Seal of the Board of Governors of the Federal Reserve System

WASHINGTON, D. C.  20551


SR 96-29 (SUP)
November 7, 1996


SUBJECT: Supervisory Program for Risk-Based Inspections of Top 50 Bank Holding Companies

                        The Federal Reserve is currently in the process of implementing risk-based inspections as discussed at last June's Dallas Conference, and as set forth in several important supervisory letters (SR 95-51, SR 96-14 and AD 96-50).  As you know, this is a major strategic initiative of the Federal Reserve designed to better focus our supervision and examination activities on management's processes for identifying, measuring and controlling risks.  Our objective is to make the System's examination and inspection processes more risk-focused, process-oriented, burden-sensitive and cost-effective.  A critical aspect of this effort is to facilitate a more efficient use of our supervisory resources.  This strategic initiative, which has been underway for some time, has been endorsed by the supervision function and is recognized as a high priority by the Board and Reserve Bank Presidents.  Central to the success of this effort is ensuring that our resources are focused effectively and consistently throughout the System on the areas of highest risk within banking organizations.

                        In furtherance of these important objectives, each Reserve Bank is requested to provide Board staff with a copy of the principal risk-based supervisory tools requested in SR 96-50 for each of the Top 50 bank holding companies as these products are prepared or as they are updated on an on-going basis.1 Distribution of these materials will permit Board staff to monitor the progress being made in implementing the risk-based supervision program; will help to promote an appropriate level of consistency throughout the System; and will permit us to focus on those more successful aspects of the program that can be shared with all of the Reserve Banks.  It will also provide Board staff with a better understanding of each company's condition in order to provide appropriate updates and briefings to the Board, as necessary.  Finally, central review of these materials will allow us to gather and analyze macro-prudential information on trends, activities, strategies, and risk profiles of the major banking organizations on a more global basis.  A System working group is in the initial stages of planning an automated information management system to store and deliver documents, including the supervisory materials requested in this letter.

                        Reserve Banks are also asked to have their examiner-in-charge of each Top 50 holding company inspection conduct a short briefing, by conference call, for Board staff prior to or immediately following the examiner's wrap-up meeting with bank holding company management to discuss the overall inspection results and to assess the risk-based supervisory program.  As part of this overall effort, Reserve Banks are also asked to continue to provide Board staff with copies of any significant summary memoranda on follow-up meetings or other significant correspondence with senior management representatives of Top 50 bank holding companies.

                        The Board's Multinational Supervision Section will be responsible for coordinating these efforts from the Board's perspective, including receiving the risk-based supervisory materials requested above, participating in the inspection conference calls, and monitoring the System's implementation of the risk-focused program.  Issues with respect to consistency of implementation, best practices and other relevant or useful information will be shared with Reserve Banks and discussed at System meetings and conferences.  To the extent possible, the materials requested above should be transmitted by e-mail, return receipt requested, to the Manager, Multinational Supervision Section (Barbara Cornyn), with a copy to the appropriate staff analyst.  Arrangements for the briefings can be made by phone or e-mail by contacting Ms. Cornyn (ext. 2434), or the appropriate staff analyst of the Multinational Supervision Section.  

                        Should your staff have any questions regarding this matter, please contact Howard Amer or Barbara Cornyn.

Richard Spillenkothen

Cross References: SR 95-51
SR 96-14
AD 96-50


1.  The four products initiated in AD 96-50 to facilitate the risk-focused process and to help meet information needs include an institutional overview, a risk assessment, a supervisory plan, and an examination program.  Return to text

SR letters | 1996