The Federal Deposit Insurance Corporation (FDIC) issued a financial institution letter recommending that state nonmember institutions implement a process to monitor their use of capital injections, liquidity support and/or financing guarantees obtained through financial stability programs established by the Department of the Treasury, the Federal Reserve and the FDIC. The reference to financial stability programs consist of direct capital injections, federal guarantees on financing, and expanded borrowing facilities. In particular, the monitoring processes should help to determine how participation in these federal programs has assisted institutions in supporting prudent lending and/or supporting efforts to work with existing borrowers to avoid unnecessary foreclosures. Given that government funds, capital and guarantees are being used to support banking institutions, banks are expected to document how they are continuing to meet the credit needs of creditworthy borrowers, as described in the November 10, 2008, “Interagency Statement on Responsible Lending.”
The FDIC expects that state nonmember institutions (or their parent companies) will deploy funding received from these federal programs to prudently support credit needs in their market and strengthen bank capital. State nonmember institutions should describe their utilization of this federal funding during bank examinations and are encouraged to summarize such information in published annual reports and financial statements. Including such information in public reports will provide important information for shareholder and public evaluation of participation in these programs.