FDIC Board Approves $4.0 Bn Operating Budget For 2010

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The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) on Tuesday approved a $4.0 billion Corporate Operating Budget for 2010 and also revised the current 2009 budget to $2.6 billion. Of the $4 billion released by the agency, $2.5 billion is to be used to fund the takeover of failed banks.

The budget portrays a grim picture of the banking industry, still struggling to deal with the economic downturn, upheaval in the residential housing market and mounting problems in the commercial real estate sector.

Stating that the 2010 budget is a prudent and measured response to current conditions in the banking industry, FDIC Chairman Sheila Bair said this will ensure that we are prepared to handle an even-larger number of bank failures next year, if that becomes necessary, and to provide regulatory oversight for an even larger number of troubled institutions.

The increase of more than $1.4 billion (55%) in the operating budget for 2010 compared to this year is primarily due to the cyclical nature of bank failures. The 2010 budget increase also is partially attributable to increased supervisory activity related to the rising number of troubled banks which the FDIC oversees.

The receivership funding component of the 2010 budget, the vast majority of which is funded by receiverships, will be $2.5 billion, up from $1.3 billion in 2009. This includes funding for the continuing work associated with bank failures that have occurred over the past two years.

The budget also contains contingency funding for the possible continuation of an elevated number of bank failures in 2010.

The agency, which for years had reduced staff because of dwindling or nonexistent bank failures, also approved an authorized 2010 staffing level of 8,653 employees, up from 7,010 in 2009. Almost all the additional staff will be hired on a temporary basis primarily to assist with bank closings, perform follow-on work related to the management and sale of failed bank assets and to conduct bank examinations and perform other bank supervisory activities.

There were 133 bank failures so far this year compare to 25 in 2008 and the agency's inventory of assets in liquidation has more than doubled to $36.8 billion through the end of November.

"It is important for the American people to know that none of the increase we are approving today will involve in any way the use of taxpayer funds," said Chairman Bair. "All of the FDIC's operating expenses are paid from the Deposit Insurance Fund--the DIF, which is fully funded by the deposit insurance premiums paid by individual banks around the country."

Created in 1933 to restore public confidence in the nation's banking system, the FDIC insures deposits at the nation's 8,099 banks and savings associations besides promoting the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars--insured financial institutions fund its operations.

(Market News Provided by RTTNews)