The Federal Financial Institutions Examinations Council (FIRREA) is a formal federal interagency body empowered to make recommendations to promote uniformity in the supervision of financial institutions and to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the:
1. Board of Governors of the Federal Reserve System (FRB)
2. Federal Deposit Insurance Corporation (FDIC)
3. National Credit Union Administration (NCUA)
4. Office of the Comptroller of the Currency (OCC)
5. Consumer Financial Protection Bureau (CFPB)
6. State Liaison Committee (SLC), which includes representatives from the Conference of State Bank Supervisors (CSBS), the American Council of State Savings Supervisors (ACSSS), and the National Association of State Credit Union Supervisors (NASCUS).
The Federal Reserve System, founded by Congress in 1913, is the central bank of the United States. The Federal Reserve’s duties fall into four general areas:
• conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates
• supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers
• maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
• providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system.
The Federal Deposit Insurance Corporation (FDIC) preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for at least $250,000; by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails.
An independent agency of the federal government, the FDIC was created in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s.
The FDIC receives no Congressional appropriations – it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. The FDIC insures approximately $9 trillion of deposits in U.S. banks and thrifts – deposits in virtually every bank and thrift in the country.
The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. The FDIC’s Electronic Deposit Insurance Estimator can help you determine if you have adequate deposit insurance for your accounts.
The FDIC insures deposits only. It does not insure securities, mutual funds or similar types of investments that banks and thrift institutions may offer.
The FDIC directly examines and supervises more than 4,500 banks and savings banks for operational safety and soundness, more than half of the institutions in the banking system. Banks can be chartered by the states or by the federal government. Banks chartered by states also have the choice of whether to join the Federal Reserve System. The FDIC is the primary federal regulator of banks that are chartered by the states that do not join the Federal Reserve System. In addition, the FDIC is the back-up supervisor for the remaining insured banks and thrift institutions.
The FDIC also examines banks for compliance with consumer protection laws, including the Fair Credit Billing Act, the Fair Credit Reporting Act, the Truth-In-Lending Act, and the Fair Debt Collection Practices Act, to name a few. Finally, the FDIC examines banks for compliance with the Community Reinvestment Act (CRA) which requires banks to help meet the credit needs of the communities they were chartered to serve.
To protect insured depositors, the FDIC responds immediately when a bank or thrift institution fails. Institutions generally are closed by their chartering authority – the state regulator, or the Office of the Comptroller of the Currency. The FDIC has several options for resolving institution failures, but the one most used is to sell deposits and loans of the failed institution to another institution. Customers of the failed institution automatically become customers of the assuming institution. Most of the time, the transition is seamless from the customer’s point of view.
The FDIC is managed by a five-person Board of Directors, all of whom are appointed by the President and confirmed by the Senate, with no more than three being from the same political party.
The National Credit Union Administration (NCUA) has a full time, three-member Board appointed by the President of the United States and confirmed by the Senate. No more than two Board members can be from the same political party, and each member serves a staggered six-year term. In 1934, President Roosevelt signed the Federal Credit Union Act into law authorizing the formation of federally chartered credit unions in all states. The new Bureau of Federal Credit Unions was first housed at the Farm Credit Administration. Regulatory responsibility shifted over the years as the agency moved from the Federal Deposit Insurance Corporation to the Federal Security Agency, and then the Department of Health, Education and Welfare.
In 1970, the Bureau became an independent federal agency when the National Credit Union Administration was formed to charter and supervise federal credit unions, and the National Credit Union Share Insurance Fund (NCUSIF) was also formed to insure credit union deposits. The NCUSIF was created without tax dollars and capitalized solely by credit unions. In 1979, a three-member Board replaced the NCUA administrator. That same year Congress created the Central Liquidity Facility, the credit union lender of last resort.
The Office of the Comptroller of the Currency’s primary mission is to charter, regulate, and supervise all national banks, federal savings associations, and federal branches and agencies of foreign banks.
The OCC was established in 1863 as an independent bureau of the U.S. Department of the Treasury. The President, with the advice and consent of the U.S. Senate, appoints the Comptroller to head the agency for a five-year term. The Comptroller also is a director of the Federal Deposit Insurance Corporation and NeighborWorks® America.
Headquartered in Washington, D.C., the OCC has four district offices plus an office in London to supervise the international activities of national banks. The OCC’s nationwide staff of bank examiners conducts on-site reviews of national banks and federal savings associations (or federal thrifts) and provides sustained supervision of these institutions’ operations. Examiners analyze loan and investment portfolios, funds management, capital, earnings, liquidity, sensitivity to market risk for all national banks and federal thrifts, and compliance with consumer banking laws for national banks and thrifts with less than $10 billion in assets. They review internal controls, internal and external audit, and compliance with law. They also evaluate management’s ability to identify and control risk.
In regulating national banks and federal thrifts, the OCC has the power to:
• Examine the national banks and federal thrifts.
• Approve or deny applications for new charters, branches, capital, or other changes in corporate or banking structure.
• Take supervisory actions against national banks and federal thrifts that do not comply with laws and regulations or that otherwise engage in unsound practices.
• Remove officers and directors, negotiate agreements to change banking practices, and issue cease and desist orders as well as civil money penalties.
• Issue rules and regulations, legal interpretations, and corporate decisions governing investments, lending, and other practices.
The Consumer Financial Protection Bureau (CFPB) was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) to protect consumers by carrying out federal consumer financial laws. Among other things, it:
• Writes rules, supervises banks, credit unions and other financial companies, and enforces federal consumer financial protection laws
• Restricts unfair, deceptive, or abusive acts or practices
• Takes consumer complaints
• Promotes financial education
• Researches consumer behavior
• Monitors financial markets for new risks to consumers
• Enforces laws that outlaw discrimination and other unfair treatment in consumer finance.
The State Liaison Committee (SLC) was established by the Federal Financial Institutions Examination Council, pursuant to Section 1007 of the Financial Institutions Regulatory and Interest Rate Control Act of 1978, to encourage the application of uniform examination principles and standards by state and federal agencies, and to allow state regulators to participate in the development of those principles and standards. The SLC consists of five representatives of state regulatory agencies that supervise financial institutions.