![]() While some staff don’t leave, others trained in up-to-date methods won’t stay. ![]() Insiders joke that the agency’s abbreviated name stands for “Found Dead In Chair.” At the executive level, the median length of employment is 26 years, based on the FDIC’s website and other publicly available sources. Meanwhile, 36% of staff in the division that winds up failed banks are already eligible, more than twice the government-wide average. The FDIC’s independent watchdog warned in February that 64% of its advanced IT experts will be retirement-eligible by 2027. A lack of technical sophistication at smaller banks compounds the problem: Highly trained examiners use precious time to collect and transfer data using old technology that could otherwise be used to analyze the safety of the banking system.Ĭhange is also hard won at an agency where employees tend to stay put for decades, thanks partly to a generous compensation and benefit scheme that pays an average $230,000 per year, based on figures in its annual report. Risk aversion is sensible for a regulator, but can come at the cost of less efficiency. While banks have roundly embraced technology, spending billions on blockchain-based ledgers and cutting-edge analytics, the watchdog is slow to embrace technological innovations, say sources with personal knowledge, with multiple overlapping systems, many built internally. The death of the 2020 project – and the fact it didn’t start years sooner – reflect deeper challenges at the FDIC. The challenge of luring a buyer contributed to a $20 billion loss to the FDIC’s depositor-rescue fund. When finding a new buyer for a bank like SVB the FDIC must set up a “data room,” and sourcing current information and models can take several days. Even so, recent bank failures show why such a project makes sense, not just in foreseeing problems but in engineering a smoother cleanup. Even had the new data panopticon been built, banks would have had to opt in, unless Congress expanded legal limits on what information the FDIC can demand. SVB would probably have failed regardless. For all but the biggest banks, the FDIC continues to rely on quarterly snapshots known as “call reports,” and the findings of its on-the-ground inspectors. As a result, no bid was declared a winner. Gruenberg, on the FDIC board since 2005, did not support the rapid phased prototyping data project, fretting that it amounted to outsourcing supervision, according to people familiar with the situation. McWilliams quit in 2022 after her Vice Chair Marty Gruenberg, a Democrat-affiliated appointee, challenged her over the rules surrounding bank mergers and ultimately won her role. Their presentations convinced even some skeptical FDIC officials, say people familiar with the process. Thirty-three firms applied for this “rapid phased prototyping,” and four were shortlisted in mid-2021, including Palantir Technologies (PLTR.N) and S&P Global Market Intelligence. Under former Chair Jelena McWilliams, an appointee of then-President Donald Trump, it invited companies to create prototype data tools to help bank supervisors monitor credit risks, depositor behavior and the effect of interest-rate moves. The FDIC at least knew what it didn’t know. Like other regulators, it was blindsided by the speed of the banks’ collapse. Given the FDIC’s overarching mission of protecting the sanctity of its fund, the failures of SVB and Signature Bank last month did not cover the agency in glory: Fearing a systemic crisis, it had to take the unusual step of reimbursing all their depositors – even those with millions in the bank. ![]() It manages the $128 billion fund that pays back depositors with savings below $250,000 if their bank collapses, and must also find new owners when a bank goes into receivership. ![]() The FDIC is one of several agencies that watches over American banks, but it’s the one that picks up the tab when a lender fails. Reviving it in some form could in future save the FDIC money, stature and time. The initiative fizzled because of skepticism from the regulator’s new leadership, and a culture wary of relying on private firms. The Federal Deposit Insurance Corp, which insures Americans’ savings, launched a project in 2020 that would have used technology from outside companies to flag risks just like the ones that felled Silicon Valley Bank. NEW YORK, April 4 (Reuters Breakingviews) - Bank watchdogs don’t have a crystal ball when it comes to spotting bank runs. ![]()
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