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Federal R eserve Bank OF DALLAS ROBERT D. M C T E E R , J R . P R E S ID E N T AND C H IE F E X E C U T I V E O F F I C E R i JUlV 9, 1993 DALLAS, TEXAS 75222 Notice 93-71 TO: The Chief Executive Officer of each member bank and others concerned in the Eleventh Federal Reserve District SUBJECT Interagency Policy Statements on Additional Credit Initiatives DETAILS The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Office of Thrift Supervision have announced further details on the implementation of their March 10, 1993, program to increase credit availabil ity to businesses and individuals. The policy statements announce the following additional credit initiatives: • Examination coordination and implementation guidelines; • Guidance on reporting in-substance foreclosures; • Guidance on returning certain nonaccrual loans to accrual status; • Fair lending initiatives; • Supervisory definition of "special mention" assets; and • Review and classification of commercial real estate loans. The latest actions of the agencies brought to a close the first phase of the President’s credit availability program. However, all four agencies have emphasized that they will continue their efforts to reduce the paperwork and the regulatory burden that impedes the flow of funds to credit worthy borrowers. ATTACHMENTS The interagency policy statements are attached. For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) - 2 - MORE INFORMATION For more information, please contact Basil Asaro at (214) 922-6066 or Earl Anderson at (214) 922-6152. For additional copies of this Bank’s notice, please contact the Public Affairs Department at (214) 922-5254. Sincerely yours, Office of the Comptroller of the Currency Joint Statement _____ Federal Deposit Insurance Corporation _____________________ Federal Reserve Board __________ Office of Thrift Supervision Interagency Policy Statement on Examination Coordination and Implementation Guidelines June 10, 1993 This statement outlines a program for coordinating examinations of insured depository institutions and inspections o f their holding companies by the federal financial regulatory agencies. This program expands on existing interagency agreements, and responds to the industry’s concern over the increased burden on organizations supervised by multiple regulatory agencies. The objective of the program is to minimize disruption and avoid duplicative examination efforts and information requests, whenever possible. The significant elements of the program include: ■ Coordinating the planning, timing and scope of examinations and inspections of federally insured depository institutions and their holding companies; ■ Conducting joint interagency examinations or inspections, when necessary; ■ Coordinating and conducting joint meetings between bank or company management and the regulators; ■ Coordinating information requests; and ■ Coordinating enforcement actions, when appropriate. bank holding The program emphasizes full cooperation and coordination by the agencies in supervising large banking organizations and organizations that are in a less than satisfactory condition. Additional effort will also be made to reduce the regulatory burden on the remaining population of depository institutions. Guidelines for implementation of the program are attached. IMPLEMENTATION GUIDELINES 1. PURPOSE These guidelines were developed to strengthen coordination and cooperation among the federal banking agencies in examining and supervising banking organizations and to cany out the provisions o f the March 10 Interagency Policy Statement intended to minimize the disruptions and burdens associated with the examination process. The provisions are: ■ Eliminate duplication in examinations by multiple agencies, unless clearly required by law; ■ Increase coordination o f examinations among agencies when duplication is required; and ■ Establish procedures to centralize and streamline examinations in multihank organizations. These guidelines address the coordination o f the examinations by federal agencies of depository institutions and the inspections of their holding companies. To achieve the desired strengthening in the coordination of the federal agencies’ examination/inspection activities, the guidelines focus on the planning, staffing, timing and conduct of examinations and inspections; the conduct of joint management meetings to discuss inspection and examination findings; and other areas o f mutual concern. 2. PRIMARY SUPERVISORY AND COORDINATION RESPONSIBILITY Examinations/inspections of a particular legal entity will be conducted by the federal regulatory agency that has primary supervisory authority for that entity. In carrying out its supervisory responsibilities for a particular entity within a hanking organisation, each regulatory agency will rely on examinations/inspections conducted by the primary regulator o f the affiliate to the extent possible, thereby avoiding unnecessary duplication and disruption to the banking organization. In certain situations, however, it may be necessary for a regulatory agency other than the entity’s primary supervisory authority to participate in the examination or inspection of the entity in order to fulfill its regulatory responsibilities. These guidelines provide procedures for handling such situations. Primary supervisory authority and coordination responsibilities arc organized as follows: OCC national banks; FDIC state nonmember banks; OTS thrift holding companies and savings associations; and FRB parent bank holding companies, nonbank subsidiaries of bank holding companies, the consolidated bank holding company and state member banks. The primary federal regulator is responsible for scheduling, staffing and setting the scope of supervisory activities, including coordinating formal and informal administrative actions, as necessary. In fulfilling these responsibilities, the primary regulatory agency should consult closely with the other appropriate agencies when there is need for coordination. 