TECH TALK The Real Impact of Downsizing Financial Regulators Laura Zannucci, Audit Manager/Information Security Officer SBS CyberSecurity Financial institution regulators — including the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC) and the Federal Reserve — are facing significant downsizing. This trend raises critical questions about the safety and soundness of financial oversight and the decisions board members must make in response. Let’s explore the implications of a reduced regulatory workforce, the risks tied to longer intervals between examinations and the potential shifts in spending priorities. The Shrinking Regulatory Workforce: A Cause for Concern? The FDIC, NCUA, OCC and Federal Reserve have been pivotal in ensuring the stability and integrity of the banking and credit union sectors. However, recent directives from the current administration have led to substantial staff reductions across these agencies. The FDIC, for instance, has seen a workforce reduction of about 9% since January 2025, driven by deferred resignation offers and layoffs of probationary employees. According to Banking Dive, the FDIC aims to reduce its workforce by 1,250 — nearly 20%. Notably, the Voluntary Early Retirement Authority (VERA) and the Voluntary Separation Incentive Program (VSIP) are not being offered to “mission critical” employees, such as those in risk management and information security. Similarly, the NCUA has pulled back job offers and discussed early retirement programs in closed board meetings. Regulatory Report states the NCUA is considering a 16% staff reduction, or approximately 200 positions, which would likely impact its ability to perform supervisory functions. The OCC has laid off more than 75 probationary employees and shed approximately 140 staff through buyouts and deferred resignations. These reductions align with broader federal efforts to streamline operations and reduce costs. The Federal Reserve is also affected, with staffing cuts across financial regulatory agencies contributing to a larger campaign to trim $1 trillion in federal spending. While the intention behind these measures is efficiency, the resulting gaps in financial oversight could have serious consequences. 14 NEBRASKA BANKER
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