of fraud
risks are contractor payments, wire transfers, travel
card purchases, and theft of cash receipts.

C O R PO R ATE MANAGEMENT CONTROL

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ANNUAL REPORT
As part of the Framework, potential fraud areas are
identified and key controls are evaluated/implemented
as proactive measures to fraud prevention. Although
no system of internal control provides absolute
assurance, the FDIC’s system of internal control
can provide reasonable assurance that key controls
are adequate and working as intended. Monitoring
activities include supervisory approvals, management
reports, and exception reporting.
FDIC management performs due diligence in areas
of suspected or alleged fraud. At the conclusion of
due diligence, the matter is either dropped or referred
to the Office of Inspector General for investigation.

During 2016, there has been no systemic fraud
identified within the FDIC.

MANAGEMENT REPORT ON
FINAL ACTIONS
As required under amended Section 5 of the
Inspector General Act of 1978, the FDIC must report
information on final action taken by management
on certain audit reports. The tables on the following
pages provide information on final action taken
by management on audit reports for the federal
fiscal year period October 1, 2015, through
September 30, 2016.

TABLE 1:
MANAGEMENT REPORT ON FINAL ACTION ON AUDITS
WITH DISALLOWED COSTS FOR FISCAL YEAR 2016
Dollars in Thousands
Number of
Reports

Disallowed
Costs

0

$0

1

$55

1

$55

(a) Collections & offsets

0

$0

(b) Other

0

$0

2. Write-offs

0

$0

3. Total of 1 & 2
Audit reports needing final action at the end of the period

0

$0

1

$55

Audit Reports

A.
B.
C.
D.

E.

Management decisions – final action not taken at beginning of period
Management decisions made during the period
Total reports pending final action during the period (A and B)
1. Recoveries:

TABLE 2:
MANAGEMENT REPORT ON FINAL ACTION ON AUDITS WITH RECOMMENDATIONS
TO PUT FUNDS TO BETTER USE FOR FISCAL YEAR 2016
Dollars in Thousands
(There were no audit reports in this category.)

132

C OR POR AT E MANAGEMENT CONTROL

2016
TABLE 3:
AUDIT REPORTS WITHOUT FINAL ACTIONS BUT WITH MANAGEMENT DECISIONS
OVER ONE YEAR OLD FOR FISCAL YEAR 2016
Report No. and
Issue Date

AUD-14-002
11/21/2013

AUD-15-003
03/30/2015

OIG Audit Finding

Management Action

The Director, Division of Administration
(DOA) should coordinate with Division
of Information Technology (DIT)
and FDIC division and office officials,
as appropriate, to address potential
gaps that may exist between the 12hour timeframe required to restore
mission essential functions following
an emergency and the 72-hour recovery
time objective for restoring missioncritical applications.

The Chief Information Officer
Organization will prepare a briefing for
the Board by June 16, 2017 on the status
of the Continuity of Operations (COOP)
effort and a Board Case by end of third
quarter 2017 that lays out the approach
for meeting the COOP objectives and
how it addresses the risk associated
with meeting the FEMA Category II
requirements.

The Director, RMS should review and
update, as appropriate, supervisory
guidance and associated training related
to newly insured banks to address the
lessons learned and issues described
in this report, including the need
for: a) thorough and timely (at least
quarterly) monitoring of changes and
deviations in bank business plans;
b) prompt communication to bank
management regarding issues involving
the adequacy of business plans; c) clear
expectations regarding the timing, type,
and documentation of supervisory
monitoring activities pertaining to
business plan compliance; and d)
proactive supervisory action when banks
materially deviate from their approved
business plans without regulatory
approval.

RMS is finalizing new de novo supervision
guidance. The Regional Director memo,
which outlines supervisory expectations,
including monitoring of business plan
changes, is in final processing and expected
to be issued by December 31, 2016.

Disallowed
Costs

$0

Due Date: 10/11/2017
$0

Due Date: 3/31/2017

C O R PO R ATE MANAGEMENT CONTROL

133

ANNUAL REPORT
TABLE 3:
AUDIT REPORTS WITHOUT FINAL ACTIONS BUT WITH MANAGEMENT DECISIONS
OVER ONE YEAR OLD FOR FISCAL YEAR 2016
(continued)
Report No. and
Issue Date

AUD-15-007
09/03/2015

OIG Audit Finding

The Director, RMS, should update
guidance for placing an institution on
a targeted examination schedule to
define dates to be used for purposes of
complying with FDI Act examination
frequency requirements.

Management Action

RMS is presently updating and
consolidating its supervisory policies
and procedures for large banks. As
part of that effort, RMS will provide
technical instructions for determining
the examination “as of ” date for an
initial examination activity under the
continuous examination program and for
recording that information in its inventory
systems to document compliance with the
examination frequency requirements of
Section 10(d) of the FDI Act. RMS will
complete this action by March 31, 2017.

Disallowed
Costs

$0

Due Date: 3/31/2017
The Director, RMS, should issue or
revise policy guidance to document the
requirements and responsibilities of
Regional Accountants for developing
and communicating a comprehensive
analysis and related conclusions for
complex and/or unique accounting
transactions, or for escalating such
analysis to the Washington Office Policy
staff, as appropriate.

RMS recently held a conference call
with Regional Accountants to discuss
updates to existing guidance. RMS has
also reached out to the OCC and FRB for
information on those agencies’ handling of
complex accounting questions. Additional
time will be needed in order for the update
to the responsibilities of the Regional
Accountant to be consistent with the
ongoing Accounting SME Project, which
is an integral part of the communication
channel for handling complex accounting
questions. The timeline for the Accounting
SME Project has been tentatively extended
through March 31, 2017.
Due Date: 3/31/2017

134

C OR POR AT E MANAGEMENT CONTROL

$0

2016
TABLE 3:
AUDIT REPORTS WITHOUT FINAL ACTIONS BUT WITH MANAGEMENT DECISIONS
OVER ONE YEAR OLD FOR FISCAL YEAR 2016
(continued)
Report No. and
Issue Date

AUD-15-008
09/16/2015

OIG Audit Finding

Management Action

The Directors, RMS and DCP, should
coordinate to review and clarify,
as appropriate, existing policy and
guidance pertaining to the provision and
termination of banking services to ensure
it adequately addresses banking products
other than deposit accounts, such as
credit products.

Additional time is required to approve
and issue several RMS Regional Director
Memorandums, which will include the
following topics: delegations of authority,
communications with bankers, matters
requiring board attention and other
supervisory recommendations, large bank
operating procedures, processing requests
for review (bank appeals), and third-party
lending.

Disallowed
Costs

$0

Due Date: 3/31/2017
The Directors, RMS and DCP, should
coordinate to assess the effectiveness
of the FDIC’s supervisory policy and
approach with respect to the issues and
risks discussed in this report after a
reasonable period of time is allowed for
implementation.

RMS’ Internal Control and Review section $0
will conduct horizontal and regional
office reviews to assess compliance with
the FDIC’s actions to address the issues
discussed in the report. The FDIC will
also continue to report to the Board on
deposit account terminations; highlight
supervisory guidance in outreach events;
and monitor inquiries and comments from
the Office of the Ombudsman.
Due Date: 6/30/2017

The Directors, RMS and DCP, should
coordinate with the Legal Division
to review and clarify, as appropriate,
existing supervisory policy and guidance
to ensure it adequately defines moral
suasion in terms of the types and
circumstances under which it is used to
address supervisory concerns, whether
it is subject to sufficient scrutiny and
oversight, and whether meaningful
remedies exist should moral suasion be
misused.

Additional time is required to approve
and issue several RMS Regional Director
Memorandums, which will include the
following topics: delegations of authority,
communications with bankers, matters
requiring board attention and other
supervisory recommendations, large bank
operating procedures, processing requests
for review (bank appeals), and third-party
lending.

$0

Due Date: 3/31/2017

C O R PO R ATE MANAGEMENT CONTROL

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2016

VII.
APPENDICES

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2016
A. KEY STATISTICS
FDIC ACTIONS ON FINANCIAL INSTITUTIONS APPLICATIONS
2014–2016
2016

2014

7

5

2

7

5

2

0

0

0

507

548

520

507

548

520

0

0

0

245

270

251

245

270

251

0

0

0

167

240

327

164

239

327

9

7

7

155

232

320

3

1

0

0

0

0

3

1

0

14

20

15

14

20

15

0

0

0

14

20

46

13

20

46

1

0

0

0

1

4

0

1

4

0

0

0

5

10

14

5

10

14

0

0

0

5

4

4

5

4

4

0

Deposit Insurance
Approved1
Denied
New Branches
Approved
Denied
Mergers
Approved
Denied
Requests for Consent to Serve2
Approved
	 Section 19
	 Section 32
Denied
	 Section 19
	 Section 32
Notices of Change in Control
Letters of Intent Not to Disapprove
Disapproved
Brokered Deposit Waivers
Approved
Denied
Savings Association Activities
Approved
Denied
State Bank Activities/Investments3
Approved
Denied
Conversion of Mutual Institutions
Non-Objection
Objection

2015

0

0

1
Includes deposit insurance application filed on behalf of (1) newly organized institutions, (2) existing uninsured financial services companies seeking
establishment as an insured institution, and (3) interim institutions established to facilitate merger or conversion transactions, and applications to
facilitate the establishment of thrift holding companies.
2
Under Section 19 of the Federal Deposit Insurance (FDI) Act, an insured institution must receive FDIC approval before employing a person convicted
of dishonesty or breach of trust. Under Section 32, the FDIC must approve any change of directors or senior executive officers at a state nonmember
bank that is not in compliance with capital requirements or is otherwise in troubled condition.
3
Section 24 of the FDI Act, in general, prohibits a federally-insured state bank from engaging in an activity not permissible for a national bank and
requires notices to be filed with the FDIC.

A PPENDICES

139

ANNUAL REPORT
COMBINED RISK AND CONSUMER ENFORCEMENT ACTIONS
2014–2016
2016

Total Number of Actions Initiated by the FDIC
Termination of Insurance
Involuntary Termination
	 Sec. 8a For Violations, Unsafe/Unsound Practices or Conditions
Voluntary Termination
	 Sec. 8a By Order Upon Request
	 Sec. 8p No Deposits
	 Sec. 8q Deposits Assumed
Sec. 8b Cease-and-Desist Actions
Notices of Charges Issued
Orders to Pay Restitution
Consent Orders
Personal Cease and Desist Orders
Sec. 8e Removal/Prohibition of Director or Officer
Notices of Intention to Remove/Prohibit
Consent Orders
Sec. 8g Suspension/Removal When Charged With Crime
Civil Money Penalties Issued
Sec. 7a Call Report Penalties
Sec. 8i Civil Money Penalties
Sec. 8i Civil Money Penalty Notices of Assessment
Sec. 10c Orders of Investigation
Sec. 19 Waiver Orders
Approved Section 19 Waiver Orders
Denied Section 19 Waiver Orders
Sec. 32 Notices Disapproving Officer/Director’s Request for Review
Truth-in-Lending Act Reimbursement Actions
Denials of Requests for Relief
Grants of Relief
Banks Making Reimbursement*
Suspicious Activity Reports (Open and closed institutions)*
Other Actions Not Listed

2015

2014

259

268

320

0

11

3

0

0

0

0

0

0

5

11

3

0

0

0

5

6

3

0

5

0

30

48

57

2

3

1

0

9

7

26

36

48

2

0

1

97

88

101

8

4

4

89

84

97

0

0

2

37

45

66

0

0

0

34

36

62

3

9

4

10

19

16

72

51

69

72

51

68

0

0

1

1

0

0

83

64

69

0

0

0

0

0

0

83

64

69

222,836

189,505

164,777

7

6

6

* These actions do not constitute the initiation of a formal enforcement action and, therefore, are not included in the total
number of actions initiated.

