TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE BANK
Over the years, the banking industry has become more complex as banking organizations have increased their activities in specialized areas. In order to address this change, the Federal Reserve has established various specialty examination programs to evaluate electronic data processing, trust, and other specialized functions at state member banks. In general, these approaches have helped to ensure that specialized functions receive high supervisory priority.
However, in recent years, a number of banking
organizations have reported that the increasing number of
specialty examinations add significantly to the workloads of
their staffs and management. Accordingly, this statement is
intended to reduce burden caused by staggered examination
activities by providing that most aspects of regular safety and
soundness examinations of state member banks be conducted
concurrently, whenever practicable.
Coordination of Examinations
In view of the preceding, Reserve Banks are asked to
offer all state member banks the option of having electronic data
processing, trust, and other specialized examinations conducted
concurrently with regular safety and soundness examinations.
Also, consistent with Federal Reserve inspection guidelines,
inspections of holding companies should be conducted with the
examination of their lead bank to the extent possible. Consumer Compliance examinations, however, will continue to be performed in accordance with separate schedules.
In communicating this option to state member banks,
Reserve Banks should make clear that, although every effort will
be made to accommodate an institution's request for such
coordination, in some instances, limitations in the availability
of specialty or safety and soundness examination staff may
preclude fulfillment of the request. Moreover, when a request
for coordination has been received, Reserve Banks should ensure
that the requesting institution understands that the demands on
an institution's space and staff will be greater over the period
that the examinations are conducted concurrently, but that the
overall amount of time spent by the institution's staff in
meeting the requirements of various Federal Reserve examinations
over the course of a year should be greatly reduced. Further,
Reserve Banks should emphasize that the coordinated examination
approach will not preclude Reserve Banks from conducting
necessary targeted examinations in areas of financial or
operational concern at any time.
The coordination of supervisory activities requires
careful planning, which should consider the concerns of the
management of banking organizations. Space and human resource
limitations, as well as other operational concerns, may make it
impractical for some organizations to accommodate concurrent
examinations and, accordingly, these institutions may prefer that
their examinations continue to be performed under existing
practices. Reserve Banks should respect these preferences as
long as they do not interfere with essential supervisory
functions .
Consistent with the June 10, 1993 Interagency Policy
Statement on Examination Coordination and Implementation
Guidelines, Reserve Banks should continue to work closely with
state and other federal banking agencies to coordinate
supervisory efforts. In addition, any communication with the
management and boards of directors of institutions involved in
this program should be coordinated among state and federal
banking agencies to the extent possible.
Procedural Issues
Given the importance of effective communication,
changes in the procedures governing communication between Reserve
Banks and state member banks must also be considered.
Specifically, it may be appropriate to combine various first day
letters for each coordinated activity into a single comprehensive
first day letter. In addition, the coordinated approach may be
enhanced by conducting a single closing meeting with a banking
organization's Board or by combining separate examination
findings into a single report. However, Reserve Banks should
continue to generate separate reports and supervisory ratings for
each specialty activity and to distribute these reports
consistent with existing procedures for each examined entity,
unless directed otherwise.
Reserve Banks should commence ascertaining the
preferences of state member banks as early as possible. While it
is recognized that examination and inspection schedules for 1994
are already in place and may, therefore, complicate the
fulfillment of coordination requests, Reserve Banks should still
attempt to coordinate examinations as soon as possible, if
requested. Board staff expects that requests for coordination
will be given a high priority at future scheduling sessions. In
addition, program implementation guidance will be given during a
telephone conference call; the procedural issues discussed above
will be addressed by Board staff as necessary; and comments
regarding your early experience with coordinated examinations
will be solicited within six months.
Benefits of Program
A suggested draft letter that introduces the
coordinated examination approach is attached and should be sent
to the chief executive officer of each state member bank in your
district. Should you have any questions regarding coordinated
examinations or this letter, please contact Larry Schiff at (202)
452-5268 or Kevin Bertsch at (202) 452-5265.
Director
ATTACHMENT TRANSMITTED ELECTRONICALLY BELOW
To: The Chief Executive Officer of Each State Member Bank
SUBJECT: Coordination of Specialty Examinations with Full Scope Safety and Soundness Examinations of State Member Banks
Over the years, the banking industry has become more
complex as banking organizations have increased their activities
in specialized areas. In order to address this change, the
Federal Reserve has established various specialty examination
programs to evaluate electronic data processing, trust, and other
specialized functions. In general, these approaches have helped
to ensure that specialized functions receive high supervisory
priority. However, in recent years, a number of banking
organizations have reported that the increasing number of
specialty examinations add significantly to the workloads of
their staffs and management.
As a result, and consistent with other Federal Reserve
initiatives to lessen the burden of regulation on the banking
industry, your state member bank is offered the option of having
its electronic data processing, trust, and other specialty
examination(s)1 conducted simultaneously with its regular safety
and soundness bank examination. When considering this option,
please be aware that during the period of a concurrent
examination the number of examiners in your institution is likely
to be increased from the number required to conduct a single bank
or specialty examination, and that the demands on your office
space and your staff may be greater over this period. In
conducting these examinations concurrently, however, the Federal
Reserve believes the overall amount of time that your staff
spends meeting the requirements of various Federal Reserve
examinations conducted over the course of a year will be greatly
reduced.
If you decide that the coordinated examination approach
will be beneficial to your institution, this Reserve Bank will
strive to implement that decision. However, certain constraints
may preclude full coordination of all examinations each year. We
ask you to recognize, further, that the coordination of
examinations will not preclude Reserve Banks from conducting
targeted examinations in areas of financial or operational
concern at any time.
Footnotes 1. Consumer Compliance examinations will continue to be performed on existing, separate schedules. Return to text |
||||||||||
