FDIC Fires Probationary Employees as Agency Culling Proceeds (1)

The Federal Deposit Insurance Corp. terminated around 170 probationary employees in the latest cuts at a key bank regulator.

Probationary employees can be new to the federal government and still have years of experience at state regulatory agencies or in the private sector. Others can have probationary status either because they’ve either transferred from another agency or been promoted to a new position.

It appears that the bulk of the probationary employees terminated were new to federal government service, although others may have been caught up as well, according to a source familiar with the matter who was granted anonymity to discuss an internal matter.

Terminated employees received letters notifying them of the end of their employment with the FDIC, with a Tuesday effective date.

“The FDIC finds that you have not demonstrated that your further employment at the FDIC would be in the public interest,” a letter obtained by Bloomberg Law said.

The letter didn’t provide a further reason for termination. Federal regulations generally require an agency to give a reason when terminating a probationary employee.

The FDIC offered employees the chance to resign rather than be terminated, meaning that no record of them being fired will be placed on their employment records, according to separation documents obtained by Bloomberg Law.

The FDIC declined to comment or confirm the number of probationary employees fired.

‘Terrible Situation’

Alexander Mejia is one FDIC probationary employee who was caught up in the terminations.

Mejia joined the FDIC in November, moving from the Austin, Texas, area to Los Angeles, where he worked out of the agency’s Pasadena, Calif., office.

Mejia, a bank examiner charged with monitoring banks’ compliance with anti-money laundering regulations, was under an evacuation order during the fires that ravaged parts of Los Angeles last month. His condo was unharmed.

Monitoring for compliance with financial crime laws is “mission critical” and shouldn’t be subject to the reduction in force order, he said.

“It’s a terrible situation for many of us,” Mejia said in an email to Bloomberg Law.

‘Will Be Smaller’

The cuts come after some 500 FDIC employees, or around 8% of its total workforce, accepted the Trump administration’s deferred resignation buyouts, the agency confirmed Feb. 14.

The FDIC had approximately 6,300 employees before the buyouts and terminations.

The FDIC “will be smaller,” acting Chairman Travis Hill said at an all-hands town hall meeting Feb. 14, although he added that no decisions had been made about the fate of the agency’s probationary employees.

Hill also said that no decisions had been made about combining federal banking regulators, which is being considered by the Trump administration.

The 2023 collapses of Silicon Valley Bank, Signature Bank, and First Republic exposed a shortage of agency bank examiners and the advanced age of the FDIC’s workforce.

A February 2023 report from the agency’s inspector general found that 38% of the FDIC’s employees would be eligible for retirement by 2027.

“Absent effective human capital management, the FDIC may lose valuable knowledge and leadership skill sets upon the departure of experienced examiners, managers, and executives,” the report said.