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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

2016 Annual Performance Plan

Supervision Program

To promote public confidence and stability in the nation’s financial system, the FDIC’s Supervision Program promotes the safety and soundness of insured depository institutions, protects consumer rights, and promotes community investment initiatives by FDIC-supervised institutions.

The FDIC is the primary federal regulator for state-chartered banks and savings institutions that are not members of the Federal Reserve System, generally known as state nonmember banks and state-chartered thrifts.  This includes state-licensed insured branches of foreign banks and state-chartered savings institutions.  As insurer, the FDIC also has special (back-up) examination authority for state member banks that are supervised by the Federal Reserve Board (FRB) and national banks and thrift institutions that are supervised by the Office of the Comptroller of the Currency (OCC).  The FDIC’s roles as insurer and primary supervisor are complementary, and many activities undertaken by the FDIC support both the insurance and supervision programs.  Through the review of examination reports, use of off-site monitoring tools, participation in examinations conducted by other federal regulators, and, where appropriate, performance of special (back-up) examination activities, the FDIC regularly monitors the potential risks at all insured institutions, including those for which it is not the primary federal regulator.

The DFA expanded the FDIC’s statutory responsibilities beyond insured depository institutions to bank holding companies with more than $50 billion in assets and nonbank financial companies that are designated as systemically important financial institutions (SIFIs) by the Financial Stability Oversight Council (FSOC).  The DFA designates the FRB as the primary supervisor of these companies, but the FDIC has established on- and off-site monitoring programs and has certain statutory back-up examination authorities for these companies.  The purpose of the FDIC monitoring and risk assessment activities for these institutions is, where possible, to mitigate identified risks; assess the adequacy of their efforts to prepare to reorganize or liquidate through bankruptcy in the event of financial distress; and be prepared, if necessary, to conduct an orderly liquidation of the company. 

As the primary federal regulator of all insured state nonmember banks and state-chartered thrifts, the FDIC performs periodic risk management examinations of these institutions to assess their overall financial condition, management policies and practices, and compliance with applicable laws and regulations. The FDIC also performs Bank Secrecy Act and information technology reviews at each risk management examination and, when applicable, conducts reviews of trust, registered transfer agent, municipal securities dealer, and government security dealer activities at these examinations. Through the examination process, the FDIC also assesses the adequacy of their management and internal control systems to identify and control risks and to detect the risks of fraud or insider abuse.  In addition, the FDIC uses off-site monitoring programs to enhance its ability to promptly identify emerging safety-and-soundness issues.

The FDIC’s compliance examination program promotes compliance with federal consumer protection laws, fair lending statutes, the Community Reinvestment Act (CRA), and the regulations that implement these laws and statutes.  It seeks to ensure that consumers are treated fairly and that the disclosures institutions provide to consumers are accurate and complete.  To promote the most effective and efficient use of resources, the compliance examination program focuses on the bank’s activities and products that pose the greatest potential risk of consumer harm or otherwise require increased supervisory attention.  The FDIC conducts separate examinations for all state nonmember banks to assess the effectiveness of their compliance management systems and CRA performance.  Banks that are subject to the primary jurisdiction of the Consumer Financial Protection Bureau (CFPB) are examined for compliance with the regulations that were not transferred to the CFPB, including the CRA.

If weaknesses are identified through the examination process, the FDIC promptly takes appropriate supervisory action.  Formal and informal enforcement actions may be issued to correct identified violations or other problems for institutions that are operating in a deteriorated financial condition; failing to comply with consumer protection, fair lending and other statutes; or displaying other significant weaknesses, including weaknesses in operations or risk management practices.  These enforcement actions remain in place until the identified weaknesses are remedied.

The FDIC also investigates consumer complaints about FDIC-supervised insured depository institutions.  Consumers write or electronically submit to the FDIC complaints and inquiries regarding consumer protection and fair lending issues.  Through its investigation of and response to consumer complaints and inquiries, the FDIC attempts to help consumers better understand their rights under federal consumer protection and fair lending laws.  The FDIC monitors through surveys the level of satisfaction with its responses to consumer complaints and inquiries.

In addition, the FDIC acts on applications from FDIC-supervised insured depository institutions to undertake new or expanded business activities.  For reviewing these applications, the FDIC evaluates various factors, including capital adequacy, quality of management, financial condition, and compliance with applicable laws and regulations.  It also considers an institution’s compliance with consumer protection, fair lending, and privacy laws and its performance under CRA. 

