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Board Report: 2014-SR-B-011 July 25, 2014

Enforcement Actions and Professional Liability Claims Against Institution-Affiliated Parties and Individuals Associated with Failed Institutions

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OIG Evaluation Report

Federal Deposit Insurance Corporation
Board of Governors of the Federal Reserve System and Consumer Financial Protection Bureau
Department of the Treasury

July 25, 2014

Martin J. Gruenberg, Chairman
Federal Deposit Insurance Corporation

Janet L. Yellen, Chair
Board of Governors of the Federal Reserve System

Thomas J. Curry, Comptroller of the Currency
Office of the Comptroller of the Currency

The federal banking regulators (Regulators)1 have strong enforcement powers under section 8 of the Federal Deposit Insurance Act (FDI Act) to address violations of law, breaches of fiduciary duty, or unsafe and unsound practices. The 2008 financial crisis had a profound and lasting impact on the banking industry and broader economy, resulting in the failure of 465 insured depository institutions (or institutions) through 2012 and losses totaling $86.6 billion to the Deposit Insurance Fund (DIF). In the wake of the crisis, members of Congress, the media, and the general public have questioned whether the Regulators have sufficiently used these powers to hold accountable, individuals whose actions harmed institutions.

To that end, this report presents the results of our joint evaluation of (1) the Regulators' efforts to investigate, pursue, and impose enforcement actions (EAs) against institution-affiliated parties (IAP) and (2) the FDIC's efforts to pursue professional liability claims (PLCs) against individuals and entities whose actions harmed institutions that ultimately failed.

EAs address practices, conditions, or violations of law committed by IAPs that, if continued, could result in loss or damage to an institution. EAs can bar individuals from engaging in banking activities for life, impose monetary penalties, and/or require administrative restitution for losses incurred by institutions.

PLCs are civil claims based on tort and breach of contract that seek recovery for damages caused by former employees or professionals who worked for or provided services to the failed institution. The FDIC as Receiver for failed institutions, pursues PLCs and collects civil judgments for receiverships. For the purposes of our report, references to the FDIC in relation to PLC responsibilities refer to the FDIC in its receivership capacity and not in its corporate capacity as regulator and deposit insurer.

  • 1. The Regulators discussed in this report are the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (FRB), the Office of the Comptroller of the Currency (OCC), and the former Office of Thrift Supervision (OTS). The OCC is a bureau of the Department of the Treasury (Treasury). Effective July 21, 2011, the OTS was abolished and its functions were transferred to the OCC, FDIC, and FRB. Return to text