In carrying out its supervisory
responsibilities over the years, the Federal Reserve System has developed
effective informal practices for discussing and resolving differences
between bankers and examiners that arise in the context of on-site
safety-and-soundness examinations. The existing process affords opportunities
for bank management and directors to communicate their views and concerns
to examiners and Reserve Bank officials during the course of the examination
and follow-up process. These practices are intended to ensure that
examination findings are based upon a balanced, fair, and prudent
consideration of all relevant information. The objective of the process
is to produce an accurate and clear report of the bank’s condition
and operations.
Currently, a state member bank that believes an error
has been made in its examination may request that the matter be reviewed
by supervisory personnel. If in the judgment of the Reserve Bank the
matter has merit, consideration is given to the issue and an attempt
is made to resolve the question in a fair and satisfactory manner.
For example, bank management may discuss examination findings and
loan classifications with the examiner-in-charge or other supervisory
officials during the on-site examination. At the completion of an
examination, examiners and/or supervisory officials meet with bank
management and, as appropriate, the board of directors to discuss
the examiner’s findings and conclusions. These practices, taken together,
are designed to address potential differences that arise during the
examination and have proved effective in maintaining appropriate lines
of communication between bank management and directors, examiners,
and supervisory personnel.
This informal process has worked well over the years and
has provided a means for ensuring that significant concerns or questions
bankers have regarding examination findings are given reasonable consideration
by the Federal Reserve. Recent developments regarding the potential
impact of examination policies and procedures on credit availability
underscore the ongoing importance of this process. Consequently, Reserve
Banks are encouraged to continue to provide bank management and directors
with suitable opportunities to discuss and resolve questions or concerns
relating to examination findings.
Consistent with long-standing practice, this process should
remain an informal one that is intended to bring legitimate bank concerns
or questions arising in connection with safety- and-soundness examinations
to the attention of supervisory personnel or other Reserve Bank officials.
In some cases, questions or concerns may be referred by the bank directly
to senior Reserve Bank officials or, on occasion, to the Reserve Bank
president. These officials have the discretion to decide whether the
circumstances of the particular situation, including the views of
the bank involved, suggest that the matter should be resolved by individuals
who did not participate directly in the particular decision or examination
finding under review. This could include the Reserve Bank president or a designee
directly accountable to the president for this purpose. In these situations,
while the examiner might be consulted, the examiner would generally
not be involved in making the final determination regarding the resolution
of the matter. The Reserve Bank president or designee also has the
discretion to decide whether an effort should be made to resolve the
issue in a manner that is confidential from the examiner involved
and how this effort, if appropriate, should be undertaken.
Matters or questions considered by the president generally
should be limited to those that are significant and that (1) have
an effect on the safety and soundness of the institution; (2) have
an impact on the operation, management, or financial standing of the
institution; or (3) have a material impact on the regulator’s supervision
of the institution. Requests for review by the Reserve Bank president
should be authorized by the state member bank’s board of directors
and should be made within a reasonable time from the occurrence of
the event or decision triggering the request.
The availability of the informal process described in
this letter and the manner in which it is carried out is at the sole
discretion of the Reserve Bank. The process cannot be used to appeal
or impede any enforcement actions since such actions have their own
formal appeals procedures. In addition, nothing in this process prevents
the Reserve Bank from taking any supervisory or enforcement action—formal
or informal—that the Reserve Bank deems appropriate to properly discharge
its supervisory or examination responsibilities. S-2546; Dec. 13,
1991.