Information about the FDIC’s supervisory program, including laws, regulations, and regulatory guidance, is available at www.fdic.gov.  The FDIC’s semiannual Supervisory Insights journal provides information about bank supervision to bankers, bank examiners, and other practitioners.

The FDIC is focused in 2016 on addressing a variety of risks to financial institutions including potential changes in interest rates, growth of asset concentrations, and cybersecurity risks. In addition, the FDIC will continue to implement its new authorities under the DFA, as well as its ongoing community banking initiative.

While interest rates remained stable for an extended period, a recent interest rate increase and a rising interest rate environment could have adversely affect the net worth and earnings performance of a number of institutions because of the mismatch in maturities of their assets and liabilities.  In 2016, the FDIC will continue to identify and address interest rate risk at FDIC-supervised institutions through off-site analysis and on-site examinations.

In 2016, the FDIC will also closely monitor concentrations of assets at FDIC-supervised institutions to ensure that institutions are managing the potential risks associated with having too large a concentration of assets in any particular area.  High concentrations of assets can expose an institution to economic, credit, and interest rate risks.  Although many institutions effectively manage concentration risk, a significant number during the financial crisis failed, to ensure that risk management practices or financial and managerial resources were sufficient in light of the risks associated with concentrated credit portfolios.  As a result, improperly managed concentration risk contributed significantly to losses sustained by financial institutions, bank failures, and losses to the DIF.  In 2016, the FDIC will continue to identify and monitor the risk management practices of institutions with high levels of asset concentrations.  Examination procedures will focus on underwriting, credit administration, portfolio management, and monitoring practices.

Cybersecurity is another significant concern for the banking industry because of the industry’s use of and reliance on technology.  During the past decade, cybersecurity has become one of the most critical challenges facing the financial services sector due to the frequency and increasing sophistication of cyber-attacks.  In response, financial institutions and their service providers are continually challenged to assess and strengthen information security programs and refocus their efforts and resources to address cybersecurity risks.

In 2015, the FDIC added to its cybersecurity awareness resources for financial institutions.  These include a Cybersecurity Awareness video and three new vignettes for Cyber Challenge, which consists of exercises that are intended to encourage discussions of operational risk issues and the potential impact of information technology disruptions on common banking functions.  As a member of the Federal Financial Institutions Council (FFIEC), the FDIC participated in the issuance of numerous statements about emerging cybersecurity and technology risks and the development and issuance of the Cybersecurity Assessment Tool designed to help financial institutions assess their inherent risk and cybersecurity preparedness.

In 2016, the FDIC added to its supervision workforce approximately 30 specialized IT Examination Analysts to help ensure that financial institutions are addressing risks related to cybersecurity.  The specialists will participate in information technology (IT) examinations at more complex FDIC-supervised institutions as well as the major technology service providers (TSPs) that support financial institutions.  The FDIC will also implement a revised IT examination work program for community banks that will include an assessment of an institution’s’ cybersecurity preparedness efforts.   

In addition, the FDIC will continue its efforts to promote the security and resilience of the financial services sector by collaborating with its fellow banking regulators through the FFIEC’s Cybersecurity and Critical Infrastructure Working Group, the Information Technology Subcommittee, and the Financial and Banking Information Infrastructure Committee. 

In 2016, the FDIC will also continue to develop its capabilities related to its responsibilities under the DFA.  The FDIC will conduct ongoing risk monitoring reviews of all banking organizations with more than $100 billion in assets as well as certain nonbank SIFIs. In addition, reviews will be completed of the resolution plans submitted by insured depository institutions and bank holding companies with assets of $50 billion or more as well as nonbank financial companies designated by the FSOC.  The FDIC has the responsibility to ensure that these resolution plans provide a viable approach for reorganizing or liquidating through bankruptcy without creating an adverse effect on U.S. financial stability. 

Finally, community bank issues will remain a high priority for 2016. The FDIC will continue to follow up on the recommendations in the Community Banking Study to make the supervisory process more efficient, consistent, and transparent to community banks.  For 2016, this will include incorporating recommendations from banker surveys conducted in late 2015 to ensure that the technical assistance video program is providing the maximum benefits to bankers.  In addition, the FDIC will complete its comprehensive review of all of its regulations, as required by the Economic Growth and Regulatory Paperwork Reduction Act, to identify any regulations that are outdated, unnecessary or unduly burdensome, with a focus on the impact on community banks.

The following table depicts the strategic goal, strategic objective, and annual performance goals for the Risk Management component of the Supervision Program.

Strategic Goal

Strategic Objectives

Annual Performance Goals

FDIC-insured institutions are safe and sound.

