Federal Examinations of Financial Institutions

Issues That Need To Be Resolved Gao ID: GGD-81-12 January 6, 1981

Key issues were identified which the Federal Financial Institutions Examination Council (Council) must address if it is to be successful in developing uniform examination principles and standards. Examination philosophies and practices followed by five Federal regulatory agencies in examining financial institutions were described and the effects and differences of the practices noted. The five agencies described included the Office of the Comptroller of the Currency, the Federal Reserve System, the Federal Deposit Insurance Corporation, the Federal Home Loan Bank Board, and the National Credit Union Administration.

GAO surveyed the practices followed by the agencies in examining the commercial activities of financial institutions and found that: (1) there are differing practices among and even within agencies regarding acceptance of examinations made by State regulatory agencies in lieu of their own; (2) the agencies have different criteria for scheduling examinations which generally do not adequately weigh the risks of institutional failure or problems against the cost and burden of examinations, with the result that some institutions may be examined more frequently or less frequently than necessary; (3) the use of timesaving techniques varies among the agencies; (4) the agencies have different policies regarding reliance on institutions' internal review groups, with the result that some work that is competently performed by these groups is duplicated; (5) the amount of data included in the examination reports varied among the agencies, and some data included in the reports did not appear to be useful to either the regulator or the financial institution; (6) the agencies place varying emphasis on examining management activities in the institutions even though there appears to be little difference in examination objectives among the five Federal agencies; and (7) the agencies have different policies regarding specific guidelines for conducting and documenting examinations.


Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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