3. O V ERVIEW The agencies will make every effort to coordinate the examinations and the inspections o f banking organizations. Coordinated examinations and inspections may not be practical in all cases because o f resource constraints, serious scheduling conflicts, or geographic considerations; however, particular emphasis for implementing this program will be placed on hanking organizations with over $10 billion in consolidated assets and those banking organizations (generally, with assets in excess o f $1 billion) that exhibit financial weaknesses. 4. PRE-EXAM INATION CO O RDINATION Where multiple regulators have authority over a legal entity, representatives from the appropriate supervisory offices should meet quarterly as necessary to discuss supervisory strategies for specific banking organizations, and at least annually to review and establish examination and inspection schedules, to plan for the next year, and to consider the need for coordination in the following areas: ■ Sharing the strategy and scope o f each examination/inspection; ■ Determining if agencies other than the primary regulator o f a particular entity should participate in the examination/inspection o f that entity; ■ Determining whether a consolidated request letter should be prepared to avoid duplicative information requests; ■ Sharing examination/inspection work papers and resulting findings and conclusions from prior examination/inspection efforts; or ■ Other areas as necessary. 2 5. INTERAGENCY REVIEW OF BANK, NONBANK AND PARENT COMPANY ACTIVITIES Certain areas or functions transcend legal entity distinctions, such as internal audit, credit review and the methodology for determining the allowance for loan and lease losses. Such functions may be located at the bank or holding company level. The primary regulator of the depository institution and the holding company may both have supervisory responsibility to assess such functions. In these cases, examinations or inspections of such areas should be conducted on a coordinated and concurrent basis to avoid duplicative reviews and unnecessary disruption. The primary regulator of the entity being examined/inspected should take the lead on such a coordinated examination or inspection, unless there is mutual agreement that another agency will serve as the lead agency. The responsibilities o f the lead agency, in consultation with other appropriate agencies, include developing the scope o f the examination or inspection and determining the staff requirements. The lead agency will also coordinate examination/inspection scheduling and the presentation o f examination/inspection findings to the appropriate management. 6. COORDINATION OF MANAGEMENT MEETINGS At the conclusion o f examinations and inspections conducted under these guidelines, the agencies should coordinate and plan joint meetings with the board o f directors to discuss the findings and conclusions. Agencies will be guided by the coordination responsibility definitions outlined in Provision 2 of this program, unless otherwise agreed upon. 7. PROCESS FOR HANDLING SIGNIFICANT DIFFERENCES BETWEEN THE AGENCIES IN FINDINGS, CONCLUSIONS AND RECOMMENDATIONS Prior to forwarding examination and inspection results to management or boards o f directors, every effort should be made to resolve any significant differences concerning major findings, conclusions and recommendations. Such differences should be resolved by examiners, or officials at the regional level, within 10 business days o f identification. If resolution cannot be achieved following full review and communication between the regional offices, the matter should be referred to the national level, where it will be resolved within a reasonable time frame. 8. INSPECTION AND EXAMINATION REPORTS The primary regulator will prepare the formal report of examination or inspection covering the entity for which it is the primary federal regulator and in those cases for which it serves as the lead agency. The report should be addressed and transmitted to the directors o f the entity for which the regulator is the primary federal supervisory authority and, as necessary, it may be sent to the directors of other entities that have a need for the information. The agencies may mutually agree, if necessary and appropriate, to prepare a joint report. 9. INFORMATION REQUESTS Any request for information to be obtained from an entity for supervisory purposes should normally be made through the entity’s primary regulator. The primary regulator should also share relevant supervisory information with the other appropriate regulatory agencies. 10. COORDINATING ENFORCEMENT ACTIONS When enforcement action is contemplated by one or more regulatory agencies, consideration should be given to initiating a joint enforcement action to address and correct deficiencies within a hanking organization. At a minimum, each agency considering enforcement action should inform other regulatory agencies. This provision reaffirms the existing interagency enforcement agreement. 