FDIC Publishes FY 2017 Annual Report

The FDIC published an Annual Report for fiscal year 2017. In the Annual Report, the FDIC detailed its performance for fiscal year 2017 and outlined effective and proposed actions for the coming year.

The FDIC provided an overview of organizational developments and regulatory enforcement, including:

• Interest-Rate, Credit and Liquidity Risks: The FDIC highlighted incidents of liquidity stress at a small number of financial institutions, and noted broader trends of reduced balance sheet liquidity among smaller banks. The FDIC, along with the Federal Reserve Board, Office of the Comptroller of the Currency and Conference of State Bank Supervisors, advised firms to create a strong portfolio of liquid assets and to diversify funding sources.

• Living Wills: The FDIC reviewed the eight largest U.S. systemically important banking organizations resolution plans. Four of the firms' plans had shortcomings (though none was deficient), and they must be resubmitted by July 1, 2019.

• Rebuilding the Deposit Insurance Fund: The FDIC expects the reserve ratio to reach 1.35 percent in 2018, ahead of the September 2020 statutory deadline.

• Community Banking Initiative: The FDIC observed signs of an increase of de novo formations from filing applications for new insured depository intuitions. During 2017, the FDIC approved six applications for deposit insurance for new community banks and remains committed to working with any group interested in starting a de novo bank.

Under the Economic Growth and Regulatory Paperwork Reduction Act of 1996, the FDIC, Office of the Comptroller of the Currency and Board of Governors of the Federal Reserve System, in conjunction with the National Credit Union Administration, conducted a two-year review of rules affecting financial institutions. The FDIC expressed support for the following reforms:

• Raise the total assets threshold for conducting annual stress tests from $10 billion to $50 billion;

• Increase the asset threshold for banks eligible for an 18-month examination cycle from $1 billion to $2 billion;

• Raise the asset threshold for the community bank Call Report to match a higher examination frequency threshold;

• Create a new appraisal threshold exemption for insured depository institutions that originate a de minimis number (i.e., less than 25) of residential mortgage loans in a calendar year; and

• Deem banks with assets under $10 billion compliant with risk-based capital requirements, if they maintain a leverage capital ratio of 10 percent and do not engage in specified activities.