WASHINGTON The Federal Deposit Insurance Corp.'s chief watchdog is urging stronger coordination between agency divisions to carry out Dodd-Frank Act responsibilities dealing with the resolution of failed behemoths.
The agency's inspector general said in a report Friday that while the FDIC has made "significant progress" implementing its new liquidation powers for systemically important financial institutions, "more work remains to be done to establish a robust corporate-wide capability for this critical responsibility."
Improving coordination between the Office of Complex Financial Institutions which the agency created following Dodd-Frank's enactment to focus on the new resolution platform and other more-established divisions within the FDIC was among several recommendations issued by the IG. The report also called for enhancing the long-term strategic planning for the new resolution duties and expanding the OCFI's infrastructure.
The report said progress such as the agency's oversight along with the Federal Reserve Board of companies' own resolution plans, and agreements between the FDIC and other countries promoting cross-border cooperation, were "notable." But it added that the report's recommendations "are intended to better position the FDIC to face future challenges and successfully carry out its systemic resolution authorities under" Dodd-Frank.
The "OCFI can further ongoing efforts" to improve coordination among divisions "by engaging key corporate stakeholders to fully define the logistics, roles and responsibilities, preparation activities, and resources needed to execute resolution strategies," the watchdog said.
The report said the OCFI and the agency's Division of Risk Management Supervision responsible for the FDIC's more traditional supervisory activities "should continue to build out and formalize coordination" for the monitoring of the large firms that could be resolved under the new Dodd-Frank facility. In March, the agency transferred OCFI staff that had been focused on monitoring to RMS to make use of the latter's "existing infrastructure for this activity."
The agency's watchdog, which conducted the report at the request of FDIC Chairman Martin Gruenberg, made a total of six recommendations. In addition to stronger ties between OCFI and RMS, the inspector general called for an enhanced strategic plan by the new resolution division, consensus building by key "corporate stakeholders" agencies related to the steps "necessary to execute effective resolution strategies," and an evaluation of appropriate staffing levels.
Other recommendations included stronger information-sharing protocols for OCFI and set timeframes for developing policies for implementing resolution authorities.
"We will continue to monitor the FDIC's progress in fully implementing these activities and will re-evaluate its readiness, as warranted," the IG said.
In a Nov. 6 letter to the IG responding to the report's findings, Gruenberg concurred with all six recommendations. He said the OCFI and a complex financial institutions team within RMS "are establishing written protocols regarding collaboration on information requests and other interaction with supervisory staff from other agencies and [systemically important firms] to ensure protocols have been fully communicated to all parties."