Notice2021-17230
Request for Information on the Federal Deposit Insurance Corporation's Supervisory Approach to Examinations During the Pandemic
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 12, 2021
Issuing agencies
Federal Deposit Insurance Corporation
Abstract
The FDIC is seeking information and comments from financial institutions for which the FDIC is the primary Federal regulator regarding the FDIC's supervisory approach to examinations during the pandemic, including on-site and off-site activities, use of technology, and communication methods.
Full Text
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<title>Federal Register, Volume 86 Issue 153 (Thursday, August 12, 2021)</title>
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[Federal Register Volume 86, Number 153 (Thursday, August 12, 2021)]
[Notices]
[Pages 44364-44366]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-17230]
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FEDERAL DEPOSIT INSURANCE CORPORATION
RIN 3064-ZA27
Request for Information on the Federal Deposit Insurance
Corporation's Supervisory Approach to Examinations During the Pandemic
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Notice and request for information (RFI).
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SUMMARY: The FDIC is seeking information and comments from financial
institutions for which the FDIC is the primary Federal regulator
regarding the FDIC's supervisory approach to examinations during the
pandemic, including on-site and off-site activities, use of technology,
and communication methods.
DATES: Comments must be received by October 12, 2021.
ADDRESSES: You may submit comments, identified by RIN 3064-ZA27, by any
of the following methods:
<bullet> Agency website: <a href="https://www.fdic.gov/resources/regulations/federal-register-publications/">https://www.fdic.gov/resources/regulations/federal-register-publications/</a>. Follow the instructions for
submitting comments on the Agency website.
<bullet> Email: <a href="/cdn-cgi/l/email-protection#7c1f1311111912080f3c1a18151f521b130a"><span class="__cf_email__" data-cfemail="c9aaa6a4a4aca7bdba89afada0aae7aea6bf">[email protected]</span></a>. Include RIN 3064-ZA27 in the
subject line of the message.
<bullet> Mail: James P. Sheesley, Assistant Executive Secretary,
Attention: Comments RIN 3064-ZA27, Federal Deposit Insurance
Corporation, 550 17th Street NW, Washington, DC 20429.
<bullet> Hand Delivery/Courier: Comments may be hand-delivered to
the guard station at the rear of the 550 17th Street NW building
(located on F Street) on business days between 7:00 a.m. and 5:00 p.m.,
EST.
<bullet> Public Inspection: All comments received will be posted
without change to <a href="https://www.fdic.gov/resources/regulations/federal-register-publications/">https://www.fdic.gov/resources/regulations/federal-register-publications/</a>, including any personal information provided,
for public inspection. Paper copies of public comments may be ordered
from the FDIC Public Information Center, 3501 North Fairfax Drive, Room
E-1002, Arlington, VA 22226, or by telephone at 877-275-3342 or 703-
562-2200.
FOR FURTHER INFORMATION CONTACT: Rae-Ann Miller, Senior Deputy
Director, Division of Risk Management Supervision, <a href="/cdn-cgi/l/email-protection#ef9d828683838a9daf898b868cc1888099"><span class="__cf_email__" data-cfemail="e3918e8a8f8f8691a385878a80cd848c95">[email protected]</span></a>,
202-898-3898; Michelle L. Cahill, Acting Senior Deputy Director,
Division of Depositor and Consumer Protection; Bill Piervincenzi,
Supervisory Counsel, Supervision, Legislation and Enforcement Branch,
Legal Division, Federal Deposit Insurance Corporation, 550 17th Street
NW, Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
Background Information
The FDIC has been performing on-site examinations of FDIC-
supervised institutions since 1934, during which examiners review
institutions' records and meet with institution management and Boards
of Directors to discuss findings. Safety and soundness examinations are
conducted in accordance with Section 10(d) of the Federal Deposit
Insurance Act (FDI Act). Section 10(d) requires the appropriate federal
banking agency for an insured depository institution to conduct a full-
scope, on-site examination at least once every 12 months, but permits a
longer cycle--at least once every 18 months--for insured depository
institutions that meet certain criteria.\1\
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\1\ See Section 10(b) and 10(d) of the Federal Deposit Insurance
Act. (12 U.S.C. 1820). See also 83 FR 67033 (December 28, 2018).
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The FDIC also performs consumer compliance and Community
Reinvestment Act (CRA) examinations to promote adherence to federal
consumer protection and fair lending laws and regulations and the CRA.
FDIC policy requires full-scope consumer compliance examinations to be
conducted every 12 to 36 months depending on certain criteria such as
an insured depository institution's total assets and prior consumer
compliance and CRA examination ratings. The Gramm-Leach-Bliley Act
established intervals between CRA examinations for insured depository
institutions with assets at certain levels and based on specific
criteria.
For a number of years prior to the Coronavirus Disease 2019 (COVID-
19) pandemic, the FDIC has been leveraging advances in technology to
allow examiners to conduct certain examination functions off-site that
were previously performed on-site. The FDIC believes this leveraging of
technology has improved the efficiencies in the examination process and
helped reduce burden on the institution, enabling examiners to be more
targeted and risk focused in the work performed on-site.
On March 13, 2020, by Proclamation 9994, the President of the
United States
[[Page 44365]]
declared a National Emergency concerning the COVID-19 pandemic. The
next day, the FDIC Chairman issued a mandatory telework order for all
employees, consistent with the FDIC's Continuity of Operations Plan and
its continued balancing of risks and mitigations under the FDIC
Pandemic Influenza Plan. This telework order provided, among other
things, that unless otherwise directed, all examination activity of
FDIC-supervised institutions to be conducted off-site.
