Federal Examinations of Financial Institutions: Issues That Need To Be Resolved

Highlights

Key issues were identified which the Federal Financial Institutions Examination Council (Council) must address if it is to be successful in developing uniform examination principles and standards. Examination philosophies and practices followed by five Federal regulatory agencies in examining financial institutions were described and the effects and differences of the practices noted. The five agencies described included the Office of the Comptroller of the Currency, the Federal Reserve System, the Federal Deposit Insurance Corporation, the Federal Home Loan Bank Board, and the National Credit Union Administration.

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Federal Financial Institutions Examination Council	The Federal Financial Institutions Examination Council should develop a system for determining the timing of examinations which is based on a perceived need to examine rather than on the basis of a static timeframe.	Closed – Not Implemented The Council has made little progress in establishing examination uniformity. A GAO report to Congress will discuss the Council's inability to develop Government-wide examination policies. If Congress wants uniform supervision of financial institutions, consolidation of the Federal regulatory structure is needed. No further action by the Council to implement the recommendations is anticipated.
Federal Financial Institutions Examination Council	The Federal Financial Institutions Examination Council should develop examination standards which limit the amount of detailed work performed during a routine examination unless potential problems are detected.	Closed – Not Implemented The Council has made little progress in establishing examination uniformity. A GAO report to Congress will discuss the Council's inability to develop Government-wide examination policies. If Congress wants uniform supervision of financial institutions, consolidation of the Federal regulatory structure is needed. No further action by the Council to implement the recommendations is anticipated.
Federal Financial Institutions Examination Council	The Federal Financial Institutions Examination Council should develop examination principles which require Federal examiners to rely on functions adequately performed by others such as internal and external audit and internal loan review departments.	Closed – Not Implemented The Council has made little progress in establishing examination uniformity. A GAO report to Congress will discuss the Council's inability to develop Government-wide policies. If Congress wants uniform supervision of financial institutions, consolidation of the Federal regulatory structure is needed. No further action by the Council to implement the recommendations is anticipated.
Federal Financial Institutions Examination Council	The Federal Financial Institution Examination Council should develop uniform standards for reporting the results of examinations which limit the amount of detailed data to that which is necessary for effective supervision.	Closed – Not Implemented The Council has made little progress in establishing examination uniformity. A GAO report to Congress will discuss the Council's inability to develop Government-wide examination policies. If Congress wants uniform supervision of financial institutions, consolidation of the Federal regulatory structure is needed. No further action by the Council to implement the recommendation is anticipated.
Federal Financial Institutions Examination Council	The Federal Financial Institutions Examination Council should develop a Federal Government-wide policy under which Federal regulators, using the criteria, developed to assess the quality of examinations performed by State agencies, would assess and monitor the quality of State examinations and accept examinations that are competently performed by State agencies in lieu of their own.	Closed – Not Implemented The Council has made little progress in establishing examination uniformity. A GAO report to Congress will discuss the Council's inability to develop Government-wide examination policies. If Congress wants uniform supervision of financial institutions, consolidation of the Federal regulatory structure is needed. No further action by the Council to implement the recommendations is anticipated.
Federal Financial Institutions Examination Council	The Federal Financial Institutions Examination Council should define the various regulators' supervisory role, in particular as it relates to the routine and systematic examination of management in financial institutions without unsafe and unsound financial conditions.	Closed – Not Implemented The Council has made little progress in establishing examination uniformity. A GAO report to Congress will discuss the Council's inablilty to develop Government-wide examination policies. If Congress wants uniform supervision of financial institutions, consolidation of the Federal regulatory structure is needed. No further action by the Council to implement the recommendations is anticipated.
Federal Financial Institutions Examination Council	The Federal Financial Institution Examination Council should prescribe uniform principles and standards consistent with the above identified supervisory role and commensurate with an acceptable level of risk and cost.	Closed – Not Implemented The Council has made little progress in establishing examination uniformity. A GAO report to Congress will discuss the Council's inability to develop Government-wide examination policies. If Congress wants uniform supervision of financial institutions, consolidation of the Federal regulatory structure is needed. No further action by the Council to implement the recommendations is anticipated.
Federal Financial Institutions Examination Council	The Federal Financial Institution Examination Council should define, with the guidance of the congressional legislative oversight committees, how forcefully the regulators should promote the establishment and maintenance of sound management.	Closed – Not Implemented The Council has made little progress in establishing examination uniformity. A GAO report to Congress will discuss the Council's inability to develop Government-wide examination policies. If Congress wants uniform supervision of financial institutions, consolidation of the Federal regulatory structure is needed. No further action by the Council to implement the recommendations is anticipated.
Federal Financial Institutions Examination Council	The Federal Financial Institutions Examination Council should include in its prescribed principles and standards the requirement that Federal regulators develop examination procedures that clearly identify (1) examination objectives; (2) examination tasks required to achieve the objectives; and (3) documentation required to fully support report comments, conclusions, and recommendations and to provide a basis for supervisory review.	Closed – Not Implemented The Council has made little progress in establishing examination uniformity. A GAO report to Congress will discuss the Council's inability to develop Governent-wide examination policies. If Congress wants uniform supervision of financial institutions, consolidation of the Federal regulatory structure is needed. No further action by the Council to implement the recommendations is anticipated.
Federal Financial Institutions Examination Council	The Federal Financial Institutions Examination Council should develop criteria for Federal regulators to assess the quality of examinations performed by State agencies, and to monitor the State's examination programs to assess changes which may affect the acceptability of the States' programs for Federal needs.	Closed – Not Implemented The Council has made little progress in establishing examination uniformity. A GAO report to Congress will discuss the Council's inability to develop Government-wide examination policies. If Congress wants uniform supervision of financial institutions, consolidation of the Federal regulatory structure is needed. No further action by the Council to implement the recomendations is anticipated.

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Topics

Auditing and Financial Management

Federal agenciesFinancial institutionsInvestigations into federal agenciesRegulatory agenciesInternal controlsCredit unionsBank managementBank examinationDeposit insuranceFederal reserve system