Expanded Examination Cycle for Certain Small Institutions

Interim Rule Effective February 12; Comments Invited by April 14
February 18, 1997
Circular No. 10927

To All State Member Banks, and State-Licensed Branches and Agencies of
Foreign Banking Organizations, in the Second Federal Reserve District:

The following is from the text of a statement by the Board of Governors of the Federal Reserve System:

    The Federal Reserve Board, along with the Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and Office of Thrift Supervision, has issued an interim rule and requested comment on a proposal to expand the examination frequency cycle for certain financial institutions.

    The interim rule is effective February 12, 1997.

    Comment is requested by April 14, 1997.

    Implementation of this ruling will expand the eligibility for the 18-month examination cycle for "2" rated, well managed banks from the current asset size limit of $100 million to a new limit of $250 million.

    The ruling will implement section 306 of the Riegle Community Development and Regulatory Improvement Act of 1994, and section 2221 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996.

The interagency notice also indicates that the International Banking Act of 1978 has been amended to provide that each branch or agency of a foreign bank shall be subject to on-site examination as frequently as would a national or state bank. Consequently, U.S. branches and agencies of foreign banks are eligible for the 18-month cycle provided that they meet the qualifying criteria. Comments are also requested regarding application of these criteria to U.S. branches and agencies of foreign banks.

An excerpt from the Federal Register of February 12, containing the text of the interim rule is available as a (pdf) file. Comments thereon should be submitted by April 14, 1997 and may be sent to the Board, as specified in the notice, or, at this Bank, to any member of your portfolio management team in our Bank Supervision Group.