140

APPENDICES

2016
ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND,
DECEMBER 31, 1934, THROUGH SEPTEMBER 30, 20161
Dollars in Millions (except Insurance Coverage)
Deposits in Insured
Institutions2

Year
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984

Insurance
Coverage2
$250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000

Total Domestic
Deposits
$11,505,053
10,950,090
10,408,187
9,825,479
9,474,720
8,782,292
7,887,858
7,705,353
7,505,408
6,921,678
6,640,097

Est. Insured
Deposits
$6,822,885
6,528,125
6,201,915
5,999,191
7,402,053
6,973,483
6,301,542
5,407,773
4,750,783
4,292,211
4,153,808

6,229,753

3,890,930

5,724,621

3,622,059

5,223,922

3,452,497

4,916,078

3,383,598

4,564,064

3,215,581

4,211,895
3,885,826
3,817,150
3,602,189
3,454,556
3,318,595
3,184,410
3,220,302
3,275,530
3,331,312
3,415,464
3,412,503
2,337,080
2,198,648
2,162,687
1,975,030
1,805,334

3,055,108
2,869,208
2,850,452
2,746,477
2,690,439
2,663,873
2,588,619
2,602,781
2,677,709
2,733,387
2,784,838
2,755,471
1,756,771
1,657,291
1,636,915
1,510,496
1,393,421

Percentage
of Domestic
Deposits
59.3
59.6
59.6
61.1
78.1
79.4
79.9
70.2
63.3
62.0
62.6
62.5
63.3
66.1
68.8
70.5
72.5
73.8
74.7
76.2
77.9
80.3
81.3
80.8
81.7
82.1
81.5
80.7
75.2
75.4
75.7
76.5
77.2

AP P ENDICES

Insurance Fund as
a Percentage of
Deposit
Insurance
Fund
80,704.0
72,600.2
62,780.2
47,190.8
32,957.8
11,826.5
(7,352.2)
(20,861.8)
17,276.3
52,413.0
50,165.3
48,596.6
47,506.8
46,022.3
43,797.0
41,373.8
41,733.8
39,694.9
39,452.1
37,660.8
35,742.8
28,811.5
23,784.5
14,277.3
178.4
(6,934.0)
4,062.7
13,209.5
14,061.1
18,301.8
18,253.3
17,956.9
16,529.4

Total Domestic
Deposits
0.70
0.66
0.60
0.48
0.35
0.13
(0.09)
(0.27)
0.23
0.76
0.76
0.78
0.83
0.88
0.89
0.91
0.99
1.02
1.03
1.05
1.03
0.87
0.75
0.44
0.01
(0.21)
0.12
0.39
0.60
0.83
0.84
0.91
0.92

Est. Insured
Deposits
1.18
1.11
1.01
0.79
0.45
0.17
(0.12)
(0.39)
0.36
1.22
1.21
1.25
1.31
1.33
1.29
1.29
1.37
1.38
1.38
1.37
1.33
1.08
0.92
0.55
0.01
(0.25)
0.15
0.48
0.80
1.10
1.12
1.19
1.19

141

ANNUAL REPORT
ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND,
DECEMBER 31, 1934, THROUGH SEPTEMBER 30, 20161 (continued)
Dollars in Millions (except Insurance Coverage)
Deposits in Insured
Institutions2

Year
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
1962
1961
1960
1959
1958
1957
1956
1955
1954
1953
1952
1951

142

Insurance
Coverage2
100,000
100,000
100,000
100,000
40,000
40,000
40,000
40,000
40,000
40,000
20,000
20,000
20,000
20,000
20,000
15,000
15,000
15,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000

Total Domestic
Deposits
1,690,576
1,544,697
1,409,322
1,324,463
1,226,943
1,145,835
1,050,435
941,923
875,985
833,277
766,509
697,480
610,685
545,198
495,858
491,513
448,709
401,096
377,400
348,981
313,304
297,548
281,304
260,495
247,589
242,445
225,507
219,393
212,226
203,195
193,466
188,142
178,540

Est. Insured
Deposits
1,268,332
1,134,221
988,898
948,717
808,555
760,706
692,533
628,263
569,101
520,309
465,600
419,756
374,568
349,581
313,085
296,701
261,149
234,150
209,690
191,787
177,381
170,210
160,309
149,684
142,131
137,698
127,055
121,008
116,380
110,973
105,610
101,841
96,713

Percentage
of Domestic
Deposits
75.0
73.4
70.2
71.6
65.9
66.4
65.9
66.7
65.0
62.4
60.7
60.2
61.3
64.1
63.1
60.4
58.2
58.4
55.6
55.0
56.6
57.2
57.0
57.5
57.4
56.8
56.3
55.2
54.8
54.6
54.6
54.1
54.2

APPENDICES

Deposit
Insurance
Fund
15,429.1
13,770.9
12,246.1
11,019.5
9,792.7
8,796.0
7,992.8
7,268.8
6,716.0
6,124.2
5,615.3
5,158.7
4,739.9
4,379.6
4,051.1
3,749.2
3,485.5
3,252.0
3,036.3
2,844.7
2,667.9
2,502.0
2,353.8
2,222.2
2,089.8
1,965.4
1,850.5
1,742.1
1,639.6
1,542.7
1,450.7
1,363.5
1,282.2

Insurance Fund as
a Percentage of
Total
Domestic
Est. Insured
Deposits
Deposits
0.91
1.22
0.89
1.21
0.87
1.24
0.83
1.16
0.80
1.21
0.77
1.16
0.76
1.15
0.77
1.16
0.77
1.18
0.73
1.18
0.73
1.21
0.74
1.23
0.78
1.27
0.80
1.25
0.82
1.29
0.76
1.26
0.78
1.33
0.81
1.39
0.80
1.45
0.82
1.48
0.85
1.50
0.84
1.47
0.84
1.47
0.85
1.48
0.84
1.47
0.81
1.43
0.82
1.46
0.79
1.44
0.77
1.41
0.76
1.39
0.75
1.37
0.72
1.34
0.72
1.33

2016
ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND,
DECEMBER 31, 1934, THROUGH SEPTEMBER 30, 20161 (continued)
Dollars in Millions (except Insurance Coverage)
Deposits in Insured
Institutions2

Year
1950
1949
1948
1947
1946
1945
1944
1943
1942
1941
1940
1939
1938
1937
1936
1935
1934

Insurance
Coverage2
10,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000

Total Domestic
Deposits
167,818
156,786
153,454
154,096
148,458
157,174
134,662
111,650
89,869
71,209
65,288
57,485
50,791
48,228
50,281
45,125
40,060

Est. Insured
Deposits
91,359
76,589
75,320
76,254
73,759
67,021
56,398
48,440
32,837
28,249
26,638
24,650
23,121
22,557
22,330
20,158
18,075

Percentage
of Domestic
Deposits
54.4
48.8
49.1
49.5
49.7
42.6
41.9
43.4
36.5
39.7
40.8
42.9
45.5
46.8
44.4
44.7
45.1

Deposit
Insurance
Fund
1,243.9
1,203.9
1,065.9
1,006.1
1,058.5
929.2
804.3
703.1
616.9
553.5
496.0
452.7
420.5
383.1
343.4
306.0
291.7

Insurance Fund as
a Percentage of
Total
Domestic
Est. Insured
Deposits
Deposits
0.74
1.36
0.77
1.57
0.69
1.42
0.65
1.32
0.71
1.44
0.59
1.39
0.60
1.43
0.63
1.45
0.69
1.88
0.78
1.96
0.76
1.86
0.79
1.84
0.83
1.82
0.79
1.70
0.68
1.54
0.68
1.52
0.73
1.61

1
For 2016, figures are as of September 30; all other prior years are as of December 31. Prior to 1989, figures are for the Bank Insurance Fund (BIF)
only and exclude insured branches of foreign banks. For 1989 to 2005, figures represent the sum of the BIF and Savings Association Insurance Fund
(SAIF) amounts; for 2006 to 2016, figures are for DIF. Amounts for 1989-2016 include insured branches of foreign banks. Prior to year-end 1991,
insured deposits were estimated using percentages determined from June Call and Thrift Financial Reports.
2
The year-end 2008 coverage limit and estimated insured deposits do not reflect the temporary increase to $250,000 then in effect under the
Emergency Economic Stabilization Act of 2008. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) Act made this
coverage limit permanent. The year-end 2009 coverage limit and estimated insured deposits reflect the $250,000 coverage limit. The Dodd-Frank Act
also temporarily provided unlimited coverage for non-interest bearing transaction accounts for two years beginning December 31, 2010. Coverage for
certain retirement accounts increased to $250,000 in 2006. Initial coverage limit was $2,500 from January 1 to June 30, 1934.

AP P ENDICES

143

ANNUAL REPORT
INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS,
SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2016
Dollars in Millions
Income

Expenses and Losses

Assessment
Credits

Investment
and Other

Effective
Assessment
Rate1

Total

Provision
for
Ins. Losses

Admin.
and
Operating
Expenses2

Interest
& Other
Ins.
Expenses

Funding
Transfer
from the
FSLIC
Resolution Fund

Net
Income/
(Loss)

Year

Total

Assessment
Income

Total

$230,629.4

$165,000.2

$11,392.9

$77,022.1

$147,747.9

$108,474.3

$29,809.6

$9,464.0

$139.5

$83,021.0

2016

10,674.1

9,986.6

0.0

687.5

0.0699%

150.6

(1,567.9)

1,715.0

3.5

0

10,523.5

2015

9,303.5

8,846.8

0.0

456.7

0.0647%

(553.2)

(2,251.3)

1,687.2

10.9

0

9,856.7

2014

8,965.1

8,656.1

0.0

309.0

0.0663%

(6,634.7)

(8,305.5)

1,664.3

6.5

0

15,599.8

2013

10,458.9

9,734.2

0.0

724.7

0.0775%

(4,045.9)

(5,659.4)

1,608.7

4.8

0

14,504.8

2012

18,522.3

12,397.2

0.2

6,125.3

0.1012%

(2,599.0)

(4,222.6)

1,777.5

(153.9)

0

21,121.3

2011

16,342.0

13,499.5

0.9

2,843.4

0.1115%

(2,915.4)

(4,413.6)

1,625.4

(127.2)

0

19,257.4

2010

13,379.9

13,611.2

0.8

(230.5)

0.1772%

75.0

(847.8)

1,592.6

(669.8)

0

13,304.9

2009

24,706.4

17,865.4

148.0

6,989.0

0.2330%

60,709.0

57,711.8

1,271.1

1,726.1

0

(36,002.6)

2008

7,306.3

4,410.4

1,445.9

4,341.8

0.0418%

44,339.5

41,838.8

1,033.5

1,467.2

0

(37,033.2)

2007

3,196.2

3,730.9

3,088.0

2,553.3

0.0093%

1,090.9

95.0

992.6

3.3

0

2,105.3

2006

2,643.5

31.9

0.0

2,611.6

0.0005%

904.3

(52.1)

950.6

5.8

0

1,739.2

2005

2,420.5

60.9

0.0

2,359.6

0.0010%

809.3

(160.2)

965.7

3.8

0

1,611.2

2004

2,240.3

104.2

0.0

2,136.1

0.0019%

607.6

(353.4)

941.3

19.7

0

1,632.7

2003

2,173.6

94.8

0.0

2,078.8

0.0019%

(67.7)

(1,010.5)

935.5

7.3

0

2,241.3

2002

2,384.7

107.8

0.0

2,276.9

0.0023%

719.6

(243.0)

945.1

17.5

0

1,665.1

2001

2,730.1

83.2

0.0

2,646.9

0.0019%

3,123.4

2,199.3

887.9

36.2

0

(393.3)

2000

2,570.1

64.3

0.0

2,505.8

0.0016%

945.2

28.0

883.9

33.3

0

1,624.9

1999

2,416.7

48.4

0.0

2,368.3

0.0013%

2,047.0

1,199.7

823.4

23.9

0

369.7

1998

2,584.6

37.0

0.0

2,547.6

0.0010%

817.5

(5.7)

782.6

40.6

0

1,767.1

1997

2,165.5

38.6

0.0

2,126.9

0.0011%

247.3

(505.7)

677.2

75.8

0

1,918.2

1996

7,156.8

5,294.2

0.0

1,862.6

0.1622%

353.6

(417.2)

568.3

202.5

0

6,803.2

1995

5,229.2

3,877.0

0.0

1,352.2

0.1238%

202.2

(354.2)

510.6

45.8

0

5,027.0

1994

7,682.1

6,722.7

0.0

959.4

0.2192%

(1,825.1)

(2,459.4)

443.2

191.1

0

9,507.2

1993

7,354.5

6,682.0

0.0

672.5

0.2157%

(6,744.4)

(7,660.4)

418.5

497.5

0

14,098.9

1992

6,479.3

5,758.6

0.0

720.7

0.1815%

(596.8)

(2,274.7)

614.83

1,063.1

35.4

7,111.5

1991

5,886.5

5,254.0

0.0

632.5

0.1613%

16,925.3

15,496.2

326.1

1,103.0

42.4

(10,996.4)

1990

3,855.3

2,872.3

0.0

983.0

0.0868%

13,059.3

12,133.1

275.6

650.6

56.1

(9,147.9)

1989

3,494.8

1,885.0

0.0

1,609.8

0.0816%

4,352.2

3,811.3

219.9

321.0

5.6

(851.8)
(4,240.7)

1988

1,773.0

0.0

1,574.7

0.0825%

7,588.4

6,298.3

223.9

1,066.2

0

3,319.4

1,696.0

0.0

1,623.4

0.0833%

3,270.9

2,996.9

204.9

69.1

0

48.5

1986

3,260.1

1,516.9

0.0

1,743.2

0.0787%

2,963.7

2,827.7

180.3

(44.3)

0

296.4

1985

3,385.5

1,433.5

0.0

1,952.0

0.0815%

1,957.9

1,569.0

179.2

209.7

0

1,427.6

1984

3,099.5

1,321.5

0.0

1,778.0

0.0800%

1,999.2

1,633.4

151.2

214.6

0

1,100.3

1983

2,628.1

1,214.9

164.0

1,577.2

0.0714%

969.9

675.1

135.7

159.1

0

1,658.2

1982

2,524.6

1,108.9

96.2

1,511.9

0.0769%

999.8

126.4

129.9

743.5

0

1,524.8

1981

2,074.7

1,039.0

117.1

1,152.8

0.0714%

848.1

320.4

127.2

400.5

0

1,226.6

1980

144

3,347.7

1987

1,310.4

951.9

521.1

879.6

0.0370%

83.6

(38.1)

118.2

3.5

0

1,226.8

APPENDICES

2016
INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS,
SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2016 (continued)
Dollars in Millions
Income

Year

Total

Expenses and Losses

Assessment
Income

Assessment
Credits

Investment
and Other

Effective
Assessment
Rate1

Provision
for
Ins. Losses

Total

Admin.
and
Operating
Expenses2

Interest
& Other
Ins.
Expenses

Funding
Transfer
from the
FSLIC
Resolution Fund

Net
Income/
(Loss)

