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Financial Institution Letters

Safety and Soundness

July 31, 1995


SUBJECT: Guidelines and Compliance Procedures Issued;
Request for Additional Comments Sought

As required by Section 132 of the FDIC Improvement Act of 1991 (FDICIA), the four federal regulators of banks and savings associations have jointly issued guidelines for safe and sound banking operations. Institutions that fail to satisfy the guidelines may be required to submit safety and soundness compliance plans. Institutions that do not submit or implement an accepted compliance plan will be subject to enforcement orders. The guidelines and the new rules for FDIC-supervised institutions (a new Part 364 and a revised Part 308 of the agency's regulations) are attached. They become effective August 9, 1995.

The guidelines from the FDIC, the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision identify the fundamental standards the agencies traditionally have used to evaluate operational and managerial controls at insured institutions relating to: (1) internal controls, information systems and internal audit systems; (2) loan documentation; (3) credit underwriting; (4) interest rate exposure; (5) asset growth; and (6) compensation, fees and benefits. A determination of whether an institution satisfies these standards generally will be made during the regular on-site examination of the institution.

As the standards do not represent a change in the agencies' policies, well-managed institutions, which are the vast majority of institutions, generally should find it unnecessary to modify their operations to satisfy the guidelines. Moreover, by adopting the standards as guidelines instead of as regulations, the agencies have provided each institution the flexibility to develop appropriate procedures. This is intended to fulfill the safety and soundness mandates of FDICIA without adding burdensome regulation.

In addition, the four agencies are seeking public comment on proposed guidelines relating to asset quality and earnings. This proposal is described starting on Page 35688 of the attached Federal Register notice. Written comments are due by August 24, 1995. When finalized, these standards will be incorporated into the interagency guidelines.

For more information, please contact Robert W. Walsh, Manager of the Planning and Program Development Section in the FDIC's Division of Supervision (202-898-6911).

Nicholas J. Ketcha Jr.
Acting Director

Attachment: PDF Format (106 kb, PDF help or hard copy), HTML Format

Distribution: FDIC-Supervised Banks (Commercial and Savings)

Last Updated 07/16/1999

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