Dive Brief:

• The Federal Deposit Insurance Corp. board voted Tuesday to approve a $2.49 billion operating budget for 2026. That’s smaller than last year’s budget after the agency undertook a 20% staff reduction.
• The 16.4% budget decrease also reflects “a number of efficiencies we have pursued this year, such as the cancellation or nonrenewal of many non-mission-critical contracts and restrictions on non-mission-critical travel,” FDIC Acting Chair Travis Hill said in a statement. 
• In its first move to implement Genius Act provisions, the board also voted Tuesday to issue a proposed rule that would implement procedures and application provisions for FDIC-supervised banks to issue payment stablecoins through a subsidiary. 

Dive Insight:

Brain drain at the already-understaffed agency had been a mounting concern when the Trump administration took aim at federal spending and government jobs. 

FDIC staff reductions came after “a weeks-long, rigorous review” of the agency’s organizational structure conducted earlier this year, Hill said in a statement. 

“Through that process, the FDIC identified areas where headcount could be reduced without sacrificing our ability to fulfill our core responsibilities,” he said. “The proposed budget continues to provide staffing and funding necessary to execute on our mission: supervising banks, insuring deposits and resolving failed institutions.”

The 2026 budget reflects declines from 2025 “in every major expense category,” Bob Nolan, deputy director in the FDIC’s finance division, said during Tuesday’s meeting. 

“Salaries and compensation savings of $325 million fully reflect 2025 workforce optimization efforts, as well as additional staffing reductions proposed for 2026,” Nolan said. 

Proposed FDIC authorized staffing, minus the Office of Inspector General, totals 5,386 positions. That’s 1,337 fewer than initially approved as part of the 2025 budget. 

About 1,009 of those are non-examiner roles cut with operational efficiency in mind, including 185 executive and managerial positions and 93 administrative support positions, he said.

“Examiner staffing is reduced by 328 positions, resulting in 13% fewer risk management examiners and 21% fewer compliance management examiners,” Nolan said. “This reflects changes to the continuous examination process, extension of the compliance examination cycle for certain favorably rated banks, and continued industry consolidation.” 

Additionally, the operational efficiency focus fueled $112 million in non-salary expense savings for 2026, he said. The budget also includes about $28 million in resources for improving the agency’s workplace culture and ensuring accountability for misconduct, Nolan said. 

Comptroller of the Currency Jonathan Gould, an FDIC board member, supported the proposed budget but expects further room to trim it. He also hinted at budget cuts to come at the OCC.  

Arriving at the OCC just prior to the agency’s Oct. 1 fiscal year start, Gould said he “found an erosion of the budgeting discipline that the 31st comptroller had championed. This limited my ability to drive the budget reforms I believe necessary there in the short term.”

“At the OCC, I intend to build a much more disciplined budgeting process over the course of this coming year,” Gould said during the meeting. “My front office has already identified millions of dollars of savings in our budget beyond just the savings attributable to a reduced headcount. I say all this because I suspect the FDIC budget may have similar room for improvement based on what I have seen at the OCC.”

On bank supervision and resolution, the experience the FDIC has lost may be more impactful than the size of the job cuts, said Grant Butler, a Boston-based partner at law firm K&L Gates.

“Both in D.C. and the regional offices a number of senior staff members and very experienced examiners have left, and with them has left a great deal of institutional knowledge and experience,” Butler said in an email. “As the FDIC loses veterans of past financial crises, the impact on future resolutions of the loss of people with such experience cannot be fully avoided. I think the same can be said for the conduct of examinations or strategic activities that require approval.” 

Since the Genius Act – which establishes a regulatory framework for stablecoin issuers – was signed in July, attention has turned to the financial regulators charged with crafting rules related to stablecoins. 

The law requires insured banks seeking to issue payment stablecoins through a subsidiary to submit a regulatory application.

“Under the proposal, the FDIC would adopt a tailored application process that would enable the FDIC to evaluate the safety and soundness of an applicant’s proposed activities based on the statutory factors while minimizing the regulatory burden on applicants,” Hill said in a statement. 

The agency would consider whether the bank’s subsidiary can comply with forthcoming capital and liquidity requirements, and operational and compliance risk management standards, among other things. And the FDIC would assess whether anyone in management has been involved in activities such as insider trading, embezzlement or financial fraud.  

One element of the proposal: If the FDIC doesn’t decide on an application within 120 days, it will be deemed approved.   

The agency also acknowledged “significant uncertainty” related to how many of its roughly 2,700 supervised banks would pursue payment stablecoin issuance or other stablecoin activities, given that it’s a “developing market.” In its analysis, the FDIC assumed that 10 would file an application each year, on average.

Comments on the proposed rule will be accepted for 60 days after it’s published in the Federal Register.

“It seems that Chairman Hill had a desire to be able to say that the FDIC was first in issuing a rule,” Butler said. 

With Gould serving on the FDIC board, it’s likely the OCC will issue similar requirements, but “it would be better for the industry if the requirements and guidance were the same across the primary federal regulators,” Butler said.  

The FDIC is planning further Genius Act-related actions, Hill noted. 

“In the months ahead, we expect to issue a proposed rule to establish the statutorily mandated capital, liquidity, and risk management requirements for subsidiaries of FDIC-supervised institutions that are approved to be [permitted payment stablecoin issuer], among other GENIUS Act-related workstreams,” he said. “We will also continue to explore ways to provide regulatory clarity regarding activities related to digital assets and tokenized deposits more broadly.”