[Federal Register Volume 60, Number 123 (Tuesday, June 27, 1995)]
[Notices]
[Pages 33206-33208]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-15734]
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FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
Guidelines for Relying on State Examinations
AGENCY: Federal Financial Institutions Examination Council.
ACTION: Notice and final guidelines.
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SUMMARY: The Federal Financial Institutions Examination Council (FFIEC)
announces the adoption of its Guidelines for Relying on State
Examinations pursuant to section 349 of the Riegle Community
Development and Regulatory Improvement Act of 1994 (CDRI Act), codified
at 12 U.S.C. 1820(d)(9). This section requires the FFIEC to issue
guidelines establishing standards for the purpose of determining the
acceptability of State reports of examination under section 10(d)(3) of
the Federal Deposit Insurance Act (FDI Act), 12 U.S.C. 1820(d)(3).
Under section 10(d)(3), a Federal banking agency may conduct an annual,
on-site examination of an insured depository institution in alternate
12-month periods (except those insured institutions with total assets
of less than $250 million for which an 18-month examination cycle is
permitted) if the Federal banking agency determines that a State
examination of that institution [[Page 33207]] conducted during the
intervening period is adequate. Section 349 of the CDRI Act states that
the standards issued by the FFIEC are to be used at the discretion of
the appropriate Federal banking agency.
EFFECTIVE DATE: These guidelines are effective on June 27, 1995.
FOR FURTHER INFORMATION CONTACT: Board: Frederick M. Struble, Associate
Director, (202/452-3794), Division of Banking Supervision and
Regulation, Board of Governors of the Federal Reserve System. For the
hearing impaired only, Telecommunication Device for the Deaf (TDD),
Dorothea Thompson (202/452-3544), Board of Governors of the Federal
Reserve System, 20th and C Streets, NW., Washington, DC 20551.
FDIC: Daniel M. Gautsch, Examination Specialist, (202/898-6912),
Office of Policy, Division of Supervision, or Ken A. Quincy, Section
Chief, (202/942-3083), Consumer Compliance & Analysis Branch, Division
of Compliance and Consumer Affairs. For legal issues, Lisa R.
Chavarria, Attorney, (202/898-6891), Supervision and Legislation
Branch, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
OCC: Bill Morris, National Bank Examiner, (202/874-5190), Office of
the Chief National Bank Examiner, Office of the Comptroller of the
Currency, 250 E Street, SW., Washington, DC 20219.
OTS: Scott M. Albinson, Special Assistant to the Director of
Supervision, (202/906-7984), Supervision, Office of Thrift Supervision,
1700 G Street, NW., Washington, DC 20552.
SUPPLEMENTARY INFORMATION: The supervisory divisions of the Federal
Deposit Insurance Corporation, the Board of Governors of the Federal
Reserve System and the Office of Thrift Supervision (Federal banking
agencies) responsible for the examination of state-chartered, insured
depository institutions, and the branches and agencies of foreign banks
that have been chartered by the States have a long history of
coordinating with the State banking departments \1\ in fulfilling a
mutual goal of promoting a safe and sound banking system.\2\ It is
recognized that this close cooperation between the Federal and State
regulators promotes efficiency in the examination process, reduces the
regulatory burden on state-chartered, insured depository institutions,
and improves the supervisory process.
\1\ The term ``State banking department'' includes any separate
thrift department or division of a State.
\2\ The Office of the Comptroller of the Currency is not
responsible for the supervision and regulation of any state-
chartered, insured depository institutions.
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The Federal and State banking agencies have worked together, to
varying degrees, in the following areas:
Conducting alternate, joint and concurrent safety and
soundness examinations of insured depository institutions and of the
branches and agencies of foreign banks that have been chartered by the
States.
Processing safety and soundness examination reports and
applications on a timely basis.
Using common examination report and application forms.
Developing and issuing informal (e.g., board resolutions,
memoranda of understanding or other similar agreements) and formal
enforcement actions.
Exchanging supervisory information.
Offering Federal agency training programs to State
Examiners.
Providing access to the Federal agency data bases.
The Federal banking agencies intend to continue these cooperative
efforts to the maximum extent possible. It is recognized, however, that
the adequacy of State budgeting, examiner staffing, and training are
important factors to enhancing Federal and State coordination.
