Improper Disclosure of Confidential Supervisory Information by Financial Institutions - Circulars

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Circular

Improper Disclosure of Confidential Supervisory Information by Financial Institutions

December 5, 1997

Circular No. 11002

To the Chief Executive Officers of All State Member Banks, Branches and Agencies of Foreign Banks, Bank Holding Companies, and Edge Corporations in the Second Federal Reserve District:

It has recently come to my attention that certain financial institutions may be improperly disclosing confidential supervisory information. This letter is intended to ensure that all institutions supervised by the Federal Reserve in the Second Federal Reserve District understand what constitutes confidential supervisory information, and for what purposes an institution may use such information.

As you should know, the Board of Governors of the Federal Reserve System has promulgated regulations defining "confidential supervisory information" as:

... [R]eports of examination and inspection, confidential operating and condition reports, and any information derived from, relating to, or contained in them. "Confidential supervisory information" may consist of documents prepared by, on behalf of, or for the use of the Board [of Governors, or] a Reserve Bank ..... (12 CFR 261.2(b))

Except to the limited extent otherwise provided by law, reports of examination or inspection -- whether prepared solely by the Federal Reserve or jointly with a Federal or state supervisory agency -- are confidential, as is all information contained in such reports, including an institution's supervisory rating, such as BOPEC, CAMELS or ROCA. Any workpapers that examiners have prepared in the course of an examination are confidential, whether or not these workpapers have been shared with a financial institution. Any evaluation of a loan or other credit, including any evaluation made pursuant to the Shared National Credit Program, is confidential. The first-day letter that the Reserve Bank sends to a financial institution in anticipation of an examination, along with the institution's responses to that letter, are also confidential. Moreover, any non-public enforcement actions, such as memoranda of understanding between the Reserve Bank and an institution, are confidential. Questions as to whether any other material is confidential supervisory information should be addressed to the Reserve Bank before any public disclosure of the information is made.

All confidential supervisory information is the property of the Board of Governors of the Federal Reserve System, and may be used only as the Board of Governors permits. Pursuant to regulatory authority, the Reserve Bank shares confidential supervisory information, such as examination reports, with the supervised financial institutions. A financial institution may not, in turn, share this information with an unaffiliated party seeking to ascertain the creditworthiness of a financial institution prior to entering into a transaction with it. Neither may a financial institution release confidential supervisory information to another supervised institution to aid that institution in the examination process, or for any other reason. A financial institution is, however, permitted to share confidential supervisory information with its directors and officers, any parent bank holding company, and its external accountants and counsel. This facilitates the understanding and implementation of any recommendations made by the Federal Reserve, and notifies those responsible for the management of a financial institution as to the Federal Reserve's assessment of the condition of their institution. Any other disclosure of this information is expressly prohibited without the Board of Governors' specific prior approval.

Disclosure of confidential supervisory information constitutes a violation of the Board of Governors' regulations, and could lead to formal supervisory action, including the imposition of substantial civil money penalties.

Please contact Fred Herriman, Vice President or me if you require any further information concerning this subject.

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