WASHINGTON – Due to its declining receivership responsibilities, the Federal Deposit Insurance Corp. said Tuesday that it will again reduce its operating budget for fiscal year 2017.

The agency's board approved a 2.4% budget cut, dropping its total operating budget to $2.16 billion, down from the $2.21 billion for fiscal 2016. While funding for ongoing operations will increase by 2.5%, to $1.82 billion, the budget for the agency's receivership functions will drop by 25%, to $300 million. The agency's Office of the Inspector General, meanwhile, will receive a boost in funding, rising 7.6% to $36.8 million.

"This is the seventh consecutive reduction in the FDIC's annual operating budget," said FDIC Chairman Martin J. Gruenberg. "These reductions are made possible by continuing steady improvement in the health of the U.S. banking industry. The FDIC remains focused on fulfilling its mission while prudently managing costs."

As of Sept. 30, the FDIC was managing 404 active receiverships, down from 446 at the start of the year. Meanwhile, the number of bank failures continued its downward trend, dropping from eight in 2015 to five so far this year.

The FDIC also predicted that bank mergers would help lower costs in 2017. It expects to perform 1,631 risk management examinations in 2017, down from 1,676 in the previous year. Compliance and Community Reinvestment Act examinations are also set to drop to 1,303 from 1,320.

In a memo, FDIC Chief Financial Officer Steven App attributed the growth of the agency's ongoing operating budget to higher employee salary and benefits expenses, as well as an increase in contracts for "enhanced information technology security."

The FDIC was under fire this year from Republicans who accused the agency of failing to report a number of cybersecurity incidents quickly enough. In July, Gruenberg acknowledged in a hearing that one of breach from a former employee was "a serious matter that must be addressed so that it does not happen again."

The FDIC said its staff numbers would overall decrease by 170 compared to last year because of declining ranks among non-permanent employees. However, the number of permanent employees will increase and the agency will beef up its division of risk management supervision – which oversees large systemically important financial institutions – with 20 new staff members. In 2017, the agency plans to have a total headcount of 6,363 employees.

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