The FDIC exercises its statutory authority, in cooperation with primary federal regulators and state agencies, to ensure that all FDIC-insured institutions appropriately manage risk.

 

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. (2.1-1)

 

Assist in protecting the infrastructure of the U.S. banking system against terrorist financing, money laundering, and other financial crimes. (2.1-2)

 

More closely align regulatory capital standards with risk and ensure that capital is maintained at prudential levels. (2.1-3)

 

Implement strategies to promote enhanced information security, cybersecurity, and business continuity within the banking industry. (2.1-4)


The following table depicts the strategic goal, strategic objectives, and annual performance goals for the Compliance and Consumer Affairs components of the Supervision Program.

Strategic Goal

Strategic Objectives

Annual Performance Goals

Consumers’ rights are protected, and FDIC-supervised institutions invest in their communities.

FDIC-supervised institutions comply with consumer protection, CRA, and fair lending laws and do not engage in unfair or deceptive practices.

 

Conduct on-site CRA and 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. (3.1-1)

Consumers have access to accurate and easily understood information about their rights and the disclosures due them under consumer protection and fair lending laws.

Effectively investigate and respond to written consumer complaints and inquiries about FDIC-supervised financial institutions. (3.2-1)

The public has fair access to banking services and is treated equitably by FDIC-supervised institutions.

Promote economic inclusion and access to responsible financial services through supervisory, research, policy, and consumer/community affairs initiatives. (3.3-1)

The following table depicts the strategic goal, strategic objectives, and annual performance goals for the Resolution Planning component of the Supervision Program.

Strategic Goal

Strategic Objectives

Annual Performance Goals

 

Large and complex financial institutions are resolvable in an orderly manner under bankruptcy.

 

Large and complex financial institutions are resolvable under the Bankruptcy Code.

Identify and address risks in large and complex financial institutions, including those designated as systemically important. (4.1-1)

 


STRATEGIC GOAL 2:
FDIC-insured institutions are safe and sound.


STRATEGIC OBJECTIVE 2.1    

The FDIC exercises its statutory authority, in cooperation with primary federal regulators and state agencies, to ensure that all FDIC-insured institutions appropriately manage risk.

Annual Performance Goal 2.1-1     

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.

Indicators and Targets

  1. Percentage of required examinations conducted in accordance with statutory requirements and FDIC policy
    • Conduct all required risk management examinations within the timeframes prescribed by statute and FDIC policy.
  1. 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.

Means and Strategies

Operational Processes (initiatives and strategies): Risk management examinations assess the overall financial condition, management practices and policies, and compliance with applicable laws and regulations of FDIC-supervised depository institutions.  The FDIC performs safety and soundness, Bank Secrecy Act, and IT reviews at each risk management examination of an FDIC-supervised insured depository institution.  As applicable, the FDIC also conducts reviews of trust, registered transfer agent, municipal securities dealer, and government security dealer activities at these examinations.

In 2016, the FDIC projects that it will conduct more than 1,820 risk management examinations required under statute, FDIC policy, or agreements with state supervisors.The number of risk management examinations conducted during 2016 will decline by approximately 72 because of a statutory change enacted in late 2015 that changed from 12 to 18 months the required examination frequency for most banks with $500 million to $1.0 billion in assets.  It may also fluctuate as the number of FDIC-supervised insured depository institutions changes as a result of mergers, closings, newly approved charters, and other actions.  In addition, increases in asset size or changes to an institution’s condition or capital levels may accelerate examination cycles and increase the number of required examinations.

The FDIC follows a risk-focused approach to examinations, which allows examiners to focus resources on those areas with the greatest potential risk.  The FDIC has several analytical models to identify higher-risk financial institutions by considering factors such as rapid growth, fluctuating earnings, economic downturns, and concentrations in vulnerable industry sectors. Examiners use these off-site tools to help them focus on various risks during on-site examinations.  These models are also used to identify the need for inquiries or on-site visits to FDIC-supervised institutions outside of the regular examination cycle.

The FDIC also continues to focus on the risks posed by technology.  On-site examinations review technology-related activities to determine how each FDIC-supervised depository institution manages its IT risks.  The FDIC proactively monitors indicators of technology risk that may affect FDIC-supervised institutions and provides information to the industry about risks associated with technology outsourcing practices (e.g., contracting for computer services).  The FDIC regularly talks with technology vendors, bank trade associations, and standards and rule-setting entities to identify and promote effective risk management practices for emerging technologies.

