Introductory BSA/AML Examiner School, Atlanta, CA

Bank of Smithville USA

Page 7

Appendix A Regulatory Definitions for Supervisory Recommendations

Supervisory recommendations are issued to address material weaknesses identified through examination activities. Supervisory recommendations must be well-supported by regulatory guidance or sound banking practices and as such may be made to: • Address deficient practices that deviate from sound governance, internal control, or risk management principles. • Correct noncompliance with law and regulations, enforcement actions, or conditions imposed in writing. • Encourage the institution to more fully adopt supervisory guidance based on the institution’s nature of business, size, and complexity. Matters Requiring Board Attention (MRBA): Supervisory recommendations described above are generally correctable in the normal course of business. Supervisory recommendations requiring immediate attention by the board and executive management are documented by issuing MRBA, which are defined as follows: • Emerging issues in which the board needs to be more proactive in establishing policy and risk management parameters; • Policy weaknesses that, if left unaddressed, could increase the institution’s risk profile, adversely affect the condition of the institution, or detract from management’s effectiveness; • Repeat examination recommendations or regulatory issues that have escalated in importance; or • Significant noncompliance with laws, regulations, or regulatory guidance. Remediation efforts of supervisory recommendations will be tracked closely by examiners and may require interim progress reports from senior management or the board.