Seal of the Board of Governors of the Federal Reserve System

WASHINGTON, D. C.  20551


SR 91-1 (FIS)
January 4, 1991


SUBJECT:    System Training Procedures

                      Late last year, the Banking Supervision and Regulation Training Committee and the Board's training center staff formed a subcommittee to develop a proposal to strengthen and enhance the System's training programs for examiners and other professional supervisory staff. The objective sought was a more integrated program for training examiners and other supervisory staff that would prepare them to meet the challenges of today's rapidly changing banking environment. A comprehensive plan was developed by the subcommittee which Tom Hoenig, Chairman of the Training Committee and the Task Force, presented at the October 30-31, 1990 Supervision Conference. After discussion, conference attendees approved the plan for implementation.

                     In summary, the plan will revise and enhance the traditional core curriculum of Federal Reserve training courses. In addition, it sets down the requirement that every System staff member wishing to obtain an examiner's commission is expected to master the core curriculum and other materials and demonstrate that mastery by a proficiency test. Every staff member wishing to become a commissioned examiner hired after December 31, 1990 will be required to pass this test, which represents the minimal acceptable level of knowledge for obtaining a commission. Beyond the core curriculum, every staff member pursuing a commission will also be expected to develop proficiency in, at least, one specialty area. It is expected that staff members assigned to any specialty area would be afforded the same time frame for commissioning as commercial bank examiners.

                      An attached memorandum from the Training Subcommittee outlines the proposed revisions to System training that were approved at the Conference. There are six basic areas of recommendation in the memorandum. A second attached memorandum sets forth a plan to implement the recommendations through task forces under the direction of a Curriculum Committee. As agreed at the conference, personnel for the task forces will come from Reserve Bank training coordinators, experienced System faculty and selected Board staff. We will begin immediately to form task forces, and you will be asked to contribute staff.

William Taylor
Staff Director


Attachment 1

Bank Supervision and Regulation Training Subcommittee Plan for the Revision and Enhancement of System Training of Examiners and Other Professional Staff

            The following outline contains recommendations designed to strengthen and enhance the System's training programs. The prescriptions represent conclusions reached by the Bank Supervision and Regulation Training Subcommittee after receiving inputs from a task force consisting of selected System Training Coordinators and subsequent interaction with all System Training Coordinators.

            In summary, the plan identifies a core curriculum of courses and knowledge that System staff members, training to be commissioned examiners, are expected to master. This mastery is demonstrated through successful completion of a proficiency check at the end of the core curriculum. In addition, commissioned examiner candidates are expected to develop proficiency in, at least, one specialty area. And commissioned examiner candidates, regardless of specialty, would be afforded the same time frame for commissioning.

I.       Core Curriculum Courses

    The core curriculum will consist of the following seven courses, each of which is currently being modified and strengthened. A brief description of course content accompanies each listing.

    A.  Banking I (attend within 3 months)

    • Basics of banking and BHC applications
    • Overview of supervision
    • Basic regulatory accounting
    • Introduction to finance, credit, and investments
    • The supervisory process

    B.  Banking II (1-1.5 years)

    • Credit analysis and classification exercise
    • Financial analysis of the bank
    • Financial analysis of parent only and consolidated entities.

    C.  Banking III (2-3 years)

    • BANKSIM exercise
    • Loan classification exercise
    • Lectures on banking issues:
      • Asset/liability management
      • Loans
      • Regulatory specialties
      • Strategic planning
      • Capital, controls and taxes

    D.  Credit Analysis (1-3 years)

    • First week includes a substantial credit classification exercise
    • Second week consists of Commercial Analysis for Lenders (CAL) material
    • The second week is optional for nonfinancial staff (i.e., Consumer Affairs, EDP, and Trust)

    E.  Effective Writing (3-6 months)

      Improves clarity, conciseness, and completeness of written communications.

    F.  Conducting Meetings with Management (6 months - 1 year)

      Develops communication skills for meetings with management and directors.

    G.  Management Skills Program (1.5 - 2.5 years)

      This course could take the form of Management Workshop or some other forum that enhances interpersonal and management skills in a field setting.

II.      Other Core Curriculum Requirements

    Besides the successful completion of the above listed courses, each student needs to demonstrate mastery of the following laws and regulations:

    A.  Federal Reserve Act (overview)
    B.  Bank Holding Company Act and Regulation Y
    C.  Regulation O
    D.  Regulation L
    E.  Sections 23A & B
    F.  Bank Secrecy Act
    G.  Right to Financial Privacy Act
    H. Change in Bank Control Act
    I.   Regulation A
    J.   Regulations G,T,U, and X
    K. Regulation Z
    L.  Regulation D
    M. Community Reinvestment Act
    N.  Regulation B
    O.  Regulation Q
    P.  Regulation H

    Interactive study guides and tests for most of these regulations have already been developed and are in the initial stages of being computerized.

    Each student, regardless of specialty or location, will be expected to successfully complete all the courses and master all the regulations in the core curriculum. The Reserve Bank would have the discretion to allow previous work or educational experience to substitute for some of these requirements. Moreover, a mechanism will be established that permits exemption for selected staff from certain core courses subject to demonstrated mastery of the course material through a pre-test. Successful completion of the core, which takes about three years, is a minimal requirement for commissioning.

