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Federal Deposit
Insurance Corporation

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

2015-2019 Strategic Plan

The FDIC and the Banking Industry:
Perspective and Outlook


Congress created the FDIC in the Banking Act of 1933 to maintain stability and public confidence in the nation’s banking system.  The statute provided a federal government guarantee of deposits in U.S. depository institutions so that depositors’ funds, within certain limits, would be safe and available to them in the event of a financial institution failure.  In addition to its role as insurer, the FDIC is the primary federal regulator of federally insured state-chartered banks that are not members of the Federal Reserve System.  The FDIC also acts as receiver for insured depository institutions (IDIs) that fail and has resolution planning responsibilities (jointly with the Federal Reserve Board) for large and complex financial companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

The FDIC carries out its mission through three major programs: insurance, supervision, and receivership management.

Over the next four years, the FDIC will face numerous issues and challenges in each of these major programs due to changing economic conditions, continuing changes in the nature of the financial services industry, expected changes in financial services regulation, and emerging consumer protection issues that affect the financial services industry. Some of the major issues and challenges are addressed in more detail below.

The Impact of the Economy

The performance of the economy at national and regional levels directly affects the business strategies of individual financial institutions and may affect the industry's overall performance. The lending and funding strategies of IDIs are influenced by interest rates, inflation, unemployment, and changes in the business cycle of sectors such as agriculture, housing, commercial real estate, and energy. Adverse economic or financial conditions abroad can spill over and affect national and regional economies. 

The U.S. economy continues to recover from the deep recession that ended in 2009. The recovery has been long and slow, as is typical of economic recoveries that follow a severe financial crisis. The housing market downturn that began in 2007 lasted several years and impaired consumer and bank balance sheets, resulting in prolonged weakness across key sectors of the economy. The recovery has also been uneven, as areas that experienced a more dramatic housing market correction or have been disproportionately affected by the recession have seen a much slower recovery.

The economic recovery has recently begun to gain momentum and the outlook has improved, which has helped the banking industry. Banks have generally repaired their balance sheets, asset quality has improved, loan balances have increased, and capital and liquidity ratios have improved. However, while net income has returned to pre-crisis levels, profitability (as measured by return on assets) has not. There are fewer problem institutions and failed institutions, yet neither has fallen to pre-crisis levels.

The extended low interest rate environment also poses significant challenges to the banking industry. Low interest rates have compressed net interest margins and encouraged banks to invest in higher yielding assets that are of longer maturity and/or higher risk.  In some cases, banks may be entering unfamiliar business lines or offering new products to increase profitability. In addition, banking institutions remain vulnerable to interest rate risk when interest rates eventually normalize to their longer-run levels.

Other Major Strategic Challenges

In addition to the challenges posed by the economy, the FDIC expects to face other challenges that will shape its priorities over the next four years.

1 Based on the definition of community banks in the FDIC Community Banking Study, 2012.
2 2013 National Survey of Unbanked and Underbanked Households, October 2014. The survey reported that 7.7 percent of U.S. households (9.6 million households) had no relationship with a mainstream financial institution and that another 20 percent of U.S. households (24.0 million households) were underbanked (“underbanked” households were defined as those that had a bank account but had also obtained during the 12-month period prior to the survey financial services or products from alternative financial services providers outside of the banking system).
3 The FDIC has issued (and updates annually) a Diversity and Inclusion Strategic Plan that guides its effort in this area.