1979

1,090.4

881.0

524.6

734.0

0.0333%

93.7

(17.2)

106.8

4.1

0

996.7

1978

952.1

810.1

443.1

585.1

0.0385%

148.9

36.5

103.3

9.1

0

803.2

1977

837.8

731.3

411.9

518.4

0.0370%

113.6

20.8

89.3

3.5

0

724.2

1976

764.9

676.1

379.6

468.4

0.0370%

212.3

28.0

180.4

3.9

0

552.6

1975

689.3

641.3

362.4

410.4

0.0357%

97.5

27.6

67.7

2.2

0

591.8

1974

668.1

587.4

285.4

366.1

0.0435%

159.2

97.9

59.2

2.1

0

508.9

1973

561.0

529.4

283.4

315.0

0.0385%

108.2

52.5

54.4

1.3

0

452.8

1972

467.0

468.8

280.3

278.5

0.0333%

65.7

10.1

49.6

6.05

0

401.3

1971

415.3

417.2

241.4

239.5

0.0345%

60.3

13.4

46.9

0.0

0

355.0

1970

382.7

369.3

210.0

223.4

0.0357%

46.0

3.8

42.2

0.0

0

336.7

1969

335.8

364.2

220.2

191.8

0.0333%

34.5

1.0

33.5

0.0

0

301.3

1968

295.0

334.5

202.1

162.6

0.0333%

29.1

0.1

29.0

0.0

0

265.9

1967

263.0

303.1

182.4

142.3

0.0333%

27.3

2.9

24.4

0.0

0

235.7

1966

241.0

284.3

172.6

129.3

0.0323%

19.9

0.1

19.8

0.0

0

221.1

1965

214.6

260.5

158.3

112.4

0.0323%

22.9

5.2

17.7

0.0

0

191.7

1964

197.1

238.2

145.2

104.1

0.0323%

18.4

2.9

15.5

0.0

0

178.7

1963

181.9

220.6

136.4

97.7

0.0313%

15.1

0.7

14.4

0.0

0

166.8

1962

161.1

203.4

126.9

84.6

0.0313%

13.8

0.1

13.7

0.0

0

147.3

1961

147.3

188.9

115.5

73.9

0.0323%

14.8

1.6

13.2

0.0

0

132.5

1960

144.6

180.4

100.8

65.0

0.0370%

12.5

0.1

12.4

0.0

0

132.1

1959

136.5

178.2

99.6

57.9

0.0370%

12.1

0.2

11.9

0.0

0

124.4

1958

126.8

166.8

93.0

53.0

0.0370%

11.6

0.0

11.6

0.0

0

115.2

1957

117.3

159.3

90.2

48.2

0.0357%

9.7

0.1

9.6

0.0

0

107.6

1956

111.9

155.5

87.3

43.7

0.0370%

9.4

0.3

9.1

0.0

0

102.5

1955

105.8

151.5

85.4

39.7

0.0370%

9.0

0.3

8.7

0.0

0

96.8

1954

99.7

144.2

81.8

37.3

0.0357%

7.8

0.1

7.7

0.0

0

91.9

1953

94.2

138.7

78.5

34.0

0.0357%

7.3

0.1

7.2

0.0

0

86.9

1952

88.6

131.0

73.7

31.3

0.0370%

7.8

0.8

7.0

0.0

0

80.8

1951

83.5

124.3

70.0

29.2

0.0370%

6.6

0.0

6.6

0.0

0

76.9

4

1950

84.8

122.9

68.7

30.6

0.0370%

7.8

1.4

6.4

0.0

0

77.0

1949

151.1

122.7

0.0

28.4

0.0833%

6.4

0.3

6.1

0.0

0

144.7

1948

145.6

119.3

0.0

26.3

0.0833%

7.0

0.7

6.36

0.0

0

138.6

1947

157.5

114.4

0.0

43.1

0.0833%

9.9

0.1

9.8

0.0

0

147.6

1946

130.7

107.0

0.0

23.7

0.0833%

10.0

0.1

9.9

0.0

0

120.7

1945

121.0

93.7

0.0

27.3

0.0833%

9.4

0.1

9.3

0.0

0

111.6

1944

99.3

80.9

0.0

18.4

0.0833%

9.3

0.1

9.2

0.0

0

90.0

1943

86.6

70.0

0.0

16.6

0.0833%

9.8

0.2

9.6

0.0

0

76.8

1942

69.1

56.5

0.0

12.6

0.0833%

10.1

0.5

9.6

0.0

0

59.0

AP P ENDICES

145

ANNUAL REPORT
INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS,
SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2016 (continued)
Dollars in Millions
Income

Year

Expenses and Losses

Provision
for
Ins. Losses

Admin.
and
Operating
Expenses2

Interest
& Other
Ins.
Expenses

Funding
Transfer
from the
FSLIC
Resolution Fund

Assessment
Income

Total

Assessment
Credits

Investment
and Other

Effective
Assessment
Rate1

10.6

0.0833%

10.1

0.6

9.5

0.0

0

51.9

Total

Net
Income/
(Loss)

1941

62.0

51.4

0.0

1940

55.9

46.2

0.0

9.7

0.0833%

12.9

3.5

9.4

0.0

0

43.0

1939

51.2

40.7

0.0

10.5

0.0833%

16.4

7.2

9.2

0.0

0

34.8

1938

47.7

38.3

0.0

9.4

0.0833%

11.3

2.5

8.8

0.0

0

36.4

1937

48.2

38.8

0.0

9.4

0.0833%

12.2

3.7

8.5

0.0

0

36.0

1936

43.8

35.6

0.0

8.2

0.0833%

10.9

2.6

8.3

0.0

0

32.9

1935

20.8

11.5

0.0

9.3

0.0833%

11.3

2.8

8.5

0.0

0

9.5

1933-34

7.0

0.0

0.0

7.0

N/A

10.0

0.2

9.8

0.0

0

(3.0)

Figures represent only BIF-insured institutions prior to 1990, BIF- and SAIF-insured institutions from 1990 through 2005, and DIF-insured institutions
beginning in 2006. After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. The effective assessment
rate is calculated from annual assessment income (net of assessment credits), excluding transfers to the Financing Corporation (FICO), Resolution
Funding Corporation (REFCORP) and FSLIC Resolution Fund, divided by the four quarter average assessment base. The effective rates from 1950
through 1984 varied from the statutory rate of 0.0833 percent due to assessment credits provided in those years. The statutory rate increased to
0.12 percent in 1990 and to a minimum of 0.15 percent in 1991. The effective rates in 1991 and 1992 varied because the FDIC exercised new
authority to increase assessments above the statutory minimum rate when needed. Beginning in 1993, the effective rate was based on a risk-related
premium system under which institutions paid assessments in the range of 0.23 percent to 0.31 percent. In May 1995, the BIF reached the mandatory
recapitalization level of 1.25 percent. As a result, BIF assessment rates were reduced to a range of 0.04 percent to 0.31 percent of assessable
deposits, effective June 1995, and assessments totaling $1.5 billion were refunded in September 1995. Assessment rates for the BIF were lowered
again to a range of 0 to 0.27 percent of assessable deposits, effective the start of 1996. In 1996, the SAIF collected a one-time special assessment
of $4.5 billion. Subsequently, assessment rates for the SAIF were lowered to the same range as the BIF, effective October 1996. This range of rates
remained unchanged for both funds through 2006. As part of the implementation of the Federal Deposit Insurance Reform Act of 2005, assessment
rates were increased to a range of 0.05 percent to 0.43 percent of assessable deposits effective at the start of 2007, but many institutions received
a one-time assessment credit ($4.7 billion in total) to offset the new assessments. For the first quarter of 2009, assessment rates were increased to a
range of 0.12 to 0.50 percent of assessable deposits. On June 30, 2009, a special assessment was imposed on all insured banks and thrifts, which
amounted in aggregate to approximately $5.4 billion. For 8,106 institutions, with $9.3 trillion in assets, the special assessment was 5 basis points of
each institution’s assets minus tier one capital; 89 other institutions, with assets of $4.0 trillion, had their special assessment capped at 10 basis points
of their second quarter assessment base. From the second quarter of 2009 through the first quarter of 2011, initial assessment rates ranged between
0.12 and 0.45 percent of assessable deposits. Initial rates are subject to further adjustments. Beginning in the second quarter of 2011, the assessment
base changed to average total consolidated assets less average tangible equity (with certain adjustments for banker’s banks and custodial banks), as
required by the Dodd-Frank Act. The FDIC implemented a new assessment rate schedule at the same time to conform to the larger assessment base.
Initial assessment rates were lowered to a range of 0.05 to 0.35 percent of the new base. The annualized assessment rates averaged approximately
17.6 cents per $100 of assessable deposits for the first quarter of 2011 and 11.1 cents per $100 of the new base for the last three quarters of 2011
(which is the figure shown in the table). The annualized assessment rate for 2016 is based on full year assessment income divided by a four quarter
average of 2016 quarterly assessment base amounts. The assessment base for fourth quarter 2016 was estimated using the third quarter 2016
assessment base and an assumed quarterly growth rate of one percent. Beginning July 1, 2016 initial assessment rates were lowered from a range of
5 basis points to 35 basis points to a range of 3 basis points to 30 basis points, and an additional surcharge was imposed on large banks (generally
institutions with $10 billion or more in assets) of 4.5 basis points of their assessment base (after making adjustments).
1

2
These expenses, which are presented as operating expenses in the Statement of Income and Fund Balance, pertain to the FDIC in its corporate
capacity only and do not include costs that are charged to the failed bank receiverships that are managed by the FDIC. The receivership expenses are
presented as part of the “Receivables from Resolutions, net” line on the Balance Sheet. The narrative and graph presented on page 89 of this report
shows the aggregate (corporate and receivership) expenditures of the FDIC.
3

Includes $210 million for the cumulative effect of an accounting change for certain postretirement benefits (1992).

4

Includes a $106 million net loss on government securities (1976).

5

This amount represents interest and other insurance expenses from 1933 to 1972.

6

Includes the aggregate amount of $81 million of interest paid on capital stock between 1933 and 1948.

146

APPENDICES

2016
FDIC INSURED INSTITUTIONS CLOSED DURING 2016
Dollars in Thousands
Codes for Bank Class:
NM	 =	 State-chartered bank that is not a 	
		 member of the Federal Reserve System
N	 =	 National Bank

Name and Location

Bank
Class

Number
of
Deposit
Accounts

SB	 =	 Savings Bank
SI	 =	 Stock and Mutual
Savings Bank

SM	=	 State-chartered bank that is a
member of the Federal Reserve System
SA	=	 Savings Association

Total
Assets1

Total Deposits1

Insured
Deposit Funding
and Other
Disbursements

$18,998

$20,148

$21,119

$10,931

04/29/16

The Bank of
Fayette County
Piperton, TN

Estimated Loss
to
the DIF2

Date of
Closing
or Acquisition

Receiver/Assuming
Bank and Location

Purchase and Assumption - All Deposits
Trust Company Bank
Memphis, TN

NM

614

Whole Bank Purchase and Assumption - All Deposits
North Milwaukee
State Bank
Milwaukee, WI

2,548

$67,115

$61,493

$59,864

11,846

03/11/16

First-Citizens Bank
& Trust Company
Raleigh, NC

First CornerStone
Bank
King of Prussia, PA

NM

2,372

$103,307

$101,040

$97,455

12,482

05/06/16

First-Citizens Bank
& Trust Company
Raleigh, NC

The Woodbury
Banking Company
Woodbury, GA

NM

1,358

$21,426

$21,122

$20,475

$5,225

08/19/16

United Bank
Zebulon, GA

Allied Bank
Mulberry, AR
1

NM

SM

4,081

$66,336

$64,713

$61,271

$6,880

09/23/16

Today’s Bank
Huntsville, AR

Total Assets and Total Deposits data are based upon the last Call Report filed by the institution prior to failure.

