1.2: Risks
The FDIC promptly identifies and responds to potential risks to the insurance funds. Other Information:
Means & Strategies: The FDIC, in cooperation with the other primary federal regulators, proactively identifies and evaluates
the risk and financial condition of every insured depository institution. The FDIC also identifies broader economic and financial
risk factors that affect all insured institutions. The availability of timely banking information is critical to ensuring
the FDIC's ability to assess risk to insured financial institutions and the deposit insurance funds. The FDIC is committed
to providing accurate and timely bank data related to the financial condition of the banking industry. Industry-wide trends
and risks are communicated to the financial industry, its supervisors and policymakers through a variety of regularly produced
publications and ad hoc reports. Risk-management activities include approving the entry of new institutions into the deposit
insurance system, off-site risk analysis, assessment of risk-based premiums, and special insurance examinations and enforcement
actions. Risk management begins with the FDIC’s review of applications for deposit insurance to ensure that the applying institution
is well-capitalized, possesses a qualified management team, and is capable of operating in a safe and sound manner. Off-site
risk analysis activities include reviewing examination reports and using a variety of information system models and tools.
The purposes of these activities are to understand the risk profile of individual financial institutions and to identify trends
and emerging risks affecting groups of financial institutions and the insurance funds. The information may be used to target
institutions for examination or other follow-up activities; focus the scope of an examination; assist in setting risk-based
premiums for individual institutions; determine the adequacy of the deposit insurance funds; develop new policy initiatives;
and determine corporate strategies for supervision, staffing, communication and other resource decisions. The FDIC assesses
risk-based insurance premiums by assigning a risk classification to each insured institution. The risk classifications are
adjusted periodically to reflect the relative risk posed by institutions. Accordingly, institutions that represent greater
supervisory risks to the insurance funds pay higher premiums, subject to the statutory requirements constraining the FDIC’s
ability to charge appropriate premiums to these institutions. In fulfilling its role as insurer, the FDIC has special insurance
examination over all insured institutions and, at times, participates in examinations with the other federal regulators. In
order to prevent or minimize losses to the funds, the primary federal regulator is required to take prompt corrective action
when an FDIC-insured institution is determined to have capital problems. Depending on the institution’s capital classification,
these actions range from imposing restrictions or requirements on an institution’s operations to the appointment of a receiver
or conservator. External Factors: A sudden or large fraud perpetrated on a financial institution could result in an unforeseen
loss to the insurance funds. Also, natural disasters, public policy changes, and sudden economic financial market crises could
cause losses to financial institutions and pose risk to the deposit insurance funds.
Indicator(s):
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