The Basics: Federal Deposit Insurance Corporation

Tuesday, January 25, 2022

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. federal government meaning it receives no Congressional appropriations and has been given certain independence from the President and Congress. As such, its acquisition process and procurement regulations are somewhat different than traditional federal agencies. The FDIC’s general responsibility is the supervision of about 3,300 financial institutions to evaluate their safety and soundness. Looking ahead, the FDIC will be addressing concerns regarding technology security, crypto-assets, and workforce management and development.

Mission and Organization

The Banking Act of 1933, also called the Glass-Steagall Act, separated commercial banking from investment banking and created the FDIC. Later, the 1999 Gramm-Leach-Bliley Act repealed the divisions between banks and securities firms. President Franklin D. Roosevelt signed the Glass-Steagall Act following thousands of bank failures in the 1920s and early 1930s, stock market crash, and subsequent Great Depression. At the time, the FDIC was temporarily created to insure bank deposits with money from the banks, not taxes. The Banking Act of 1935 made the FDIC an independent permanent agency.

The FDIC holds six core values: integrity, competence, teamwork, effectiveness, accountability, and fairness. Its mission is to “maintain stability and public confidence in the nation’s financial system.” This is accomplished by insuring deposits, examining and supervising financial institutions for safety and soundness and consumer protection, making large and complex financial institutions resolvable, and managing receiverships. The Insurance Program handles the Deposit Insurance Fund. The Supervision Program includes fair lending, consumer protection, and insured depository institutions (IDIs); it is assisted by the Federal Reserve System and Office of the Comptroller of the Currency. Lastly, the Receivership Management Program resolves failed IDIs.

The FDIC is led by a five-person Board of Directors, including the Comptroller of the Currency and the Director of the Consumer Financial Protection Bureau (CFPB). The board members are appointed by the President and confirmed by the Senate, and no more than three are allowed to be from the same political party. Headquartered in Washington, D.C., the FDIC has 16 divisions and offices across six Regional Offices and about 90 Field Offices. The FDIC’s organizational chart is below.

FDIC in Action

FDiTech

The FDIC launched a new program, FDiTech, to discover new best practices for utilizing customer data in a safe and effective way. It advocates for new technologies to be used in the financial services sector, such as easier methods of reporting financial information. FDiTech leads “tech sprints” and pilot programs to showcase and develop new technologies faster. Its first sprint in August 2021, Breaking Down Barriers: Reaching the Last Mile of the Unbanked, combined non-profits, researchers, banks, and more to brainstorm new ways community banks can adapt to be more useful for those who don’t currently belong to a bank. In October 2021, FDiTech selected six teams (including Amazon Web Services [AWS] and Google) in a sprint for banks to measure and test resilience.

Insuring Failed Institutions

When a federal or state banking regulatory agency closes a bank due to an inability to meet its financial obligations, the FDIC organizes the fallout of the failing bank. The FDIC’s Resolutions Handbook outlines this process. The FDIC is also the federal regulator for state nonmember banks. Usually, the deposits and loans of the failed bank are sold by the FDIC to another institution, transferring customers as well. There have been 561 bank failures since 2001. The FDIC also sells any real estate owned by the bank. These asset sales include real estate/property, loans (often sold in groups called sealed bid sales) and financial assets. New banks join through the states or the Office of the Comptroller of the Currency, and banks chartered by states have the option to join the Federal Reserve System. In addition to overseeing the failed bank’s transformation, the FDIC also steps in to protect the bank’s customers by paying them insurance. The FDIC first insured deposit amounts up to $2,500, and now insures up to $250,000. No depositor has lost money as a result of a bank’s failure since FDIC insurance began in 1934.

FDIC Quarterly Banking Profile

Four times a year, the FDIC releases its Quarterly Banking Profile, a summary of financial information for all FDIC-insured institutions. These reports began in 1995 and were originally called FDIC Banking Reviews. In the FDIC’s 3rd Quarter of 2021 Banking Profile, U.S. banks reported a net income of $69.5B, a 35.9% increase from last year.

Trust Through Transparency

Another FDIC initiative, Trust Through Transparency promotes ideas of openness and accountability between the FDIC, other regulators, banks, and the public. Since 2018, Trust Through Transparency has worked to make reports and data, like application and assistance turnaround times, available to the public.

