United States Government Publishing Office publisher pbl distributor dst United States Government Accountability Office General Government Division author aut Government Organization text government publication eng GAOREPORTS Legislative Agency Publications gao legislative 2010-08-12 U.S. Government Printing Office 1997-10-08 monographic deposited born digital 21 p. GA 1.13:T-GGD-98-13 https://www.govinfo.gov/app/details/GAOREPORTS-T-GGD-98-13 P0b002ee18037c960 f:gg98013t DGPO 2010-08-12 2011-03-23 GAOREPORTS-T-GGD-98-13 machine generated eng fdlp REPORT GAOREPORTS-T-GGD-98-13 T-GGD-98-13 Internal controls Risk management Regulatory agencies Savings and loan associations Insured commercial banks Bank examination Bank management Banking regulation Testimony GGD GAO discussed bank and thrift supervision and examination.<p/>GAO noted that: (1) bank supervision and examination today show evidence of lessons learned from the bank and thrift crises of the 1980s and early 1990s; (2) these procedures are the primary basis for federal regulatory agencies to assess the risks that banks and thrifts assume and to take actions to maintain a safe and sound banking system and protect deposit insurance funds; (3) one critical lesson of the earlier crises was that excessive regulatory forbearance contributed to the extent of the crises; (4) the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) based regulatory practices on a simple principle: if a depository institution fails to operate in a safe and sound manner, it should be subject to timely and forceful supervisory response, including, if necessary, prompt closure; (5) FDICIA also required that banks reform their corporate governance and accounting practices and that the regulatory agencies improve their supervision of insured banks and thrifts; (6) in a November 1996 report, however, GAO noted that questions remain about the effectiveness of FDICIA's trip-wire provisions which are intended to limit regulatory discretion; (7) as implemented, the trip-wire that enables regulatory action at the early stage of problems in a bank does little to limit regulatory discretion; (8) in several reports in the early 1990s, GAO also noted limitations in the safety and soundness examinations conducted by the regulatory agencies; (9) the limitations included a lack of comprehensive internal control assessments, insufficient review of loan quality and loan loss reserves, weaknesses related to insider lending, and insufficient assessment of bank subsidiaries; (10) regulators have made a number of changes in an effort to improve their examinations; (11) the changes respond, in part, to the dynamic banking environment in which institutions can rapidly reposition risk exposures; (12) to ensure that banks and thrifts have the managerial ability and internal control structure to effectively manage risk, the examination process is evolving to put greater emphasis on risk management and internal controls; and (13) in its recent report on foreign banking organizations operating in the United States, GAO noted that regulators have begun to put greater emphasis on risk management processes and operational controls in examinations of these organizations. https://www.govinfo.gov/content/pkg/GAOREPORTS-T-GGD-98-13/html/GAOREPORTS-T-GGD-98-13.htm https://www.govinfo.gov/content/pkg/GAOREPORTS-T-GGD-98-13/pdf/GAOREPORTS-T-GGD-98-13.pdf GAO/T-GGD-98-13 https://www.govinfo.gov/app/details/GAOREPORTS-T-GGD-98-13 Testimony GAO/T-GGD-98-13; Bank and Thrift Examinations: Adoption of Risk-Focused Examination Strategies; Internal controls Risk management Regulatory agencies Savings and loan associations Insured commercial banks Bank examination Bank management Banking regulation