The Federal Deposit Insurance Corp.'s board of directors voted to approve a $2.7 billion budget for 2013, an 18% drop from last year. This was driven by fewer anticipated costs for bank failures and their clean-ups.

Yet the agency is hardly back to its pre-crisis levels. The FDIC is maintaining significant funds for a still high number of troubled institutions and resources to implement the Dodd-Frank Act, including a new facility to unwind failed megabanks.

"This is mostly a good news story," Thomas Peddicord, a deputy director in the FDIC's finance division, said at a meeting to discuss the budget. "It's consistent with the sharp reduction we've had in the number of … failures."

Under the agency's operating budget, spending for failed-bank work will fall to $900 million. That is far from the $2.5 billion allotted in 2010, when failures hit 157. By comparison, the 2012 failure toll (as of mid-December) is less than 50.

Overall, authorized staff will fall 7.9% from this year's budget to 8,026 positions, though the reduction is almost entirely due to cuts in non-permanent posts. To avoid a painful downsizing reminiscent of the period after the savings and loan debacle in the 1990s, the FDIC had focused on hiring non-permanent staff to deal with the more recent crisis. Staffing in the division of resolutions and receiverships will decline by nearly 400 positions from last year's budget to 1,463 in 2013. The agency said funding for contractors that help support the division's operations will also decline, by 41%, to $456.7 million.

Yet the declines in other spending areas since failures peaked have been less dramatic. Officials stressed that with the number of institutions on the FDIC's "Problem Bank" list still historically high, the agency's budget is still significantly higher than before the crisis hit. The list totaled 694 institutions at the end of the third quarter, down from the most recent peak of 888 in early 2011.

"That is still a highly elevated level, but it still represents a significant decrease from the peak at the first quarter of last year," said FDIC Chairman Martin Gruenberg.

Peddicord noted that resources for the FDIC's supervisory functions are also on a downward trend, but he said it is a "slow and gradual reduction." Indeed, the areas of the budget outside resolution and receivership spending-what the FDIC calls "ongoing operations-will be essentially unchanged next year, totaling $1.78 billion. And the total 2013 budget is still more than double the amount in 2007, before the mortgage market cratered.

In its official proposal, agency staff said the budget also contains "substantial 2013 resources" devoted to fulfilling the FDIC's new responsibilities under Dodd-Frank. That includes "monitoring the risks in large, systemically important financial institutions …, reviewing the resolution plans submitted by companies covered by DFA, and preparing, if necessary, to undertake their orderly liquidation."

Still, the agency said authorized staffing for risk management examinations of 1,966 positions in 2013 will be down from a peak of 2,237 in 2011. Compliance exam staffing will also start to come down in 2013, from the 2012 peak of 572 positions, to 522 proposed next year. The FDIC said a 4% increase in average salaries for employees will be offset in part by eliminating 232 non-permanent staff in both the risk management and compliance supervision sections.

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