TE Study Guide - Formal Administrative
Actions (15.1) Questions and Answers
What is a formal enforcement action? - Answers -Notices of orders issued by FDIC
against a bank or IAP. They are legally enforceable and most notices and final orders
are published after issuance.
When is a formal enforcement action used? - Answers -To reduce risks and address
deficiencies.
- Generally, for a composite rate 4 or 5
- Conditions or concern over a high volume or severity of violations.
When can the formal enforcement action be modified? - Answers -A modification order
must be issued to modify an existing order.
When can the formal enforcement action be terminated? - Answers -When any of the
following exist:
- Conditions and relevant circumstances at the bank have improved sufficiently and
formal action no longer needed.
- Provision of the formal action have been fully satisfied
- A new formal or informal action has been issued to replace the existing action and
address any outstanding issues.
- Conditions of the bank have deteriorated and a new action has been initiated.
Section 8 of the FDI Act provides the FDIC's Board with broad enforcement powers.
What does Section 8a do? - Answers -Terminate deposit insurance
Section 8 of the FDI Act provides the FDIC's Board with broad enforcement powers.
What does Section 8b do? - Answers -Issue cease and desist orders
- Can say bank engaging in unsafe or unsound practice if 3 rated AQ, management,
earnings, or liquidity.
Section 8 of the FDI Act provides the FDIC's Board with broad enforcement powers.
What does Section 8c do? - Answers -Invoke temporary (effective upon service) cease
and desist orders
Section 8 of the FDI Act provides the FDIC's Board with broad enforcement powers.
What does Section 8e and 8g do? - Answers -Remove IAPs or prohibit their
participation in bank affairs
, Section 8 of the FDI Act provides the FDIC's Board with broad enforcement powers.
What does Section 8s do? - Answers -Issue orders to C&D from violating certain AML
regulations.
Section 8 of the FDI Act provides the FDIC's Board with broad enforcement powers.
What does Section 8w do? - Answers -Terminate deposit insurance for certain money
laundering offenses.
Is only the FDIC Board authorized to deem something unsafe and unsound? - Answers
-Yes.
Can examiners use the term "unsafe and unsound" in the ROE? - Answers -No, they
can use undesirable, unacceptable, imprudent, etc.
Does the ROE serve as primary evidence to support formal actions? - Answers -Yes.
Is a recommendation for the formal action dependent on the ROE being finished? -
Answers -No. DO NOT wait until the end of the exam to recommend formal order.
Should consult with RO ASAP.
What should be included in the memo to the RO for the formal order? - Answers -
Should include suggested measures and timeframes for correcting each undesirable
practice or condition.
Should also include names and home addresses of any individuals to be named in the
formal action to facilitate the service of a Notice of Charges.
(True/False) Examiners have to review compliance with a formal order during exams.
They should include a summary of O/S formal enforcement actions in the ECC section.
Document in factual manner the steps management has taken to comply with
provisions. - Answers -True.
Can Examiners use conclusory statements of opinion (bank in compliance with
provision)? - Answers -No, not for us to decide.
Does the FDI Act define the difference between unsafe and unsound practice versus
condition? - Answers -No. The FDIC Board has established some examples from
previous Section 8 proceedings.
What is this, an unsafe and unsound practice or condition? If continued, would result in
abnormal risk of loss or damage to the bank, its shareholders, or the DIF. - Answers -
Unsafe and unsound practice.
What are some practices deemed unsafe and unsound? - Answers -- Inadequate capital
- Hazardous lending and tax collection practices (extending credit without info,
inadequately secured, overdrafts w/o controls, etc.)
- Inadequate liquidity
Actions (15.1) Questions and Answers
What is a formal enforcement action? - Answers -Notices of orders issued by FDIC
against a bank or IAP. They are legally enforceable and most notices and final orders
are published after issuance.
When is a formal enforcement action used? - Answers -To reduce risks and address
deficiencies.
- Generally, for a composite rate 4 or 5
- Conditions or concern over a high volume or severity of violations.
When can the formal enforcement action be modified? - Answers -A modification order
must be issued to modify an existing order.
When can the formal enforcement action be terminated? - Answers -When any of the
following exist:
- Conditions and relevant circumstances at the bank have improved sufficiently and
formal action no longer needed.
- Provision of the formal action have been fully satisfied
- A new formal or informal action has been issued to replace the existing action and
address any outstanding issues.
- Conditions of the bank have deteriorated and a new action has been initiated.
Section 8 of the FDI Act provides the FDIC's Board with broad enforcement powers.
What does Section 8a do? - Answers -Terminate deposit insurance
Section 8 of the FDI Act provides the FDIC's Board with broad enforcement powers.
What does Section 8b do? - Answers -Issue cease and desist orders
- Can say bank engaging in unsafe or unsound practice if 3 rated AQ, management,
earnings, or liquidity.
Section 8 of the FDI Act provides the FDIC's Board with broad enforcement powers.
What does Section 8c do? - Answers -Invoke temporary (effective upon service) cease
and desist orders
Section 8 of the FDI Act provides the FDIC's Board with broad enforcement powers.
What does Section 8e and 8g do? - Answers -Remove IAPs or prohibit their
participation in bank affairs
, Section 8 of the FDI Act provides the FDIC's Board with broad enforcement powers.
What does Section 8s do? - Answers -Issue orders to C&D from violating certain AML
regulations.
Section 8 of the FDI Act provides the FDIC's Board with broad enforcement powers.
What does Section 8w do? - Answers -Terminate deposit insurance for certain money
laundering offenses.
Is only the FDIC Board authorized to deem something unsafe and unsound? - Answers
-Yes.
Can examiners use the term "unsafe and unsound" in the ROE? - Answers -No, they
can use undesirable, unacceptable, imprudent, etc.
Does the ROE serve as primary evidence to support formal actions? - Answers -Yes.
Is a recommendation for the formal action dependent on the ROE being finished? -
Answers -No. DO NOT wait until the end of the exam to recommend formal order.
Should consult with RO ASAP.
What should be included in the memo to the RO for the formal order? - Answers -
Should include suggested measures and timeframes for correcting each undesirable
practice or condition.
Should also include names and home addresses of any individuals to be named in the
formal action to facilitate the service of a Notice of Charges.
(True/False) Examiners have to review compliance with a formal order during exams.
They should include a summary of O/S formal enforcement actions in the ECC section.
Document in factual manner the steps management has taken to comply with
provisions. - Answers -True.
Can Examiners use conclusory statements of opinion (bank in compliance with
provision)? - Answers -No, not for us to decide.
Does the FDI Act define the difference between unsafe and unsound practice versus
condition? - Answers -No. The FDIC Board has established some examples from
previous Section 8 proceedings.
What is this, an unsafe and unsound practice or condition? If continued, would result in
abnormal risk of loss or damage to the bank, its shareholders, or the DIF. - Answers -
Unsafe and unsound practice.
What are some practices deemed unsafe and unsound? - Answers -- Inadequate capital
- Hazardous lending and tax collection practices (extending credit without info,
inadequately secured, overdrafts w/o controls, etc.)
- Inadequate liquidity
