Retirement wave could leave FDIC short-staffed in crisis, watchdog warns

Register now

WASHINGTON — The internal watchdog for the Federal Deposit Insurance Corp. reiterated concerns that the agency is facing a potential retirement wave over the next five years that could deplete its institutional knowledge and challenge its capacity to respond to a financial crisis.

In a report released Friday morning, the FDIC’s inspector general also said that high turnover among chief information officers over the past decade has limited the agency’s ability to modernize its IT infrastructure.

The report was part of a standard review conducted by Inspector General offices throughout the government, identifying management challenges at respective agencies, as required by the Reports Consolidation Act of 2000.

The report typically summarizes recent IG findings and gives strategic recommendations for the year ahead. But of particular note in recent years has been the FDIC’s aging workforce; according to the Government Accountability Office, just over 31% of the permanent federal workforce will be eligible to retire within five years. At the FDIC, however, 42% will hit retirement age by 2024.

The IG first noted the FDIC’s looming retirement figures in 2019.

“Although historical FDIC projections show that employees may not retire on their eligibility date, this wave of potential retirements could deplete the FDIC’s institutional experience and knowledge, especially during a crisis,” the report said.

A retirement wave over the next decade could also be exacerbated by staffing trends at the agency: according to the IG report, the FDIC has hired progressively fewer staff members for nine consecutive years, including a net reduction of 182 positions between 2018 and 2019. The report notes that the staffing reflects “the FDIC’s reduced bank failure workload” from the heights of the financial crisis a decade ago.

Among the FDIC’s regional offices, Dallas could be hit particularly hard by a retirement wave. According to the report, 53% of the current workforce will be eligible to retire by 2024, along with 77% of its executives and managers. The trend is particularly concerning, the IG says, given the Dallas office’s historic capability for managing large-scale bank failures.

“Retirements and attrition can create opportunities for employees and allow organizations to restructure to meet program goals and fiscal realities,” the report said. “However, if turnover is not strategically monitored and managed, gaps can develop in an organization’s institutional knowledge and leadership.”

On the IT side, the FDIC has been dinged by its watchdog in the past for being sluggish on updating its own legacy technology. Part of the problem, Friday’s report said, has had to do with executive turnover.

The appointment of a new information chief in January, the report noted, “marks the FDIC’s eighth CIO or Acting CIO in the last decade.” Referring to findings by the Government Accountability Office, the report said that “high turnover rate in CIOs negatively impacts their effectiveness because there is limited time to put their agenda in place or form close working relationships with agency leadership.”

The report also urged the agency to focus on keeping pace with fintech development, ensuring crisis readiness and strengthening its own governance, among other management priorities.

For reprint and licensing requests for this article, click here.
Financial regulations FDIC Workforce management