WASHINGTON — The Federal Deposit Insurance Corp.'s internal watchdog found "weaknesses" in the agency's hiring of temporary personnel for managing bank resolutions and receiverships.

In a report released Friday, the FDIC’s Office of Inspector General criticized how vacancies were announced in the Division of Resolutions and Receiverships, saying the qualifications listed in job announcements were too narrow.

The IG also noted weaknesses in how applications were reviewed, citing issues with conflicts of interest and confidentiality, among others. Yet the watchdog said it had not been able to substantiate certain allegations against the agency, including that the division excluded qualified veterans from the process.

FDIC flag flies outside the agency's headquarters in Washington D.C.
The FDIC's inspector general said "weaknesses" in the process of hiring resolutions and receiverships staff "could have contributed to perceptions that" the "selection process was unfair." Bloomberg News

“We identified weaknesses in the FDIC’s process for filling certain time-limited positions,” said the report, “which could have contributed to perceptions that [the division]’s selection process was unfair.”

In multiple cases, the inspector general said, the hiring process violated the FDIC’s own rules for processing applications. Hiring decisions are made jointly by the agency’s Division of Administration and the Division of Resolutions and Receiverships, following a set of guidelines that govern the selection process.

The report found that Division of Resolutions and Receiverships staff had performed applicant qualification reviews before the human resources staff at Division of Administration, which is normally assigned that task, had undertaken reviews.

“This practice was inconsistent with [FDIC procedure] and inefficient because subject-matter experts reviewed applicants that DOA later found to not be eligible,” the inspector general report said.

In addition, some job postings were too specific, and could have excluded qualified applicants, the report said.

For instance, in five different job postings, the positions were “narrowly written and limited the number of qualified applicants,” the Office of Inspector General found. One such requirement was “being a member of a specific committee,” which was “narrowly focused and not essential to the related positions,” the report said.

The inspector general found that these irregularities led to instances of potential conflicts of interest.

“For example, we identified one instance where an applicant was also a selecting official,” said the report, “and another instance where an applicant was also a subject-matter expert responsible for referring applications for selection.”

In response to the findings, the heads of the agency’s Division of Administration and the Division of Resolutions and Receiverships agreed to follow five recommendations made by the inspector general to remedy issues.

“FDIC takes seriously its commitment to carrying out hiring processes in a fair and equitable manner,” Arleas Upton Kea, the director of the administration division, and Bret D. Edwards, the director of the resolutions and receiverships division, said in a letter attached to the report.

But the officials also said that the inspector general had not been able to “substantiate allegations that qualification factors were too restrictive or that DRR attempted to exclude” veterans.

The inspector general evaluated 13 positions that were the subjects of complaints. It received three hotline calls from employees in the department, the report said.

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Lalita Clozel

Lalita Clozel covers fintech regulation, anti-money-laundering, cybersecurity and the Federal Deposit Insurance Corp. in American Banker's Washington bureau.