The examination report identifies any corrective actions to be taken by the institution.  If deemed necessary, a formal or informal enforcement action is sent to the financial institution with the report of examination.  To ensure that supervisory actions are taken promptly, the FDIC monitors the time it takes to provide examination reports to FDIC-supervised institutions after the completion of an examination.  In addition to an on-site visit and a subsequent examination, compliance with an enforcement action is assessed through progress reports from the institution, use of off-site monitoring tools, and direct communication with management of the financial institution.

At this point in the economic cycle, it is more important to ensure that problems identified at well-rated institutions are promptly addressed before they result in more serious deficiencies requiring formal or informal corrective programs. When there are material issues and recommendations that require attention by the institution’s Board of Directors, the examination report will identify MRBAs to highlight areas that, if not properly measured, monitored, and controlled, could adversely affect the institution.  A timely response is requested from institution management to mitigate risks and correct noted deficiencies.  The response is reviewed to ensure it is appropriate and that it addresses supervisory concerns.

Human Resources (staffing and training): The FDIC has 1,723 authorized positions (1,520 permanent and 173 nonpermanent) in its field examination workforce for risk management in 2016.   This includes approximately 30 specialized IT Examination Analyst (ITEA) positions to augment the IT expertise within the examination workforce.  Field examiners conduct on-site examinations and visits.  Staffing and training needs are reviewed regularly to ensure that the staff resources supporting the risk management examination program are adequate to conduct a high quality examination program and that employees possess the skills and knowledge to effectively identify existing and emerging risks. For 2016, all FDIC field examiners will receive training on the IT examination work program and a Cybersecurity Assessment Tool that will be implemented by year-end.

The FDIC has cooperative agreements with most states to conduct joint or alternating risk management examinations.  If a state supervisor handling an examination has scheduling, staffing, or other resource constraints, the statutory examination requirement may not be met.  In such cases, the FDIC will work with the state supervisor to make sure that any delinquent examination is quickly scheduled and completed.  When appropriate, the FDIC may conduct the examination instead of the state supervisor.

Case managers and other regional office officials finalize reports of examination and monitor compliance with enforcement programs.  Staffing and training needs for this function are also reviewed regularly to ensure that the resources available are adequate and that employees possess the required skills and knowledge.

Information Technology:  The FDIC’s Virtual Supervisory Information on the Net (ViSION) system is used to schedule and track the completion of risk management examinations. ViSION is also used to monitor all enforcement activity and other significant events at troubled institutions and to schedule on-site visits and follow-up examinations of 3-, 4-, and 5-rated institutions.

The FDIC will complete in 2016 a multi-year project to develop and implement a new Examination Tools Suite (ETS) that will replace four examination-related software applications and address the risk of technological obsolescence.  In 2012, the FDIC implemented the first phase of ETS by replacing the electronic loan review software that had been in use since 1996.  The final phase of development will be completed by mid-2016, and deployment will begin on a phased, region-by-region basis.

Verification and Validation

The number and timing of examinations are tracked through ViSION and reported through established management processes.  Enforcement actions and the timing of required on-site visits are tracked through ViSION.  The FDIC uses its Regional Office Internal Control Review program to make sure that regions effectively monitor the compliance of FDIC-supervised institutions with formal and informal enforcement actions.  This review incorporates various components of the supervisory process, including assessment of the appropriateness of formal and informal corrective actions and monitoring of enforcement implementation and follow-up activities. Any material exceptions noted during the reviews are brought to management’s attention for appropriate action.

2015 Performance Results

This annual performance goal and its associated performance indicators and targets are unchanged from 2015.  The FDIC successfully met the performance target for this annual performance goal in 2015. 


Annual Performance Goal 2.1-2

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

Indicator and Target

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

Means and Strategies

Operational Processes (initiatives and strategies):  The FDIC conducts Bank Secrecy Act/Anti-Money Laundering (BSA/AML) examinations and Office of Foreign Assets Control (OFAC) reviews to assess the BSA/AML and OFAC compliance programs of FDIC-supervised financial institutions.  These examinations and reviews cover sound risk management, compliance with recordkeeping requirements, and the ability of the institution to identify and report suspicious activity.  BSA/AML examinations and OFAC reviews are performed as a part of all risk management examinations of FDIC-supervised insured depository institutions.  The FDIC also completes BSA exams for states that do not conduct these exams.  The FDIC follows a risk-based approach to BSA/AML examinations and OFAC reviews, which allows examiners to focus resources on those areas with the greatest potential risk.

