Supervisory Process

 

The main objective of the supervisory process is to evaluate the overall safety and soundness of the banking organization. This evaluation includes an assessment of the organization’s risk management systems, financial condition, and compliance with applicable banking laws and regulations.

The supervisory process entails both onsite examinations and inspections and offsite surveillance and monitoring. Typically, state member banks must have an onsite examination at least once every twelve months. Banks that have assets of less than $250 million and that meet certain management, capital, and other criteria may be examined once every eighteen months. The Federal Reserve coordinates its examinations with those of the bank’s chartering state and may alternate exam cycles with the bank’s state supervisor.

The Federal Reserve generally conducts an annual inspection of large bank holding companies (companies with consolidated assets of $1 billion or greater) and smaller bank holding companies that have significant nonbank assets. Small, noncomplex bank holding companies are subject to a special supervisory program that permits a more flexible approach that relies on offsite monitoring and the supervisory ratings of the lead subsidiary depository institution. When evaluating the consolidated condition of the holding company, Federal Reserve examiners rely heavily on the results of the examination of the company’s subsidiary banks by the primary federal or state banking authority, to minimize duplication of efforts and reduce burden on the banking organization.

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