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FDIC Banking Review

Figure 1 is a flowchart of how supervisors might respond to a given market signal for a given supervised institution. The beginning node of the flowchart represents the market signal. If the market signal moves in a positive direction, the figure shows a terminal node in the process as supervisors leave their supervisory strategy for the institution unchanged. If the market signal moves in a negative direction, the figure shows the next node in the process as supervisors subjecting the institution to further evaluation. The figure shows the various factors that will be incorporated into this evaluation: namely, economic indicators, other market information, financial performance information, and examination information. The figure then shows the next node in process, which is a determination of an appropriate supervisory response in light of the evaluation performed in the previous node. If the degree of supervisory concern indicated by this evaluation is low, the figure shows a terminal node in the process that indicates no change in the existing supervisory strategy. If the degree of supervisory concern indicated by the evaluation is high, the figure shows a terminal node in the process that indicates either an accelerated examination schedule or some other adjustment to the scope of on-site examination activities. If the degree of supervisory concern indicated by the evaluation is between low and high, the figure shows a terminal node in the process that indicates either an accelerated off-site analysis schedule or the scheduling of an on-site visitation to the institution.



Last Updated 05/15/2005 Questions, Suggestions & Requests