Guidance is provided to risk management staff through written memoranda, participation in the FFIEC BSA/AML Examination Workshop, and attendance at the FFIEC Advanced BSA/AML Specialists Conference.

Human Resources (staffing and training): The FDIC has 319 examiners who are designated as BSA/AML subject matter experts.  Staffing and training needs are reviewed regularly to ensure that the staff resources supporting the BSA/AML examination program are adequate and that employees possess the skills and knowledge to effectively and successfully assess compliance with BSA/AML requirements and detect any emerging risks.

Information Technology: ViSION is used to track the number and timing of required BSA/AML examinations.  Examiners also use ETS to update BSA violation codes automatically, thereby increasing the efficiency of those examinations.

Verification and Validation

The number and timing of BSA/AML examinations are tracked in ViSION and reported through established management processes.

2015 Performance Results

This annual performance goal and its associated performance indicator and target are unchanged from 2015.  The FDIC successfully met this performance target in 2015.


Annual Performance Goal 2.1-3     

More closely align regulatory capital standards with risk and ensure that capital is maintained at prudential levels.

Indicator and Target

  1. U.S. implementation of internationally agreed regulatory standards
    • Publish in 2016, a Notice of Rulemaking on the Basel III Net Stable Funding Ratio.

Means and Strategies

Operational Processes (initiatives and strategies): FDIC staff have been working closely with the other federal banking agencies to develop a proposed rule to implement in the United States. the Net Stable Funding Ratio (NSFR) for internationally active banking organizations.  Throughout 2015 the FDIC, the OCC and the FRB (agencies) devoted substantial resources to develop an interagency notice of proposed rulemaking (NPR) to implement the NSFR rule, with a target of issuing the NPR by year-end 2015.  However, the agencies decided in late 2015 to delay issuance of the NPR until 2016 to allow additional analysis.  After the close of the public comment period on the proposed rule, the agencies will review all public comments and draft a proposed final rule.  In considering these comments, the FDIC will consult internally with individuals and groups that have specialized expertise in areas such as complex financial institution, supervision, accounting, consumer compliance, and insurance and research.  FDIC staff will also continue to lead and support the Basel Committee’s ongoing quantitative impact study work on the NSFR.

Human Resources (staffing and training): The breadth and depth of knowledge among FDIC staff on bank liquidity, funding, and other capital markets matters has expanded in recent years, partly through continued staff participation and active involvement in numerous Basel policy development groups. In 2016, the FDIC will continue to increase the number of staff with capital market expertise by providing internal and external training on liquidity, funding, capital, trading activities, financial modeling, and other capital market areas.

Information Technology:  The FDIC will use existing technology to accomplish this annual performance goal.

Verification and Validation

Progress in meeting this annual performance goal will be tracked through periodic meetings and established reporting processes.

2015 Performance Results

This annual performance goal and its associated performance indicator are unchanged from 2015, but its associated performance target has been updated for 2016.  The FDIC did not meet the 2015 performance target to issue an interagency Notice of Proposed Rulemaking (NPR) on the NSFR for public comment by the end of 2015, as the agencies determined that additional financial analysis was necessary prior to the issuance of an NPR.


Annual Performance Goal 2.1-4

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

Indicator and Targets

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

Means and Strategies

Operational Processes (initiatives and strategies): The FDIC assesses the ability of FDIC-supervised financial institutions to manage information technology risks through a comprehensive framework of IT risk management standards, risk ratings and on-site examinations.  This framework, jointly established by the members of the FFIEC, is implemented and enhanced to the extent needed by each agency.  The framework focuses on evaluating information security, business continuity, incident response, audit and assessment, board and management oversight, vendor relationships, and payment systems.  When significant weaknesses are identified in supervised financial institutions or TSPs, the FDIC issues enforcement actions to compel them to correct these weaknesses.

The FFIEC agencies created a Cybersecurity Assessment Tool that institutions may use to conduct a self-assessment of their cyber preparedness.  The assessment tool for institutions was released to the industry in June 2015.  The FFIEC is in the process of preparing a cybersecurity assessment tool for TSPs that is planned to be released in 2016.

Human Resources (staffing and training): The vast majority of the FDIC’s 1,166 commissioned risk management examiners have basic IT examination skills.  The FDIC has 365 commissioned examiners who have completed all four post-commission IT schools and more than 600 who have completed at least one of these schools.  The FDIC also has 60 dedicated IT examiners, and 104 risk management examiners designated as either intermediate or advanced IT subject matter experts based on their completion of an on-the-job training program.  Finally, 41 specialized ITEA positions support the IT examination process, including 30 new positions added in 2015 for ITEAs with advanced technical skills.

