2023 Bank Failures Spur Proposed Changes by FDIC – What Risk Managers Need to Know

According to the FDIC, bank failures in 2008 and the Spring of 2023 demonstrate institutions with poor corporate governance and risk management practices face a higher risk of failure.

There is a wave of panic among US banks. After years of putting short-term gains over long–term stability, US banks experienced a surge of failures in recent years, with an average of 93 failures annually between 2008 and 2012 compared to an average of just 3.57 annually between 2001and 2007. This has caused the FDIC to not only criticize the way the banks are managing regulations, but also require banks to calculate risk more effectively.

In the summer of 2023, the U.S. Federal Reserve and Federal Deposit Insurance Corp. (FDIC) released a proposal that increases the number of banks that would be required to account for unrealized gains and losses. It would also alter the way banks calculate risk-weighted assets. The proposed FDIC guidelines, affecting banks with $10b total consolidated assets, will create additional obligations for these institutions to govern.

Read SAI360’s e-book to understand:

• Requirements outlined in the FDIC proposal
• Steps financial institutions can take not only to comply if the proposal is adopted, but to also improve their efficiency and broader operational resilience in the process
• Role of governance, risk and compliance applications for banks