11. OTHER MATTERS The agencies will establish arrangements to monitor coordination efforts and to resolve any differences that arise under this program. The agencies will also endeavor to coordinate with state banking departments, where appropriate and feasible. June 10, 1993 4 Office of the Comptroller of the Currency _____ Federal Deposit Insurance Corporation Joint Statement ________________ Federal Reserve Board ___________________________________ Office of Thrift Supervision For immediate release Interagency Guidance on Reporting of In-Substance Foreclosures June 10, 1993 On March 10, 1993, the four federal banking and thrift regulatory agencies issued an Interagency Policy Statement on Credit Availability. That statement indicated that the agencies would seek to clarify the reporting treatment for in-substance foreclosures (I5>F) and would work with the accounting authorities to achieve consistency between generally accepted accounting principles (GAAP) and regulatory reporting requirements in this area. Under existing accounting guidelines for determining whether the collateral for a loan has been in-substance foreclosed, a loan is transferred to "other real estate owned" (OREO or REO) and appropriate losses are recognized if certain criteria are met. Such OREO designations may impede efforts to improve credit availability and may discourage lenders from working with borrowers experiencing temporary financial difficulties. The Financial Accounting Standards Board (FASB) recently issued Statement No. 114, "Accounting by Creditors for Impairment o f a Loan," addressing the accounting for impaired loans. This Standard also clarifies the existing accounting for in-substance foreclosures. Under the new impairment standard and related amendments to Statement No. 15," Accounting by Debtors and Creditors for Troubled Debt Restructurings" (FAS 15), a collateral dependent real estate loan (i.e., a loan for which repayment is expected to be provided solely by the underlying collateral) would be reported as OREO only if the lender had taken possession o f the collateral. For other collateral dependent real estate loans, loss recognition would be based on the fair value' o f the collateral if foreclosure is probable. However, such loans would no longer be reported as OREO. Rather, they would remain in the loan category. (more) 1 Fair value is defined in paragraph 13 of FAS 15. Accordingly, the agencies have concluded that losses2 must be recognized on real estate loans that meet the existing ISF criteria based on the fair value o f the collateral, but such loans need not be reported as OREO unless possession o f the underlying collateral has been obtained. The agencies believe that this interagency guidance, coupled with other agency actions currently being taken, will reduce impediments to the availability o f credit. U# # # # 2 Consistent with GAAP, loss recognition would consider estimated costs to sell. Office of the Comptroller of the Currency Joint Statement _____ Federal Deposit Insurance Corporation _____________________ Federal Reserve Board _______________________ Office of Thrift Supervision For immediate release Revised Interagency Guidance on Returning Certain Nonaccrual Loans to Accrual Status June 10, 1993 Introduction On March 10 1993, the four federal banking agencies issued an Interagency Policy Statement on Credit Availability. That policy statement outlined a program o f interagency initiatives to reduce impediments to the availability o f credit to businesses and individuals. As part o f that program, the agencies are making two revisions to existing policies for returning certain nonaccrual loans to accrual status. The revised policies should remove impediments to working with borrowers who are experiencing temporary difficulties in a manner that maximizes recovery on their loans, while at the same time improving disclosures in this area. The first change conforms the banking and thrift agencies’ policies on troubled debt restructurings (TDRs) that involve multiple notes (sometimes referred to as "AVB" note structures). The second change would permit institutions to return past due loans to accrual —status, provided the institution expects to collect all contractual principal and interest due and the borrower has demonstrated a sustained period o f repayment performance in accordance with the contractual terms. The revised policies are effective immediately. Thus, institutions may elect to adopt such changes for purposes o f the June 30, 1993, Consolidated Reports o f Condition and Income (Call Report) and Thrift Financial Report (TFR). Revised Call Report and TFR instructions will be distributed as o f September 30, 1993. 