Alliance for Economic Inclusion

Alliances for Economic Inclusion (AEI) are groups of local financial, consumer, and government leaders that advocate for safe, affordable, and sustainable financial products and solutions to help people achieve financial stability and build wealth. The FDIC supports 12 AEIs around the country, working to increase economic inclusion for low-income people and businesses.

Contract Procurement and Acquisition

The FDIC’s Acquisition Services Branch, within the Division of Administration, is headquartered in Arlington, Virginia and has a regional office in Dallas, Texas. Contracting Officers are overseen by the Acquisition Services Branch Deputy Director. While the vehicles used may vary, the acquisition process traditionally includes pre-solicitation, solicitation, evaluation, award, administration. Since the Federal Acquisition Regulation (FAR) doesn’t apply to the FDIC as a quasi-independent agency, the FDIC uses its own Acquisition Policy Manual (APM) as contracting guidelines. It also has an Acquisition Procedures, Guidance, and Information (PGI) Report to detail its acquisition process.

The FDIC acquires goods and services through numerous contractual agreements. It uses fixed-price contracts and level of effort contracts as its two basic types, in addition to the following methods:

  • FDIC Purchase Card (P-Card)
  • GSA Federal Supply Schedules (i.e. GSA eBuy)
  • Blanket Purchase Agreements (BPA)
  • SBA 8(a) Program Contracts
  • Basic Ordering Agreements (BOA)
  • Receivership Basic Ordering Agreements (RBOA)

The FDIC uses simplified procurement procedures for buying goods and services valued at less than $100,000 and commercial goods and services valued at less than $5M. These allow oral and written requests for quotations, and generally, no less than three bidders are selected for the work based on price or delivery requirements alone. Simplified procurement orders, blanket purchase agreements, and P-Cards may be used instead of contracts. Competitive pricing is not required when a contract is valued under $5,000, so the FDIC prefers using P-Cards to save time. In addition, the FDIC also supports subcontractors on prime contracts.

These various methods of acquisition provide the speed and flexibility the FDIC needs when servicing a failed institution. There are two types of accelerated contracting procedures used when there is often not enough time to follow the formal contracting procedure: expedited contracting and emergency contracting. These include an advance authorization letter followed by a formal contract. The FDIC uses its existing contracts as much as possible to fill any arising needs from a failed bank.

The majority of contracts come from the following FDIC divisions and offices:

  • Division of Administration
  • Division of Resolutions and Receiverships
  • Chief Information Officer Organization
  • Division of Risk Management Supervision
  • Division of Depositor and Consumer Protection
  • Corporate University
  • Legal Division

Recent Contracts

The following are a few examples of active FDIC contracts. The FDIC’s contracting needs are just as varied as any other federal agency, ranging from accounting to interpreting support services.

  • Information Technology Application Services (ITAS) Next Generation (NG): In September 2021, FDIC awarded a Basic Ordering Agreement (BOA) worth up to $487.5M over the next seven-and-a-half years. Under this BOA, contractors will help FDIC’s Division of IT deal with operations and maintenance support of its infrastructure while the financial agency looks to improve “productivity and efficiencies to continue to mature between 2020 and 2027”. Among the awardees is Synergy and CTIS.
  • Business Operations Support (BOS) Accounting Services: Mir, Mitchell & Company, LLP (MMC) won a Receivership Basic Ordering Agreement (RBOA) to supply the FDIC’s Division of Resolutions and Receiverships (DRR) with increased staff flexibility and availability of resources in BOS areas. Mir’s Subject Matter Experts (SMEs) provide insight on matters such as international bank secrecy restrictions on a failed institution’s foreign financial information. This contract is in place from January 1, 2019 to December 21, 2021.
  • Executive Search Services: The FDIC contracted Heidrick and Struggles International, Inc. to provide executive consulting services on a number of projects, including recruitment for executive positions, board members, and lower levels of management. Heidrick and Struggles International is experienced in working with the various types of FDIC-insured institutions and failed systemically important financial institutions. The contract is in place until September 2022.
  • Government-Backed Loan Servicing: Small Business Lending, Inc. was chosen to provide consultant and loan servicing services for Government-Backed Guaranteed Loans. The work may also extend to loans, loan pools, or securities guaranteed by the Small Business Administration (SBA), U.S. Department of Agriculture (USDA), U.S. Housing and Urban Development (HUD), and others. The contract is effective until December 2024.
  • Owned Real Estate (ORE) Management and Marketing Services: The FDIC was looking for several companies to provide contractor support at failed institution closings by identifying owned real estate and offering asset management and marketing services for bank-owned real estate. Colliers International Greater Los Angeles, Inc. was chosen to handle regular and large complex assets through 2024. CBRE, Inc. was also selected to work with large complex assets.
  • Translation/Transcreation/Interpretation Services: TransPerfect Translations International, NewType Inc., and Translation Excellence Inc. were contracted by the FDIC for translation and transcreation services when the FDIC works with a failing institution that has a customer base in a foreign language. These services, which also may include interpretation services, are able to be utilized at the contractor’s office, the failed institution, or any FDIC building. The contract is in place until February 2025.

