BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.  20551

DIVISION OF CONSUMER
AND COMMUNITY AFFAIRS

CA 03-13
Supersedes CA 01-3

December 10, 2003

TO THE OFFICERS AND MANAGERS IN CHARGE OF CONSUMER AFFAIRS SECTIONS:

SUBJECT: Revised Risk-Focused Consumer Compliance Supervision Program Procedures

This letter transmits revised Risk-Focused Consumer Compliance Supervision Program (323 KB PDF)procedures. These revised procedures reflect changes that will facilitate the sharing of information related to consumer compliance risk with examiners from other specialty areas.¹ Examiners should use these new procedures on all examinations commencing after December 31, 2003 .

Major changes to the examination procedures include the following:

•  The Consumer Compliance Risk Management Program section gives guidance for assessing a bank's consumer compliance risk management program using six key elements-board of directors and senior management oversight, consumer compliance program structure, policies and procedures, compliance audits/reviews, internal controls, and training.

•  A new rating category, Compliance Risk Management Rating (CRMR), replaces the Compliance Risk Indicator. This rating reflects the examination findings within all six elements of the consumer compliance risk management program. The rating is based on a scale of 1 through 5, in ascending order of supervisory concern. The CRMR process will provide an effective way to incorporate consumer compliance risk into the overall risk management rating assigned to the bank by safety and soundness examiners.

•  The procedures include a sample Consumer Compliance Risk Profile and give guidance on information sources for completing the Institution Overview and Compliance Management sections of the profile.

The revised procedures give guidance for addressing operational, legal, and reputational risk in regard to consumer compliance. Consumer compliance examiners should review SR 95-51 (which contains definitions of operational, legal, and reputational risk) to ensure their understanding of the general risk assessment process followed by safety and soundness examiners.

The Compliance Risk Management Rating and the consumer compliance examiner's assessment of the level of operational, legal, and reputational risk will be incorporated into the Consumer Compliance Risk Profile. Revised guidance for safety and soundness examiners will instruct them to consider the Consumer Compliance Risk Profile in determining the bank's risk management rating. This approach is designed to foster stronger communication among the supervision functions and to promote a more accurate assessment of an institution's overall risk.

Questions on the revised guidance should be referred to the review examiner assigned to your district.

Sincerely,
(signed)

Dolores S. Smith
Director

Notes:


¹ The section related to examination frequency has been deleted since guidance on frequency was recently issued in CA Letter 03-12.  Return to text