Regulators urge their examiners to ‘exercise flexibility’ in response to coronavirus crisis

Guidance intended to promote consistency and flexibility in the supervision and examination of financial institutions affected by the coronavirus crisis was issued Tuesday by federal banking and credit union regulators.

The agencies noted, in releasing the guidance, that no action on the part of banks or credit unions is required.

According to the agencies (the Federal Deposit Insurance Corp., [FDIC], Federal Reserve, National Credit Union Administration [NCUA] and the Office of the Comptroller of the Currency [OCC]), “stresses caused by the spread of COVID-19 have led to significant economic strain and adversely affected global financial markets.” The guidance, the agencies said, instructs examiners to consider the nature of the issues confronting the institutions they supervise due to the pandemic. The regulators urged examiners to “exercise appropriate flexibility in their supervisory response.”

Joining the federal regulators in issuing the guidance were state regulators, in the form of the Conference of State Bank Supervisors (CSBS).

In a financial institution letter (FIL-64-2020) issued in conjunction with the guidance, the FDIC said examiners will continue to assess institutions in accordance with existing policies and procedures and may provide supervisory feedback, or downgrade an institution’s composite or component ratings, when conditions have deteriorated.

Other highlights according to the FIL included:

  • Examiners will consider whether institution management has managed risk appropriately, including taking appropriate actions in response to stresses caused by COVID-19 impacts.
  • Examiners will give consideration to the challenges involved in assessing the risk that the response presents to the institution in real time given the level of information available and the stage of local economic recovery.
  • In assessing an institution under the principles in the interagency examiner guidance, examiners will consider the institution’s asset size, complexity, and risk profile, as well as the industry and business focus of its customers.

Joint Release/Federal and State Regulatory Agencies Issue Examiner Guidance for Assessing Safety and Soundness Considering the Effect of the COVID-19 Pandemic on Financial Institutions

FDIC FIL-64-2020: Interagency Examiner Guidance for Assessing Safety and Soundness Considering the Effect of the COVID-19 Pandemic on Financial Institutions

 

 

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