The IT examination function is supported by IT policy and examination personnel in its Washington, D.C. Headquarters.  The FDIC will also expand its headquarters operations to address the growing risk exposure in the payment services area and to enhance its examination of TSPs and cybersecurity risks in the banking industry. 

Information Technology: ViSION is used to schedule and track the completion of risk management examinations and any related enforcement actions or significant events at institutions due to noncompliance with IT-related banking laws and regulations.

Verification and Validation

The number and timing of IT examinations are tracked through ViSION and reported through established management processes.  Enforcement actions and the timing of required on-site visits are also tracked through ViSION

The majority of TSP exams are conducted and scheduled on an interagency basis.  Planning for examinations of the largest TSPs takes place annually with the OCC and the FRB.  Examinations of smaller TSPs are managed at the FDIC regional office level in coordination with the local FRB and OCC counterparts.  All IT examination activity (including TSPs) conducted by FDIC staff and detailed information on individual examiner participation is tracked through FDIC systems.

The FDIC uses its Regional Office Internal Control Review program to make sure that regions effectively monitor the compliance of FDIC-supervised institutions with formal and informal enforcement actions.  This review incorporates various components of the supervisory process, including assessment of the appropriateness of formal and informal corrective actions and monitoring of enforcement implementation and follow-up activities.  Any material exceptions noted during the reviews are brought to management’s attention for appropriate action.

2015 Performance Results

This annual performance goal and performance indicator are unchanged from 2015, but the associated performance targets have been updated for 2016.  The FDIC successfully met the performance targets for this annual performance goal in 2015.

 


STRATEGIC GOAL 3:
Consumers’ rights are protected, and FDIC-supervised institutions invest in their communities.


STRATEGIC OBJECTIVE 3.1    

FDIC-supervised institutions comply with consumer protection, CRA, and fair lending laws and do not engage in unfair or deceptive practices.

Annual Performance Goal 3.1-1     

Conduct on-site CRA and 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.

Indicators and Targets

  1. Percentage of examinations conducted in accordance with the timeframes prescribed by FDIC policy
    • Conduct all required examinations within the timeframes established by FDIC policy.
  1.  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.

Means and Strategies

Operational Processes (initiatives and strategies):  The FDIC conducts CRA and compliance examinations of FDIC-supervised depository institutions to determine compliance with consumer protection and fair lending laws and performance under CRA.  The frequency of compliance examinations is specified by FDIC policy.  For CRA examinations, the FDIC’s examination frequency policy conforms to applicable provisions of the Gramm-Leach-Bliley Act (GLBA), which establishes the CRA examination cycle for most small banks.  In 2016, the FDIC estimates that it will conduct approximately 1,375 compliance and/or CRA examinations.

The FDIC’s compliance examination approach emphasizes a risk-focused scoping process to look at an institution’s compliance risk management practices and the potential risk of consumer harm.  This approach involves an expanded review of an institution’s systems and compliance policies so that transaction testing can be better targeted and focused on areas that pose the greatest risk for consumer harm.  This approach creates a more efficient and effective use of examination resources, especially in financial institutions with high compliance risk profiles.

Institutions with compliance deficiencies are identified primarily through the examination process.  While discussions with bank management are usually sufficient to correct these deficiencies, the FDIC has broad enforcement powers to correct practices, conditions, or violations of law that threaten an institution’s compliance with consumer protection and fair lending laws or a consumer’s rights under those laws. 

Institutions that are subject to enforcement actions because of unfavorable ratings for compliance with consumer protection and fair lending laws and regulations are closely monitored by regional office officials.  A follow-up examination or on-site visit is conducted to review compliance with supervisory actions for each institution that receives an unsatisfactory rating. . Additional follow-up action is taken when the initial corrective program is determined to have been insufficient in addressing the identified problem. Progress in complying with an enforcement action is also assessed through quarterly progress reports from, and direct communication with, management of the financial institution.

Human Resources (staffing and training):  The FDIC has 497 authorized positions (470 permanent, 27 nonpermanent) in its field examination workforce for compliance and consumer protection in 2016.  Staffing and training needs are reviewed regularly to ensure that staff resources supporting the compliance supervision program are adequate to conduct a high quality examination program and that employees possess the skills and knowledge to effectively implement this program.

Information Technology:  The System of Uniform Reporting of Compliance and CRA Examinations (SOURCE) is used to schedule and track compliance examinations, support pre-examination planning, and provide management information.

