Agency Provides Update to Examination Modernization Project

Industry Updates  Â»  Agency Provides Update to Examination Modernization Project

The Federal Financial Institutions Examination Council (FFIEC) has announced an update on the status of its Examination Modernization Project.

The objective of the project is to identify and assess ways to improve the community bank safety-and-soundness examination process, and it was undertaken as a follow-up to the review of regulations under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA).

As an initial step in the Examination Modernization Project, staff of the FFIEC members compared current safety-and-soundness examination processes and obtained feedback from supervised institutions and examiners. The Examination Modernization Project is expected to be a long-term effort, and FFIEC members expect to take actions beyond this update as other areas for improvement emerge. 

Not surprisingly, a key theme addressed during feedback sessions was that agencies should highlight and reinforce communication objectives during the examination process. The FFIEC update indicates that the FFIEC members plan to reinforce and clarify for examiners the importance of being clear and transparent to community bankers during the examination process.

The update specifically states the following actions to be taken with regard to examiner guidance:

  • Assist community financial institutions to prepare for the examination by providing prior notification and addressing spacing needs, staffing, and logistics.
  • Tailor the examination request list and scope to the unique risk profile and business model of the institution.
  • Facilitate the secure exchange of information between institution management and examiners.
  • Inform institution management of areas under review and provide management the opportunity to communicate any additional information or clarification before the conclusion of the examination.
  • Establish clear expectations regarding items the financial institutions are expected to address.

The FFIEC members state that, in the past, they have taken a number of steps to enhance the efficiency of the safety and soundness examination process, including:

  • Moving from a one-size-fits-all examination process to a risk-based approach that tailors examinations to the size, complexity, risk profile, and business model of each institution; and
  • Leveraging technology to improve offsite surveillance systems and improve the efficiency of onsite and offsite reviews.

Based on this feedback, the FFIEC members plan to focus initial efforts on the following four areas that have the potential for the most meaningful supervisory burden reduction:

  1. Highlight and reinforce regulator communication objectives before, during, and after examinations;
  2. Leverage technology and shift, as appropriate, examination work from onsite to offsite;
  3. Continue to tailor examinations based on risk; and
  4. Improve electronic file transfer systems to facilitate the secure exchange of information between institutions and supervisory offices or examiners.

Although the members’ initial efforts will be focused on the above four themes, the Examination Modernization Project is expected to be a long-term endeavor, and other areas of improvement may emerge. As a first step, and to address the first theme, the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the State Liaison Committee (SLC) have each committed to issue reinforcing and clarifying guidance to its examination staff about the importance of being clear and transparent to community bankers during examination processes.

While the National Credit Union Administration (NCUA) is not required to participate in the EGRPRA process, it does so voluntarily. The NCUA in 2016 launched a similar effort, its exam flexibility initiative, and the agency has incorporated parts of that initiative into its examination process.


How to cite this blog post (APA Style): 
Premier Insights. (2018, March 29). Agency Provides Update to Examination Modernization Project [Blog post].  Retrieved from https://www.premierinsights.com/agency-provides-update-to-examination-modernization-project.


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