Seal of the Board of Governors of the Federal Reserve System
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM

WASHINGTON, D. C.  20551

DIVISION OF BANKING
SUPERVISION AND REGULATION

SR 98-2 (TRN)
February 25, 1998

TO THE OFFICER IN CHARGE OF SUPERVISION
          AT EACH FEDERAL RESERVE BANK


SUBJECT: New Training Program Leading to Commissioned Examiner Status

BACKGROUND

The Federal Reserve's current examiner training program was developed in 1990 and implemented pursuant to SR 91-1.  The program has served the System well, but developments in the last several years prompted the Staff Development and Utilization Committee of the System supervision and regulation function (SDU) to commission a comprehensive review of the System's examiner training requirements.

Board and Reserve Bank staff who conducted the review (the Core Curriculum Review Group or "CCR") recommended immediate modifications to certain System courses to reflect recent changes in examination policies and processes.  These course revisions were implemented in early 1997.  In addition, the CCR produced a white paper in July 1997 recommending significant changes to the System's training program for assistant examiners.  The CCR's proposed program considered the recommendations of the Supervision Strategic Plan Committee; the System's migration to risk-focused examinations; and the increasing emphasis on internal controls, information technology, and risk management while building on many features of the current program.  The SDU and System Officers in Charge of Supervision approved the white paper's recommendations in 1997 and implementation of the new training program is currently underway.  Details of the new program are set forth below and in the attachments to this letter.

PROGRAM OBJECTIVES

Based on an assessment of the required knowledge and skills for an assistant examiner, the objectives of the new program are as follows:


Training Program
Objectives


  • Ensure that examiners receive the knowledge required to keep pace with recent and expected changes in the banking industry (e.g., risk management and information technology)

  • Encourage the use of skills needed to employ successfully a risk-focused approach to examinations (e.g., critical thinking, strategic thinking, investigative, leadership, and interpersonal communication)

  • Present integrated supervision concepts

  • Provide flexibility to address examiners' varying education levels and experiences at time of hire (e.g., recent college graduate, M.B.A., J.D., related work experience)

  • Promote flexibility to accommodate examiners' different career paths (e.g., specific specialty areas, generalists versus specialists)

  • Build flexibility to address the System's diverse supervisory responsibilities (e.g., large bank versus small bank examination responsibilities)

  • Integrate training program with on-the-job responsibilities

  • Clarify responsibilities of assistant examiners and Reserve Bank management for achieving training objectives


STRUCTURE

The program involves a three-level approach that starts when an assistant examiner is hired and continues until he or she is commissioned.1  Level One stresses the core knowledge needed by every examiner regardless of the area of specialization.  After successfully completing the Level One training requirements, an assistant examiner is eligible to take a standardized proficiency examination that tests the examiner's knowledge of the basic core curriculum.  Level Two emphasizes an assistant examiner's specialty area.  The revised program includes four areas of specialization: safety and soundness, consumer affairs, information technology, and trust.  Level Three focuses on understanding the banker's perspective in managing a financial institution, including risk management, in contrast to examining and regulating the institution.  In addition, training at this level promotes the skills needed to evaluate risk management examination processes and analyze issues that are prevalent in all areas under an integrated supervisory approach.

As an examiner progresses through the three levels, a higher level of mastery of a topic is gained.2  For example, the risks outlined in SR 95-51 will be presented at a comprehension level in Level One.  By the time a safety and soundness examiner completes Level Three, he or she should be able to evaluate such risks.

After completing Levels Two and Three, the assistant examiner will take a second standardized proficiency examination to test his or her knowledge of the applicable specialty area, concepts related to managing an institution, and an overall understanding of other specialties.  The assistant examiner is eligible to be considered for commissioning after completing the three levels of coursework, including passing the two proficiency examinations and demonstrating job-related proficiency to the satisfaction of his or her Reserve Bank management.

