FDIC Answers Questions on Problem Banks, CAMELS Reform, Stablecoin Rulemaking and ILC Approvals

At the FDIC's press briefing following the agency's fourth-quarter results, reporters pressed Chairman Travis Hill on supervision, problem banks, stablecoin rulemaking, living wills and recent Industrial Loan Company (ILC) applications.

On the problem bank list, reporter Katanga Johnson of Bloomberg asked for a sense of why three banks were added. "It was a net of 3 increase," Chairman Travis Hill said, clarifying the agency added five banks and removed two. "The number altogether is still a relatively low number that are on the problem bank list," he said, adding there is "a range of possible reasons why a bank might be on the problem bank list."

A Politico reporter asked whether changes to how the FDIC supervises banks and reforms to CAMELS ratings would mean some banks that historically were downgraded would no longer be added. Hill said the FDIC is "working through the CAMELS reform," expects more to come on how components are defined, and does not believe banks with significant financial problems would avoid a downgrade under reform. "Because typically those are institutions that have pretty significant financial problems," he said.

On stablecoins, the FDIC said it is drafting rulemaking to implement prudential aspects of the statute named in the transcript as the "Genius Act" affecting subsidiaries of FDIC-supervised institutions that issue stablecoins. Hill said the scope of FDIC supervision in that area likely covers a smaller set of firms than the OCC's jurisdiction, and he expects the OCC's proposal to be released first while the FDIC aims not to fall far behind.

When asked about living wills and whether the FDIC might eliminate certain plan requirements, Hill acknowledged comments from another official and said the FDIC has been "working for a while on reforms to the IDI rule process" and aims to find a path that can achieve board consensus while incorporating lessons learned.

On recent ILC approvals, Hill said several applications had been pending for a long time and the FDIC must process pending applications. He said the approved ILC applicants would face "fairly significant expectations" and protections, including higher leverage ratios and other conditions the agency found persuasive in allowing applications to move forward.

Throughout the session, Hill repeatedly emphasized vigilance in monitoring risks but did not single out any newly emerging, broad-based industry concern beyond the portfolio weaknesses raised in the presentation. The briefing concluded after no further questions were raised.