Failed Financial Institutions: RTC/FDIC Risk Fraud and Mismanagement by Employing Those Deemed Culpable
OSI-95-1
Published: Oct 03, 1994. Publicly Released: Nov 10, 1994.
Skip to Highlights
Highlights
Pursuant to a congressional request, GAO reviewed whether the Resolution Trust Corporation (RTC) and the Federal Deposit Insurance Corporation (FDIC) have sufficient systems to assist hiring and management officials in culpability determinations.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Federal Deposit Insurance Corporation | The Acting Chairman, FDIC, and the Deputy and Acting Chief Executive Officer, RTC, should direct their agencies to perform employment screening before hiring individuals and routinely do so for their current employees, using reliable databases of individuals found responsible for institution failures. |
Closed – Implemented
FDIC's Office of Personnel Management Circular 2120.5 (November 4, 1994) set forth the minimum standards for employment with FDIC, as mandated by the Resolution Trust Corporation Completion Act. All required applicant/employee screening and appropriate database support will be operational by September 30, 1995. RTC's Thrift Investigation Management System has been updated to more effectively identify former officers/directors culpable in institution losses.
|
| Resolution Trust Corporation | The Acting Chairman, FDIC, and the Deputy and Acting Chief Executive Officer, RTC, should direct their agencies to perform employment screening before hiring individuals and routinely do so for their current employees, using reliable databases of individuals found responsible for institution failures. |
Closed – Implemented
FDIC's Office of Personnel Management Circular 2120.5 (November 4, 1994) set forth the minimum standards for employment with FDIC, as mandated by the Resolution Trust Corporation Completion Act. All required applicant/employee screening and appropriate database support will be operational by September 30, 1995. RTC's Thrift Investigation Management System has been updated to more effectively identify former officers/directors culpable in institution losses.
|
| Resolution Trust Corporation | The Deputy and Acting Chief Executive Officer, RTC, should ensure that conservatorship employees who occupy positions with responsibilities for asset disposition, such as those performing loan workout functions, be included in the employment screening process. |
Closed – Implemented
All new hires will be screened using existing systems and new databases. New procedures for screening applicants and current employees include a systematic exchange of information between FDIC and RTC.
|
| Federal Deposit Insurance Corporation | The Acting Chairman, FDIC, and the Deputy and Acting Chief Executive Officer, RTC, should direct their agencies to develop reliable databases that will effectively identify individuals found culpable in institution failures. |
Closed – Implemented
Utilizing existing systems and a new database, the Financial Institution Regulator Agency Criminal Referral System, will provide information to FDIC, RTC, NCUA, OTS, OCC, and the Federal Reserve regarding the suitability of proposed officers and directors of financial institutions. Information in existing databases, i.e., RTC's Thrift Investigation Management System, is being updated to ensure the accuracy of the data.
|
| Resolution Trust Corporation | The Acting Chairman, FDIC, and the Deputy and Acting Chief Executive Officer, RTC, should direct their agencies to develop reliable databases that will effectively identify individuals found culpable in institution failures. |
Closed – Implemented
Utilizing existing systems and a new database, the Financial Institution Regulator Agency Criminal Referral System will provide information to FDIC, RTC, NCUA, OTS, OCC, and the Federal Reserve regarding the suitability of proposed officers and directors of financial institutions. Information in existing databases, i.e., RTC's Thrift Investigation Management System, is being updated to ensure the accuracy of the data.
|
| Federal Deposit Insurance Corporation | The Acting Chairman, FDIC, and the Deputy and Acting Chief Executive Officer, RTC, should direct their agencies to share information systematically, enabling each to be aware of those individuals the other has found culpable in the failure of federally insured institutions. |
Closed – Implemented
There are at least four databases available to the FDIC Office of Personnel Management, including RTC's Thrift Investigation Management System, to assist in screening current and prospective employees. Additionally, the FDIC/RTC Transition Task Force is addressing best practices of the Corporations. New procedures for screening applicants and current employees include a systematic exchange of information between FDIC and RTC.
|
| Resolution Trust Corporation | The Acting Chairman, FDIC, and the Deputy and Acting Chief Executive Officer, RTC, should direct their agencies to share information systematically, enabling each to be aware of those individuals the other has found culpable in the failure of federally insured institutions. |
Closed – Implemented
There are at least four databases available to the FDIC Office of Personnel Management, including RTC's Thrift Investigation Management System, to assist in screening current and prospective employees. Additionally, the FDIC/RTC Transition Task Force is addressing best practices of the Corporations. New procedures for screening applicants and current employees include a systematic exchange of information between FDIC and RTC.
|
| Federal Deposit Insurance Corporation | The Acting Chairman, FDIC, and the Deputy and Acting Chief Executive Officer, RTC, should direct their agencies to ensure that personnel guidance is clear and appropriate regarding employees and prospective employees for whom the agencies have made culpability determinations. |
Closed – Implemented
FDIC Circular 2120.5, Minimum Standards for Employment with the FDIC, as Mandated by the Resolution Trust Corporation Completion Act (RTCCA), implements practicable policy guidance for the recommendation. FDIC is finalizing regulations based on the RTCCA minimum standards for employment provisions, and RTC issued guidance on May 1, 1995, concerning employees who may be culpable in losses to institutions.
|
| Resolution Trust Corporation | The Acting Chairman, FDIC, and the Deputy and Acting Chief Executive Officer, RTC, should direct their agencies to ensure that personnel guidance is clear and appropriate regarding employees and prospective employees for whom the agencies have made culpability determinations. |
Closed – Implemented
FDIC Circular 2120.5, Minimum Standards for Employment with the FDIC, as Mandated by the Resolution Trust Corporation Completion Act (RTCCA), implements practicable policy guidance for the recommendation. FDIC is finalizing regulations based on the RTCCA minimum standards for employment provisions, and RTC issued guidance on May 1, 1995, concerning employees who may be culpable in losses to institutions.
|
Full Report
Office of Public Affairs
Topics
Bank failuresBank holding companiesDatabasesFraudInsured commercial banksInternal controlsLiability (legal)Performance appraisalRisk managementSavings and loan associations