The Director of the Division of Banking Supervision and Regulation and the Board's General Counsel, acting under authority delegated by the Board, have approved changes to the System examiners' borrowing rules as a result of the Preserving Independence of Financial Institution Examinations Act of 2003. The Act, among other things, liberalized examiner borrowing restrictions by providing narrow exceptions that enable bank examiners to obtain credit cards and certain home mortgage loans from a broader range of lenders.
Under the Act, a Reserve Bank examiner may now accept a credit card or a loan secured by a mortgage on the examiner's principal residence from an institution supervised by the Federal Reserve, as long as the examiner meets the financial requirements to obtain such credit or loan and the terms of the credit or loan are not more favorable than terms generally offered to other borrowers. However, even though an examiner can now obtain such a mortgage, Federal Reserve policy will continue to restrict examiners from examining entities from which they have home mortgage loans.
Changes have been made to the Federal Reserve Administration Manual (FRAM) to reflect the new exceptions (attached). Similar changes will be made in due course to the Reserve Banks' Code of Conduct (Code). Reserve Banks should continue to periodically monitor borrowing relationships to provide adequate oversight over potential conflicts of interest as well as the perception of any conflict of interest.
The Reserve Banks are encouraged to review current examiner files and request that the Board revise "restricted" examiner letters as appropriate. If you have any questions concerning revisions to the policy, please contact Jamie Lenoci, Supervisory Financial Analyst at (202) 452-2288.