Corporation Comments

FDIC

Federal Deposit Insurance Corporation
550 17th Street NW, Washington, D.C. 20429-9990

DATE: December 13, 2011

TO: Stephen M. Beard
Deputy Inspector General for Audits and Evaluations

FROM: Sandra L. Thompson, Director /Signed/
Division of Risk Management Supervision
Michael H. Krimminger /Signed/
General Counsel

SUBJECT: Response to Draft Report Entitled, The FDIC's Qualification Process for Private Capital Investors Interested in Acquiring or Investing in Failed Insured Depository Institutions (Assignment No. 2010-109)

The Division of Risk Management Supervision (RMS) and the Legal Division have received and considered the draft report entitled The FDIC's Qualification Process for Private Capital Investors Interested in Acquiring or Investing in Failed Insured Depository Institutions (Report). The Report was prepared by BDO USA, LLP (BDO) under contract with the Federal Deposit Insurance Corporation's (FDIC) Office of Inspector General (OIG). The Report describes the results of an audit by the BDO/OIG of the FDIC's process for qualifying private capital investors to bid on the deposits and assets of failed insured depository institutions.

Acquisition proposals by private capital investors have necessitated appropriate control activities to support the effective evaluation of such proposals and the documentation of the qualification process for such investors. The Report acknowledges that the FDIC established procedures and controls for reviewing and processing proposals, including the issuance of the Statement of Policy on Qualifications for Failed Bank Acquisitions (SOP) and associated interpretive guidance. The Report also recognizes that the FDIC's processes and controls continued to improve over time; that documentation demonstrated that the acquisition proposals had been reviewed by RMS and the Legal Division; that the FDIC demonstrated that the necessary internal approvals were obtained prior to granting the investors clearance to bid; and that support for the FDIC's decisions was evident. Finally, the Report acknowledges FDIC's collaboration with other federal banking agencies when evaluating acquisition proposals.

The Report recommends that the FDIC review how approvals and analyses are documented and how this documentation is retained. RMS and the Legal Division concur with this recommendation and, by March 30, 2012, will undertake a review to determine whether current procedures and practices are adequate. The Report also observes that although the FDIC has taken steps to review the operation and impact of the SOP, management may find it beneficial to conduct a more thorough and formal review of the SOP's impact for consideration by the FDIC Board. We agree and will provide a briefing to the FDIC Board within six months of the issuance of this Report.

Thank you for the opportunity to review and comment on the draft Report.