3 Ways the FDIC Hiring Freeze Could Affect Banking in 2025
Written by
Gabriel Vito
Edited by
Amber Barkley
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The Federal Deposit Insurance Corporation (FDIC) plays a crucial role in maintaining the stability of the U.S. banking system. However, a hiring freeze ordered by President Donald Trump on Jan. 20, 2025, is already disrupting the agency’s work.
In response to the freeze, the FDIC has rescinded more than 200 job offers for bank examiners, and there could be more changes in store.
Here’s how the FDIC’s hiring freeze could impact banking this year.
Increased Risk of Bank Failures
The FDIC plays a critical role in ensuring financial institutions operate safely and comply with regulations. Its examiners assess a bank’s policies, risk management practices and financial health while evaluating whether institutions treat depositors and consumers fairly. Other FDIC divisions contribute to regulatory oversight, risk analysis and crisis response.
The importance of strong regulatory oversight became evident during the 2023 collapse of Signature Bank. In its supervisory report of the bank’s failure, the FDIC cited “resource challenges with examination staff” as a contributing factor to the bank’s failure — highlighting the risks of an understaffed regulatory agency.
The FDIC’s move to rescind job offers due to the hiring freeze has drawn criticism from lawmakers, including Sen. Elizabeth Warren, who posted on X, “The FDIC should explain why it’s now axing even more examiners whose job it is to make sure big banks don’t crash our economy.”
Weakened Consumer Protections
The FDIC enforces consumer protection laws to ensure banks do not engage in misleading, unfair or abusive practices. Under Section 5 of the Federal Trade Commission Act, banks are prohibited from deceptive or unfair practices, such as hidden fees or misleading loan terms.
The Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) standards under Dodd-Frank further expand protections by prohibiting abusive financial practices that take advantage of consumers — such as predatory lending or aggressive debt collection tactics.
However, staffing shortages could weaken enforcement. A 2023 FDIC report warned that losing experienced examiners may delay compliance reviews and reduce oversight, making it harder to hold banks accountable.
The FDIC also administers deposit insurance, which guarantees up to $250,000 per depositor per bank. This safety net protects consumers if their bank fails.
Aaron Klein, a senior fellow at the Brookings Institution, highlighted the risks of understaffing during a Senate Banking Committee hearing, saying, “The FDIC does a fantastic job of handling a failed bank. … Understaffing this puts our ability to handle failures — so that people have access to their money immediately — at great risk.”
Loss of Institutional Knowledge
On top of the hiring freeze, the FDIC faces another staffing challenge: A significant portion of its workforce is nearing retirement. A 2023 report from the FDIC shared that 38% of the FDIC workforce is eligible to retire by 2027.
According to the report, “Absent effective human capital management, the FDIC may lose valuable knowledge and leadership skill sets upon the departure of experienced examiners, managers and executives.”
Current and former regulators have echoed these concerns, warning that hiring cuts combined with retirements could further weaken the FDIC’s ability to regulate financial institutions.
“I think we’re going to see a brain drain and a loss of institutional memory,” Michele Alt, co-founder and partner at financial services advisory firm Klaros Group, told Banking Dive.
Former FDIC official Alexandra Steinberg Barrage linked the staffing shortage to the future of banking, saying “It makes it more challenging for the exam teams to retool to reflect the broader modernization of banking,” The Washington Post reported.
With fewer experienced regulators on staff, the FDIC may struggle to adapt to the rapidly evolving financial landscape.
Conclusion
The FDIC’s hiring freeze raises serious concerns about the agency’s ability to effectively oversee the banking sector. The loss of examiners and regulatory staff could have wide-ranging effects on financial stability, consumer protection and market confidence. As expert analyses and real-world examples show, reduced oversight increases risks across the system, making it harder to prevent crises before they unfold.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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