l Commercial banks and savings institutions. Does not include U.S.
branches of foreign banks.
n Savings institutions and commercial banks. Does not include
Resolution Trust Corporation (RTC) conservatorships.
SAIF-insured institutions that failed in 1995 or prior were the financial responsibility
of the SAIF. The RTC was responsible for the resolution and related costs of SAIF-insured
institutions that failed before July 1,1995. The SAIF became responsible for resolutions
& This represents the receivership for Heartland Federal Savings and
Loan Association, Ponca City, Oklahoma, which was closed on October 8, 1993. Although this
is a SAIF receivership, any financial burden will be borne by the FSLIC Resolution Fund
(FRF). The number of active failed thrift receiverships for the FRF was: 33 in 1996
(excluding 435 former RTC receiverships); 62 in 1995; and 76 in 1994.
Joseph H. Neely, former Mississippi banking
commissioner, was sworn in as a member of the FDIC Board of Directors. His appointment
brought the Board to its full membership of five directors for the first time since August
1992 (click here and here).
The FDIC Board streamlined and simplified
audit and reporting requirements for certain sound, well-managed banks. These amendments
implemented provisions of a 1994 law promoting regulatory relief as well as the
FDICs own recommendations to eliminate unnecessary requirements (click here).
At an FDIC symposium on derivatives, Chairman
Helfer announced new efforts to monitor and assess risk at insured institutions. The
efforts are designed to enhance the FDICs traditional approach to risk assessment
allowing the agency to respond more quickly and efficiently to emerging risks. As part of
those efforts, the FDIC developed specific guidelines for examiners on how to factor
relevant economic and other data into their risk evaluations of specific institutions (click here).
The FDIC reported that commercial banks
earned $48.8 billion in 1995, surpassing by 9.4 percent the previous record of $44.6
billion in 1994, according to preliminary data. The jump in earnings resulted primarily
from increased interest and fee income. In 1996, bank earnings reached a new record of
$52.4 billion (click here and here).
The first results of a new examiner reporting
system showed that loan underwriting standards remained stable at a group of 2,001
FDIC-supervised institutions that were examined during the 12-month period ending in
February. However, in just over 10 percent of the institutions reviewed, FDIC examiners
reported that underwriting standards were characterized by higher-than-normal risk. The
FDIC plans to release its evaluation of loan underwriting trends semiannually (click here).
Chairman Helfer announced the agency is
taking a series of steps to improve bank and thrift compliance with disclosure guidelines
for mutual funds and other uninsured investment products. The action followed a year-long
study on the sale of investment products at banks that found a gap exists between
regulatory guidelines and actual employee performance for a number of banks (click here).
Continuing its efforts to reduce burdensome
regulations for banks and the public, the FDIC took steps to streamline rules and policies
in areas such as capital standards and securities registration requirements (click here).
The FDICs Legal Division
issued guidance to help banks and thrifts decide whether the stored-value cards they issue
qualify for federal deposit insurance. In a General Counsel opinion letter, the FDIC
concluded that in most cases stored-value cards are not protected by deposit insurance.
The FDIC separately asked for comment on whether the agency should, by future regulation,
determine that stored-value cards are entitled to deposit insurance depending on their
general usage (click here).
The first institution insured by the Savings
Association Insurance Fund (SAIF) failed since the FDIC assumed responsibility from the
Resolution Trust Corporation for these institutions on July 1, 1995. No other SAIF-member
institution was closed during the year although an Oakar institution, one
where deposits are insured by both the Bank Insurance Fund (BIF) and the SAIF, was closed
on June 14 (click here and here).
The FDIC held a
public hearing on stored-value cards, Internet banking and other electronic payment
systems. Issues discussed included whether stored-value cards should be entitled to
federal deposit insurance as they become more widely used; what types of disclosures an
institution should provide to consumers; and safety and soundness concerns (click here).
legislation supported by the FDIC to put the SAIF on sound footing. The President signed
the legislation into law the same day. Under the new law, the thrift industry paid a
one-time special assessment of $4.5 billion to capitalize the SAIF, while banks will bear
part of the payments on the Financing Corporation (FICO) bonds sold from 1987 to 1989 to
shore up the former Federal Savings and Loan Insurance Corporation. BIF-member
institutions will pay one-fifth the rate paid by SAIF members for the first three years or
until the funds are merged. After January 1, 2000, BIF and SAIF members will share the
FICO payments on a pro-rata basis (click here and here and here).
Implementing the new SAIF law, the FDIC Board
set a special assessment of 65.7 basis points on institutions that pay assessments to the
SAIF in order to capitalize the fund at its Designated Reserve Ratio of 1.25 percent of
insured deposits effective October 1, 1996. The special assessment was collected
electronically on November 27. With the SAIF now capitalized, the Board also proposed to
reduce SAIF assessment rates, retroactive to October 1, 1996 (click
Responding to the FDICs declining
workload, Deputy to the Chairman and Chief Operating Officer Dennis F. Geer outlined for
employees the Corporations plans for downsizing in 1997 and subsequent years. He
also announced a number of measures intended to cushion the impact of staff reductions,
such as a new buyout program and expanded outplacement assistance. During the first buyout
programoffered to FDIC and Resolution Trust Corporation employees from November 1995
through January 1996over 900 employees took buyouts (click
here and here).
To handle the reduced levels of resolutions
and liquidation work projected over the next several years more effectively, the FDIC
created the new Division of Resolutions and Receiverships (DRR). The new division
represents a merger of the Division of Depositor and Asset Services and the Division of
Resolutions (click here and here
The FDIC unveiled a new service called
Institution Directory, which enables the public to obtain information about
individual banks and savings institutions via the Internet. The service is available on
the FDICs home page at www2.fdic.gov (click here and click here).
The Board lowered SAIF assessment rates and
widened the rate spread in order to avoid collecting more than is needed to maintain the
SAIFs capitalization at 1.25 percent of insured deposits and to improve the
effectiveness of the risk-based assessment system. SAIF-insured institutions will pay the
same rate for deposit insurance as BIF-insured institutions (click
The Board also approved the
Corporations 1997 budget of $1.62 billion, down $221 million or 13.6 percent from
the $1.84 billion authorized in 1996. The budget reduction reflected the continued impact
of the Corporations downsizing efforts.
The FDIC Board adopted the interagency
Federal Financial Institutions Examination Councils revised CAMELS
rating system for assessing the soundness of financial institutions on a uniform basis. A
sixth component was added to the previous CAMEL rating
systemS for sensitivity to market risk. Also, the FDIC in October became
the first federal banking agency to disclose individual component ratings to banks (click here and here).