An Update from a FDIC Field Examiner
By Denise Wiese
The following are a few of the notes I took during the Compliance Professional Group meeting from last Friday (3/21/08). A FDIC compliance examiner spoke to our group about current compliance issues.
Bank Exams:
- The FDIC examinations will be more risk based in the future. They will focus on the higher risks of each bank. The risks will be different for each bank. The FDIC will be doing less transactional testing during examinations and more reviewing of the banks systems.
- The examiners will have more flexibility in what they consider significant violations. Issues that do not have a major impact on consumers (like the assumption clause within the Truth in Lending disclosure) will likely not be considered a significant violation even if it system wide. This should reduce the number of significant violations. They will be focusing on major items with the greatest risk to the consumers.
- Banks will be expected to make a commitment to correct and follow up on all significant violations. This may require a written response to examiners on how the violation was corrected within a period of time after the examination.
Flood Insurance:
- The FDIC will be looking for replacement cost value (RCV) on flood insurance versus actual/depreciated value. Lenders need to ensure the amount of flood insurance matches the amount of hazard insurance. They will have a phase in period for this change. They will expect banks to re-evaluate the amount of flood insurance and if necessary increase it to RCV when they make, extend and renew loans with property located in a special flood hazard area.
Editor's Note: If this is a shock to you, read section 2 (Calculating Coverage) on page 27 of the FEMA "Mandatory Purchase of Flood Insurance Guidelines" issued in 8/07. Additionally, last Friday the regulators issued an updated (proposed) Frequently Asked Questions that is consistent with this new thinking. We'll be studying this new guidance and will keep you informed.
If you're in the Grand Island, Nebraska area and would like to be a part of the monthly meetings, please email us at consultants@bankerscompliance.com. We'll pass your name and email address on to the Compliance Professional Group so you can be involved (and informed).
Our next meeting is scheduled for April 18th at Platte Valley State Bank in Grand Island at noon. Bring your own lunch. Derick Tarr, a Special Agent for the Department of Treasury will be the speaker. He is a BSA SAR investigator. He will have many helpful hits on when to complete SARs and how to complete them to get the attention they deserve. Hope to see you then!