Estimated losses are as of December 31, 2016. Estimated losses are routinely adjusted with updated information from new appraisals and asset
sales, which ultimately affect the asset values and projected recoveries. Represents the estimated loss to the DIF from deposit insurance obligations.
2

AP P ENDICES

147

ANNUAL REPORT
RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS
FOR THE PROTECTION OF DEPOSITORS, 1934 - 2016
Dollars in Thousands
Bank and Thrift Failures1

2016

Total
Assets3

Total
Deposits3

Funding4

2,615

Year2

Number
of Banks/
Thrifts

Recoveries5

Estimated
Additional
Recoveries

Final and
Estimated
Losses6

$941,561,675

$708,551,440

5

$277,182

$268,516

$582,315,734

$412,100,104

$63,283,794

$106,931,836

260,184

0

212,820

47,364

2015

8

6,706,038

4,870,464

4,559,009

730,994

2,921,111

906,904

2014

18

2,913,503

2,691,485

2,679,230

387,559

1,899,750

391,921

2013

24

6,044,051

5,132,246

5,019,216

217,015

3,549,064

1,253,137

2012

51

11,617,348

11,009,630

11,035,242

1,647,257

6,913,768

2,474,217

2011

92

34,922,997

31,071,862

30,705,964

2,847,739

21,329,461

6,528,764

2010

7

157

92,084,988

78,290,185

82,295,469

55,153,961

10,678,036

16,463,472

20097

140

169,709,160

137,835,121

136,056,847

94,312,538

14,205,363

27,538,946

2008

25

371,945,480

234,321,715

205,822,476

184,374,984

3,146,441

18,301,051

2007

3

2,614,928

2,424,187

1,920,576

1,461,932

297,359

161,285

2006

0

0

0

0

0

0

0

2005

0

0

0

0

0

0

0

2004

4

170,099

156,733

139,182

134,978

287

3,917

7

2003

3

947,317

901,978

883,772

812,933

2002

11

2,872,720

2,512,834

1,567,805

1,711,173

(493,685)

350,317

2001

4

1,821,760

1,661,214

21,131

1,138,677

(1,410,011)

292,465

2000

7

410,160

342,584

297,313

265,175

0

32,138

1999

8

1,592,189

1,320,573

1,308,225

711,758

9,324

587,143

1998

3

290,238

260,675

292,921

58,248

11,819

222,854

1997

1

27,923

27,511

25,546

20,520

0

5,026

1996

6

232,634

230,390

201,533

140,918

0

60,615

1995

6

802,124

776,387

609,043

524,571

0

84,472

1994

13

1,463,874

1,397,018

1,224,769

1,045,718

0

179,051

1993

41

3,828,939

3,509,341

3,841,658

3,209,012

0

632,646

1992

120

45,357,237

39,921,310

14,541,476

10,866,760

567

3,674,149

1991

124

64,556,512

52,972,034

21,501,145

15,496,730

4,128

6,000,287

1990

168

16,923,462

15,124,454

10,812,484

8,040,995

0

2,771,489

1989

206

28,930,572

24,152,468

11,443,281

5,247,995

0

6,195,286

1988

200

38,402,475

26,524,014

10,432,655

5,055,158

0

5,377,497

1987

184

6,928,889

6,599,180

4,876,994

3,014,502

0

1,862,492

1986

138

7,356,544

6,638,903

4,632,121

2,949,583

0

1,682,538

1985

116

3,090,897

2,889,801

2,154,955

1,506,776

0

648,179

1984

78

2,962,179

2,665,797

2,165,036

1,641,157

0

523,879

1983

44

3,580,132

2,832,184

3,042,392

1,973,037

0

1,069,355

1982

32

1,213,316

1,056,483

545,612

419,825

0

125,787

1981

7

108,749

100,154

114,944

105,956

0

8,988

8,192

62,647

1980

148

10

239,316

219,890

152,355

121,675

0

30,680

1934 - 1979

558

8,615,743

5,842,119

5,133,173

4,752,295

0

380,878

APPENDICES

2016
RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS
FOR THE PROTECTION OF DEPOSITORS, 1934 - 2016
Dollars in Thousands
Assistance Transactions1
Number
of Banks/
Thrifts

Year2

154

Total
Assets3

Total
Deposits3

Recoveries5

Funding4

$3,317,099,253 $1,442,173,417

Estimated
Additional
Recoveries

Final and
Estimated
Losses6

$11,630,356

$6,199,875

0

$5,430,481

2016

0

0

0

0

0

0

0

2015

0

0

0

0

0

0

0

2014

0

0

0

0

0

0

0

2013

0

0

0

0

0

0

0

2012

0

0

0

0

0

0

0

2011

0

0

0

0

0

0

0

2010

0

0

0

0

0

0

0

20098

8

1,917,482,183

1,090,318,282

0

0

0

0

2008

5

1,306,041,994

280,806,966

0

0

0

0

2007

0

0

0

0

0

0

0

2006

0

0

0

0

0

0

0

2005

0

0

0

0

0

0

0

2004

0

0

0

0

0

0

0

2003

0

0

0

0

0

0

0

2002

0

0

0

0

0

0

0

2001

0

0

0

0

0

0

0

2000

0

0

0

0

0

0

0

1999

0

0

0

0

0

0

0

1998

0

0

0

0

0

0

0

1997

0

0

0

0

0

0

0

1996

0

0

0

0

0

0

0

1995

0

0

0

0

0

0

0

1994

0

0

0

0

0

0

0

1993

0

0

0

0

0

0

0

1992

2

33,831

33,117

1,486

1,236

0

250

1991

3

78,524

75,720

6,117

3,093

0

3,024

1990

1

14,206

14,628

4,935

2,597

0

2,338

8

1989

1

4,438

6,396

2,548

252

0

2,296

1988

80

15,493,939

11,793,702

1,730,351

189,709

0

1,540,642

1987

19

2,478,124

2,275,642

160,877

713

0

160,164

1986

7

712,558

585,248

158,848

65,669

0

93,179

1985

4

5,886,381

5,580,359

765,732

406,676

0

359,056

AP P ENDICES

149

ANNUAL REPORT
RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS
FOR THE PROTECTION OF DEPOSITORS, 1934 - 2016 (continued)
Dollars in Thousands
Assistance Transactions1
Year2
1984

Number
of Banks/
Thrifts
2

Total
Assets3

Total
Deposits3

40,470,332

29,088,247

Recoveries5

Estimated
Additional
Recoveries

Final and
Estimated
Losses6

5,531,179

4,414,904

0

1,116,275

Funding4

1983

3,611,549

3,011,406

764,690

427,007

0

337,683

10

10,509,286

9,118,382

1,729,538

686,754

0

1,042,784

1981

3

4,838,612

3,914,268

774,055

1,265

0

772,790

1980

1

7,953,042

5,001,755

0

0

0

0

1934 - 1979
1

4

1982

4

1,490,254

549,299

0

0

0

0

Institutions for which the FDIC is appointed receiver, including deposit payoff, insured deposit transfer, and deposit assumption cases.	

For 1990 through 2005, amounts represent the sum of BIF and SAIF failures (excluding those handled by the RTC); prior to 1990, figures are only
for the BIF. After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. For 2006 to 2016, figures are
for the DIF.
2

3

Assets and deposit data are based on the last Call Report or TFR filed before failure.

Funding represents the amounts provided by the DIF to receiverships for subrogated claims, advances for working capital, and administrative
expenses paid on their behalf. Beginning in 2008, the DIF resolves failures using whole-bank purchase and assumption transactions, most with an
accompanying shared-loss agreement (SLA). The DIF satifies any resulting liabilities by offsetting receivables from resolutions when receiverships
declare a dividend and/or sending cash directly to receiverships to fund an SLA and other expenses.
4

5

Recoveries represent cash received and dividends (cash and non-cash) declared by receiverships.

Final losses represent actual losses for unreimbursed subrogated claims of inactivated receiverships. Estimated losses represent the difference
between the amount paid by the DIF to cover obligations to insured depositors and the estimated recoveries from the liquidation of receivership
assets.
6

7
Includes amounts related to transaction account coverage under the Transaction Account Guarantee Program (TAG). The estimated losses as of
December 31, 2016, for TAG accounts in 2010, 2009, and 2008 are $381 million, $1.1 billion, and $13 million, respectively.
8

150

Includes institutions where assistance was provided under a systemic risk determination.

APPENDICES

2016
NUMBER, ASSETS, DEPOSITS, LOSSES, AND LOSS TO FUNDS OF INSURED THRIFTS
TAKEN OVER OR CLOSED BECAUSE OF FINANCIAL DIFFICULTIES, 1989 THROUGH 19951
Dollars in Thousands
Year

Total

Assets

Deposits

Estimated
Receivership
Loss2

Total

748

$393,986,574

$318,328,770

$75,977,846

$81,581,578

1995

2

423,819

414,692

28,192

27,750

Loss to
Fund3

1994

2

136,815

127,508

11,472

14,599

1993

10

6,147,962

5,708,253

267,595

65,212

1992

59

44,196,946

34,773,224

3,286,908

3,832,145

1991

144

78,898,904

65,173,122

9,235,967

9,734,263

1990

213

129,662,498

98,963,962

16,062,685

19,257,578

19894

318

134,519,630

113,168,009

47,085,027

48,650,031

1
Beginning in 1989 through July 1, 1995, all thrift closings were the responsibility of the Resolution Trust Corporation (RTC). Since the RTC was
terminated on December 31, 1995, and all assets and liabilities transferred to the FSLIC Resolution Fund (FRF), all the results of the thrift closing activity
from 1989 through 1995 are now reflected on the FRF’s books. Year is the year of failure, not the year of resolution.
2
The Estimated Receivership Loss represents the projected loss at the fund level from receiverships for unreimbursed subrogated claims of the FRF and
unpaid advances to receiverships from the FRF.
3
The Final Loss to Fund represents the total resolution cost of the failed thrifts in the FRF-RTC fund. In addition to the estimated losses for
receiverships, the final loss includes corporate revenue and expense items, such as interest expense on Federal Financing Bank debt, interest expense
on escrowed funds, and interest revenue on advances to receiverships.
4

Total for 1989 excludes nine failures of the former FSLIC.

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ANNUAL REPORT
B. MORE ABOUT THE FDIC
FDIC BOARD OF DIRECTORS

Seated (left to right): Thomas M. Hoenig and Martin J. Gruenberg.
Standing (left to right): Thomas J. Curry and Richard Cordray.

Martin J. Gruenberg
Martin J. Gruenberg is the 20th Chairman of the
FDIC, receiving Senate confirmation on November
15, 2012, for a five-year term. Mr. Gruenberg
served as Vice Chairman and Member of the FDIC
Board of Directors from August 22, 2005, until his
confirmation as Chairman. He served as Acting
Chairman from July 9, 2011, to November 15, 2012,
and also from November 16, 2005, to June 26, 2006.
Mr. Gruenberg joined the FDIC Board after broad
congressional experience in the financial services and

152

regulatory areas. He served as Senior Counsel to
Senator Paul S. Sarbanes (D-MD) on the staff of the
Senate Committee on Banking, Housing, and Urban
Affairs from 1993 to 2005. Mr. Gruenberg advised
the Senator on issues of domestic and international
financial regulation, monetary policy, and trade.
He also served as Staff Director of the Banking
Committee’s Subcommittee on International Finance
and Monetary Policy from 1987 to 1992. Major
legislation in which Mr. Gruenberg played an active
role during his service on the Committee includes
the Financial Institutions Reform, Recovery, and

APPENDICES

2016
Enforcement Act of 1989 (FIRREA); the Federal
Deposit Insurance Corporation Improvement Act of
1991 (FDICIA); the Gramm-Leach-Bliley Act; and
the Sarbanes-Oxley Act of 2002.

Thomas J. Curry

Mr. Gruenberg served as Chairman of the Executive
Council and President of the International Association
of Deposit Insurers (IADI) from November 2007 to
November 2012.

The Comptroller of the Currency is the administrator
of national banks and federal savings associations,
and chief officer of the Office of the Comptroller
of the Currency (OCC). The OCC supervises
approximately 1,700 national banks and federal
savings associations and about 50 federal branches and
agencies of foreign banks in the United States. These
institutions comprise nearly two-thirds of the assets
of the commercial banking system. The Comptroller
is a Director of NeighborWorks® America where he
served as Chairman from March 2014 through June
2016, and also a member of the Federal Financial
Institutions Examination Council (FFIEC) where he
served as Chairman for a two-year term from April
2013 until April 2015.

Mr. Gruenberg holds a J.D. from Case Western
Reserve Law School and an A.B. from Princeton
University, Woodrow Wilson School of Public and
International Affairs.

Thomas M. Hoenig
Thomas M. Hoenig was confirmed by the Senate as
Vice Chairman of the FDIC on November 15, 2012.
He joined the FDIC on April 16, 2012, as a member
of the Board of Directors of the FDIC for a six-year
term. He is also a member of the Executive Board of
the International Association of Deposit Insurers.
Prior to serving on the FDIC Board, Mr. Hoenig was
the President of the Federal Reserve Bank of Kansas
City and a member of the Federal Reserve System’s
Federal Open Market Committee from 1991 to 2011.
Mr. Hoenig was with the Federal Reserve for 38
years, beginning as an economist, and then as a
senior officer in banking supervision during the U.S.
banking crisis of the 1980s. In 1986, he led the
Kansas City Federal Reserve Bank’s Division of Bank
Supervision and Structure, directing the oversight of
more than 1,000 banks and bank holding companies
with assets ranging from less than $100 million to
$20 billion. He became President of the Kansas City
Federal Reserve Bank on October 1, 1991.
Mr. Hoenig is a native of Fort Madison, Iowa,
and received a doctorate in economics from Iowa
State University.

Thomas J. Curry was sworn in as the 30th
Comptroller of the Currency on April 9, 2012.

Prior to becoming Comptroller of the Currency,
Mr. Curry served as a Director of the FDIC Board
since January 2004, and as the Chairman of the
NeighborWorks® America Board of Directors.
Prior to joining the FDIC’s Board of Directors, Mr.
Curry served five Massachusetts Governors as the
Commonwealth’s Commissioner of Banks from 1990
to 1991 and from 1995 to 2003. He served as Acting
Commissioner from February 1994 to June 1995. He
previously served as First Deputy Commissioner and
Assistant General Counsel within the Massachusetts
Division of Banks. He entered state government in
1982 as an attorney with the Massachusetts’ Secretary
of State’s Office.
Mr. Curry served as the Chairman of the Conference
of State Bank Supervisors from 2000 to 2001, and
served two terms on the State Liaison Committee
of the Federal Financial Institutions Examination
Council, including a term as Committee Chairman.
He is a graduate of Manhattan College (summa cum
laude), where he was elected to Phi Beta Kappa. He
received his law degree from the New England School
of Law.

