Skip to main content
U.S. flag
An official website of the United States government
Dot gov
The .gov means it’s official. 
Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you’re on a federal government site.
Https
The site is secure. 
The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

Correspondent Concentration Risks Interagency Guidance

Risk Management Practices
April 30, 2010
Summary: The federal financial regulatory agencies (agencies) are issuing the attached guidance on Correspondent Concentration Risks (CCR Guidance) to outline the agencies' expectations for identifying, monitoring and managing correspondent concentration risks between financial institutions. The CCR Guidance also addresses the agencies' expectations relative to performing appropriate due diligence on all credit exposures to and funding transactions with other financial institutions.

Highlights:
  • A financial institution's relationship with a correspondent may result in credit (asset) and funding (liability) concentrations. On the asset side, a credit concentration represents a significant volume of credit exposure that a financial institution has advanced or committed to a correspondent. On the liability side, a funding concentration exists when an institution depends on one or a few correspondents for a disproportionate share of its total funding.
  • While the agencies recognize some concentrations meet certain business needs or purposes, correspondent concentrations represent a lack of diversification, which adds a dimension of risk that management should consider when formulating strategic plans and internal risk limits.
  • Institutions should implement procedures for identifying correspondent concentrations, which encompass their aggregate credit and funding concentrations to each correspondent on both a stand-alone basis and on an organization-wide basis.
  • Institutions should specify prudent internal parameters relative to what information, ratios or trends will be monitored for each correspondent on an ongoing basis.
  • Institutions should develop plans for managing concentration risks when internal limits, ranges or tolerances are met or exceeded, either individually or collectively.
  • Institutions that maintain or contemplate entering into any credit or funding transactions with another financial institution should ensure the terms for these transactions are on an arm's-length basis; conform to sound investment, lending and funding practices; and avoid potential conflicts of interest.
  • This guidance supplements existing guidance.

Distribution:
FDIC-Supervised Banks (Commercial and Savings)

Suggested Routing:
Chief Executive Officer
Chief Lending Officer
Chief Financial Officer

Note:
FDIC financial institution letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/financial-institution-letters/2010/index.html .

To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html .

Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-275-3342 or 703-562-2200).

Additional Related Topics:

  • Interagency Policy Statement on Funding and Liquidity Risk Management
Attachment(s)
Advisory on Interest Rate Risk Management, FIL-2-2010

Last Updated: April 30, 2010