[Federal Register Volume 60, Number 123 (Tuesday, June 27, 1995)]
[Notices]
[Pages 33206-33208]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-15734]



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FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL


Guidelines for Relying on State Examinations

AGENCY: Federal Financial Institutions Examination Council.

ACTION: Notice and final guidelines.

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SUMMARY: The Federal Financial Institutions Examination Council (FFIEC) 
announces the adoption of its Guidelines for Relying on State 
Examinations pursuant to section 349 of the Riegle Community 
Development and Regulatory Improvement Act of 1994 (CDRI Act), codified 
at 12 U.S.C. 1820(d)(9). This section requires the FFIEC to issue 
guidelines establishing standards for the purpose of determining the 
acceptability of State reports of examination under section 10(d)(3) of 
the Federal Deposit Insurance Act (FDI Act), 12 U.S.C. 1820(d)(3). 
Under section 10(d)(3), a Federal banking agency may conduct an annual, 
on-site examination of an insured depository institution in alternate 
12-month periods (except those insured institutions with total assets 
of less than $250 million for which an 18-month examination cycle is 
permitted) if the Federal banking agency determines that a State 
examination of that institution [[Page 33207]] conducted during the 
intervening period is adequate. Section 349 of the CDRI Act states that 
the standards issued by the FFIEC are to be used at the discretion of 
the appropriate Federal banking agency.

EFFECTIVE DATE: These guidelines are effective on June 27, 1995.

FOR FURTHER INFORMATION CONTACT: Board: Frederick M. Struble, Associate 
Director, (202/452-3794), Division of Banking Supervision and 
Regulation, Board of Governors of the Federal Reserve System. For the 
hearing impaired only, Telecommunication Device for the Deaf (TDD), 
Dorothea Thompson (202/452-3544), Board of Governors of the Federal 
Reserve System, 20th and C Streets, NW., Washington, DC 20551.
    FDIC: Daniel M. Gautsch, Examination Specialist, (202/898-6912), 
Office of Policy, Division of Supervision, or Ken A. Quincy, Section 
Chief, (202/942-3083), Consumer Compliance & Analysis Branch, Division 
of Compliance and Consumer Affairs. For legal issues, Lisa R. 
Chavarria, Attorney, (202/898-6891), Supervision and Legislation 
Branch, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
    OCC: Bill Morris, National Bank Examiner, (202/874-5190), Office of 
the Chief National Bank Examiner, Office of the Comptroller of the 
Currency, 250 E Street, SW., Washington, DC 20219.
    OTS: Scott M. Albinson, Special Assistant to the Director of 
Supervision, (202/906-7984), Supervision, Office of Thrift Supervision, 
1700 G Street, NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION: The supervisory divisions of the Federal 
Deposit Insurance Corporation, the Board of Governors of the Federal 
Reserve System and the Office of Thrift Supervision (Federal banking 
agencies) responsible for the examination of state-chartered, insured 
depository institutions, and the branches and agencies of foreign banks 
that have been chartered by the States have a long history of 
coordinating with the State banking departments \1\ in fulfilling a 
mutual goal of promoting a safe and sound banking system.\2\ It is 
recognized that this close cooperation between the Federal and State 
regulators promotes efficiency in the examination process, reduces the 
regulatory burden on state-chartered, insured depository institutions, 
and improves the supervisory process.

