In the wake of the most severe episode of financial distress and the longest economic recession since the 1930s, the Dodd-Frank Act provides regulators with important new authorities to enhance financial stability and to respond to the regulatory challenges posed by large, complex systemically important financial institutions. For example, the Dodd-Frank Act grants the Federal Deposit Insurance Corp. new authorities to manage the Deposit Insurance Fund in a way that will make it more resilient in any future crisis.
The act also provides for a new SIFI resolution framework, including an Orderly Liquidation Authority and a requirement for SIFI resolution plans, which will give regulators much better tools with which to manage the failure of large, complex institutions. Finally, the Dodd-Frank Act also contains provisions that will complement the ongoing Basel III reforms that will make capital requirements more uniformly strong across the banking system.
The winding down of the OTS under the Dodd-Frank Act will result in the transfer of supervisory responsibility for 59 state-chartered savings associations to the FDIC. These institutions are located in 18 states and territories, with almost half of the total charters located in Ohio.
All of the state-chartered institutions transferring to the FDIC are small, with the largest having assets of just over $2 billion and only 3 of the 59 having total assets exceeding $1 billion. Given the small number of charters transferring to the FDIC and their relative lack of problems and complexity, the FDIC will absorb all state-chartered savings associations into our existing supervisory program.
We have assigned responsibility for examinations and other supervisory activities for each state-chartered savings association to the appropriate FDIC regional office. FDIC and OTS supervisory personnel began coordinating early in 2011 to ensure that that there will be no gaps in supervision and that the supervisory approach for these institutions will continue to be rigorous, consistent and balanced both during and after the transition.
We also recognize the importance of communicating regularly with the industry throughout this process. Two FDIC outreach events were held in Ohio to assist institutions in understanding the transition, and institutions in other states were contacted directly to ensure that their questions about the transition were answered.
The FDIC is fully integrating OTS staff into its current organizational structure. In addition to absorbing the supervisory responsibility for state-chartered thrifts, the FDIC will transfer approximately 95 employees from the OTS, including commissioned examiners as well as other staff. The FDIC plans to open one additional local office in southern Ohio to manage the concentration of additional examination work in that location. Since the FDIC has historically recognized and accepted professional examination credentials from other federal banking agencies, including the OTS, it will treat as commissioned FDIC examiners all OTS examiners who transfer to the FDIC with OTS accreditation.
The FDIC will address any individual training gaps that emerge after the transfer date through individual training and development plans. The FDIC has also worked closely with the OCC and the OTS to ensure that all transferred OTS employees are treated in full accordance with the requirements of sections 322(e) and 322(k)(2) of the Dodd-Frank Act with respect to their status, tenure, pay and benefits.
The agencies have determined, subject to public notice and comment and OMB approval, that it would be best to phase out the separate collection of Thrift Financial Report data and to merge that data collection process into the Call Report process used by other FDIC-insured depository institutions beginning with the March 2012 reporting period. The FDIC will assume responsibility for TFR reporting on an interim basis beginning with the second quarter 2011 TFR.
OTS staff previously responsible for collecting and analyzing TFR data will transfer to the FDIC to support the transition of thrifts to the Call Report and the ongoing reporting process for these institutions. In addition, OTS personnel who are assigned to the FDIC will continue to process all of the existing Savings and Loan Holding Co. reports that were previously required to be filed by the OTS until the SLHCs can be transitioned to holding company reports required by the FRB.
While the CFPB will be responsible for writing consumer protection rules for lenders of all types and all sizes, the current primary federal regulators will retain their enforcement responsibilities for FDIC-insured banks and thrifts with assets of less than $10 billion. This means that the FDIC will continue to examine about 4,500 state-chartered, non-member banks for compliance with consumer laws and regulations.
The FDIC has held several meetings with CFPB staff to discuss transition issues, including data sharing, hiring and consumer complaint handling, and recently supplied the CFPB with information they requested on institutions that will be transferred to its oversight, including examination reports and consumer complaint information. We are working with the CFPB on a joint Memorandum of Understanding to provide for the transfer to the CFPB of consumer complaints involving large financial institutions.
We are working hard to close out as many open examinations and enforcement cases as possible. But as part of our ongoing discussions, the CFPB has asked the FDIC to continue handling certain consumer complaints after the July 21 handover to provide for the orderly transition of complaint handling for large banks. We anticipate the possibility of ongoing work related to the transfer of consumer complaints between the FDIC and CFPB including, among other things, procedures for sharing information about complaints handled by each agency. The FDIC has also issued a solicitation of interest for experienced staff to apply for employment with the CFPB. At this point, 40 FDIC employees have accepted CFPB offers to transfer.
Today's testimony highlights the FDIC's progress in implementing financial reforms authorized by the Dodd-Frank Act. The act authorized important reforms to the FDIC's deposit insurance program that will ensure that coverage is sufficient to preserve public confidence in a crisis, that premiums are proportional to insurance risks, and that the fund itself is restored to long-term health and maintained at levels that will withstand future periods of financial distress. These deposit insurance reforms are critical to both ensuring financial stability and preserving competitive balance between the largest institutions and smaller community institutions.
The act contains a number of provisions that, together, form the basis for a new SIFI resolution framework that substantially improves the ability of regulators to respond to severe financial distress on the part of a large, complex financial institution. These reforms are not a cure-all, but are designed to work in concert with the other Dodd-Frank Act reforms, including those that strengthen capital requirements and the DIF, to promote competitive balance and make financial crises less frequent and less costly in the future.
Since the Dodd-Frank Act became law one year ago, the FDIC has proceeded—on our own authority and in concert with our regulatory counterparts—to implement its provisions. We have made much progress in one year, but still have considerable work ahead of us. Throughout this process, we have sought input from the industry and the public, and we continue to report back to Congress on our progress. We believe that successful implementation of these provisions will represent a significant step forward in providing a foundation for a financial system that is more stable and less susceptible to crises in the future, and better prepared to respond to crises if and when they develop.
In retrospect, it appears clear that expanding the coverage of deposit accounts during the crisis helped maintain public confidence in the banking system and particularly helped community banks maintain deposits. In the aftermath of the crisis, the Dodd-Frank Act made permanent the increase in the coverage limit to $250,000. It also provided deposit insurance coverage on the entire balance of non-interest bearing transaction accounts at all insured depository institutions until Dec. 31, 2012. This provision extends, with some modifications, an FDIC program that provided stability to banks and their business customers during the crisis. The two-year extension of full coverage for non-interest bearing transaction accounts will especially help smaller banks retain accounts commonly used for payroll and other business transaction purposes and maintain the ability to make loans within their communities.
Martin Gruenberg is acting chairman of the Federal Deposit Insurance Corp.
