- Correspondent concentrations represent a lack of risk diversification,
adding a dimension of risk that management should consider when formulating
strategic plans and internal risk limits.
- The agencies generally have considered credit exposures greater than 25
percent of Tier 1 capital as concentrations, whereas funding exposures as
low as 5 percent of an institution's total liabilities could be considered a
- The proposed guidance establishes that management should:
- implement procedures for identifying the totality of an institution's
aggregate credit and funding exposures to other institutions and their
- specify what information, ratios or trends will be reviewed for each
- set prudent correspondent concentration limits, establish ranges or
tolerances for each factor being monitored, and develop plans for
managing risks when these limits, ranges or tolerances are met or
exceeded, either individually or collectively; and
- conduct an independent analysis before entering into any credit or
funding transactions with another financial institution.
- This guidance would supplement existing guidance.
FDIC-Supervised Banks (Commercial and
Chief Executive Officer
Chief Lending Officer
Chief Financial Officer
Chief Compliance Officer
Concentration Risks, Proposed Guidance - PDF (PDF
Senior Examination Specialist Beverlea S. Gardner at BGardner@FDIC.gov or (202) 898-3640
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(1-877-275-3342 or 703-562-2200).