2 TDR M ultiple Note Structure The agencies are conforming their reporting requirements for TDR structures involving multiple notes. The basic example is a troubled loan that is restructured into two notes where the first or "A" note represents the portion o f the original loan principal amount which is expected to be fully collected along with contractual interest. The second part of the restructured loan, or "B" note, represents the portion o f the original loan that has been charged off. Such TDRs generally may take any of three forms. (1) In certain TDRs, the "B" note may be a contingent receivable that is payable only if certain conditions are met (e.g., sufficient cash flow from the property). (2) For other TDRs, the "B" note may be contingently forgiven (e.g., note "B"isforgiven if note "A" is paid in full). (3) In other instances, an institution would have granted a concession (e.g., rate reduction) to the troubled borrower but the "B" note would remain a contractual obligation o f the borrower. Because the "B" note is not reflected as an asset on the institution’s books and is unlikely to be collected, the agencies have concluded that for reporting purposes the "B" note could be viewed as a contingent receivable. Institutions may return the "A" note to accrual status provided the following conditions are met: (1) The restructuring qualifies as a TDR as defined by FASB Statement No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructuring," (SFAS 15) and there is economic substance to the restructuring. (Under SFAS 15, a restructuring o f debt is considered a TDR if "the creditor for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider.") (2) The portion o f the original loan represented by the "B" note has been charged off. The charge-off must be supported by a current, well documented credit evaluation o f the borrower’s financial condition and prospects for repayment under the revised terms. The charge-off must be recorded before or at the time o f the restructuring. (3) The "A" note is reasonably assured o f repayment and of performance in accordance with the modified terms. (4) In general, the borrower must have demonstrated sustained repayment performance (either immediately before or after the restructuring) in accordance with the modified terms for a reasonable period prior to die date on which the "A" note is returned to accrual status. A sustained period o f payment performance generally would be a m inim um o f six months and involve payments in the form o f cash or cash equivalents. 3 Under existing reporting requirements, the "A" note would be disclosed as a TDR. In accordance with these requirements, if the "A" note yields a market rate o f interest and performs in accordance with the restructured terms, such disclosures could be eliminated in the year following the restructuring. To be considered a market rate o f interest, the interest rate on the "A" note at the time o f the restructuring must be equal to or greater than the rate that the institution is willing to accept for a new receivable with comparable risk. Nonaccrual Loans That Have Demonstrated Sustained Contractual Performance Certain borrowers have resumed paying the full amount o f scheduled contractual interest and principal payments on loans that are past due and in nonaccrual status. Although prior arrearages may not have been eliminated by payments from the borrowers, some borrowers have demonstrated sustained performance over a period o f time in accordance with the contractual terms. Under existing regulatory standards, institutions cannot return these loans to accrual status unless they expect to collect all contractual principal and interest and the loans are brought fully current (or unless the loan becomes well secured and in the process of collection). Such loans may henceforth be returned to accrual status, even though the loans have not been brought fully current, provided two criteria are met: (1) all principal and interest amounts contractually due (including arrearages) are reasonably assured o f repayment within a reasonable period, and (2) there is a sustained period o f repayment performance (generally a minimum o f six months) by the borrower, in accordance with the contractual terms involving payments o f cash or cash equivalents. Consistent with existing guidance, when the regulatory reporting criteria for restoration to accrual status are met, previous charge-offs taken would not have to be fully recovered before such loans are returned to accrual status. Loans that meet the above criteria would continue to be disclosed as past due (e.g., 90 days past due and still accruing for Call Report and TFR purposes), as appropriate, until they have been brought fully current. Additional Guidance The Financial Accounting Standards Board (FASB) recently issued Statement No. 114, "Accounting by Creditors for Impairment o f a Loan," which establishes a new approach for recognizing impairment on problem loans and for recognizing income on such loans. In addition, the standard establishes new disclosure requirements for impaired loans for financial reporting purposes. In light o f the significance o f those changes, the agencies are reevaluating regulatory disclosure and nonaccrual requirements that will apply when the statement becomes effective, and expect to issue revised policies at a later date. ## ## # Office of the Comptroller of the Currency Joint Release _____ Federal Deposit Insurance Corporation _____________________ Federal Reserve Board ___________________________________ Office of Thrift Supervision For immediate release Interagency Policy Statement on Fair Lending Initiatives June 10, 1993 The four financial institution regulatory agencies are announcing initiatives that they will pursue over the next several months to e nhance their ability to detect lending discrimination, to improve the level o f education they provide to the industry and to their examiners, and to strengthen fair lending enforcement Background A number o f interagency efforts are already completed or