Final report - July 16, 2003

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Executive Summary

• Introduction



• Improving financial reporting – Horizon 1


• Building best-practice financial risk management – Horizon 2


• Anticipating future needs – Horizon 3

Improving Financial Reporting – Horizon 1

• Recommendation 1.1: Refine the Contingent Loss Reserve methodology



• How the CLR is calculated


• Performance of the CLR


• Specifics of Recommendation 1.1 (Refining the CLR methodology)



• Recommendation 1.2: Replace the 2-year Projection with a confidence interval around the CLR and a 2-year loss estimate



• How the 2-year Projection is calculated


• Performance of the 2-year Projection


• Specifics of Recommendation 1.2 (Replacing the 2-year Projection)



• Recommendation 1.3: Adopt a set of new FRC organizational practices



• The current FRC organization and process


• Performance of the FRC process


• Specifics of Recommendation 1.3 (Adopting a new set of FRC organizational practices)

Building Best-Practice Financial Risk Management – Horizon 2

• Recommendation 2.1 – Accelerate development of the new integrated model for financial risk management



• The credit risk model concept


• Specifics of Recommendation 2.1 (Accelerate development of the integrated model)



• Recommendation 2.2 – Build a more integrated risk management organization



• Observations on the FDIC’s risk management today


• Specific recommendations for strengthening the NRC


• Specific recommendations for strengthening the RAC


• Specific recommendations for strengthening the FRC

Anticipating Future Needs – Horizon 3

• Recommendation 3.1 – Annually assess whether to move to Horizon 3



• The Horizon 3 environment


• The potential benefits of Horizon 3


• The likely costs of Horizon 3