Verification and Validation

The FDIC will analyze examination-related data collected in SOURCE to determine whether the performance target for this goal is achieved during the reporting period.  Results will be reported through established management processes.

2015 Performance Results

This annual performance goal and its associated performance indicators and targets are unchanged from 2015. The performance targets for the annual performance goal were met in 2015.



STRATEGIC OBJECTIVE 3.2

Consumers have access to easily understood information about their rights and the disclosures due them under consumer protection and fair lending laws.

Annual Performance Goal 3.2-1     

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

Indicator and Target

  1. Timely responses to written consumer complaints and inquiries
    • Respond to 95 percent of written consumer complaints and inquiries within timeframes established by policy, with all complaints and inquiries receiving at least an initial acknowledgement within two weeks.

Means and Strategies

Operational Processes (initiatives and strategies):  The FDIC has a comprehensive program to disseminate information to banks and the public on consumer rights under consumer protection and fair lending laws and regulations.  It also operates a centralized Consumer Response Center that coordinates the investigation of and response to consumer complaints and inquiries.  For correspondence related to an FDIC supervised institutions, FDIC staff contacts the institution and reviews the bank's actions for compliance with applicable federal consumer protection regulations before providing a response. Correspondence regarding institutions under the jurisdiction of other primary federal regulators is referred to those agencies.  Target response times vary by the type of inquiry or complaint. 

Human Resources (staffing and training): The FDIC’s centralized Consumer Response Center (CRC) is located in Kansas City and is staffed by FDIC employees.  CRC staff and management team work in partnership with supervisory staff in each region on consumer complaints and inquiries involving new or unusual issues or sensitive matters.

Information Technology: The FDIC uses an automated Customer Assistance Form on the FDIC’s website to facilitate submission of consumer correspondence.  The Specialized Tracking and Reporting System (STARS) is used to capture and report information regarding the FDIC’s consumer assistance program, including response time. 

Verification and Validation

The FDIC closely monitors the timeliness of its acknowledgment letters and responses through STARS.  Performance results are monitored through established management processes. In addition, surveys are sent to all consumers who have filed written consumer protection and fair lending complaints about a FDIC-supervised instituion to assess their satisfaction with the FDIC’s investigations and responses.  Established survey research methods are used to ensure the validity and reliability of the survey instrument and results.

2015 Performance Results

This annual performance goal and its associated performance indicator and target are unchanged from 2015.  In 2015, the FDIC successfully met the performance target for this annual performance goal.


STRATEGIC OBJECTIVE 3.3

The public has fair access to banking services and is treated equitably by FDIC-supervised institutions.

Annual Performance Goal 3.3-1

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

Indicator and Targets

  1. Completion of planned initiatives

Means and Strategies

Operational Processes (initiatives and strategies): Approximately 28 percent of U.S. households are underserved by the banking industry, based on survey results previously published by the FDIC.  This includes both “unbanked” households (those with no checking or savings accounts) and “underbanked” households (those with checking or savings accounts who have used nonbank alternative financial services and providers, such as money orders, check cashing services, payday loans, rent-to-own agreements, pawn shops, or refund anticipation loans, in the past 12 months). 

The Advisory Committee supports research, demonstrations, and pilot projects and promotes sound supervisory and public policies to improve the “appropriate engagement” of underserved households with mainstream financial institutions. Appropriate engagement means that households are using financial products and services that are affordable, easy to understand, and not subject to unfair or unforeseen fees.

During 2016, the FDIC will publish results from its 2015 FDIC National Survey of Unbanked and Underbanked Households (Household Survey) conducted jointly with the U.S. Census Bureau.  In addition to the Household Survey, the FDIC also collects information to provide insights into banks efforts to serve the unbanked and underbanked.  In 2016, the FDIC will report on the results of qualitative research into the strategies that banks are using to serve these populations.  Together, these efforts will enable the FDIC to provide an important set of references that will help assess progress and remaining challenges for economic inclusion.  In addition, the FDIC will be better positioned to identify strategies that promote economic inclusion by studying opportunities to expand access to mainstream financial services, identifying the role that community banks play in meeting community needs, and increasing awareness of communities that are currently underserved or at risk of becoming underserved.

The Advisory Committee’s work will support the expanded availability of SAFE accounts and the responsible use of technology, including mobile banking, to expand banking services to the underbanked population.  In 2016, the FDIC will issue a report on research with consumers and banks to further assess opportunities to take advantage of the economic inclusion potential presented by mobile financial services. The Advisory Committee may recommend to the FDIC specific measures of improvement, many of which may represent national objectives that require the participation and cooperation of multiple stakeholders, including other federal agencies; federal, state, and local policy makers; the financial services industry; nonprofit and philanthropic groups; and consumer groups.

