As Banks Grow Strong, FDIC Plans to Shrink : Regulation: Agency will halve staff of liquidation division, closing 15 offices. Irvine office will remain open.
The Federal Deposit Insurance Corp., recognizing that the health of the banking industry is improving, said Wednesday that it will close most of its offices nationwide and cut half the staff in the division that sells properties held by failed banks.
The drastic restructuring of the liquidation division, to begin next month, aims to save the agency $430 million by the end of 1997 and $170 million a year after that.
By the time the realignment is completed, the division’s Irvine office will be one of only five service centers handling the assets of failed banks. Altogether, 15 of 22 liquidation offices nationwide will be closed, and 3,300 of 6,600 employees will be gone.
“The realignment of the division is a positive sign that the health of the banking industry has significantly improved,” FDIC Chairman Andrew C. Hove Jr. said in a prepared statement.
The agency’s workload has been reduced significantly this year as the rate of bank failures has declined. For the first half of 1993, U.S. banks earned record profits.
The agency’s liquidation division disposes of the real estate, loans and other property of failed banks in an effort to pay back creditors. The agency, which also insures deposits and audits banks, had a total of 15,365 employees at the end of June.
Nearly all the cuts in the unit’s staffing will affect employees who work under year-to-year contracts, said Keith W. Seibold, the liquidation division’s regional director in San Francisco. The more than 1,300 career employees are expected to keep their jobs, Seibold said, “but these are decisions to be made down the road.”
Besides recognizing that fewer banks will fail in the future, the FDIC is trying to build a strategic operating structure that will cause less disruption in employees’ lives and allow for smoother handling of bank assets, Seibold said.
Previously, employees were often uprooted to work months or a few years at the site of failed institutions. Now the work will be transferred to the service centers.
The San Francisco office will be folded into the Irvine unit in 1995. Offices in Encino and San Jose are expected to close in August and November, 1994, respectively.
The Irvine office, which employs 490, will grow somewhat, Seibold said. The other California offices employ a total of 365 workers.
Seibold himself will be going to Atlanta next month to head that service center. Sandra A. Waldrop, now his top deputy, will take over as head of the Western service center in Irvine, though she isn’t expected to move to Irvine until the San Francisco office closes.
The other service centers will be in Chicago, Dallas and Hartford, Conn. In addition, the New York regional office will be converted into the new Office of Internal Review and will be moved to Jersey City, N.J.
