Interagency Guidelines Establishing
Standards for Safety and Soundness to Include Final
Asset Quality and Earning Standards
The four federal regulators of banks and savings associations
have jointly amended the Interagency Guidelines Establishing
Standards for Safety and Soundness to include standards
for asset quality and earnings. The guidelines are issued
pursuant to Section 39 of the Federal Deposit Insurance
Act (FDI Act).
The guidelines from the FDIC, the Federal Reserve Board,
the Office of the Comptroller of the Currency and the Office
of Thrift Supervision represent the agencies' longstanding
expectations regarding an institution's management of asset
quality and earnings. The standards are designed to prompt
a depository institution to take steps that will help identify
emerging problems in the institution. Moreover, by adopting
the standards as guidelines instead of as regulations, these
qualitative standards provide an institution with sufficient
flexibility to adopt practices that are consistent with
safe and sound banking and that are appropriate to the institution's
size and the nature and scope of its 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. However,
since the standards do not represent a change in the agencies'
policies, well-managed institutions--which are the majority
of institutions--generally should find it unnecessary to
modify their operations to satisfy the guidelines.
The new guidelines for asset quality and earnings are
attached. The guidelines take effect on October 1, 1996.
If you have any questions, please contact your Division
of Supervision regional office on the attached list.