Federal Deposit Insurance Corporation
Office of Inspector General
Federal Deposit Insurance Corporation - Office of Inspector General

Claims Administration System Functionality

Friday, March 16, 2018

On March 16, 2018, the FDIC Office of Inspector General issued a report on the functionality of FDIC’s Claims Administration System (CAS). CAS is a mission-critical system that FDIC personnel use to identify depositors’ insured and uninsured funds in failing and failed financial institutions. CAS’s capabilities affect the FDIC’s ability to pay deposit insurance claims in a prompt and accurate manner. We evaluated the extent to which CAS has achieved the FDIC’s performance expectations for capacity, timeliness, and accuracy in making insurance determinations.

CAS has substantially met the FDIC’s expectations for capacity, timeliness, and accuracy in making insurance determinations for most insured institutions. Recognizing the difficulties in resolving a large institution over a closing weekend, the FDIC issued rules intended to mitigate potential shortfalls in CAS capability. The largest financial institutions (those with 2 million or more deposit accounts) are required to configure their information systems and data to enable the FDIC to make insurance determinations by April 2020. We recommend further simulation and testing for failing and failed large bank scenarios in order to facilitate resolution planning for potential large bank failures and decrease the risk of untimely insurance determinations.

The FDIC has not fully validated the maximum processing capacity of CAS. In the original justification for CAS in 2006, FDIC program officials initially expected that CAS could make insurance determinations for an institution of any size, up to 5 million deposit accounts. Because the FDIC recognized that it could not achieve this expectation due to the account complexities at larger institutions, the FDIC adjusted its expectations for institutions with up to 2 million deposit accounts.

CAS improved timeliness of insurance determinations compared to the FDIC’s predecessor system. The FDIC’s goal is to provide depositors at failed institutions with access to their insured funds within one or two business days of failure. Although the FDIC has never failed to meet this timeliness standard, CAS may not be able to meet the FDIC’s goal for the largest institutions due to the volume and complexity of large bank deposit platforms. In such cases, the FDIC may withhold a portion of the failed institution’s deposits until an insurance determination can be made.

Regarding accuracy in making insurance determinations, CAS has reduced the risk of inaccurate insurance determinations as compared to the FDIC’s predecessor system by decreasing the opportunity for human error. The FDIC strives to provide an accurate estimate of uninsured deposits during pre-closing activities. In this regard, the FDIC believes that CAS capabilities and procedures provide reasonable assurance of the accuracy of insurance determinations.

We made three recommendations to improve CAS functionality through additional testing and FDIC management concurred.

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