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Supervisory Insights

Winter 2007 Vol. 4, Issue 2 - Table of Contents

Last Updated: July 10, 2023

Supervisory Insights - Winter 2007 - PDF

Letter from the Director


Liquidity Analysis: Decades of Change

Over the past 15 years, there has been a significant shift from asset-based liquidity management to more complex funding strategies that emphasize liability sources and off-balance-sheet funding. Consistent with this migration, measurements have shifted from more simplistic ratios toward more forward-looking measures. This article highlights some of these changes and discusses the importance of scenario analysis and contingency funding plans.

Managing Commercial Real Estate Concentrations

Rising growth in commercial real estate (CRE) lending and subsequent concentrations in many banks led to the joint agency supervisory guidance on managing CRE risk in 2006. This article discusses the scope of the guidance and elaborates on many of the topics in the guidance. Topics covered include market monitoring and analysis, credit underwriting and administration, portfolio management, credit risk rating and review, and stress testing. The authors also draw from their firsthand observations to share methods banks use to monitor and control CRE concentration risk.

Connecting the Dots…The Importance of Timely and Effective Suspicious Activity Reports

There is often a financial connection to crime, and Suspicious Activity Reports (SARs) play a critical role in exposing the financial links to illicit activities and fighting financial crimes. For the suspicious activity reporting system to be effective, SARs must be complete, accurate, and timely. This article highlights the importance of SARs, provides examples of how various agencies use SARs, discusses common deficiencies in SAR filings, and provides tips on what makes an effective SAR.

HMDA Data: Identifying and Analyzing Outliers

Beginning with the 2004 Home Mortgage Disclosure Act (HMDA) data, lenders have been required to report data on certain higher-priced home mortgage loans. Effective analysis of these pricing data relies on clear communication and effective information sharing between banks and the FDIC. This article describes the FDIC’s process of HMDA loan review and analysis and offers suggestions to bankers and examiners gleaned from analyses of two years of HMDA pricing data.

Authentication in Internet Banking: A Lesson in Risk Management

Federal banking regulators issued guidance in 2005 instructing financial institutions to actively protect customers’ online banking access credentials. This article discusses how the guidance addresses the risks of Internet banking and how banks and technology service providers have responded to the guidance.

Regular Features

From the Examiner’s Desk…Community Bank Leverage Strategies: Short-term Rewards and Longer-term Risks

Community banks are constantly seeking ways to improve their earnings performance. One strategy community banks use involves leverage transactions that use wholesale funding to purchase investment securities. Using experience from banks in the FDIC’s Dallas Region, the authors discuss the risks of these transactions and the regulatory risk management expectations both prior to entering into a leverage transaction and on an ongoing basis when conducting this business activity.

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
Donna J. Gambrell, Deputy Director
William A. Stark, Deputy Director
M. Anthony Lowe, Acting Regional Director
Doreen R. 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.