are under way to improve fair lending detection techniques, enforcement, and education. For example: ■ The agencies have issued a joint statement to financial institutions that reaffirms their commitment to the enforcement o f the fair lending laws and provides the industry with guidance and suggestions on fair lending matters. ■ The agencies are working on a revised supervisory enforcement policy for dealing with violations o f the Equal Credit Opportunity and Fair Housing Acts. This revised policy w ill replace a policy issued in 1981. The revised policy specifies corrective actions for several different substantive violations o f the ECOA and FHA. ■ The agencies are developing uniform fair lending examination procedures and training programs. The agencies believe these new procedures will significantly strengthen existing discrimination detection programs. These new examination procedures w ill be publicly available this summer. New Initiatives The four agencies w ill pursue the following new initiatives over the next several months: (more) - 1. 2 - Fair Lending Training for Examiners The agencies will develop a new training program in fair lending for experienced compliance examiners that will be conducted on a regional basis. A pilot program could be held as early as Fall 1993. 2. Fair Lending Seminar for Industry Executives The agencies will develop and sponsor regional fair lending programs for top level industry executives (chief executive officers and executive vice presidents) to explain their efforts to enforce fair lending laws and to foster additional sensitivity and awareness among lenders about discrimination issues, specifically subtle practices that impede the availability o f credit to low-income and minority individuals. The first session o f this program could be held later this year. 3. Alternative Discrimination Detection M ethods The agencies will explore statistically-based discrimination analysis models. These models may help identify loan applications files for review as part o f the examination process. This will significantly enhance the agencies’ abilities to identify loan applicants that may have received differential treatment 4. Stronger Enforcement o f Fair Lending Laws Each agency will implement an internal process for making referrals to the Department o f Justice for violations o f the Equal Credit Opportunity A ct These internal procedures will ensure that appropriate cases are being put forth for consideration by senior management 5. Improved Consumer Complaint Programs The agencies believe that refinements to their consumer complaint systems can also better promote the broad availability o f credit on a non-discriminatoiy basis. During the next few months, each agency will evaluate the effectiveness o f its consumer complaint system in detecting and correcting credit discrimination, and alerting the agencies to industry practices that may inhibit the free flow o f credit Each agency will announce its own specific initiatives in these areas. #### # Office of the Comptroller of the Currency _____ Federal Deposit Insurance Corporation Joint Statement _____________________ Federal Reserve Board ___________________________________ Office of Thrift Supervision For immediate release Interagency Statement on the Supervisory Definition of Special Mention Assets Ju n e 10, 1993 The March 10, 1993 Interagency Policy Statement on Credit Availability indicated the federal banking and thrift regulatory agencies would issue guidance clarifying use o f the Special Mention definition for regulatory supervision purposes. The four agencies have agreed on the definition o f "Special Mention" as staled below. This definition should also be considered by an institution when performing its own internal asset review. The definition o f Special Mention is as follows: A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration o f the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. In the past, the agencies used different terminology and definitions for Special Mention. Supervisory reports and their contents also varied between agencies. The use o f a common definition will lead to more consistent application o f supervisory procedures. The definition will also enable examiners to more readily segregate Special Mention assets from those warranting adverse classification. It will also ensure that the Special Mention category is not used to identify an asset which has as its sole weakness credit data exceptions or collateral documentation exceptions that are not material to the repayment o f the asset The agencies are in the process o f developing examiner guidance explaining how the Special Mention category will be used in the assessment o f the overall condition o f an institution. The agencies have agreed to conform their policies and guidance to the following principles: (more) - 2 - ■ Classified assets, which by definition do not include Special Mention assets, will be the standard measure used in expressing the quality o f a bank or thrift’s loan portfolio and other assets. The agencies will not express asset quality in terms o f "criticized assets," a term that is generally recognized as including both Special -Mention and classified assets. ■ The agencies will ensure their policies, examiner guidance, and internal monitoring systems do not call for internal reporting o f criticized asset totals or percentages. However, examiners will continue to consider the level and