Regulators adopt ‘report of exam’ principles to promote ‘consistency, clarity, easy of reference’

Principles for more clearly presenting “report of examination” (ROE) information were issued Wednesday by the federal financial institution regulators, which include (the regulators said) an effort to promote “consistency, clarity and ease of reference.”

In a release, the Federal Financial Institutions Examination Council (FFIEC) said its “Policy Statement on the Report of Examination” was developed as part of its examination modernization project. The project, it said, is aimed at reducing unnecessary regulatory burden on community financial institutions.

In addition, the group said – in issuing the principles – FFIEC is rescinding its 1993 Interagency Policy Statement. That statement, part of FFIEC’s Uniform Core Report of Examination, is replaced by the new policy statement.

In the statement, the FFIEC said the principles set forth minimum expectations of what should be part of all ROEs:

  • Identifying information:
    • the name of the agency or agencies issuing the ROE;
    • the financial institution’s name, location, and the identifier number assigned by the issuing agency; and
    • the time period covered by the ROE or a financial “as of” date.
  • A statement conveying that the ROE contains confidential supervisory information and should be treated as such.
  • A presentation of conclusions and issues in order of importance.
  • Documentation of the financial institution’s condition and risk profile, which includes the assigned regulatory component and composite ratings, and provides clear narrative and key data to support assigned ratings and other conclusions “with a level of detail consistent with the assigned rating or level of concern.” The FFIEC said the narrative should generally be brief for 1- and 2-rated components and increase in detail for 3-, 4-, and 5-rated components.
  • A discussion of the adequacy of the financial institution’s risk management practices.
  • Documentation of issues of supervisory concern or warranting corrective action prominently, including:
    • noncompliance with laws or regulations,
    • the status of compliance with outstanding enforcement actions; and
    • the status of issues of supervisory concern or warranting corrective action communicated in the prior ROE.
  • A request for signatures of the board of directors to acknowledge their receipt and review of the ROE.

The FFIEC counts as members the leaders of the Federal Deposit Insurance Corp. (FDIC); the Consumer Financial Protection Bureau (CFPB); the Office of the Comptroller of the Currency; and the National Credit Union Administration (NCUA); a member of the Federal Reserve Board; and the chairman of the FFIEC’s State Liaison Committee (SLC), made up of state regulators.

FFIEC Members Adopt Policy Statement on the Report of Examination