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2nd Quarter - 2008

This edition of our Letter to Stakeholders highlights the FDIC’s activities and accomplishments during the second quarter of 2008. The FDIC celebrated its 75th anniversary on June 16. For three quarters of a century, the FDIC has protected insured depositors and has brought stability to the U.S. banking system. As the nation faces continued uncertainties in today’s housing markets and the broader economy, the FDIC maintains the public’s confidence through effective bank supervision programs, prudent oversight of the insurance fund and by providing consumers with information about deposit insurance coverage. For more information about the FDIC, please visit our Web site at www.fdic.gov.

Our Priorities

Depositor Protection

• FDIC-insured commercial banks and savings institutions reported net income of $5.0 billion in the second quarter of 2008, a decline of $31.8 billion (86.5 percent) from the $36.8 billion the industry earned in the second quarter of 2007.



• The Deposit Insurance Fund (DIF) balance decreased by 14 percent ($7.6 billion) to $45.2 billion during the second quarter of 2008. This decrease was primarily due to the $10 billion increase in the contingent liability for anticipated failures for the second quarter, the majority of which pertained to the projected loss for IndyMac Bank.
  
  
• The FDIC estimates assessment income earned of $627 million in the second quarter of 2008.

Mission Support

• In May, the federal financial regulatory agencies issued illustrations to help consumers understand certain hybrid adjustable-rate mortgage (ARM) products, which are the subject of the agencies’ Statement on Subprime Mortgage Lending. In June, the FDIC issued guidance reminding institutions of legal and risk-management considerations if they freeze or reduce home equity lines of credit as a result of falling home prices or borrower financial problems.

• The FDIC and the United Kingdom Financial Services Authority (FSA) signed a Memorandum of Understanding (MOU) that will provide formal information-sharing services and contingent planning arrangements in connection with cross-border banking activities in the United States and the United Kingdom. The MOU will strengthen the FDIC’s and FSA’s continued cooperation toward the common goal of promoting confidence and stability in our financial markets. 

• The FDIC is conducting, along with the U.S. Bureau of the Census, the first national household survey to collect data on the number and demographic characteristics of unbanked and underbanked households, as well as the barriers they perceive when deciding how and where to conduct financial transactions.



• In June the FDIC published Guidance for Managing Third-Party Risk, which identifies the sound practices that can help banks avoid the significant safety-and-soundness and compliance problems that have been observed in connection with some third-party relationships.