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Federal Deposit Insurance Corporation

Division of Supervision

550 17th Street NW, Washington, DC 20429

Banker Feedback on the Examination Process
FIL-76-95
November 2, 1995
TO:

CHIEF EXECUTIVE OFFICER

SUBJECT:

Banker Outreach Program on the Safety and Soundness Examination Process

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On March 24, 1995, the FDIC announced a one-year informal outreach program designed to solicit
bankers' opinions and suggestions on how to improve the quality and efficiency of the safety and
soundness examination process. This effort is aimed at detecting and changing aspects of the FDIC
examination process that may be burdensome or inefficient.

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Most of the approximately 3,500 FDIC-supervised commercial banks and savings banks nationwide that
are expected to undergo a safety and soundness examination within the 12-month period are being sent
a three-page questionnaire along with their final examination report. The questionnaire asks bankers
opinions about such matters as: the appropriateness and thoroughness of the examination procedures;
the quality and professionalism of the FDIC examination team; the usefulness of written and oral
comments in the examination report; and the size of the examination team and preference for having
other specialty examinations done separately or at the same time as the safety and soundness
examination.
Of the 917 questionnaires sent during the March-July period, 455 or 49.6 percent were returned by July
31, 1995. Of the 455 responses, 330 bankers or 73 percent identified themselves and 209 provided
written comments. While the voluntary and anonymous nature of the responses means that the results do
not constitute a scientifically valid survey, the FDIC has found them to be enlightening and constructive.
In particular, the 455 respondents felt as follows:
Examination Process

91% of the respondents agreed that pre-examination preparations and requests for information made by
examiners enabled the examination to be conducted in the most efficient manner possible.
95% of the respondents agreed that examiners focused on the appropriate risk areas.

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95% of the respondents agreed that examiners maintained adequate communication with bank
management throughout the examination.
96% agreed that examiners disclosed and discussed material supervisory concerns and
recommendations to senior bank officials during the examination.
74% of the respondents agreed that the examination length was appropriate.
Examination Team

97% of the respondents agreed that examiners acted professionally and responsively.
86% of the respondents agreed that the examination team was the appropriate size.
90% of the respondents agreed that examiners created as little disruption as possible to daily operations.
93% of the respondents agreed that examiners appeared to be informed of banking issues and
adequately trained.

93% of the respondents agreed that oral examination findings and recommendations were logically and
clearly disseminated to senior bank officials.
75% of the respondents agreed that correspondence from the regional office was clear and concise.
However, 24% of the respondents gave no opinion on this statement.
Examination Report
93% of the respondents agreed that the examination report is in a logical and readable format.
91% of the respondents agreed that the examination report objectively documents the institution's overall
condition, risks and prospects.

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93% of the respondents agreed that the examination report accurately reflects material issues and
recommendations.

93% of the respondents agreed that the examination report is consistent with the preliminary findings
disclosed to senior bank management at the end of the examination.

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90% of the respondents agreed that the examination report documents and fairly represents
management's response to report findings.

93% of the respondents agreed that the examination report serves as an information source for senior
bank management.
Other Examination Issues

77% of the respondents do not prefer a larger examination team in order to shorten examination time.
65% of the respondents prefer having the compliance examination done at the same time as the safety
and soundness examination.
81% and 84% of the respondents, respectively, prefer having the in-house automation facilities and trust
department done at the same time as the safety and soundness examination.
The physical limitation of space and support personnel were the primary reasons cited by those
respondents preferring a smaller examination team.

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Overall, the FDIC is encouraged by the positive responses received and helpful comments submitted. It is
evident that many bankers took advantage of this opportunity to tell the FDIC what was on their minds.
Nevertheless, four areas where those who responded thought that the FDIC could improve were:


to provide banks with more advance notice of upcoming examinations;



to be more sensitive to the number of examiners assigned to conduct examinations of small,
community-type banks with limited facilities; to the extent practicable, to perform more preexamination functions outside of the bank; and



to shorten the length of time it takes to complete a safety and soundness examination.

In response to the comments, the FDIC's Division of Supervision (DOS) is taking the following actions:
 Henceforth, with certain exceptions, examiners are to provide bankers with a minimum two-week
prior notice of an upcoming examination. This should provide bankers with the time needed to
prepare for an examination and to respond to examiners' pre-examination requests for information.



DOS is conducting a complete review of its examination procedures for the purpose of identifying
those examination functions which can be performed outside of the bank. In this way, the on-sight
examination hours and burden on bankers should be reduced accordingly.



DOS has established a goal to reduce total examination hours.



DOS field office supervisors have been instructed to carefully review their procedures for
scheduling examinations and for assigning examiners. The goal is to assign an examination team
that is no bigger than necessary to do the job in a compact, concerted manner and to minimize, to
the extent practicable, any disruption to the bank.

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We encourage those bankers who receive a safety and soundness examination in the coming months to
complete the examination questionnaire that will accompany the examination report. We ask, however,
that bankers complete only one questionnaire per bank in order that the responses accurately reflect the
concerns raised. As the FDIC receives additional feedback and identifies additional trends and actions
that can be taken to improve the examination process, you will be advised.
Nicholas J. Ketcha Jr.
Acting Director

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Distribution: FDIC-Supervised Banks (Commercial and Savings)