Spending Trends

The FDIC does not get Congressional appropriations; it is funded by premiums banks and savings associations pay for deposit insurance coverage. The FDIC’s Proposed 2021 Budget most notably features a 133.3% increase in Receivership Funding compared to the 2020 budget. It is also looking to add 33 permanent staff in 2021 as well. Overall, the FDIC’s 2021 Operating Budget totaled $2.28B. The following is the proposed breakdown of the 2021 budget.

Furthermore, FDIC information available on USASpending is likely not updated often as the FDIC doesn’t have the same reporting requirements as other federal agencies. Usually, USASpending is a reliable source of updated information, but the FDIC is not listed as an “Awarding Agency” on the Award Search function. As of September 2021, the FDIC has only reported utilizing 1.6% of its budget. There are also no reported contracts awarded by the FDIC from FY16-FY22. All of this information must be taken with a grain of salt as it is unreasonable and likely inaccurate.

Current Opportunities to Work with FDIC

SAM.gov may also be unreliable when looking for the most accurate and active contracting opportunities, even though it is listed as a good source. Only 18 results when searching FDIC, and most are inactive or stop progressing at the Requests for Information (RFI) stage. However, FDIC did recently post an RFI for a Loss Share Data Management Solution.

The FDIC recommends registering your business with the FDIC Contract Resource List. This list of potential vendors is used to form new solicitation lists and send out a solicitation distribution mailing list with new opportunities to engage with the FDIC.

FDIC in 2022

The 2018-2022 FDIC Strategic Plan outlines goals for each FDIC program.

The report also listed challenges the FDIC must address:

  • Impact of the longest recorded economic expansion
  • Future of community banking
  • Large and complex financial institutions
  • Information technology and cybersecurity
  • Economic inclusion
  • Workforce management and development

An Office of the Inspector General (OIG) audit reported weaknesses in its supply chain risk management program and administrative accounts security measures. Banking institutions are vulnerable to interest-rate, liquidity, and credit risks. This leads to a higher possibility of the FDIC or its insured institutions being hacked. Overall the FDIC scored a four out of five on the audit, which is still good, but clearly leaves room for improvement.

The FDIC, Federal Reserve System, and Office of the Comptroller of the Currency released a roadmap of activities planned for 2022 revolving around crypto-assets. These federal bank regulatory agencies are concerned with crypto-asset safekeeping, facilitation of customer purchases, loans collateralized by crypto-assets, and more. They aim to increase consumer protection, examine banks’ consideration of legal permissibility when handling crypto-assets, assemble a crypto-vocabulary, and analyze how transferable existing regulations are to crypto-assets.

FDIC Beyond 2022

The FDIC is making information technology updates to protect secure information and ensure the agency is running efficiently. The CIO Organization Strategic Plan for 2020 to 2023 improves internal operations. Its themes are effective communication, strategic focus, excellent service delivery, and engaged organization.

Additionally, the FDIC’s IT Modernization Plan and Roadmap, 2020-2024 updates its former IT Strategic Plan and builds on its Information Security and Privacy Strategic Plan. Application, data, and structural initiatives are being employed to modernize legacy IT systems and incorporate new technologies to encourage business innovation and efficiency. Strengthening data governance as a corporate resource is also a priority.

Business Drivers:

  • Supervision modernization
  • Crisis preparedness
  • Streamlined stakeholder interactions
  • Data as a competitive resource
  • Digital workforce
  • Resilient and cost-effective corporate support

The following are the goals for the FDIC’s acquisition process. Like above, the developments center around being technologically updated, secure, and efficient.

Researched and authored by Haley Boulanger, Pulse Analyst.

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