Pub. 4 2016 Issue 2

Issue 2. 2016 17 Safety and Soundess Examination Compliance Examination Exam Area % of Insitutions Receiving Criticism Exam Area % of Insitutions Receiving Criticism Interest rate risk management approaches 24% Real Estate Settlement Procedures Act 24% Credit administration practices 23% Regulation Z (Truth in Lending Act) 23% Adversely classified asset levels 21% Re HMDA/Regulation C 23% Real estate appraisal and evaluation processes 20% Flood Disaster Protection Act 18% Business Continually Planning 17% Regulation B (Equal Credit Opportunity Act) 16% Bank participation is paramount to the success of the RFI. We encourage all institutions to visit http://www.allbankers.org to share anonymous information about their last examination. This article was written by Scott Polakoff, Executive Vice President, and Stephen Brown Klinger Director, of FinPro Inc. For more information on FinPro’s strategic planning, capital planning, regulatory advisory, new director orientation, and board retreat facilitation services, contact them at 908-234-9398 or by emailing finpro@finpro.us . The Coalition’s leadership, working closely with FinPro’s advanced analytic group and staff of former senior regulators, has streamlined the survey process and improved the relevance of questions. their examination. The most common divergences in expecta- tions historically surrounded the application of Appraisal and Evaluation Guidelines (FIL-82-2010), but most recently dis- agreements regarding the Guidance for Managing Third-Party Risk (FIL-44-2008) have emerged as a trend. Not surprisingly, 51 percent of the bankers who disagreed with the above state- ment reported their examiner-in-charge had been supervising bank examinations for less than five years. Augmenting the experience of examiners is only one part of the solution though. Some FILs, such as 44-2008, contain language stating the guid- ance “should not be considered as a set of required procedures.” However, others contain language that is more ambiguous. For example, 82-2010 states that “the Guidelines enhance the re- quirements for collateral valuation methods….” The mention of requirements is understandably confusing. Changes in staffing must be combined with a more clear communication of expecta- tions from the agencies to banks. Continue: The most bipolar results from the current RFI survey data surround exam preparation. Overall, institutions had positive feedback pertaining to the examination staff being “knowledgeable about important issues and regulatory requirements” and “knowledgeable about your institution.” This indicates an adequate level of preparation by staff prior to the examination. However, there have been a significant number of comments pertaining to banks being given short-notice to prepare themselves for the examination. Examiners should con- tinue to be vigilant in preparing for the examination and be just as proactive in communicating information about the schedule and timing of the examination as early as possible. In combination with providing examiners feedback, the improved survey and greater bank participation allows for better reports to aid bankers in upcoming examinations. Past comments from the survey included the desires to know such items as: • “that BSA and IT were growing hot topics,” • “there is a new focus on detailed policies,” • “the examiner was going to spend 75 percent of their time on interest rate risk,” • “application of UDAAP specifically to their bank,” • or generally “when the goal posts moved.” We hear you, and the reports from the new survey will greatly improve your bank’s ability to stay aware of hot topics in prepa- ration for examinations. While it is always incumbent on senior managers and directors to stay educated on current industry issues and regulations, here are the areas of greatest criticism in examinations conducted over the last two years. n