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Supervisory Insights

Summer 2007 Vol. 4, Issue 1 - Table of Contents

Last Updated: June 28, 2023

Supervisory Insights - Summer 2007 - PDF

Letter from the Director


Third-Party Arrangements: Elevating Risk Awareness

Many community banks provide products and services through arrangements with third parties. Appropriately managed third-party relationships can enhance competitiveness, provide diversification, and ultimately strengthen the safety and soundness of insured institutions. Third-party arrangements can also help institutions attain key strategic objectives. But third-party arrangements also present risks. In this article, we show how failure to manage these risks can expose a financial institution to everything from financial loss to regulatory action and loss of customer relationships.

Staying Alert to Mortgage Fraud

The Federal Bureau of Investigation reports having more than one thousand pending mortgage fraud investigations, with over half involving financial institutions as victims. However, they estimate the actual number of mortgage fraud cases to be closer to 36,000. This article discusses the housing boom of the early 2000s and how the resultant demand led to increases in mortgage fraud activity. The authors share examples from FDIC examiners and offer fundamental mitigation steps as well as links to other resources.

Wind Hazard Insurance: No Longer Just a Technical Exception

Hazard insurance has played a big role in mitigating the risk of loss of collateral value from catastrophic damage. Examiners have traditionally cited inadequacies in collateral insurance coverage as technical exceptions when reviewing loan files. But in the current environment, potentially widespread issues regarding insurance availability and affordability could result in consequences reaching beyond anything considered technical. This article explores the impact of the rising costs (and in some cases, the lack of availability) of wind hazard insurance, with a focus on Florida.

Regular Features

From the Examiner’s Desk...The e-Exam

An e-Exam, or electronic examination, is a financial institution examination in which electronic data are exchanged through a secure delivery method, thus improving examination efficiencies for both banks and examiners. Banks generally maintain a wide variety of information—written policies and procedures, customer disclosures, board minutes, and even loan files—in electronic format. This article discusses the FDIC’s e-Exam policy and the impact that being able to exchange documents electronically is having on examinations.

Accounting News: Recent Developments Affecting the Accounting for Split-Dollar Life Insurance Arrangements

Over the past year, the Financial Accounting Standards Board’s Emerging Issues Task Force has addressed the accounting for endorsement and collateral assignment split-dollar life insurance arrangements under which employers and employees share the rights to the cash surrender value and death benefits of insurance policies. The consensuses reached by the Task Force will change how many banks have accounted for their existing split-dollar arrangements and will require them to recognize a liability at the beginning of 2008. This article discusses the principal elements of this recent accounting guidance and its effect on banks’ capital and future earnings.

Regulatory and Supervisory Roundup

This feature provides an overview of recently released regulations and supervisory guidance.

Supervisory Insights

Supervisory Insights is published by the Division of Supervision and Consumer Protection of the Federal Deposit Insurance Corporation to promote sound principles and best practices for bank supervision.

Sheila C. Bair
Chairman, FDIC

Sandra L. Thompson
Director, Division of Supervision and Consumer Protection

Journal Executive Board

George French, Deputy Director and Executive Editor
Christopher J. Spoth, Senior Deputy Director
John M. Lane, Deputy Director
Robert W. Mooney, Acting Deputy Director
William A. Stark, Deputy Director
John F. Carter, Regional Director
Doreen Eberley, Regional Director
Stan R. Ivie, Regional Director
James D. LaPierre, Regional Director
Sylvia H. Plunkett, Regional Director
Mark S. Schmidt, Regional Director

Journal Staff

Bobbie Jean Norris
Managing Editor

Christy C. Jacobs
Financial Writer

Eloy A. Villafranca
Financial Writer

Supervisory Insights is available online by visiting the FDIC’s website at To provide comments or suggestions for future articles, request permission to reprint individual articles, or to request print copies, send an e-mail to

The views expressed in Supervisory Insights are those of the authors and do not necessarily reflect official positions of the Federal Deposit Insurance Corporation. In particular, articles should not be construed as definitive regulatory or supervisory guidance. Some of the information used in the preparation of this publication was obtained from publicly available sources that are considered reliable. However, the use of this information does not constitute an endorsement of its accuracy by the Federal Deposit Insurance Corporation.