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ANNUAL REPORT
Richard Cordray
Richard Cordray serves as the first Director of
the Consumer Financial Protection Bureau. He
previously led the Bureau’s Enforcement Division.
Prior to joining the Bureau, Mr. Cordray served
on the front lines of consumer protection as Ohio’s
Attorney General. Mr. Cordray recovered more than
$2 billion for Ohio’s retirees, investors, and business
owners, and took major steps to help protect its
consumers from fraudulent foreclosures and financial
predators. In 2010, his office responded to a record
number of consumer complaints, but Mr. Cordray
went further and opened that process for the first
time to small businesses and nonprofit organizations
to ensure protections for even more Ohioans. To
recognize his work on behalf of consumers as Attorney
General, the Better Business Bureau presented
Mr. Cordray with an award for promoting an
ethical marketplace.
Mr. Cordray also served as Ohio Treasurer and
Franklin County Treasurer, two elected positions in
which he led state and county banking, investment,
debt, and financing activities. As Ohio Treasurer, he
resurrected a defunct economic development program

154

that provides low-interest loan assistance to small
businesses to create jobs, re-launched the original
concept as GrowNOW, and pumped hundreds of
millions of dollars into access for credit to small
businesses. Mr. Cordray simultaneously created a
Bankers Advisory Council to share ideas about the
program with community bankers across Ohio.
Earlier in his career, Mr. Cordray was an adjunct
professor at the Ohio State University College of
Law, served as a State Representative for the 33rd
Ohio House District, was the first Solicitor General
in Ohio’s history, and was a sole practitioner and
Counsel to Kirkland & Ellis. Mr. Cordray has
argued seven cases before the United States Supreme
Court, by special appointment of both the Clinton
and Bush Justice Departments. He is a graduate of
Michigan State University, Oxford University, and
the University of Chicago Law School. Mr. Cordray
was Editor-in-Chief of the University of Chicago Law
Review and later clerked for U.S. Supreme Court
Justices Byron White and Anthony Kennedy.
Mr. Cordray lives in Grove City, Ohio, with his wife
Peggy—a Professor at Capital University Law School
in Columbus—and twin children Danny and Holly.

APPENDICES

AP P ENDICES
DIVISION OF DEPOSITOR
AND CONSUMER PROTECTION

OFFICE OF
COMMUNICATIONS

Board Member

Vacant
FDIC

Director

Mark E. Pearce

Doreen R. Eberley

Director

DIVISION OF RISK
MANAGEMENT SUPERVISION

Chief Learning Officer and Director

Suzannah L. Susser

CORPORATE UNIVERSITY

Director

Arleas Upton Kea

DIVISION OF
ADMINISTRATION

Director

Craig R. Jarvill

DIVISION OF FINANCE

Vice Chairman, Board Member

Thomas M. Hoenig
FDIC

DEPUTY TO THE CHAIRMAN

Kymberly K. Copa

DEPUTY TO THE CHAIRMAN
FOR COMMUNICATIONS

Barbara Hagenbaugh

DIVISION OF RESOLUTION
AND RECEIVERSHIPS

Lawrence Gross, Jr.

CHIEF INFORMATION OFFICER
AND PRIVACY OFFICER

Jason C. Cave

SPECIAL ADVISOR FOR
SUPERVISORY MATTERS

Acting Chief Risk Officer

Lee Price

Director

Bret D. Edwards

Arthur J. Murton
Director

OFFICE OF COMPLEX
FINANCIAL INSTITUTIONS

Michele A. Heller

WRITER-EDITOR

Acting Inspector General

Fred W. Gibson

OFFICE OF INSPECTOR GENERAL

Robert D. Harris

INTERNAL OMBUDSMAN

David S. Hoelscher

CHIEF RISK OFFICER

Barbara A. Ryan

Steven O. App

SENIOR ADVISOR
INTERNATIONAL RESOLUTION POLICY

DEPUTY TO THE CHAIRMAN
AND CHIEF OPERATING OFFICER,
CHIEF OF STAFF

DEPUTY TO THE CHAIRMAN
AND CHIEF FINANCIAL OFFICER

Chairman

Martin J. Gruenberg
FDIC

BOARD OF DIRECTORS

Charles Yi

General Counsel

LEGAL DIVISION

Noreen Padilla

Acting Chief Information
Security Officer

INFORMATION SECURITY
AND PRIVACY STAFF

Director

Russell G. Pittman

DIVISION OF INFORMATION
TECHOLOGY

Board Member

Thomas J. Curry
OCC

FDIC ORGANIZATION CHART/OFFICIALS

Director

Diane Ellis

DIVISION OF INSURANCE
AND RESEARCH

Acting Ombudsman

Gordon Talbot

OFFICE OF
THE OMBUDSMAN

Director

Andy Jiminez

OFFICE OF
LEGISLATIVE AFFAIRS

Acting Director

Avelino Rodriguez

OFFICE OF MINORITY AND
WOMEN INCLUSION

Administrative Law Judge

C. Richard Miserendino

OFFICE OF FINANCIAL
INSTITUTION ADJUDICATION

Board Member

Richard Cordray
CFPB

2016

155

ANNUAL REPORT
CORPORATE STAFFING
STAFFING TRENDS 2007-2016
9000

6000

3000

0

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

4,532

4,988

6,557

8,150

7,973

7,476

7,254

6,631

6,385

6,096

FDIC Year–End On-Board Staffing
Note: 2007–2016 staffing totals reflect year-end full time equivalent staff. Prior to 2008, staffing totals reflect total employees
on-board.

156

APPENDICES

2016
NUMBER OF EMPLOYEES BY DIVISION/OFFICE 2015 AND 2016 (YEAR-END)1
 

Total
Division or Office:

Executive Offices2
TOTAL

Regional/Field

3

2016

2015

2016

2015

2016

2015

2,627

2,683

204

208

2,423

2,475

838

841

116

122

722

719

537

719

138

149

399

570

531

564

340

356

191

208

370

367

256

251

114

116

301

319

237

252

64

67

210

194

202

187

8

7

193

205

153

163

40

42

167

171

164

169

3

2

34

36

34

36

0

0

122

119

76

74

47

46

67

62

50

52

17

10

22

Division of Risk Management Supervision
Division of Depositor and Consumer Protection
Division of Resolutions and Receiverships
Legal Division
Division of Administration
Division of Information Technology
Corporate University
Division of Insurance and Research
Division of Finance
Information Security and Privacy Staff
Office of Inspector General
Office of Complex Financial Institutions
Executive Support Offices

Washington

22

22

22

0

0

79

84

72

76

7

8

6,096

6,385

2,062

2,115

4,034

4,270

The FDIC reports staffing totals using a full-time equivalent methodology, which is based on an employee’s scheduled work hours. Division/Office
staffing has been rounded to the nearest whole FTE. Totals may not foot due to rounding.
1

2

Includes the Offices of the Chairman, Vice Chairman, Director (Appointive), Chief Operating Officer, Chief Financial Officer, and Chief Information Officer.

3

Includes the Offices of Legislative Affairs, Communications, Ombudsman, Minority and Women Inclusion, and Corporate Risk Management.

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ANNUAL REPORT
SOURCES OF INFORMATION
FDIC Website
www.fdic.gov

Public Information Center

A wide range of banking, consumer, and financial
information is available on the FDIC’s website. This
includes the FDIC’s Electronic Deposit Insurance
Estimator (EDIE), which estimates an individual’s
deposit insurance coverage; the Institution Directory,
which contains financial profiles of FDIC-insured
institutions; Community Reinvestment Act
evaluations and ratings for institutions supervised by
the FDIC; Call Reports, which are bank reports of
condition and income; and Money Smart, a training
program to help individuals outside the financial
mainstream enhance their money management skills
and create positive banking relationships. Readers
also can access a variety of consumer pamphlets,
FDIC press releases, speeches, and other updates on
the agency’s activities, as well as corporate databases
and customized reports of FDIC and banking
industry information.
FDIC Call Center
Phone:	 877-275-3342 (877-ASK-FDIC)
	703-562-2222

Phone:	 877-275-3342 (877-ASK-FDIC),
	
703-562-2200
Fax:	703-562-2296
FDIC Online Catalog: https://catalog.fdic.gov
E-mail: publicinfo@fdic.gov
Publications such as FDIC Quarterly and Consumer
News and a variety of deposit insurance and
consumer pamphlets are available at www.fdic.gov
or may be ordered in hard copy through the
FDIC online catalog. Other information, press
releases, speeches and congressional testimony,
directives to financial institutions, policy
manuals, and FDIC documents are available
on request through the Public Information
Center. Hours of operation are 9:00 a.m. to
4:00 p.m., Eastern Time, Monday – Friday.
Office of the Ombudsman

Hearing Impaired:	800-925-4618
	703-562-2289 	
The FDIC Call Center in Washington, DC, is the
primary telephone point of contact for general
questions from the banking community, the public,
and FDIC employees. The Call Center directly, or
with other FDIC subject matter experts, responds to
questions about deposit insurance and other consumer
issues and concerns, as well as questions about FDIC
programs and activities. The Call Center also refers
callers to other federal and state agencies as needed.
Hours of operation are 8:00 a.m. to 8:00 p.m.,
Eastern Time, Monday – Friday, and 9:00 a.m. to
5:00 p.m., Saturday – Sunday. Recorded information
about deposit insurance and other topics is available
24 hours a day at the same telephone number.
As a customer service, the FDIC Call Center has
many bilingual Spanish agents on staff and has access
to a translation service, which is able to assist with
over 40 different languages.

158

3501 Fairfax Drive
Room E-1021
Arlington, VA 22226

3501 Fairfax Drive
Room E-2022
Arlington, VA 22226
Phone: 877-275-3342 (877-ASK-FDIC)
Fax:	703-562-6057
E-mail: ombudsman@fdic.gov
The Office of the Ombudsman (OO) is an
independent, neutral, and confidential resource and
liaison for the banking industry and the general
public. The OO responds to inquiries about the
FDIC in a fair, impartial, and timely manner. It
researches questions and fields complaints from
bankers and bank customers. OO representatives
are present at all bank closings to provide accurate
information to bank customers, the media, bank
employees, and the general public. The OO also
recommends ways to improve FDIC operations,
regulations, and customer service.

APPENDICES

2016
REGIONAL AND AREA OFFICES
Atlanta Regional Office

Chicago Regional Office

Michael J. Dean, Regional Director
10 Tenth Street, NE
Suite 800
Atlanta, Georgia 30309
(678) 916-2200

M. Anthony Lowe, Regional Director
300 South Riverside Plaza
Suite 1700
Chicago, Illinois 60606
(312) 382-6000

Alabama
Florida
Georgia
North Carolina
South Carolina
Virginia
West Virginia

Illinois
Indiana
Kentucky
Michigan
Ohio
Wisconsin

Dallas Regional Office

Memphis Area Office

Kristie K. Elmquist, Regional Director
1601 Bryan Street
Dallas, Texas 75201
(214) 754-0098

Kristie K. Elmquist, Director
6060 Primacy Parkway
Suite 300
Memphis, Tennessee 38119
(901) 685-1603

Colorado
New Mexico
Oklahoma
Texas

Arkansas
Louisiana
Mississippi
Tennessee

Kansas City Regional Office

New York Regional Office

James D. LaPierre, Regional Director
1100 Walnut Street
Suite 2100
Kansas City, Missouri 64106
(816) 234-8000

John F. Vogel, Regional Director
350 Fifth Avenue
Suite 1200
New York, New York 10118
(917) 320-2500

Iowa
Kansas
Minnesota
Missouri
Nebraska
North Dakota
South Dakota

Delaware
District of Columbia
Maryland
New Jersey
New York
Pennsylvania
Puerto Rico
Virgin Islands
AP P ENDICES

159

ANNUAL REPORT
Boston Area Office

San Francisco Regional Office

John F. Vogel, Director
15 Braintree Hill Office Park
Suite 100
Braintree, Massachusetts 02184
(781) 794-5500

Kathy L. Moe, Acting Regional Director
25 Jessie Street at Ecker Square
Suite 2300
San Francisco, California 94105
(415) 546-0160

Connecticut
Maine
Massachusetts
New Hampshire
Rhode Island
Vermont

Alaska
American Samoa
Arizona
California
Federated States of Micronesia
Guam
Hawaii
Idaho
Montana
Nevada
Oregon
Utah
Washington
Wyoming

160

APPENDICES

2016
C. OFFICE OF INSPECTOR GENERAL’S
ASSESSMENT OF THE MANAGEMENT
AND PERFORMANCE CHALLENGES
FACING THE FDIC
Under the Reports Consolidation Act of 2000,
the Office of Inspector General (OIG) identifies
the management and performance challenges
facing the FDIC and provides its assessment to the
Corporation for inclusion in the FDIC’s annual
performance and accountability report. In doing
so, we keep in mind the FDIC’s overall program
and operational responsibilities; financial industry,
economic, and technological conditions and trends;
areas of congressional interest and concern; relevant
laws and regulations; the Chairman’s priorities and
corresponding corporate goals; and ongoing activities
to address the issues involved. The OIG believes that
for the foreseeable future, the FDIC faces challenges
in the critical areas listed below, a number of which
carry over from past years. A challenge of particular
emphasis this year is Maintaining Strong Information
Security and Governance Practices. We would point
out that all of these challenges may well be impacted
by changes brought on by a new Administration
during 2017.

