Banking and Finance Law Daily Banking agencies issue examiner guidance for major disasters
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Monday, December 18, 2017

Banking agencies issue examiner guidance for major disasters

By J. Preston Carter, J.D., LL.M.

The federal financial institution regulatory agencies, in consultation with the Conference of State Bank Supervisors, have jointly issued guidance outlining the supervisory practices to be followed in assessing the financial condition of supervised institutions affected by a disaster that results in the President’s declaring an area a major disaster with individual assistance. Such disaster areas generally experience extensive damage that will continue to affect the business activities of the institutions serving that area for an extended period of time.

The Interagency Supervisory Examiner Guidance for Institutions Affected by a Major Disaster describes factors that examiners should consider when assessing the financial condition of a supervised institution affected by a major disaster. In addition to providing information on assessing the various ratings components, the guidance directs examiners to review management’s effectiveness in addressing the immediate aftermath of the disaster as well as longer-term changes to an institution’s business markets and strategy. In assessing a financial institution’s management of problems related to a major disaster, examiners should consider the institution’s asset size, complexity, and risk profile.

The guidance indicates that examiners will consider how management at affected institutions conduct initial risk assessments and refine such assessments as more complete information becomes available and recovery efforts proceed. The guidance also states that examiners must consider the extent to which weaknesses in an institution’s financial condition are caused by external problems related to the major disaster and its aftermath.

The supervisory agencies will work with institutions affected by a major disaster to determine their needs, reschedule any examinations, consider extensions for filing quarterly Reports of Condition and Income or other reports, and address capital declines due to temporary deposit growth, as needed.

The Financial Deposit Insurance Corporation notified its supervised institutions of the guidance in FIL-62-2017. The Federal Reserve Board issued notice of the guidance in Supervisory Letter SR 17-14. The Office of the Comptroller of the Currency published a news release and OCC Bulletin 2016-61 to inform institutions of the guidance.

Companies: Conference of State Bank Supervisors

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