During 2016, FDIC working groups will continue to conduct research, develop policy proposals, facilitate partnerships, and conduct outreach related to expanding access to mainstream banking services for underserved consumers.  The FDIC may present these proposals to the Advisory Committee for advice and recommendations.

Human Resources (staffing and training): This annual performance goal will be carried out largely by existing staff in the FDIC’s consumer research, policy, and consumer and community   affairs functions.  The activities of the Advisory Committee are supported by staff in several FDIC divisions. Employees in those divisions provide staff support for the Advisory Committee, as needed, including support for its research and demonstration activities.

Information Technology: Existing technology will be used to accomplish this goal.  The FDIC broadcasts the Advisory Committee’s public meetings on its website.

Verification and Validation

Progress in completing the initiatives planned for this annual performance goal will be monitored through established management reporting processes.

2015 Performance Results

This annual performance goal and its associated performance indicator are unchanged from 2015, but its performance targets have been updated for 2016.  In 2015, the FDIC substantially met the performance targets for this annual performance goal.



STRATEGIC GOAL 4:
Large and complex financial institutions are resolvable in an orderly manner under bankruptcy.


STRATEGIC OBJECTIVE 4.1    

Large and complex financial institutions are resolvable under the Bankruptcy Code.

Annual Performance Goal 4.1-1     

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

Indicators and Targets

  1. 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.
    • 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 timeframes.  Identify potential impediments to resolvability under the Federal Deposit Insurance (FDI) Act.
  1. Risk monitoring of large, complex financial institutions, bank holding companies and designated nonbanking firms
    • 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.

Means and Strategies

Operational Processes (initiatives and strategies): Ongoing risk analysis and monitoring is conducted by resident FDIC teams at large, complex financial institutions and offsite analytical teams composed of quantitative experts and complex financial institution specialists with bank examination backgrounds.  The offsite teams analyze industry and market conditions and trends to support individual institution monitoring and the consideration of broader policy issues.  They attempt to identify early warning signals and triggers and the range of possible response actions by monitoring financial condition and performance, assessing institutional risk management capabilities, and reviewing recovery plans.  FDIC staff also participates in collaborative risk management examinations and targeted reviews of SIFIs with other regulatory agencies.

Under Section 165(d) of the DFA, covered companies are required to submit resolution plans that provide for their rapid and orderly resolution under the Bankruptcy Code in the event of material financial distress or failure.  The staffs of the FDIC and FRB have shared responsibility for the review of the plans submitted by covered companies to assess informational completeness and the resolvability of individual banks and bank holding companies.

In addition, under Section 360.10 of the FDIC Rules and Regulations, the IDI Rule requires each covered IDI to provide a resolution plan that allows the FDIC as receiver to resolve the institution in an orderly manner, enable prompt access of insured deposits, maximize the return from the failed institution’s assets, and minimize losses realized by creditors and the DIF. The FDIC has the authority to review those plans.

Human Resources (staffing and training): Ongoing risk monitoring is conducted by onsite resident teams and offsite analysts who have expertise with large, complex financial institution operations.  The FDIC’s review of resolution plans submitted under Section 165(d) of the DFA is carried out by a multidisciplinary team of personnel from various divisions with expertise across all major operational and business line functions of the covered companies, both domestically and internationally.  The FDIC’s review of resolution plans submitted under the IDI Rule is carried out by multidisciplinary teams primarily consisting of commissioned examiners and resolution specialists.  These teams are complemented by subject matter experts, as necessary.  Training needs for each of these groups are reviewed regularly to ensure that these teams have the knowledge and expertise necessary to appropriately perform their assigned responsibilities.

Information Technology: The FDIC uses existing technology to track the submission and review of the resolution plans required under Section 165(d) of the DFA and Section 360.10 of the FDIC Rules and Regulations.

Verification and Validation

Progress in achieving this annual performance goal will be monitored through established management reporting processes.

2015 Performance Results

This annual performance goal is unchanged from 2015.  However, its associated performance indicator and targets have been updated to distinguish between the review of resolution plans submitted by covered companies under Title I of the DFA and those submitted by covered IDI’s under Section 360.10 of the FDIC Rules and Regulations.  The FDIC successfully met the performance target for this annual performance goal in 2015.



 

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