Maintaining Strong Information Security
and Governance Practices
Essential to achieving the FDIC’s mission of
maintaining stability and public confidence in the
nation’s financial system is safeguarding sensitive
information, including personally identifiable
information that the FDIC collects and manages
in its role as employer, federal deposit insurer,
regulator of state nonmember financial institutions,
and receiver of failed institutions. Materials that
the FDIC possesses related to its Dodd-Frank
Wall Street Reform and Consumer Protection Act
(Dodd-Frank Act) responsibilities contain some
of the most sensitive information that the FDIC
maintains and safeguarding it from unauthorized

access or disclosure is critically important. Equally
important to the FDIC and the Nation is the defense
of critical infrastructure, which includes financial
systems and associated computer network operations.
In that regard, the Federal Information Security
Modernization Act (FISMA) of 2014 establishes
standards to assess information security government
wide. The OIG’s FISMA work is intended not only
to ensure compliance with those standards but also
to help defend the critical infrastructure against those
who would attack it.
The FDIC has recently come under increased scrutiny
by the Congress for specific actions it has taken
related to protecting sensitive information and has
been criticized for its reporting of breaches of such
information, as required by FISMA and related Office
of Management and Budget (OMB) guidance. The
Corporation’s continuing challenge will be to restore
confidence both in its ability to protect the sensitive
information it possesses and its actions to fully report
major security incidents within prescribed timeframes,
as required by law. Our office reported and testified
before the Committee on Science, Space, and
Technology, U.S. House of Representatives, on our
work in two areas in this regard, and we continue to
conduct work on related matters.
One audit dealt with the FDIC’s process for
identifying and reporting major information security
incidents and focused on an incident where a former
FDIC employee copied a large quantity of sensitive
FDIC information, including personally identifiable
information, to removable media and took this
information when departing the FDIC’s employment
in October 2015. The FDIC detected the incident
through its Data Loss Prevention tool. Although
the FDIC had established various incident response
policies, procedures, guidelines, and processes, these
controls did not provide reasonable assurance that
major incidents were identified and reported in a
timely manner. We recommended actions to provide
the FDIC with greater assurance that major incidents
are identified and reported consistent with relevant
guidance.

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ANNUAL REPORT
In a second audit, we reviewed the Corporation’s
controls for mitigating the risk of an unauthorized
release of highly sensitive resolution plans. In
September 2015, an FDIC employee abruptly
resigned from the Corporation and took copies of
sensitive components of resolution plans without
authorization and in violation of FDIC policy. A
number of factors contributed to this security
incident. Most notably, an insider threat program
was not in place that would have better enabled the
FDIC to deter, detect, and mitigate the risks posed
by the employee. Additionally, a key security control
designed to prevent employees with access to sensitive
resolution plans from copying electronic information
to removable media failed to operate as intended.
To address these concerns, we recommended that
the FDIC establish a corporate-wide insider threat
program and take other steps to better protect
sensitive resolution plans. On September 20,
2016, the Corporation issued a policy formally
establishing its Insider Threat and Counterintelligence
Program and finalized a governance charter and
implementation plan for the program.
As noted earlier, more broadly speaking, the OIG
looks to its annual work under FISMA to identify
the Corporation’s information security successes and
its ongoing challenges. Our most recent FISMA
work determined that the FDIC had established a
number of information security program controls
and practices that were generally consistent with
FISMA requirements, OMB policy and guidelines,
and applicable National Institute of Standards
and Technology (NIST) standards and guidelines.
The FDIC had also taken steps to strengthen its
security program controls following our 2015
FISMA work. Among other things, the FDIC:
restricted (with limited exceptions) the ability
of employees and contractor personnel to copy
information to removable media in response to the
major information security incidents involving the
unauthorized exfiltration of sensitive information by
departing employees; identified and reported its high
value assets to the Department of Homeland Security
(DHS); and updated its security control framework

162

to address changes introduced by NIST guidance
related to security and privacy controls for federal
information systems and organizations.
Notwithstanding these actions, our FISMA audit
found security control weaknesses that impaired
the effectiveness of the FDIC’s information security
program and practices and placed the confidentiality,
integrity, and availability of the FDIC’s information
systems and data at elevated risk. Some findings were
identified during the current year and others were
identified in prior reports issued by the OIG or the
Government Accountability Office. Areas of notable
weakness that continue to pose challenges for the
Corporation include strategic planning, vulnerability
scanning, the FDIC’s information security manager
program, configuration management, third-party
software patching, multifactor authentication, and
contingency planning.
The FDIC is working to strengthen the effectiveness
of its information security program controls in a
number of other areas. For example, the FDIC is
working to improve its incident response capabilities;
more effectively protect its sensitive information
by improving the effectiveness of its Data Loss
Prevention tool and adopting Digital Rights
Management software; complete an end-to-end
assessment of its information security and privacy
programs; hire a permanent Chief Information
Security Officer (CISO); and begin addressing action
items identified during a Cyber Stat Review with
OMB and DHS officials aimed at improving the
FDIC’s cybersecurity posture.
Other ongoing challenges for the Corporation that we
pointed out involve a risk related to the performance
of the vendor that supports the FDIC’s infrastructure
services and an observation on the frequent turnover
in the CISO position and whether the CISO’s
authorities enable the CISO to effectively address the
responsibilities defined in FISMA.
Going forward, a challenging priority for the FDIC
will be to maintain effective communication with
the Congress and collaboration among all parties

APPENDICES

2016
involved in protecting sensitive information and the
Nation’s critical infrastructure. Doing so will require
strong leadership and an effective IT governance
structure. In addition, in confronting its information
security challenges, competing priorities must be
carefully considered, and sound decision-making will
be critical to the Corporation’s success. Given the
substantial financial investment in FDIC systems,
security features, and related human resources, the
Corporation needs to consider the cost-effectiveness
and measurable business value outcomes in its
decisions to fund major IT projects to ensure proper
stewardship of millions of dollars in IT investments.

Carrying Out Dodd-Frank Act Responsibilities
The Dodd-Frank Act created a comprehensive new
regulatory and resolution framework designed to
avoid the severe consequences of financial instability.
Under current law, Title I of the Dodd-Frank Act
provides tools for regulators to impose enhanced
supervision and prudential standards on systemically
important financial institutions (SIFI). Title II
provides the FDIC with a new orderly liquidation
authority for SIFIs, subject to a systemic risk
determination by statutorily designated regulators.
The FDIC has made progress toward implementing
its systemic resolution authorities under the
Dodd-Frank Act, but challenges remain. These
challenges involve the FDIC fulfilling its insurance,
supervisory, receivership management, and resolution
responsibilities as it meets the requirements of the
Dodd-Frank Act. These responsibilities are crosscutting and require collaborative efforts among staff
throughout the Corporation’s headquarters and
regional divisions and offices in implementing Titles
I and II, including the Office of Complex Financial
Institutions (OCFI), Division of Risk Management
Supervision (RMS), Division of Resolutions and
Receiverships (DRR), and Legal Division.
Of note with respect to the challenge of Dodd-Frank
Act responsibilities, in April 2016, the FDIC and the
Federal Reserve Board (FRB) announced a significant

step forward in the use of the “living will” authority
to require systemically important financial institutions
to demonstrate they can fail in an orderly way at no
cost to taxpayers. Specifically, following eight firms’
submission of their living wills or resolution plans
in July 2015, the FDIC and the Federal Reserve
announced findings based on their review of the plans
and conveyed required actions that firms needed
to take for remediation. For five firms, the agencies
jointly determined that the plans were not credible
or would not facilitate an orderly resolution under
bankruptcy. The FDIC and FRB jointly identified
a number of deficiencies in those plans, as required
by statute. Those five firms were required to remedy
the deficiencies by October 1, 2016. If not, the firms
could be subject to more stringent capital, leverage,
or liquidity requirements, or restrictions on growth,
activities, or operations. On December 13, 2016, the
FDIC and the FRB announced that four of the five
firms had adequately remediated deficiencies in their
2015 plans.
For two other firms, the FDIC and the FRB did not
make a joint determination, but did find separately
that in the two cases, the plans were not credible
and would not facilitate an orderly resolution under
bankruptcy. For the eighth and final firm, the
shortcomings did not rise to the level of the statutory
standard for a joint determination of non-credibility.
In addition to the October deadline for the five plans
referenced above, all shortcomings in the plans must
be addressed by July 1, 2017.
Those involved in Dodd-Frank Act activities will
continue to evaluate the resolution plans submitted
by the largest bank holding companies and other
SIFIs under Title I, develop strategies for resolving
SIFIs under Title II, work to promote cross-border
coordination and cooperation for the orderly
resolution of a global SIFI, and coordinate with the
other regulators in developing policy to implement
the provisions of the Act.
Also, the FDIC will need to ensure that staff have
the needed knowledge and experience to continue

AP P ENDICES

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ANNUAL REPORT
to carry out risk assessments to identify supervisory,
resolution, and insurance pricing-related risks in all
insured depository institutions with more than $10
billion in assets, including those for which the FDIC
is not the primary federal regulator, in addition to
systemically important bank holding companies and
nonbank financial companies subject to Title I of the
Dodd-Frank Act.

Maintaining Effective Supervision and
Preserving Community Banking
The FDIC’s supervision program promotes the
safety and soundness of FDIC-supervised insured
depository institutions. The FDIC is the primary
federal regulator for 3,790 FDIC-insured, statechartered institutions that are not members of the
Board of Governors of the Federal Reserve System.
As such, the FDIC is the lead federal regulator for
the majority of community banks. In the case of “de
novo” institutions, the FDIC needs to continue to
emphasize that these new banks satisfactorily address
statutory factors, including adequacy of capital, future
earnings prospects, and the general character and
fitness of bank management.
We have pointed out in our past work that a key
lesson from the crisis is the need for earlier regulatory
response when risks are building. Even now, for
example, as they operate in a post-crisis environment,
banks may be tempted to take additional risks, engage
in imprudent concentrations, or loosen underwriting
standards. Some banks are also introducing new
products or lines of business or seeking new sources
for non-interest income, all of which can lead to
interest rate risk, credit risk, operational risk, and
reputational risk. Such risks need to be managed and
addressed early-on during the “good times” before a
period of downturn. RMS has continued to reinforce
the importance of forward-looking supervision to
assess the potential impact of an institution’s new and/
or growing risks and ensure early mitigation when
necessary.
FDIC examiners need to continue to identify
problems; bring them to bank management’s

164

attention; follow up on problems; bring enforcement
actions as needed; ban individuals from banking, as
appropriate; and be alert to such risks as Bank Secrecy
Act and anti-money-laundering issues. In doing
so, the Corporation needs to execute its supervisory
authority in a fair, consistent manner. With respect
to important international concerns, the FDIC
also needs to support development of sound global
regulatory policy through participation on the Basel
Committee on Bank Supervision and other related
sub-groups.
In light of technological changes, increased use of
technology service providers (TSP), new delivery
channels, and cyber threats, we have pointed out in
past work that the FDIC’s IT examination program
needs to be proactive and bankers and Boards of
Directors need to ensure a strong control environment
and sound risk management and governance practices
in their institutions. Importantly, with respect
to TSPs, one TSP can service hundreds or even
thousands of financial institutions, so the impact of
security incidents in one TSP can have devastating
ripple effects on those institutions. Controls need to
be designed not only to protect sensitive customer
information at banks and TSPs, but also to guard
against intrusions that can compromise the integrity
and availability of operations, information and
transaction processing systems, data, and business
continuity. Given the complexities of the range
of cyber threats, the FDIC needs to ensure its
examination workforce has the needed expertise to
effectively carry out its IT examination function.
An article in the FDIC’s Winter 2015 issue of
Supervisory Insights highlights a number of steps the
Corporation has taken to increase industry awareness
of cyber risks and to provide practical tools to help
mitigate the risk of cyber attacks. Among those,
the FDIC has urged institutions to avail themselves
of existing resources to identify and mitigate cyber
risks; developed the “Cyber Challenge” exercise
for community banks to use in assessing their
preparedness for a cyber-related incident; offered a
cybersecurity awareness training program for FDICsupervised institutions and FDIC supervision staff

APPENDICES

2016
and management in each of the FDIC’s regional
offices; continued participation on the Federal
Financial Institutions Examination Council’s (FFIEC)
Cybersecurity Critical Infrastructure Working Group
to determine how well banks manage cyber security
and assess banks’ preparedness to mitigate cyber risks;
and assisted in updating the FFIEC’s IT Examination
Handbook and related guidance.
In the coming months, the Corporation needs to
continue efforts, along with the other regulators, to
address these and other emerging risks and use all
available supervisory and legal authorities to ensure
the continued safety and soundness of financial
institutions and affiliated third-party entities. It also
needs to ensure effective information-sharing about
security incidents with regulatory parties and other
federal groups established to combat cyber threats in
an increasingly interconnected world.
The FDIC Chairman continues to emphasize that one
of the FDIC’s most important priorities is the future
of community banks and the critical role they play in
the financial system and the U.S. economy as a whole.
Local communities and small businesses rely heavily
on community banks for credit and other essential
financial services. These banks foster economic
growth and help to ensure that the financial resources
of the local community are put to work on its behalf.
Consolidations and other far-reaching changes in
the U.S. financial sector in recent decades have made
community banks a smaller part of the U.S. financial
system. Still, over the last several years, they have
made up a larger percentage of all FDIC-insured
banks and thrifts than at any other time over the last
three decades. Their share of total industry loans has
also remained relatively constant over the past decade.
The FDIC has sought to identify and implement
changes to improve the efficiency and effectiveness
of the community bank risk management and
compliance examination processes, while still
maintaining supervisory standards. To ensure the
continued strength of the community banks, the
Corporation will also need to sustain initiatives such
as ongoing research, technical assistance to the banks

by way of training videos on key risk management
and consumer compliance matters, continuous
outreach and dialogue with community banking
groups, and attention to strengthening minority
depository institutions.
Maintaining a strong examination program,
conducting forward-looking supervisory activities for
both small and large banks, applying lessons learned,
being attuned to harmful cyber threats in financial
institutions and technology service providers, and
preserving community banking will be critical to
ensuring stability and continued confidence in the
financial system going forward.

