There is another important reason for limiting the size of the FDIC fund: it acts as a means of discipline, encouraging the FDIC to use its resources wisely. This is why our interest was piqued when it was reported that the FDIC would add “another 200 plus positions.” Certainly, the FDIC has a lot on its plate, dealing with high numbers of bank failures. But the budget approved by the FDIC actually eliminates 251 positions in the Division of Resolutions and Receiverships. These are vacant positions that will not be filled because the pace of failures had slowed.
So where are these new positions being deployed? First, 29 new positions will be added to support the newly created Division of Depositor and Consumer Protection. This division is to pick up where the Bureau of Consumer Financial Protection leaves off in examining smaller banks for compliance with any new rules from the Bureau.
There should be no doubt in bankers’ minds that the FDIC intends to devote considerable resources to assure compliance with the Bureau’s rules. Just to put an exclamation point on that, the FDIC is adding another 7 new permanent positions in the legal division to support the work of this new division. Moreover, FDIC noted
There are some additional decisions to create the infrastructure of that division and to beef up the enforcement portions of the compliance discipline and those are also funded as permanent positions in this budget.
There are more FDIC costs that the banking industry will bear under what the FDIC called “significant new responsibilities that we have under Dodd-Frank.” For example, the FDIC board approved the creation of an office of complex financial institutions in August and now is budgeting for 156 positions in that new organization. The FDIC noted:
There are also some additional positions, 13 positions in legal to support that new area of business. So there is a substantial amount of resource here included related to our responsibility to address those responsibilities going forward.
There’s more: “24 additional permanent positions for large bank responsibility that are driven both by the provisions of Dodd-Frank for stress testing and things like that,” noted FDIC staff. Plus, FDIC staff noted: “we have added 118 new permanent positions to implement a new permanent staffing platform for future readiness.”
Since the full cost of the FDIC – including personnel, administrative, examination, and bank failure costs – is borne by the banking industry, the decisions made by FDIC today will have significant consequences for banks and the communities they serve for years to come.
Read the Memorandum on the 2011 Budget.
View the Budget in Excel.