Examiner-in-Charge School

Conveying Examination Findings

EXIT MEETING

Communication

• Critical to examination process

• Strength in both written and verbal communication is necessary

• Ability to vary communication styles is important

Purpose of the Exit Meeting

• Provide closure to exam

• Obtain verification of examination facts

• Alert management to items included in the Report of Examination

• Alert management to other items

Exit Meeting Tone and Format • Consistent with management discussions

• Consistent with the materiality of exam findings

• Consistent with the tone used in the Report of Examination

Meeting Agendas

Necessity of formal agendas  Office requirement  Numerous issues  Material recommendations Agenda Formats  Vary by state and federal agency  Concise and void of clutter  Spelling and Grammar

Additional Handouts

• Vary by state

• Know the practices of any participating federal agency

• Regulations, FILs, State Laws

• Ratio Tables

Meeting Disclosures

• No surprises – IMPORTANT!!! • CAMELS • Violations • Recommendations • Risk factors

Items Worthy of Discussion Only • EIC needs to be able to distinguish between discussion only topics and reportable issues • Recent instance of a poor banking practice • Prior poor practices • Corrections during the exam • Inadvertent Violation

Tips for a Successful Exit Meeting

• Encourage a dialogue • Familiarize yourself with ROE • Absolute agreement? • Keep management informed • EIC should update bank management on all items in process of review • Bring another examiner

Tips for a Successful Exit Meeting

• Leave no surprises

• Advise of any potential regulatory actions

• Advise management to respond

Subsequent Events • Advise bank management of any changes to individual CAMELS component ratings and/or composite rating

• Document the exit meeting discussion

WRITING THE ECC PAGE

You need to catch the readers attention!!

Most Critical Section of the Report of Examination

• First report section reviewed

• Sometimes the only section reviewed

Purpose of the ECC Page Comments

• Highlights critical findings

• Ranks the importance of examination findings

Purpose of the ECC Page Comments  ‐ continued

• Pull together the component ratings to form a composite rating.

Tone of ECC Page Comments

• Commensurate with the level of materiality of weaknesses reported.

• Consistent with the tone used in management discussions.

Influence Further Reading

• Highlight critical examination findings. • Avoid inclusion of immaterial findings. • Be as concise as possible. • Choose words carefully. • Use appropriate grammar and spelling.

ECC Page Format

• May vary between agencies and states

• Discuss the composite rating

• Identify the overall risk profile of the organization

• Present individual CAMELS components in order of importance

Main Topics

• Composite rating • Overall risk profile

• Highlight commitments made by management • Specify whether a management response is required

ECC Page Comments Assignment

Board Meetings, Joint Examinations and Enforcement Actions

Board Meetings

• Know your audience / Be Prepared – Many aren’t bankers and probably won’t understand our daily language • High points / Significant Issues – Don’t get bogged down in too much detail unless it is the main issue – Practice – Vet out your thoughts with co-workers – You are your office. Don’t pass the buck. • You most likely will not be alone – Your supervisors might have things to say. Have a plan worked out before hand

Board Meetings - Continued

• Other thoughts or experiences?

Joint Examinations

• More frequent now:

– Banks over a Billion in assets

– Problem banks or bank’s with identified issues

– Just to coordinate resources

Your role as EIC

• Early communication in planning • Which agency is the lead for processing?

• It is and should be a joint process • Coordinate staffing and resources • Should make it as seamless as possible for the institution • Remember both agencies will have bosses that have questions or want to be informed

Your Role - Continued

• Contact and meetings with bank management shouldn’t be conducted alone • Avoid disclosing conclusions until management until things have been vetted

Enforcement Actions

• What is an enforcement action?

• Why do bank regulators use them?

Types of Enforcement Actions

• Informal vs. Formal • Typically joint actions • Contents:

– Identifies parties to the document – References a specific examination – Requires signatures of the directors – Sets time frames for initiating change – Usually requires updated to the regulators

Informal Actions

• Regulatory Letter

• Board Resolution

• Memorandum of Understanding (MOU)

• Section 39 of the FDIC Act (FDIC)

Formal Actions

• Written Agreement

– Issued to state member banks – Signed by Regulators and Board

• Consent Order ( C & D) – Issued to state member and non-member banks – Signed by Regulators and Board – Requires bank to immediately stop inappropriate action or implement affirmative action

Formal Action – continued

• Capital component will likely need to address Prompt Corrective Action (PCA) – If bank doesn’t consent there would be a hearing with a Administrative Law Judge – Capital Directives – Removal of Officers and/or Directors – Civil Money Penalties (CMPs) – Termination of Insurance – There are many specific limitations that occur when a PCA capital category drops