FDIC TE - Section 1.1 Basic Examination Concepts And
Guidelines: Questions With Valid Solutions
Why does the FDIC conduct bank exams? Correct Answer - Ensure
public confidence in the banking system and to protect the DIF
Section 10(b) and (c) of the FDI Act Correct Answer - Empowers
examiners to make a thorough examination of a bank's affairs
UFIRS stands for what? Correct Answer - Uniform Financial Institutions
Rating System
FFIEC stands for what? Correct Answer - Federal Financial Institutions
Examination Council
6 Areas Composite Ratings are Based on Correct Answer - CAMELS -
Capital, Asset Quality, Management, Earnings sufficiency, Liquidity Position,
SMR
Can banks disclose the ratings or any part of the ROE? Correct Answer -
No, not without prior consent of the regulator
Specialty Exam Areas Correct Answer - Bank Secrecy Act (BSA), IT,
Trust, Government Security Dealers, Municipal Security Dealers, and
Registered Transfer Agent
Management Disclosure of Ratings Correct Answer - The EIC should
discuss tentative ratings with management near the end of the exam, stating
that their ratings are tentative and subject to the review and final approval by
the regional director
Part 309 of the FDIC Rules and Regs Correct Answer - Examination
findings, including the composite and component ratings, are subject to
confidentiality rules
Examination letter should notify management of what? Correct Answer -
should notify management that the institution's composite rating was
tentatively downgraded and convey the expectation that management
, stabilize the institution's risk profile and strengthen its financial condition.
The letter should notify management that actions taken to materially expand
the institution's balance sheet or risk profile are inconsistent with supervisory
expectations. The letter should also inform management they are required to
obtain a non-objection from the regional director before engaging in any
transactions that would materially change the institution's balance sheet
composition, such as significantly increasing total assets or volatile funding
sources. If practical, state banking departments should be included as a joint
issuer of examination letters relating to FDIC-supervised examinations.
Section 337.12 of the FDIC Rules and Regulations implements Section 10(d) of
the FDI Act and governs what? Correct Answer - Exam frequency, 12
months unless conditions are met
Bank conditions to met in order to extend exams to every 18 months
Correct Answer - •The bank has total assets of less than $3 billion;
•The bank is well capitalized as defined in Section324.403(b)(1) of the FDIC
Rules and Regulations;
• The bank was assigned a management component rating of 1 or 2 at the
most recent FDIC or applicable state examination;
• The bank was assigned a composite rating of 1 or 2 at the most recent FDIC
or applicable state examination;
•The bank currently is not subject to a formal enforcement proceeding or
order by the FDIC, OCC, or Federal Reserve System; and
•No person acquired control of the bank during the preceding 12-month
period in which a full-scope, onsite examination would have been required
but for the above noted exceptions.
End of an Exam is defined as what? Correct Answer - Earlier of the date
he EIC submits the report for review or 60 calendar days from the exam start
date
Specialty Exam Frequency Intervals Correct Answer - Governed by RMS
policy, usually should be conducted concurrently with RMS exams
Risk Focused Supervision Correct Answer - Focusing resources on a
bank's high risk areas
Guidelines: Questions With Valid Solutions
Why does the FDIC conduct bank exams? Correct Answer - Ensure
public confidence in the banking system and to protect the DIF
Section 10(b) and (c) of the FDI Act Correct Answer - Empowers
examiners to make a thorough examination of a bank's affairs
UFIRS stands for what? Correct Answer - Uniform Financial Institutions
Rating System
FFIEC stands for what? Correct Answer - Federal Financial Institutions
Examination Council
6 Areas Composite Ratings are Based on Correct Answer - CAMELS -
Capital, Asset Quality, Management, Earnings sufficiency, Liquidity Position,
SMR
Can banks disclose the ratings or any part of the ROE? Correct Answer -
No, not without prior consent of the regulator
Specialty Exam Areas Correct Answer - Bank Secrecy Act (BSA), IT,
Trust, Government Security Dealers, Municipal Security Dealers, and
Registered Transfer Agent
Management Disclosure of Ratings Correct Answer - The EIC should
discuss tentative ratings with management near the end of the exam, stating
that their ratings are tentative and subject to the review and final approval by
the regional director
Part 309 of the FDIC Rules and Regs Correct Answer - Examination
findings, including the composite and component ratings, are subject to
confidentiality rules
Examination letter should notify management of what? Correct Answer -
should notify management that the institution's composite rating was
tentatively downgraded and convey the expectation that management
, stabilize the institution's risk profile and strengthen its financial condition.
The letter should notify management that actions taken to materially expand
the institution's balance sheet or risk profile are inconsistent with supervisory
expectations. The letter should also inform management they are required to
obtain a non-objection from the regional director before engaging in any
transactions that would materially change the institution's balance sheet
composition, such as significantly increasing total assets or volatile funding
sources. If practical, state banking departments should be included as a joint
issuer of examination letters relating to FDIC-supervised examinations.
Section 337.12 of the FDIC Rules and Regulations implements Section 10(d) of
the FDI Act and governs what? Correct Answer - Exam frequency, 12
months unless conditions are met
Bank conditions to met in order to extend exams to every 18 months
Correct Answer - •The bank has total assets of less than $3 billion;
•The bank is well capitalized as defined in Section324.403(b)(1) of the FDIC
Rules and Regulations;
• The bank was assigned a management component rating of 1 or 2 at the
most recent FDIC or applicable state examination;
• The bank was assigned a composite rating of 1 or 2 at the most recent FDIC
or applicable state examination;
•The bank currently is not subject to a formal enforcement proceeding or
order by the FDIC, OCC, or Federal Reserve System; and
•No person acquired control of the bank during the preceding 12-month
period in which a full-scope, onsite examination would have been required
but for the above noted exceptions.
End of an Exam is defined as what? Correct Answer - Earlier of the date
he EIC submits the report for review or 60 calendar days from the exam start
date
Specialty Exam Frequency Intervals Correct Answer - Governed by RMS
policy, usually should be conducted concurrently with RMS exams
Risk Focused Supervision Correct Answer - Focusing resources on a
bank's high risk areas
