The Federal Deposit Insurance Corp.’s readiness to resolve large regional bank failures leaves a bit to be desired, and it came up short during the regional bank failures of 2023, according to an inspector general report released Wednesday.
The agency’s readiness was “not sufficiently mature to facilitate consistently efficient response efforts in a potential crisis failure environment,” the OIG said.
The evaluation follows the spring 2023 collapses of Silicon Valley Bank, Signature Bank and First Republic Bank, which in rapid succession were the third-, fourth-, and second-worst bank failures in U.S. history. Sen Elizabeth Warren, D-MA, called for the investigation in March 2023.
“At the time of the Spring 2023 failures, the FDIC had not ensured that it fully met human and technology resource needs or that it sufficiently coordinated resources among its divisions and offices,” the OIG reported. “As a result, the FDIC did not satisfy the readiness activities for planning, training, exercises, evaluation, and monitoring consistent with best practices.”
Several lawmakers have been critical of the FDIC’s response to these large regional bank failures. The Government Accountability Office, too, reviewed the FDIC’s supervisory practices following the bank failures. Earlier this month, the GAO found weaknesses in the FDIC’s supervisory framework, including that it lacks a centralized tracking system for supervisory recommendations, therefore limiting the agency’s ability to flag emerging risks at supervised banks.
The OIG, for its part, made 11 recommendations to the FDIC. The recommendations included to improve its coordination of human and IT resources; complete or revise resolution guidance to address significant gaps; and increase interdivisional coordination over planning and exercises.
Additionally, the OIG recommended the FDIC ensures routine training of key resolution staff; identify, prioritize, and track significant after-action review recommendations; conduct routine internal reviews of resolution planning activities; and come up with a plan to periodically assess its resolution readiness.
The FDIC plans to complete all corrective actions by June 30, 2026, according to the OIG