Carrying Out Current and Future Resolution
and Receivership Responsibilities
One of the FDIC’s most important roles is acting
as the receiver or liquidating agent for failed FDICinsured institutions. The FDIC’s responsibilities
include planning and efficiently handling the
resolutions of failing FDIC-insured institutions
and providing prompt, responsive, and efficient
administration of failing and failed financial
institutions in order to maintain confidence and
stability in our financial system.
As part of the resolution process, the FDIC values
a failing federally insured depository institution,
markets it, solicits and accepts bids for the sale of
the institution, considers the least costly resolution
method, determines which bid to accept, and works
with the acquiring institution through the closing
process. The receivership process involves performing
the closing function at the failed bank; liquidating
any remaining assets; and distributing any proceeds to
the FDIC, the bank customers, general creditors, and
those with approved claims. The FDIC seeks to close
out or pursue professional liability claims within 18
months of an insured institution’s failure, which can
prove challenging as well.
The FDIC places great emphasis on promptly
marketing and selling the assets of failed institutions
and terminating the receivership quickly. Although

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ANNUAL REPORT
the number of institution failures has fallen
dramatically since the crisis, these activities still pose
challenges to the Corporation. As of December 31,
2016, DRR was managing 378 active receiverships
with assets in liquidation totaling about $3.3 billion.
In addition, through purchase and assumption
agreements with acquiring institutions, the
Corporation has entered into shared-loss agreements
(SLA). Since loss sharing began during the most
recent crisis in November 2008, the Corporation
has resolved 304 failures with accompanying
SLAs. Under these agreements, the FDIC agrees
to absorb a portion of the loss—generally 80 to 95
percent—which may be experienced by the acquiring
institution with regard to those assets, for a period
of up to 10 years. The FDIC entered into 304 SLAs
from November 2008 through September 30, 2013,
with an initial asset base of $216.5 billion. As of
December 31, 2016, FDIC recoveries totaled $5.2
billion, representing 15.2 percent of the $34.1 billion
in FDIC SLA payments.
As another resolution strategy, the FDIC entered
into 35 structured sales transactions involving
43,315 assets with a total unpaid principal balance
of $26.2 billion. Under these arrangements, the
FDIC receiverships retain a participation interest
in future net positive cash flows derived from thirdparty management of these assets. As of December
31, 2016, the unpaid principal balance in 26 active
arrangements was $1.5 billion. The Corporation will
continue to evaluate termination offers from limited
liability company (LLC) managing members in
deciding whether to pursue dissolution of the LLCs if
in the best economic interest of the receiverships.
As time passes and recovery from the crisis continues,
these risk sharing agreements will continue to
wind down and certain active receiverships will be
terminated. Given the substantial dollar value and
risks associated with the risk-sharing activities and
other receivership operations, the FDIC needs to
ensure continuous monitoring and effective oversight
to protect the FDIC’s financial interests. As an
example, a large number of commercial SLAs have

166

reached their 5-year mark, resulting in the end of
FDIC loss-share coverage but not the end of the
commercial SLAs, which last 8 years. The last 3 years
of commercial SLA coverage is for recoveries only.
Acquiring institutions may not pursue recoveries
as vigorously as they should because they may only
share in a relatively small percentage of recoveries.
The FDIC needs to be sure that acquiring institutions
identify and remit recoveries to the Corporation.
While conditions in the economy and financial system
have improved since the peak of the financial crisis,
bank failures continue to occur. The Corporation has
reshaped its workforce and adjusted its budget and
resources in line with the trend of far fewer failures.
Notably, in the case of the FDIC’s resolutions and
receiverships workforce, authorized staffing decreased
dramatically from a peak of 2,460 in 2010 to
authorized staffing of 564 for 2016. As of December
31, 2016, DRR on-board staffing totaled 537. DRR
will continue to substantially reduce its nonpermanent
staff each year, based on declining workload.
These staff reductions bring with them a loss of
specialized experience and expertise that could impact
the success of future, large-scale resolution and
receivership activities. As discussed in connection
with Dodd-Frank Act responsibilities, for example,
the Corporation must continue to review the
resolution plans of large bank holding companies and
designated nonbank holding companies to ensure
their resolvability under the Bankruptcy Code, if
necessary, and in cases where their failure would
threaten financial stability, administer their orderly
liquidation. Carrying out such activities could pose
significant challenges to those remaining staff in DRR
who could be called upon to lead critical resolution
activities.

Ensuring the Continued Strength
of the Deposit Insurance Fund
Insuring deposits remains at the heart of the
FDIC’s commitment to maintain stability and
public confidence in the nation’s financial system.

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2016
Continuing to replenish the Deposit Insurance Fund
(DIF) in a post-crisis environment is a critical activity
for the FDIC. To maintain sufficient DIF balances,
the FDIC collects risk-based insurance premiums
from insured institutions and invests deposit
insurance funds. A broad goal for the FDIC is that
institutions that pose the greatest risk to the DIF have
deposit insurance rates that are commensurate with
that risk.
The DIF balance had dropped below negative $20
billion during the worst time of the crisis. As of
December 31, 2016, the DIF balance had risen to
$83.2 billion. While the fund is considerably stronger
than it has been, the FDIC must continue to monitor
the emerging risks that can threaten fund solvency in
the interest of continuing to provide and administer
the insurance coverage that depositors have come
to rely upon. This is true for insured depositors at
small banks as well as for claims at large depository
institutions.
In response to the Dodd-Frank Act and in the interest
of protecting and insuring depositors, the Corporation
has designed a long-term DIF management plan.
This plan complements the Restoration Plan, which
is designed to ensure that the DIF reserve ratio will
reach 1.35 percent by September 30, 2020. As of
September 30, 2016, the reserve ratio had reached
1.18 percent, the highest reserve ratio in 8 years.

assessments because of the reduction in regular
assessment rates. The FDIC is taking a balanced
approach to restoring the health of the DIF as it
seeks to reduce the risk that it will need to raise rates
unexpectedly to address a future crisis and to help
ensure stable and predictable assessments across the
board.
Given the volatility of the global markets and financial
systems, new risks can emerge without warning and
threaten the safety and soundness of U.S. financial
institutions and the viability of the DIF. The FDIC
must be prepared for such a possibility. In the face
of such threats, the FDIC needs to continue to
disseminate data and analysis on issues and risks
affecting the financial services industry to bankers,
supervisors, and the public.
As part of its efforts, the FDIC also needs to continue
collaborating with others involved in helping to
ensure financial stability and protect the DIF. One
important means of doing so is through participation
with other financial regulators on the Financial
Stability Oversight Council, created under the DoddFrank Act. This Council was established to provide
comprehensive monitoring of stability in the U.S.
financial system by identifying and responding to
emerging risks to U.S. financial stability and by
promoting market discipline.
The FDIC will also be challenged to contribute to
global financial stability by continuing its engagement
with strategically important foreign jurisdictions and
playing a leadership role in international organizations
that support robust, effective deposit insurance
systems, crisis management and resolution programs,
and bank supervision practices around the globe.

In February 2011, the FDIC Board decided to reduce
overall assessment rates when the reserve ratio reached
1.15 and the Board reaffirmed that position in April
2016. Now a large majority of banks will pay lower
deposit insurance assessments. Assessment rates for
approximately 93 percent of banks with less than
$10 billion in assets declined. Regular quarterly
assessments declined on average by about one-third
for these smaller institutions.

Promoting Consumer Protections and
Economic Inclusion

Additionally, since the ratio has reached 1.15 percent,
banks with $10 billion or more in assets began paying
temporary surcharges to bring the reserve ratio up
to statutory minimums. Even with the surcharges,
about one-third of large banks still pay lower total

The FDIC carries out its consumer protection role by
providing consumers with access to information about
their rights and disclosures that are required by federal
laws and regulations. Its Consumer Response Center
serves an important function in this regard. Similarly,

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ANNUAL REPORT
initiatives like the FDIC’s Money Smart and Youth
Savings programs go a long way towards educating
the public about important consumer and financial
matters. Importantly, the FDIC also examines the
banks for which it is the primary federal regulator
to determine the institutions’ compliance with laws
and regulations governing consumer protection, fair
lending, and community investment. These activities
require effective examiner training and regular
collaboration with other regulatory agencies.

determined that the share of unbanked households in
the U.S. dropped in 2015 to 7.0 percent, representing
a significant decline from the 7.7 unbanked rate
reported in 2013 and the 8.2 unbanked rate in 2011.
The survey also revealed a growth pattern in consumer
use of mobile and online banking. For the unbanked
households, smart phones are often the primary
means of managing their accounts. The FDIC is
further exploring the economic inclusion potential of
mobile financial services.

The Dodd-Frank Act consolidated many of the
consumer financial protection authorities previously
shared by several federal agencies into the Consumer
Financial Protection Bureau (CFPB) and granted the
CFPB authority to conduct rulemaking, supervision,
and enforcement with respect to federal consumer
financial laws; handle consumer complaints and
inquiries; promote financial education; research
consumer behavior; and monitor financial markets for
risks to consumers. The FDIC coordinates with the
CFPB on consumer issues of mutual interest and to
meet statutory requirements for consultation relating
to rulemakings in mortgage lending and other types of
consumer financial services and products. The FDIC
will need to continue to assess the impact of such
rulemakings on supervised institutions, communicate
key changes to stakeholders, and train examination
staff accordingly.

In addition, the FDIC’s Advisory Committee
on Economic Inclusion, composed of bankers,
community and consumer organizations, and
academics, will continue to explore ways of bringing
the unbanked into the financial mainstream. The
FDIC’s Alliance for Economic Inclusion initiative
seeks to collaborate with financial institutions;
community organizations; local, state, and federal
agencies; and other partners to form broad-based
coalitions to bring unbanked and underbanked
consumers and small businesses into the financial
mainstream.

The FDIC continues to work with the Congress and
others to ensure that the banking system remains
sound and that the broader financial system is
positioned to meet the credit needs of consumers and
the economy, especially the needs of creditworthy
households that may experience distress. One of the
challenges articulated by the FDIC Chairman is to
continue to develop and implement targeted strategies
to expand access to mainstream financial institutions
by populations that are disproportionately likely to be
unbanked or underbanked.
The FDIC conducts national surveys of unbanked
and underbanked households every 2 years, in
conjunction with the Census Bureau, to inform
those strategies. The most recent survey, for example,

168

The FDIC will need to sustain ongoing efforts to
carry out required compliance and community
reinvestment examinations, coordinate with the
other financial regulators and CFPB on regulatory
matters involving financial products and services, and
pursue and measure the success of economic inclusion
initiatives to the benefit of the American public.

