BOARD OF GOVERNORS
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
DIVISION OF BANKING
SUPERVISION AND REGULATION
SR 90-12 (STR)
April 9, 1990
TO THE OFFICER IN CHARGE OF SUPERVISION
AT EACH FEDERAL RESERVE BANK
SUBJECT: Infrastructure Reviews for Banking Organizations Seeking Expanded Securities Underwriting and Dealing Powers
Bank holding companies seeking to engage in the full range of underwriting and dealing activities for ineligible debt securities are required, inter alia, to undergo a review by the Federal Reserve prior to commencing the activity to ensure that the proper managerial and operational infrastructure has been established, including adequate procedures, accounting and computer systems, and internal risk management controls ("the infrastructure reviews"). (See Board Order dated January 18, 1989.) A question has arisen as to the appropriate timing of these reviews in conjunction with applications that have been:
(a) discussed with the Reserve Bank but have not yet been filed, (b) filed in either draft or final form but have not yet been accepted for processing, or (c) accepted for processing but on which actions have not yet been taken.
This letter describes the procedure with respect to the timing of these reviews.
As a general matter, if the Applicant is ready to be examined and the Reserve Bank has available examiner resources, the Reserve Bank should initiate and complete the reviews early in the applications processing period, even before the acceptance of the application if possible. This preference, however, is predicated upon the existence of a proposal that does not contain any unresolved policy issues, or present deviations from established Board policies that are likely to make the proposal unacceptable to the Board.
It is recognized, however, that circumstances will sometimes preclude completion of these reviews prior to timely action on the application. In instances where the reviews are not completed within the applications processing period, the reviews should be completed within 90 calendar days of the approval of the proposal, unless the applicant notifies the Reserve Bank in writing that it is not ready to be examined.
In the event that an applicant rejects the Reserve Bank's offer to perform the infrastructure review, the Reserve Bank then has no obligation to perform the review until the applicant subsequently notifies the Reserve Bank in writing of its preparedness and desire to be examined. Once the Reserve Bank is subsequently notified by the applicant of its desire to be reviewed, the Reserve Bank should initiate and complete the review within 90 calendar days of the applicant's subsequent request.
Please contact Sid Sussan (x-2638) if there are any questions.
Don E. Kline Associate Director
CROSS REFERENCE: N/A
SR letters | 1990