If there is a partial Federal government shutdown due to a failure to reach a budget agreement, what effect would this have on the four main Federal banking agencies? The short answer: None.

None of the Federal Reserve System, the FDIC, the OCC, or the OTS receives appropriations from Congress. Instead, each of these Federal agencies is funded through various other sources, as described below. Thus, none of the services or responsibilities of these Federal agencies will be affected if a budget agreement is not reached.

However, many other Federal agencies may be significantly affected by a Federal government shutdown, including, notably for financial institutions, the SEC. We would recommend that institutions with on-going matters with the SEC reach out to their contact persons at the SEC to discuss their situations.

The following is from each agency’s website:

Federal Reserve: The Federal Reserve’s income is derived primarily from the interest on U.S. government securities that it has acquired through open market operations. Other sources of income are the interest on foreign currency investments held by the System; fees received for services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations; and interest on loans to depository institutions (the rate on which is the so-called discount rate). After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.  

FDIC: The FDIC receives no Congressional appropriations – it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities.  

OCC: The OCC does not receive appropriations from Congress. Instead, the OCC’s operations are funded primarily by assessments on national banks. National banks pay for their examinations, and they pay for the OCC’s processing of their corporate applications. The OCC also receives revenue from its investment income, primarily from U.S. Treasury securities.  

OTS: The OTS receives no appropriations from Congress; the agency’s operating budget is funded by periodic assessments to the thrift industry.