    \1\ The term ``State banking department'' includes any separate 
thrift department or division of a State.
    \2\ The Office of the Comptroller of the Currency is not 
responsible for the supervision and regulation of any state-
chartered, insured depository institutions.
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    The Federal and State banking agencies have worked together, to 
varying degrees, in the following areas:
     Conducting alternate, joint and concurrent safety and 
soundness examinations of insured depository institutions and of the 
branches and agencies of foreign banks that have been chartered by the 
States.
     Processing safety and soundness examination reports and 
applications on a timely basis.
     Using common examination report and application forms.
     Developing and issuing informal (e.g., board resolutions, 
memoranda of understanding or other similar agreements) and formal 
enforcement actions.
     Exchanging supervisory information.
     Offering Federal agency training programs to State 
Examiners.
     Providing access to the Federal agency data bases.
    The Federal banking agencies intend to continue these cooperative 
efforts to the maximum extent possible. It is recognized, however, that 
the adequacy of State budgeting, examiner staffing, and training are 
important factors to enhancing Federal and State coordination. 
Currently, the Federal banking agencies, individually, have entered 
into formal or informal arrangements or working agreements with most 
State banking departments. These working agreements or informal 
arrangements generally address the following areas:
     The number of state-chartered, insured institutions to be 
examined on an alternating basis by the State banking department and by 
the Federal banking agency.
     The frequency of safety and soundness examinations.
     The type of examinations to be conducted (independent, 
joint, or concurrent) by each agency.
     The pre-examination procedures to be performed.
     The responsibilities of each agency for processing reports 
of examination.
     The responsibilities of each agency for conducting 
specialty examinations (compliance, information systems, trust, etc.).
     The procedures for coordinating informal and formal 
enforcement actions.
     The procedures for processing joint applications.
     The procedures for sharing supervisory information. These 
working agreements or informal arrangements are structured to permit 
both Federal and State agencies the flexibility to conduct an 
independent examination subject only to notification to the other 
party. Generally, only institutions rated ``1'' or ``2'' are examined 
on an alternating basis allowing for a reasonable interval between 
examinations. The appropriate Federal banking agency and the State 
banking department periodically meet and coordinate examination 
schedules.\3\

    \3\ In 1992, the FDIC and the Federal Reserve, individually, 
entered into joint resolutions with the Conference of State Bank 
Supervisors designed to encourage the negotiation and formation of 
working agreements with the State banking departments. The objective 
of these agreements is to foster closer supervisory cooperation 
between the State departments and the FDIC or the Federal Reserve. 
The working agreements generally identify those state-chartered 
banks that will be examined on an alternating basis, and other banks 
that will be examined on a joint or concurrent basis, if 
practicable.
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    A hallmark of the successful program to date has been this 
flexibility to tailor cooperation to the particulars of each State and 
to the specifics of individual banks within a State, plus the reality 
of changing circumstances at both the Federal and the State levels. The 
FFIEC guidelines strive to maintain that flexibility.
    Therefore, the FFIEC issues the following guidelines pursuant to 12 
U.S.C. 1820(d)(9):

GUIDELINES FOR RELYNG ON STATE EXAMINATIONS: The Federal banking 
agencies will accept and rely on State reports of examination in all 
cases in which it is determined that State examinations enable the 
Federal banking agencies to effectively carry out their supervisory 
responsibilities. The following criteria may be considered, in whole or 
in part, by a Federal banking agency when determining the acceptability 
of a State report of examination under section 10(d) of the Federal 
Deposit Insurance Act:
     The completeness of the State examination report. The 
State report of examination of a state-chartered, insured depository 
institution or a state-chartered branch or agency of a foreign bank 
should contain sufficient information to permit a reviewer to make an 
independent determination on the overall condition of the institution 
as well as each component factor and composite rating assigned under 
the ``Uniform Financial Institutions Rating System'' used for insured 
depository institutions and commonly referred to as the ``CAMEL'' 
rating system or the ROCA rating system used for branches and agencies 
of foreign banks.
     The adequacy of documentation maintained routinely by 
State examiners [[Page 33208]] to support observations made in 
examination reports.
     The ability over time of a State banking department to 
achieve examination objectives. At a minimum, the Federal banking 
agencies will consider the adequacy of State budgeting, examiner 
staffing and training, and the overall review and follow-up examination 
process of a State banking department. Accreditation of a State banking 
department by the Conference of State Bank Supervisors is among the 
factors that also will be considered.
     The adequacy of any formal or informal arrangement or 
working agreement between a State banking department and a Federal 
banking agency.
    The Federal banking agencies, as part of their routine review of 
State examination reports, will assess the quality and scope of the 
reports to determine whether they continue to meet the above general 
criteria. The Federal banking agencies retain the option in cases in 
which a State examination report appears insufficient or the condition 
of an insured institution, as indicated in the examination report or 
other sources, appears to be seriously deteriorating, to conduct a 
follow-up examination.
    The appropriate Federal banking agency and State banking department 
will continue to share, discuss and work to resolve any problems or 
concerns regarding the acceptability of each other's work or the 
operation of these guidelines and the alternating examination program, 
as well as other issues of mutual interest.

    Dated: June 22, 1995.
Joe M. Cleaver,
Executive Secretary/Federal Financial institutions Examination Council.
[FR Doc. 95-15734 Filed 6-26-95; 8:45 am]
BILLING CODE 6210-01-M