Currently, the Federal banking agencies, individually, have entered
into formal or informal arrangements or working agreements with most
State banking departments. These working agreements or informal
arrangements generally address the following areas:
The number of state-chartered, insured institutions to be
examined on an alternating basis by the State banking department and by
the Federal banking agency.
The frequency of safety and soundness examinations.
The type of examinations to be conducted (independent,
joint, or concurrent) by each agency.
The pre-examination procedures to be performed.
The responsibilities of each agency for processing reports
of examination.
The responsibilities of each agency for conducting
specialty examinations (compliance, information systems, trust, etc.).
The procedures for coordinating informal and formal
enforcement actions.
The procedures for processing joint applications.
The procedures for sharing supervisory information. These
working agreements or informal arrangements are structured to permit
both Federal and State agencies the flexibility to conduct an
independent examination subject only to notification to the other
party. Generally, only institutions rated ``1'' or ``2'' are examined
on an alternating basis allowing for a reasonable interval between
examinations. The appropriate Federal banking agency and the State
banking department periodically meet and coordinate examination
schedules.\3\
\3\ In 1992, the FDIC and the Federal Reserve, individually,
entered into joint resolutions with the Conference of State Bank
Supervisors designed to encourage the negotiation and formation of
working agreements with the State banking departments. The objective
of these agreements is to foster closer supervisory cooperation
between the State departments and the FDIC or the Federal Reserve.
The working agreements generally identify those state-chartered
banks that will be examined on an alternating basis, and other banks
that will be examined on a joint or concurrent basis, if
practicable.
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A hallmark of the successful program to date has been this
flexibility to tailor cooperation to the particulars of each State and
to the specifics of individual banks within a State, plus the reality
of changing circumstances at both the Federal and the State levels. The
FFIEC guidelines strive to maintain that flexibility.
Therefore, the FFIEC issues the following guidelines pursuant to 12
U.S.C. 1820(d)(9):
GUIDELINES FOR RELYNG ON STATE EXAMINATIONS: The Federal banking
agencies will accept and rely on State reports of examination in all
cases in which it is determined that State examinations enable the
Federal banking agencies to effectively carry out their supervisory
responsibilities. The following criteria may be considered, in whole or
in part, by a Federal banking agency when determining the acceptability
of a State report of examination under section 10(d) of the Federal
Deposit Insurance Act:
The completeness of the State examination report. The
State report of examination of a state-chartered, insured depository
institution or a state-chartered branch or agency of a foreign bank
should contain sufficient information to permit a reviewer to make an
independent determination on the overall condition of the institution
as well as each component factor and composite rating assigned under
the ``Uniform Financial Institutions Rating System'' used for insured
depository institutions and commonly referred to as the ``CAMEL''
rating system or the ROCA rating system used for branches and agencies
of foreign banks.
The adequacy of documentation maintained routinely by
State examiners [[Page 33208]] to support observations made in
examination reports.
The ability over time of a State banking department to
achieve examination objectives. At a minimum, the Federal banking
agencies will consider the adequacy of State budgeting, examiner
staffing and training, and the overall review and follow-up examination
process of a State banking department. Accreditation of a State banking
department by the Conference of State Bank Supervisors is among the
factors that also will be considered.
The adequacy of any formal or informal arrangement or
working agreement between a State banking department and a Federal
banking agency.
The Federal banking agencies, as part of their routine review of
State examination reports, will assess the quality and scope of the
reports to determine whether they continue to meet the above general
criteria. The Federal banking agencies retain the option in cases in
which a State examination report appears insufficient or the condition
of an insured institution, as indicated in the examination report or
other sources, appears to be seriously deteriorating, to conduct a
follow-up examination.
The appropriate Federal banking agency and State banking department
will continue to share, discuss and work to resolve any problems or
concerns regarding the acceptability of each other's work or the
operation of these guidelines and the alternating examination program,
as well as other issues of mutual interest.
Dated: June 22, 1995.
Joe M. Cleaver,
Executive Secretary/Federal Financial institutions Examination Council.
[FR Doc. 95-15734 Filed 6-26-95; 8:45 am]
BILLING CODE 6210-01-M