trends o f assets categorized as Special Mention in their analysis as appropriate. ■ In implementing Section 132 o f the FDIC Improvement Act, Standards for Safety and Soundness, the agencies will use classified assets and not use criticized assets as a measure o f asset quality. ■ Special Mention assets will not be combined with classified assets in reports o f examination or in corporate applications. Each agency will make appropriate revisions to its examiner guidance, and all will work to ensure their guidance is consistent among the agencies. The guidance will emphasize that it is inappropriate to use the Special Mention category to capture loans solely because o f their nature or type, such as small business lending or affordable housing lending. Implementation o f the revised definition will be effective immediately. Examiner guidance will be forthcoming shortly. ##### Office of the Comptroller of the Currency Joint Release _____ Federal Deposit Insurance Corporation _____________________ Federal Reserve Board _______ ____________________________ Office of Thrift Supervision For immediate release Interagency Policy Statement on Review and Classification of Commercial Real Estate Loans June 10, 1993 On March 10, 1993, the four federal regulators o f banks and thrifts issued an Interagency Policy Statement on Credit Availability. This policy statement outlined a program of interagency initiatives to reduce impediments to making credit available to businesses and individuals. One impediment to making credit available to commercial real estate borrowers may be problems in evaluation of real estate collateral. The federal bank and thrift regulatory agencies have been working with their examination staffs for some time to ensure that commercial real estate loans are evaluated in accordance with agency policy. In issuing today’s policy statement, the federal bank and thrift regulatory agencies are reaffirming the guidelines in the November 7, 1991 Interagency Policy Statement on the Review and Classification of Commercial Real Estate Loans. The November 7, 1991 policy statement provides clear and comprehensive guidance to ensure supervisory personnel are reviewing commercial real estate loans in a consistent, prudent and balanced manner. A copy o f that statement is attached. The November 7, 1991 statement clarified regulatory policy on real estate valuation and classification. The evaluation o f commercial real estate loans is based on a review o f the borrower’s willingness and capacity to repay and on the income-producing capacity of the underlying collateral over time. The value of collateral increases in importance as a loan becomes troubled and the borrower’s ability to repay the loan becomes more questionable. The statement emphasizes that it is NOT regulatory policy to value collateral that underlies real estate loans on a liquidation basis. (See the discussion on "Examiner Review o f Individual Loans, Including the Analysis o f Collateral Value," beginning on page 3 o f the policy statement.) Furthermore, the policy statement discusses management’s responsibility for reviewing appraisal assumptions and conclusions for reasonableness. Appraisal assumptions should not be based solely on current conditions that ignore the stabilized income-producing capacity of the property. - 2 - Management should adjust any assumptions used by an appraiser in determining values that are overly optimistic or pessimistic. The policy statement also indicates that the assumptions used in a discounted cash flow analysis (such as discount rates and direct capitalization rates) should reflect reasonable expectations about the rate o f return that investors require under normal, orderly and sustainable market conditions. Unrealistic or unsustainable high or low discount rates, "cap" rates, and income projections should not be used. The use o f appropriate assumptions in a discounted cash flow analysis is particularly important in determining the value of collateral for a troubled, project-dependent commercial real estate loan (involving income-producing property). The agencies use this valuation for determining the amount of the loan that is adequately secured by the value of the collateral. The November 7, 1991 Interagency Policy Statement indicates that generally, any portion o f the loan balance that exceeds the amount adequately secured by collateral values and that can be clearly identified as uncollectible should be classified "loss." The portion o f the loan balance that is adequately secured by the value o f the collateral should generally be classified no worse than "substandard." The policy statement also indicates that, when an institution has taken a chargeoff in sufficient amount so that the remaining recorded balance o f the loan (a) is being serviced (based on reliable sources) and (b) is reasonably assured o f collection, classification of the remaining recorded balance may not be appropriate. The federal bank and thrift regulatory agencies will continue to ensure their examiners implement the policy statement appropriately and uniformly. Each agency has an appeals process for institutions with significant concerns about examinations, including any concerns relating to the supervisory treatment o f commercial real estate loans. Reference: Interagency Policy Statement on Review and Classification o f Commercial Real Estate Loans, November 7, 1991
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