New Approach to FDIC Compliance Exams
Effective June 30, the FDIC will use a new process for bank compliance exams. The new exam procedures focus on a bank's compliance management system rather than individual transactions, using a "top-down" approach for compliance exams. The new procedure will not change how the agency conducts fair lending or CRA exams.
Special attention was devoted to small banks in developing the procedures, the FDIC said. The agency does not expect smaller institutions to have a separate compliance officer or department to manage the process, but every bank should have a method that ensures compliance. As a bank grows and expands its product lines, it may be necessary to institute written programs and dedicated compliance staff to ensure compliance. Similarly, the need for a regular compliance audit will depend on the individual bank's size and operations.
If there is a formal compliance audit function at the bank, though, the FDIC expects the bank to detail the audit scope and its findings in a written report. According to the FDIC, "the end result of this process is an examination report that concentrates on the strengths and weaknesses of the institution's approach to compliance, whether the institution has a formal program or a less formal set of practices." By focusing on how the bank manages the compliance process, the FDIC hopes to eventually reduce the amount of time examiners need to carry out a compliance exam at well-managed banks. Under the new process, the analysis by examiners will begin off-site, based on information the bank provides in a new, combined information request.
Additional information will be gathered through discussions with bank management and staff during the exam. While the new process focuses on a bank's compliance system and policies and procedures, transaction testing will still occur based on the examiner's assessment of the bank's compliance risk profile. Responses from bankers that have already experienced the new procedures in a test pilot conducted by the agency gave them high marks, the FDIC said. More details on the new testing procedures can be found at the FDIC Web site at www.fdic.gov in FIL-52-2003.