The following diagram illustrates the new training program:



NEW COURSES

The program includes six new courses, although not all of the courses may be required depending upon the assistant examiner's specialty.  Four of the courses are based on materials and concepts contained in the current curriculum;3 the other two courses introduce new training concepts into the curriculum.  One new course is a three-part, Self-Study Program for assistant safety and soundness examiners.  The program is a means to equip assistant examiners with the skills needed for future System courses, reinforce concepts presented in previous schools, and explain and apply other critical regulatory concepts and issues that are not presented in the required System schools.  The program encourages research, investigative, and critical-thinking skills.  The program also encourages individual examiners to assume greater responsibility for their own training and career development.

The other new course is Examination Management, also known as "XMan." This course is designed to enhance a participant's analytical, critical-thinking, decision-making, and leadership skills by working in mock examination teams.  The course emphasizes risk-focused examination management including the evaluation of information systems, internal controls, bank holding company concepts, identified risks, and loans.  XMan also focuses on the interrelationship among information technology, safety and soundness, and trust specialty areas.  To accomplish its goals, XMan includes two practice examinations, one involving a community bank and its noncomplex bank holding company and another involving a larger complex organization with significant nonbank activities.

DELIVERY MECHANISMS

The new program encourages a stronger link between classroom learning objectives and the skills needed by examiners to perform their jobs.  In addition, on-the-job training will reinforce material learned in the classroom and focus on any examiner weaknesses identified during the classroom training.  More attention is also given to matching the appropriate instructional media with the subject matter and learning objectives.  Finally, the program increasingly will utilize distance education systems such as precourse assignments on FedWeb and short training sessions using video conferences.

IMPLEMENTATION

The Board's Examiner Training Program developed a revised roster of course committee assignments in early October 1997.  In mid-October 1997, the course committees began work on the new and revised courses pursuant to a project plan, which envisions completion of all elements of the new program by year-end 1999.  The CCR will remain in place during the two-year development phase to provide continuous guidance to and coordinate the work of the course committees.

ADDITIONAL DETAILS

A more detailed description of the new training program is included in Attachment I. 

Attachment II contains a transition plan that provides guidance on how the System will move from the SR 91-1 training program to the new training program.  Under the plan, an assistant examiner hired after February 28, 1998, will be required to complete the new training program, including the associated proficiency examinations.  Reserve Bank management will need to determine whether an assistant examiner hired on or before February 28, 1998, should finish the training program outlined in SR 91-1 or complete the new training program.

Senior Officers in Charge of Supervision are asked to ensure that supervisory personnel and examiners are fully informed of the new training program and the transition plan as set forth in this letter.  If you have any questions regarding this letter, please contact Sid Sussan, Deputy Associate Director, at (202) 452-2638.


Richard Spillenkothen
Director


Cross Reference:  SR 91-1, SR 95-51


Attachments:

Attachment I - New Training Program Leading to Commissioned Examiner Status (105 KB PDF)

Attachment II - Transition Plan (51 KB PDF)



Footnotes

1.   The program addresses only the needs of assistant examiners relative to their commissioning.  At the discretion of the Reserve Bank, an assistant examiner may receive other training for or in addition to that required for commissioning.  Furthermore, since education is a continual process, commissioned examiners are provided post-commissioning classes and other ongoing education opportunities.  Return to text

2.   See Hopkins, Kenneth D., and Julian O. Stanley, Educational and Psychological Measurement and Evaluation, (New Jersey: Prentice-Hall, Inc., 1981).  The levels of mastery are based on Bloom’s Adult Learning Hierarchy.  The levels of mastery include (1) knowledge, (2) comprehension, (3) application, (4) analysis, (5) synthesis, and (6) evaluation.  For example, at the comprehension level, an examiner is expected to explain or describe a particular topic.  At the analysis level, for example, an examiner would have the ability to analyze and appraise the subject matter.  Return to text

3.   The four courses are Orientation, Banking and Supervision Elements, Operations and Analysis School, and Report Writing.  Return to text


SR letters | 1998