General Examination

Unveiling the Mystery of General Examinations in Banking

Understanding General Examinations: A Detailed Insight into Regulatory Assessments

Introduction to General Examinations:

A general examination is a vital regulatory measure designed to conduct comprehensive inspections of banks, ensuring their compliance with laws and regulations while evaluating their overall operational soundness. This examination encompasses various aspects of a bank's management processes and activities, aiming to maintain the integrity of the financial system.

Exploring the Process of General Examinations

Regulatory Oversight:

Different governing bodies, such as the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the Federal Reserve Board (FRB), oversee the examination process based on the type of financial institution being evaluated. These examinations occur periodically, typically every two years, to provide a thorough assessment of a bank's operations.

Facts About General Examinations:

1. Examiner Expertise: In the United States, there are over 2,000 trained examiners tasked with evaluating the health and efficiency of banks during general examinations.

2. CAMELS Rating System: Banks are evaluated based on the CAMELS system, which assesses their capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to systemic risk, assigning them a rating from one to five.

3. Impact of Ratings: Banks with high ratings (one or two) are considered strong institutions, while those with lower ratings (four or five) may face regulatory scrutiny and be placed on a watch list for closer monitoring.

Conducting the Examination

Comprehensive Assessment:

During a general examination, examiners delve into various aspects of the bank's operations, including financial statements, compliance with regulations, trust operations, electronic systems, and community credit needs. They meticulously review documents such as policies, financial reports, and board meeting minutes to ensure regulatory compliance.

Conclusion and Rating

Outcome of the Examination:

Upon completion of the examination, examiners hold an exit meeting with the bank's management and board of directors, presenting their findings and issuing a rating based on the CAMELS system. The results are documented in a Report of Examination, providing insights into the bank's performance and compliance status.