WASHINGTON — The Federal Deposit Insurance Corp. board of directors approved a $2.09 billion operating budget for 2018, down 3.0% from 2017, despite a large investment in investment technology.

The FDIC board, which for the first time included acting Consumer Financial Protection Bureau chief Mick Mulvaney, signed off on a budget for next year that is 48% lower than the peak of the agency's crisis-era spending in 2010.

“I note that next year’s budget and staffing will be lower than the prior year for the eighth consecutive year,” said FDIC Chairman Martin Gruenberg, in likely his final budget meeting as chairman. “This reflects the continued steady improvement in the health of the U.S. banking industry over this period as well as the FDIC’s efforts to carefully manage resources.”

FDIC Chairman Martin Gruenberg
"Next year’s budget and staffing will be lower than the prior year for the eighth consecutive year,” said FDIC Chairman Martin Gruenberg. “This reflects the continued steady improvement in the health of the U.S. banking industry over this period as well as the FDIC’s efforts to carefully manage resources.” Bloomberg News

The agency's receivership funding will fall to $225 million, down from $300 million in 2017. But the agency will increase spending in some areas. The component of the budget for ongoing operations will increase 0.3% to $1.83 billion in 2018. Spending for the Office of the Inspector General will increase 9.1% to $40 million.

The 2018 budget included a reduction of 266 nonpermanent positions and 21 permanent positions. The overall staffing level for 2018 will be 6,076 full-time-equivalent positions.

The budget was approved by Gruenberg, FDIC Vice Chairman Thomas Hoenig and Mulvaney, who holds an FDIC board seat as a result of his becoming acting director of the CFPB last month.

A well-known budget hawk who is also the director of the Office of Management and Budget, Mulvaney commended the FDIC's spending control, but warned that the agency will lose flexibility as the agency shifts away from relying on temporary staff and toward more full-time hires. The agency had hired large numbers of temporary staff following the financial crisis to handle the wave of bank failures.

A fourth FDIC board seat would normally have gone to the comptroller of the currency. But Joseph Otting, who was recently sworn in as comptroller, was not there because additional paperwork needs to be filed before he can attend meetings. (A fifth seat for an internal FDIC board member is currently vacant.)

However, while the agency plans to shrink staff, it also plans to spend $44 million, or 5.3% more, on information technology, compared with 2017. IT spending is up 23.2% from 2016.

“The IT spending is going up pretty significantly,” Hoenig said. He asked Thomas Peddicord, a deputy director in the FDIC's finance division, if the IT spending is “kind of topping out or is this likely to continue on in the future.”

Peddicord said the extra spending is meant to improve efficiency and in turn bring down costs over time.

However, the FDIC is also budgeting for the migration of a data center from Manassas, Va., to Dallas.

The two-year total cost for the relocation project is expected to between $55 million and $60 million, with $35 million to $40 million being earmarked for 2018, according to a memo from Steven App, the FDIC's chief financial officer, to the board or directors.

“It is essential to commence work on these tasks immediately to prevent further delays in addressing the risks posed by the current backup data center,” said the memo.

Hoenig noted that the FDIC’s budget has been relatively flat since 2011 despite a significant reduction in the number of banks that it supervises. However, Peddicord said the majority of the agency’s budget is earmarked for salaries that have increased over time. He also said that the size and complexity of the institutions that the FDIC oversees has increased. He added that the agency will likely shrink its field office structure, which could bring down costs.

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