FDIC beefing up staffing in anticipation of more 'problem banks'

The Federal Deposit Insurance Corp. is beefing up its examination staff following lessons learned from the bank failures in 2023 and an outlook of more "problem banks" in 2024.

The FDIC finalized its 2024 budget today, which included approval for 189 new staff positions. While the FDIC expects to conduct fewer exams next year due to a decline in the number of insured banks, the exams will be tougher and require more effort from examiners, according to the agency's memorandum on its 2024 budget. The agency attributed the need for more staff to lessons learned from the regional bank failures earlier in 2023 and an outlook for more "problem banks" next year.

"The resources of the FDIC were strained during that period" of the failures, Chairman Martin Gruenberg said in a statement. "We identified several areas where we needed to strengthen our existing capabilities on a long-term basis. The proposed budget directly addresses those needs."

In the agency's post-mortem report on the failure of Signature Bank, it said the FDIC faced staffing issues, which contributed to the bank's collapse.

"Although the FDIC successfully managed the failures of those institutions, they placed considerable stress on the FDIC's existing staff capabilities and revealed areas of weakness in those capabilities," the memo on the 2024 budget read.

Moreover, the agency expects the number of banks on its "problem bank list" to continue to climb throughout 2024, according to the memo. There were 44 banks on the list in the third quarter for a total of $54 billion in assets at Sept. 30, up from 43 banks for a total of $46 billion in assets in the linked quarter.

"This number is expected to continue to rise in 2024," the memo read.

A bank is considered a "problem bank" by the FDIC when its CAMELS composite rating is a 4 or 5. The CAMELS scale measures a bank's capital adequacy, asset quality, management, earnings, liquidity and sensitivity on a scale of 1 to 5, with 5 being the worst.

Even with the increase in staff, the agency's total 2024 budget declined by 6.3% from its 2023 budget. This was largely due to a 57.5% decline in the receivership funding component. That decline was "due to the completion of much of the post-failure workload associated with the three large regional bank failures that occurred earlier this year," Gruenberg said.