The Risk Management Examination and Your Community Bank The FDIC is committed to open communication with community banks, recognizing this is critical to administering an effective supervisory process. A key component of this communication is ensuring bankers understand examination programs and regulatory expectations. This article presents an overview of the examination and supervisory process, and suggests ways to enhance communication between bankers and supervisors.
Stress Testing Credit Risk at Community Banks The recent banking crisis illustrates how quickly market conditions can deteriorate, straining community bank loan portfolios. Stress testing can help financial institutions evaluate lending risks and capital adequacy under stressed, but plausible, scenarios and develop appropriate strategies to mitigate the risk. This article describes the credit-related stress-testing process, discusses its usefulness in managing risk, and provides simple examples of how community banks can conduct stress testing.
Results from the FDIC’s Credit and Consumer Products/Services Survey: Focus on Lending Trends Completed by FDIC examiners at the conclusion of each examination, the Credit and Consumer Products/Services Survey gathers examiner insights on underwriting practices, new and evolving banking products and activities, commercial real estate market conditions, and funding practices. This article shares recent Survey results with a focus on lending activity, including trends in underwriting, factors influencing banks’ ability and willingness to lend, use of loan workouts, and loan growth patterns across the country.
Accounting News: Accounting for Troubled Debt Restructurings Insured financial institutions modify loans for a variety of reasons. A modification is identified as a troubled debt restructuring when a borrower is experiencing financial difficulties, and the bank grants a concession it would not otherwise consider. This article provides a summary of the accounting for troubled debt restructurings, including a discussion of regulatory reporting issues.