TE Study Guide - Basic Examination
Concepts and Guidelines (1.1)
Rationale of Bank Exams - Why does the FDIC conduct bank exams? - Answers --
Ensure public confidence in banking system
- Protect DIF
Rationale of Bank Exams - What do onsite exams do to help ensure stability of banks? -
Answers -- Identify undue risks and weak risk management practices
- Evaluate adherence to laws and regulations which is given high priority by Congress
and bank supervisors
Rationale of Bank Exams - Exams play a key role in the supervisory process by helping
the FDIC identify? - Answers -- The cause and severity of problems at individual banks
- Emerging risks in the financial services industry
- Helps FDIC develop effective corrective measures.
Conduct of Exams - Do regulatory personnel have access to all records and employees
of the bank during the exam? - Answers -Yes.
Conduct of Exams - Section 10(b) and (c) of the FDI Act empower examiners to make
thorough exam of the bank? - Answers -True
Conduct of Exams - Should FDIC employees avoid any form of political communication
with the bank that could be perceived as suggesting the exam process is influenced by
political considerations or that the bank should take a particular position on legislative
issues? - Answers -Yes, FDIC should maintain integrity and effectiveness of exam
process.
Rating System - UFIRS stands for what? - Answers -Uniform Financial Institution Rating
System
Rating System - What does the UFIRS do? - Answers -- Assists regulatory agencies in
fulfilling mission of maintaining stability and public confidence in financial system.
- Ensures banks are evaluated in a comprehensive and uniform manner, and that
supervisory attention is appropriately focused on banks with financial and operational
weaknesses.
- Assists Congress in assessing the aggregate strength of financial industry and follow
trends.
, Rating System - Can the composite rating be derived from averaging component
ratings? - Answers -No, but the composite rating generally bears a close a relationship
to its component ratings.
Rating System - What component should be given special consideration when
assigning a composite rating? Why? - Answers -Management.
Shows the ability to respond to changing circumstances and address risks that result
from new business conditions, activities, and products.
Rating System - What are the six specialty exam areas? - Answers -- BSA
- IT
- Trust
- Government Security Dealers
- Municipal Security Dealers
- Registered Transfer Agent
Discussion with Management - What must you tell management? - Answers -- Ratings
are tentative and subject to approval by RO
- Explain key factors when assigning ratings
- Explain the composite rating is NOT based on numerical average
- Remind management of confidentiality (Part 309)
- If a component or composite is 3 or worse, we have to contact RO and discuss with
CM prior to telling the bank.
Examination Letters - What is an examination letter used for? - Answers -Used for
newly assigned composite rating of 3 or worse.
Examination Letters - What does the examination notify management of? - Answers --
Composite tentatively downgraded
- Expectation that management stabilize the risk profile and strengthen condition
- Can't take actions that materially expand the balance sheet or risk profile
- Required to obtain a non-objection in transactions that materially change the balance
sheet (increase TA or use volatile funding sources)
Examination Frequency - What is the first priority of RMS? - Answers -Effective
oversight of banks requiring special attention
Examination Frequency - What regulation governs the frequency for domestic banks? -
Answers -Part 337
Examination Frequency - What regulation governs the frequency for foreign banks? -
Answers -Part 347
Examination Frequency - How often are full-scope, onsite examinations required -
Answers -At least once every 12 months
Concepts and Guidelines (1.1)
Rationale of Bank Exams - Why does the FDIC conduct bank exams? - Answers --
Ensure public confidence in banking system
- Protect DIF
Rationale of Bank Exams - What do onsite exams do to help ensure stability of banks? -
Answers -- Identify undue risks and weak risk management practices
- Evaluate adherence to laws and regulations which is given high priority by Congress
and bank supervisors
Rationale of Bank Exams - Exams play a key role in the supervisory process by helping
the FDIC identify? - Answers -- The cause and severity of problems at individual banks
- Emerging risks in the financial services industry
- Helps FDIC develop effective corrective measures.
Conduct of Exams - Do regulatory personnel have access to all records and employees
of the bank during the exam? - Answers -Yes.
Conduct of Exams - Section 10(b) and (c) of the FDI Act empower examiners to make
thorough exam of the bank? - Answers -True
Conduct of Exams - Should FDIC employees avoid any form of political communication
with the bank that could be perceived as suggesting the exam process is influenced by
political considerations or that the bank should take a particular position on legislative
issues? - Answers -Yes, FDIC should maintain integrity and effectiveness of exam
process.
Rating System - UFIRS stands for what? - Answers -Uniform Financial Institution Rating
System
Rating System - What does the UFIRS do? - Answers -- Assists regulatory agencies in
fulfilling mission of maintaining stability and public confidence in financial system.
- Ensures banks are evaluated in a comprehensive and uniform manner, and that
supervisory attention is appropriately focused on banks with financial and operational
weaknesses.
- Assists Congress in assessing the aggregate strength of financial industry and follow
trends.
, Rating System - Can the composite rating be derived from averaging component
ratings? - Answers -No, but the composite rating generally bears a close a relationship
to its component ratings.
Rating System - What component should be given special consideration when
assigning a composite rating? Why? - Answers -Management.
Shows the ability to respond to changing circumstances and address risks that result
from new business conditions, activities, and products.
Rating System - What are the six specialty exam areas? - Answers -- BSA
- IT
- Trust
- Government Security Dealers
- Municipal Security Dealers
- Registered Transfer Agent
Discussion with Management - What must you tell management? - Answers -- Ratings
are tentative and subject to approval by RO
- Explain key factors when assigning ratings
- Explain the composite rating is NOT based on numerical average
- Remind management of confidentiality (Part 309)
- If a component or composite is 3 or worse, we have to contact RO and discuss with
CM prior to telling the bank.
Examination Letters - What is an examination letter used for? - Answers -Used for
newly assigned composite rating of 3 or worse.
Examination Letters - What does the examination notify management of? - Answers --
Composite tentatively downgraded
- Expectation that management stabilize the risk profile and strengthen condition
- Can't take actions that materially expand the balance sheet or risk profile
- Required to obtain a non-objection in transactions that materially change the balance
sheet (increase TA or use volatile funding sources)
Examination Frequency - What is the first priority of RMS? - Answers -Effective
oversight of banks requiring special attention
Examination Frequency - What regulation governs the frequency for domestic banks? -
Answers -Part 337
Examination Frequency - What regulation governs the frequency for foreign banks? -
Answers -Part 347
Examination Frequency - How often are full-scope, onsite examinations required -
Answers -At least once every 12 months