III.     Core Knowledge Proficiency Test

    Upon completion of the core curriculum, the student will take a proficiency test to demonstrate mastery of the core material. The following features characterize this exam:

    A.  The exam will be given quarterly at each Reserve Bank, the tests to be graded at the Board. Each Reserve Bank will provide a uniform review session for all test takers. The format will be developed by the Subcommittee.

    B.  There will be a uniform pass/fail standard that represents the minimal acceptable level of knowledge for all employees hired on or after January 1, 1991. The Reserve Bank will retain the option of whether to include others within the testing program and how otherwise to use the test results.

    C.  The exam will be sectioned by topic area so that a minimal score is required for each section. As with the CPA exam, the student would only need to repeat the failed sections(s) of the exam. If the section were failed two times, the whole exam would need to be repeated.

    D.  Successful completion of the exam will be a necessary, but not sole, condition of commissioning for those hired on or after January 1, 1991. Other factors, such as job performance, interpersonal skills, and judgment, will be included in the decision to commission. The commissioning decision will be made by the respective Reserve Bank.

    E.  Any staff exempted from all or part of the core curriculum material by their Reserve Bank will still be subject to successful completion of the proficiency exam.

IV.     Specialty Area Courses

    Every candidate for an examiner commission is expected to develop expertise in at least one specialty area. Generally, the completion of specialty requirements will follow the proficiency exam, but an employee may begin work in a specialty area whenever the Reserve Bank chooses. Specialty areas are divided between Non-Financial and Financial areas. Listed under each specialty are the courses required to demonstrate expertise in the specialty area.

    A.  Non-Financial Specialties

    1. Consumer Affairs/CRA

      • Consumer Compliance I
      • Consumer Compliance II
      • White Collar Crime

    2. EDP

      • EDP Examination School
      • EDP Technology Conference
      • White Collar Crime

    3. Trust

      • Basic Trust
      • Advanced Trust
      • White Collar Crime

    B.  Financial Specialties

    1. Commercial Bank Examination

      • Advanced Credit Analysis (to be created)
      • Commercial Detail School (already developed by the Chicago Fed)
      • Off Balance Sheet Risk
      • White Collar Crime
      • Payment System Risk

    2. BHC Inspections

      • BHC Inspection School
      • Advanced BHC Inspections (to be created)
      • Payment System Risk
      • White Collar Crime

    3. International

      • International Banking I & II
      • Advanced Foreign Exchange
      • International Capital Markets
      • Payment System Risk
      • Off Balance Sheet Risk

    4. Applications

      • BHC Applications School
      • CRA Workshop

    5. Supervision Surveillance

      • White Collar Crime
      • BHC Inspections

V.      Specialty Area Knowledge

    Each specialty area will have requirements relating to job knowledge, just as in the core curriculum. Some job knowledge modules have already been produced and have been listed below while others will need to be developed for each area.

    • Basic real estate
    • Bankruptcy
    • Other Real Estate
    • Internal/external audit
    • Income taxes for banking organizations

    Upon completion of the specialty curriculum and the related job knowledge modules, the examiner will take an examination to demonstrate mastery of the specialty material.

VI.  Orientation Program

    The system needs a uniform training program for new hires. The Board staff will coordinate System resources to develop self-study, videotape, and computer-based products that provide an introduction to banking and bank holding company operations, the regulatory environment, and bank accounting.

Attachment 2

Bank Supervision and Regulation Training Subcommittee
Plan for the Implementation of a Revised System Training Program

                            The Training Subcommittee has adopted seven primary recommendations for revising and enhancing the System's training programs. These seven recommendations are as follows:

  1. Develop a uniform orientation program
  2. Strengthen the core curriculum courses
  3. Produce and disseminate job knowledge modules for the core curriculum and the specialty areas
  4. Construct a core curriculum proficiency test
  5. Build proficiency tests for each specialty area
  6. Develop new courses:
    1.   Advanced Credit Analysis School
    2.   Advanced BHC Inspection School
  7. Effective implementation of these recommendations requires a plan that capitalizes on the training experience of the Board's training staff and Reserve Bank personnel.

                            A task force will be developed for each of the seven recommendations. Each task force will consist of Reserve Bank training coordinators, experienced System instructors, and selected Board staff, the composition varying according to the nature and magnitude of the task. Reserve Banks will be contacted immediately about personnel they will be expected to contribute to these task forces. Each task force has responsibility for implementing, in a timely and efficient manner, its assigned recommendation. Moreover, the task force will have discretion, subject to Training Subcommittee approval, to refine and alter the specific content of its task as long as it remains consistent with the approved plan.

                            Because of the complexity of the task, the task force responsible for building specialty exams will probably need to operate through separate committees for each of the eight specialty areas. Although this task force will be significantly larger than the other six task forces, the time commitment required from each participant should not exceed one week.

                            The heads, or chairpersons, of each task force will constitute the Curriculum Committee, which will have oversight responsibility concerning the implementation of the seven recommendations. The Chairperson of this committee will be a Board training staff member who will report directly to the Board's Assistant Director responsible for training, who will serve as a liaison with the Banking Supervision and Regulation Training Subcommittee.

SR letters | 1991