Appeals of Material Supervisory Determinations: Guidelines & Decisions
SARC-95-02 (July 17, 1995)
The Supervision Appeals Review Committee of the Federal Deposit Insurance Corporation (FDIC), on July 12, 1995, considered your appeal and concluded that the Composite 3 rating assigned at the August 22, 1994 limited scope examination was appropriate. The virtually unlimited investment authority exercised by Chairman with no board supervision or oversight, the boards failure to establish and implement a definitive investment policy, and the boards general failure to supervise the investment portfolio create unwarranted exposure to the bank and justify the rating.
As of the examination date, the bank was in substantial noncompliance with the February 10, 1992 FFIEC Policy Statement on Securities Activities. Relevant securities activities were not being conducted in a segregated trading account; documentation demonstrating that prices paid for high risk mortgage derivatives represented fair market value was not being maintained; there was no board approved investment policy; the activities were being conducted from a remote location without maintenance of bank records on premises; and there were virtually no limits on the investment officers authority. Deficiencies in managing the banks investment portfolio had been brought to the boards attention at previous examinations with no effective corrective action taken.
Pursuant to the FDICs guidelines, the scope of the FDICs review was limited to the facts and circumstances that existed at the time of the examination and no consideration was afforded any changes in circumstances occurring after that date or to any subsequent corrective action.
This determination is considered a final supervisory decision of the Federal Deposit Insurance Corporation.
By direction of the Supervision Appeals Review Committee of the Federal Deposit Insurance Corporation.