Skip to Main Content
PCBB Banc Investment Daily September 25, 2017
Banc Investment Daily
September 25, 2017

"Pen Precise" FDIC Guidance

A new type of "pen" produced by researchers at the University of Texas at Austin has been shown to detect cancer in 10 seconds with 96% accuracy. This amazing pen does so in lung, thyroid, breast and ovary cancer cells. It provides critical information to surgeons in real time to more accurately remove all cancer cells. Researchers say the next step in this evolution is to decrease the allowable sample size to make surgery more precise. Maybe regulators have been reading this too, because the FDIC has moved to add more precision to its instruction book.
It updated its FDIC Risk Management Manual of Examination Policies (Examination Manual) on July 26. The update primarily was done to incorporate the FDIC Board of Directors' guidance for examiners on the subject of supervisory recommendations. These include matters that necessitate board attention, as well as deviations from the principles of safety and soundness that undergird policy statements.
The update also added instructions for new report of examination (ROE) schedules and any necessary updates to existing schedules. Applicable to all financial institutions, the revised instructions implement the most recent FDIC Board of Directors' statement on developing and communicating supervisory recommendations.
Under the revised rules, supervisory recommendations must address meaningful concerns. Recommendations must be communicated clearly and in writing, via either an ROE or on official FDIC letterhead. Any recommendation must also clearly explain both the problem and the suggested correction. Given this new guidance, there should be less room for ambiguity or misunderstanding, so most bankers we talked to seem to welcome the updates and changes.
Supervisory examinations in ROE must also appear on the examination conclusion and comments (ECC), risk management assessment, or schedules for matters that require board attention, as appropriate. This extra level of detail may help banks to more clearly understand how best to remedy things.
When supervisory recommendations are related to departures from safety and soundness principles that lie beneath statements of policy, or guidelines that aren't already included as appendices to FDIC rules and regulations, those recommendations must also be summarized on the examination conclusion and comments (ECC) schedule. They must be discussed in more detail on the schedule for matters requiring board attention, as well as other board schedules, as appropriate.
The update includes revised instructions for preparing the ECC and concentrations schedules, as well as the officer's questionnaire and instructions for the information technology and operations risk assessment schedule that the FDIC added to the ROE last fall. Community banks that do not have the extensive resources of larger banks should be helped by these additional instructions and risk assessment schedule.
As you break out your own pen to test this against your bank, the new Bank of Anytown model released by the FDIC that includes the revised ROE instructions can be accessed on the regulator's website.