BOARD OF GOVERNORS
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C. 20551
DIVISION OF BANKING
SUPERVISION AND REGULATION
SR 97-8 (SUP)
April 9, 1997
TO THE OFFICER IN CHARGE OF SUPERVISION
AT EACH FEDERAL RESERVE BANK
SUBJECT: Revisions to Examination Frequency Guidelines For State Member Banks
This SR letter amends the examination frequency guidelines in SR 94-64, dated December 30, 1994, to include necessary revisions due to the enactment of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 ("EGRPRA"). The amendments presented below specifically address section 2221 of the new law as it pertains to examination frequencies. Section 10(d)(4) of the Federal Deposit Insurance Act, as amended by Section 306 of the Riegle Community Development and Regulatory Improvement Act of 1994 (the "Riegle Act") and Section 2221 of EGRPRA, has expanded the category of insured depository institutions eligible for a full-scope examination frequency of 18 months.
Effective February 12, 1997, the Federal Reserve in conjunction with the FDIC, OCC and OTS, implemented, through an interim rule, the extended examination provisions contained in Section 306 of the Riegle Act and Section 2221 of the EGRPRA. A copy of the interim rule is attached. These sections permit the federal banking agencies to raise the asset size from $100 million to $250 million for certain banks that can be examined on an 18-month cycle. Banks qualifying for the program:
- must be rated a composite 2 or better;
- must be well capitalized;
- must be well managed;
- must not be subject to a formal enforcement action; and
- must not have experienced a change of control during the preceding 12-month period in which a full-scope on-site examination would have been required.
With regards to foreign banking organizations, Section 2214 of EGRPRA amended the International Banking Act of 1978, to provide that each federal or state branch or agency of a foreign bank will be subject to on-site examination by an appropriate federal or state banking agency as frequently as would a national or state member bank, respectively, by the appropriate federal banking agency. Consequently, U.S. branches and agencies of foreign banks are eligible for the 18-month cycle if they meet the qualifying criteria. However, a methodology must be developed by which the capital adequacy criteria can be measured and applied to these entities, and the criteria are currently under consideration. In the interim rulemaking process, the Board, OCC and FDIC have requested comment regarding application of these criteria to U.S. branches and agencies of foreign banks. Therefore, an 18-month examination cycle for U.S. branches and agencies of foreign banks will be considered once the comments are evaluated and the Board acts on the final rule.
If you have any questions regarding the adoption of this change, please contact Bill Tiernay, Senior Financial Analyst, at (202) 872-7579.
Stephen C. Schemering
Supersedes SR letter 94-64 (FIS)
Supersedes SR letter 94-36 (FIS)
Amends Commercial Bank Examination Manual Section 1000.1
SR letters | 1997