By leveraging prior efforts and existing technology systems,
examiners have continued the FDIC examination program despite pandemic
conditions.
In light of the experience of the last year, and as we look ahead,
the FDIC wants to leverage what worked well in the off-site examination
context to see what lessons we can learn about streamlining and
improving the efficiency and efficacy of our examinations as we plan
for future examinations.
Off-Site/On-Site Procedures
Prior to the pandemic, the FDIC established the following
instructions for examiners regarding expectations for off-site and on-
site examination activities. The FDIC is the in the process of
reviewing those instructions and identifying opportunities to enhance
them by incorporating lessons learned from the pandemic.
Safety and Soundness
Each safety and soundness examination has an on-site component,
consistent with the requirements of Section 10(d) of the Federal
Deposit Insurance Act. Per the FDIC's Risk Management Supervision (RMS)
Manual of Examination Policies, Section 21.1 Examination Planning,\2\
during the examination planning stage, the FDIC Examiner-in-Charge
(EIC) is expected to identify examination activities that are
appropriate for off-site review and those that are better suited for
on-site review after considering the institution's business model, risk
profile, and complexity.
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\2\ <a href="https://www.fdic.gov/regulations/safety/manual/section21-1.pdf">https://www.fdic.gov/regulations/safety/manual/section21-1.pdf</a>.
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The determination of the extent of off-site or on-site for each
examination activity depends, in part, on the type and extent of
electronic information available and whether the activity requires
interaction with institution personnel.
Examiners are encouraged to conduct a number of activities off-
site, such as:
<bullet> Reviewing historical financial and supervisory data and
performing initial analysis of capital, earnings, liquidity, and
sensitivity to market risk; and
<bullet> Reviewing the institution's written policies and
procedures.
Regarding credit review, examiners may conduct the following types
of actions off-site:
<bullet> Reviewing loan policies; and
<bullet> Reviewing performance report ratio data and management
reports.
Examiners are currently expected to conduct certain activities on-
site:
<bullet> Conducting in-depth discussions with management, including
exit meetings; and
<bullet> Observing and assessing institution operations and
internal controls.
Consumer Compliance and CRA
FDIC compliance and CRA examinations primarily involve three
stages: pre-examination planning; review and analysis, both off-site
and on-site; and communicating findings to institution management. Pre-
examination planning is generally completed off-site in advance of the
examination start date.
The extent to which consumer compliance and CRA examinations are
conducted off-site varies. Examiners generally consider conducting
certain examination activities off-site to promote efficient and
effective examinations, and to minimize disruptions to an institution's
normal business activities; other examination activities are more
efficiently and effectively conducted on-site. For example, consumer
compliance staff have found that, generally, it is more efficient to
perform robust transaction testing on-site. In addition, consistent and
open communication benefits from in-person meetings with institution
management.
FDIC Use of Technology
The FDIC regularly evaluates and implements technology and process
changes to improve regulatory effectiveness and efficiency. Some
examples of technology improvements include:
<bullet> File exchange: The FDIC has many systems that permit
financial institutions to provide electronic documents to the FDIC on a
secure basis.
<bullet> Interactive software: The FDIC has been able to leverage
technology to collaborate during examinations with other regulators as
well as bankers.
Request for Comments From Interested Parties
The FDIC is issuing this RFI seeking feedback and comments from
FDIC-supervised financial institutions regarding the FDIC's supervisory
approach to examinations during the pandemic, including the impact of
off-site activities on institution operations, the effectiveness of
technology used to carry out off-site activities, and the effectiveness
of communication methods used to support off-site activities.
Specifically, the FDIC is seeking comment on what worked well in the
off-site examination context to inform plans for future examinations,
consistent with applicable law and the purpose of examinations.
The FDIC encourages comments from financial institutions for which
the FDIC is the primary regulator. The FDIC also welcomes comments from
other interested members of the public, including, but not limited to,
other financial institutions or companies, individual depositors and
consumers, consumer groups, trade associations, and others.
Suggested Topics for Commenters
On-Site and Off-Site Activities
1. In your experience, what FDIC examination activities have been
best adapted to completion on an off-site basis? Please explain,
including why these activities are performed best or are most effective
using an off-site approach.
2. In your experience, what FDIC examination activities have not
been as well suited to completion on an off-site basis? Please explain,
including why these activities are best suited for completion on or are
most effective using an on-site approach.
3. What criteria are useful in determining FDIC examination
activities best suited for completion on either an off-site or on-site
basis? Please explain.
Use of Technology
4. In your experience, what FDIC technologies used in conjunction
with off-site examination activities have worked well? Please explain.
5. In your experience, what FDIC technologies used in conjunction
with off-site examination activities could be improved? Please explain.
6. What new or emerging technologies would support additional off-
site examination activities? Please explain, including any potential
impediments to adoption or deployment.
Communication Methods
7. What communication methods used during FDIC off-site
examinations worked well? Please explain.
8. What communication methods used during FDIC off-site
examinations could be improved? Please explain.
[[Page 44366]]
9. Should the FDIC continue to use secure email as an alternative
to hardcopy mail, including when providing outgoing supervisory
correspondence? Please explain.
Federal Deposit Insurance Corporation.
Dated at Washington, DC, on August 5, 2021.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2021-17230 Filed 8-11-21; 8:45 am]
BILLING CODE 6714-01-P
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