The “contours of changes” to the federal bank deposit insurance agency “remain unclear” resulting from the series of executive orders from the Trump administration aiming to reduce government size, the agency’s inspector general said in a report issued Thursday.
“The Federal Government is undergoing significant restructuring and reform that continues to unfold as we complete our annual assessment of the Top Management and Performance Challenges facing the Federal Deposit Insurance Corporation (FDIC),” the agency said in its report by its Office of Inspector General (OIG).
“The pace of change and fluidity regarding the status and composition of the FDIC (Federal Deposit Insurance Corp.) makes it difficult to assess the full impact of these changes on the FDIC and its mission,” the agency added.
The report outlines eight top challenges for the FDIC (which were not, the agency said, rank-ordered). Those are:
- Enhancing governance
- Establishing effective human capital management
- Ensuring readiness to execute resolution and receivership responsibilities
- Identifying and addressing emerging financial sector risks
- Assessing operational resilience in the financial sector
- Improving contract management
- Ensuring IT security and scalability
- Guarding against harmful scams
However, under the first point of “enhancing governance,” the report notes that it is “critical to ensure that FDIC Divisions and Offices work together to address all identified Top Challenges.”
In 2023 and 2024, the agency dealt with the consequences of a sexual harassment scandal that ultimately led to the resignation of the agency’s then-Chairman Martin Gruenberg. Since then, Vice Chairman Travis Hill has become acting chairman of the board. The report also notes that two of the three appointed seats on the agency board are now unfilled (Board Member Jonathon McKernan, who resigned in February, has been nominated to serve as director of the Consumer Financial Protection Bureau, or CFPB).
It is in that context that the report focuses on changes wrought by the Trump administration for the federal government.
“Federal agencies and departments are undergoing significant restructuring and reform,” the report notes. “The Administration has issued a series of executive orders and other directives with the primary aim to reduce government size and scope in furtherance of workforce optimization. As such, the contours of changes to the FDIC remain unclear.”
“Effective governance of the FDIC by its Board of Directors and senior leaders is critical to ensure that the FDIC can fulfill its mission to maintain stability and public confidence in the Nation’s financial system,” the report states. “Elements of a sound governance framework include establishing a culture of high integrity and ethical values; implementing Enterprise Risk Management (ERM) and internal controls to consider and address risks holistically across an organization; as well as measuring progress towards achievement of short- and long-term organizational and program goals.”
The report notes that, in the past, the OIG has found that the agency’s various elements “tend to work in a siloed, independent fashion rather than as a cohesive enterprise to assess and address risks faced by the FDIC and ensure coordination of activities across FDIC Divisions and Offices.”
Those “coordination gaps,” the report states, affected the agency’s mission and programs. Further, the report states, the OIG has identified in the past that some FDIC programs either lacked performance goals and metrics, or the goals and metrics they did have “did not provide a clear measurement of program effectiveness or status.”
The OIG also reported that about 453 FDIC employees (approximately 7% of all FDIC employees) accepted the Trump administration’s Deferred Resignation Program (DRP) offer. Additionally, the FDIC dismissed about 162 probationary employees (approximately 2% of all FDIC employees). The agency said there were also 103 separations – including retirements, resignations, and transfers to other agencies – between Jan. 1 and Feb. 18 “that were unrelated to these activities.”
“The full, long-term effect of the restructuring and reshaping of the FDIC is unknown, as these activities are ongoing. In addition to human capital challenges, we also previously identified, and continue to find, that the FDIC has not established an accountable workplace culture, including an adequate sexual harassment prevention program,” the report states.
Top Management and Performance Challenges Facing the Federal Deposit Insurance Corporation
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