Implementing Workforce Changes
and Budget Reductions
The Corporation continues to reassess its current
and projected workload along with trends within the
banking industry and the broader economy.  Based
on that review, the FDIC expects a continuation
of steady improvements in the global economy, a
small number of insured institution failures, gradual
reductions in post-failure receivership management
workload, and further reductions in the number of
3-, 4-, and 5-rated institutions.  While the FDIC
will continue to need some temporary and term

APPENDICES

2016
employees over the next several years to complete the
residual workload from the financial crisis, industry
trends continue to confirm that there will be a steadily
decreasing need for nonpermanent employees over the
next several years.
Given those circumstances, the FDIC Board of
Directors approved a $2.16 billion FDIC Operating
Budget for 2017, 2.4 percent lower than the 2016
budget. In conjunction with its approval of the
2017 budget, the Board also approved an authorized
2017 staffing level of 6,363 positions for 2017, a 2.6
percent decrease from 2016 and 32 percent lower than
the peak in 2011. This was the seventh consecutive
reduction in the FDIC’s annual operating budget.
As conditions improve throughout the industry and
the economy, the FDIC will continue its efforts to
achieve the appropriate level of resources; at the
same time, however, it needs to remain mindful
of ever-present risks and other uncertainties in the
economy that may prompt the need for additional
resources and new skill sets and expertise that may be
challenging to obtain. The need for these new skill
sets comes at a time when the Corporation is focusing
on succession management, in light of a substantial
number of FDIC staff, many “baby boomers,” who
are retiring. In that regard, the FDIC is continuing
to work toward integrated workforce development
processes as it seeks to bring on the best people to
meet its changing needs and priorities, and do so
in a timely manner. In all of its hiring efforts, the
Corporation needs to ensure fairness and integrity
in its processes and hiring practices and decisions.
Most recently, the Corporation has emphasized its
Workforce Development Initiative as a means of
fulfilling the FDIC’s future leadership and workforce
capability needs. It has also focused on addressing
resource needs to address the many challenges
in divisions such as OCFI, RMS, and DRR, as
previously discussed.
With respect to leadership at the uppermost levels of
the Corporation, it is important to note that a vacancy
currently exists on the FDIC Board of Directors—

Jeremiah Norton left the FDIC in June 2015 and his
seat on the Board remains vacant. The current FDIC
Chairman’s term is set to expire in November 2017,
which would leave another position vacant. The
FDIC Board has experienced such vacancies in the
past and the FDIC IG at the time strongly advocated
filling those Board positions. Now, given the myriad
financial and economic concerns, emerging risks,
Dodd-Frank Act responsibilities, important priorities
and challenges facing the FDIC, and the advent of
a new Administration, strong and sustained senior
leadership is even more essential.
The FDIC has long promoted diversity and
inclusion initiatives in the workplace. Section 342
of the Dodd-Frank Act reiterates the importance
of standards for assessing diversity policies and
practices and developing procedures to ensure the fair
inclusion and utilization of women and minorities
in the FDIC’s contractor workforce. The DoddFrank Act also points to the Office of Minority and
Women Inclusion as being instrumental in diversity
and inclusion initiatives within the FDIC working
environment. This office needs to ensure that it has
the proper staff, expertise, and organizational structure
to successfully carry out its advisory responsibilities
to ensure diversity and inclusion throughout the
Corporation.
The FDIC needs to sustain its emphasis on fostering
employee engagement and morale on the part of all
staff in headquarters, regions, and field locations. It
looks to the annual Federal Employee Viewpoint
Survey to provide a candid assessment of employee
views of the FDIC workplace. The Corporation’s
diversity and inclusion goals and initiatives,
Workplace Excellence Program, and Workforce
Development Initiative are positive steps that should
continue to help create a workplace that promotes
diversity and equal opportunity.
Finally, an organization’s overall corporate culture
is essential to its success and, in July/August 2016,
prompted in part by earlier OIG work, the FDIC
Board of Directors reaffirmed the Corporation’s

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ANNUAL REPORT
Code of Conduct and the six core values that
underlie it: integrity, competence, teamwork,
effectiveness, accountability, and fairness. The
Chairman emphasized that these values apply not
only to internal conduct but also externally, as FDIC
leadership and staff interact with bankers, consumers,
and other members of the public. In further support
of these values, the Board prohibits retaliation against
an employee who raises concern about conduct
that appears to violate laws, rules, or the FDIC’s
supervisory policy. In that connection, the Chairman
also underscored the importance of whistleblower
protection in a message to all FDIC staff on the
occasion of the U.S. Senate passing Resolution 522
on July 7, 2016, designating July 30, 2016, National
Whistleblower Appreciation Day.  This Resolution
acknowledges and commemorates the contributions
of whistleblowers to combat waste, fraud, and
violations of law. As noted by the Chairman, the
Resolution encouraged executive federal agencies to
inform employees and contractors about the legal
rights to “blow the whistle” by honest and good faith
reporting of misconduct, fraud, misdemeanors, or
other crimes to the appropriate authorities.

Ensuring Effective Enterprise Risk
Management Practices
Enterprise risk management is a critical aspect of
governance at the FDIC. Notwithstanding a stronger
economy and financial services industry, the FDIC’s
enterprise risk management framework and related
activities need to be attuned to emerging risks, both
internal and external to the FDIC, that can threaten
key business processes and corporate success. As
evidenced in the challenges discussed above, certain
difficult issues may fall within the purview of a single
division or office, while many others are cross-cutting
within the FDIC, and still others involve coordination
with the other financial regulators and other external
parties.
The Corporation needs to maintain effective controls,
mechanisms, and risk models that can address a wide

170

range of concerns—from specific, everyday risks such
as those posed by use of corporate purchase or travel
cards and records management activities, for example,
to the far broader concerns of the ramifications of
an unwanted and harmful cyber attack or the failure
of a large bank or systemically important financial
institution.
In July 2016, the Office of Management and
Budget updated Circular A-123, Management’s
Responsibility for Enterprise Risk Management and
Internal Control. This circular defines management’s
responsibility for enterprise risk management (ERM)
and internal control. It emphasizes the need to
coordinate risk management and strong and effective
internal control into existing business activities
as an integral part of governing and managing an
agency. Notwithstanding existing corporate risk
management resources and mechanisms in place, the
Corporation would be well served to examine and
adopt those principles and practices embodied in the
circular that make sense for the FDIC and ensure
they are institutionalized, as intended by the circular.
Doing so can help ensure that the Corporation’s
risk management processes and systems identify
challenges early on, bring them to the attention of
corporate leadership, and develop solutions. Given
the range, complexity, and importance of many of the
Corporation’s current endeavors—for example, the
personal identification validation project, email and
hard copy records management practices, data breach
prevention measures, personnel security initiatives,
and the like, such an approach could help ensure
more effective project management and other controls
and strengthen oversight of often costly investments
and mission-critical activities.
The Corporation’s stakeholders—including the
Congress, American people, media, and others—
expect effective governance, sound risk management
practices, and vigilant regulatory oversight of the
financial services industry. The Corporation needs to
maintain the trust and confidence that it has instilled
over the years. The FDIC Board of Directors, senior

APPENDICES

2016
management, and individuals at every working
level throughout the FDIC need to acknowledge,
understand, and take ownership of current and
emerging risks to the FDIC mission and be prepared
to take necessary steps to mitigate those risks as

changes occur and challenging scenarios that can
undermine the FDIC’s short- and long-term success
present themselves. A corporate culture marked by
integrity, efficiency, and transparency is essential to
that end.

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ANNUAL REPORT
D. ACRONYMS
ACP	

Access Control Program

DCP	

Division of Depositor and Consumer
Protection

AHDP	

Affordable Housing Disposition Program

AEI	

Alliance for Economic Inclusion

DFA	

Dodd-Frank Act

AFS	

Available for Sale

DHS	

Department of Homeland Security

AIG	

American International Group, Inc.

DIF	

Deposit Insurance Fund

AML	

Anti-Money Laundering

DIR	

Division of Insurance and Research

ASBA	

Association of Supervisors of Banks of the
Americas

DIT	

Division of Information Technology

DOA	

Division of Administration

ASC	

Accounting Standards Codification

DOJ	

Department of Justice

ASU	

Accounting Standards Update

DRM	

Digital Rights Management

BCBS	

Basel Committee on Banking Supervision

DRR	

Designated Reserve Ratio

BOE	

Bank of England

DRR (FDIC)	

Division of Resolution and Receiverships

BSA	

Bank Secrecy Act

EDIE	

Electronic Deposit Insurance Estimator

Call Report	

Consolidated Reports of Condition and
Income

EGRPRA	

Economic Growth and Regulatory Paperwork
Reduction Act of 1996

ERM	

Enterprise Risk Management

FAQs	

Frequently Asked Questions

FASB	

Financial Accounting Standards Board

CAMELS
rating scale	

Capital adequacy; Asset quality; Management
quality; Earnings; Liquidity; Sensitivity to
market risks

CCIWG	

Cybersecurity and Critical Infrastructure
Working Group

FBO	

Foreign Bank Organization

FDI Act	

Federal Deposit Insurance Act

CCP	

Central Counterparties

FDIC	

Federal Deposit Insurance Corporation

CDFI	

Community Development Financial
Institution

FEHB	

Federal Employees Health Benefits

FERS	

Federal Employees Retirement System

CDOs	

Collateralized Debt Obligations

FFB	

Federal Financing Bank

CEO	

Chief Executive Officer

FFIEC	

CEP	

Corporate Employee Program

Federal Financial Institutions Examination
Council

CFI	

Complex Financial Institution

FFMIA	

CFO Act	

Chief Financial Officers’ Act

Federal Financial Management
Improvement Act

CFPB	

Consumer Financial Protection Bureau

FHFA	

Federal Housing Finance Agency

CFR	

Center for Financial Research

FICO	

Financing Corporation

CFTC	

Commodity Futures Trading Commission

FIL	

Financial Institution Letters

CIP	

Customer Identification Program

FinCEN	

Financial Crimes Enforcement Network

CISO	

Chief Information Security Officer

FIRREA	

CMG	

Crisis Management Group

Financial Institution Reform, Recovery
and Enforcement Act of 1989

CMP	

Civil Money Penalty

FIS	

Financial Institution Specialist

ComE-IN	

Advisory Committee on Economic Inclusion

FISMA	

CPI-U	

Consumer Price Index for All Urban
Consumers

Federal Information Security Modernization
Act of 2014

FMFIA	

Federal Managers’ Financial Integrity Act

CRA	

Community Reinvestment Act

FMSP	

Financial Management Scholars Program

CSRS	

Civil Service Retirement System

FRB	

Board of Governors of the Federal Reserve
System

172

APPENDICES

2016
FRF	

FSLIC Resolution Fund

MOU	

Memorandum of Understanding

FRF-FSLIC	

Assets & Liabilities of FSLIC transferred to
the FRF Upon the Dissolution of FSLIC

MRBA	

Matters Requiring Board Attention

FRF-RTC	

RTC Assets & Liabilities

MWOB	

Minority- and women-owned business

FSAP	

Financial Sector Assessment Program

NAFTA	

North American Free Trade Agreement

FSB	

Financial Stability Board

NCUA	

National Credit Union Administration

FS-ISAC	

Financial Services Information Sharing and
Analysis Center

NIST	

National Institute of Standards and
Technology

FSLIC	

Federal Savings and Loan Insurance
Corporation

NPR	

Notice of proposed rulemaking

OCC	

Office of the Comptroller of the Currency

FSOC	

Financial Stability Oversight Council

OCFI	

Office of Complex Financial Institutions

FSVC	

Financial Services Volunteer Corps

OCRM	

Office of Corporate Risk Management

FTE	

Full-time employee

O&G	

Oil and Gas

GAAP	

Generally Accepted Accounting Principles

OIG	

Office of Inspector General

GAO	

U.S. Government Accountability Office

OLA	

Orderly Liquidation Authority

GECC	

General Electric Capital Corporation, Inc.

OLF	

Orderly Liquidation Fund

GPRA	

Government Performance and Results Act

OMB	

Office of Management and Budget

GSA	

General Services Administration

OMWI	

Office of Minority and Women Inclusion

GSEs	

Government Sponsored Entities

OO	

Office of the Ombudsman

G-SIFIs	

Global SIFIs

OPM	

Office of Personnel Management

HSPD	

Homeland Security Presidential Directive

ORE	

Owned Real Estate

HVRE	

High Volatility Commercial Real Estate

IADI	

International Association of Deposit Insurers

IDI	

Insured depository institution

IMF	

International Monetary Fund

InTREx	

Information Technology Risk Examination

IRS	

Internal Revenue Service

ISDA	

International Swaps and Derivatives
Association

IT	

OTC	Over-the-counter
OTS	

Office of Thrift Supervision

P&A	

Purchase and assumption

PDG	

Policy Development Group

PFR	

Primary federal regulator

PIV	

Personal Identity Verification

QBP	

Quarterly Banking Profile

REFCORP	

Resolution Funding Corporation

Information technology

ReSG	

FSB’s Resolution Steering Committee

ITCIP	

Insider Threat and Counterintelligence
Program

RMS	

Division of Risk Management Supervision

RTC	

Resolution Trust Corporation

LCR	

Liquidity coverage ratio

SBA	

Small Business Administration

LIDI	

Large Insured Depository Institution

SEC	

Securities and Exchange Commission

LLC	

Limited Liability Company

SIFI	

Systemically important financial institution

LMI	

Low- or moderate-income

SLA	

Shared-loss agreement

LURAs	

Land Use Restriction Agreements

SMS	

Systemic Monitoring System

MDIs	

Minority depository institutions

SNC Program	

Shared National Credit Program

MFA	

Multifactor Authentication

SNM	

State Nonmember

MLA	

Military Lending Act of 2006

SRAC	

Systemic Resolution Advisory Committee

MOL	

Maximum Obligation Limitation

SSGNs	

Securitizations, and Structured Sale of
Guaranteed Notes

AP P ENDICES

173

ANNUAL REPORT
TIPS	

Treasury Inflation-Protected Securities

VIEs	

Variable Interest Entities

TSP	

Federal Thrift Savings Plan

WE	

Workplace Excellence

TSP (IT-related)	 Technology service providers

WIOA	

Workforce Innovation Opportunity Act

URSIT	

Uniform Rating System for Information
Technology

YSP	

Youth Savings Program

U.S.	

United States

174

APPENDICES

N OT E S

N OT E S

2016

Federal Deposit
Insurance Corporation
This Annual Report was produced by talented and dedicated staff.
To these individuals, we would like to offer our sincere thanks and
appreciation. Special recognition is given to the following for their
contributions:
♦	 Jannie F. Eaddy
♦	 Barbara A. Glasby
♦	 Financial Reporting Section Staff
♦	 Receivership Support Section Staff
♦	 Division and Office Points-of-Contact

FEDERAL DEPOSIT INSURANCE CORPORATION

H H H

550 17th Street, N.W.
Washington, DC 20429-9990
www.fdic.gov
FDIC-003-2017

H H H


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102