Examinations are fundamental to the supervision of national banks. Examiners evaluate bank activities and management processes to ensure that banks operate in a safe and sound manner, do not take excessive risks, and comply with laws and regulations.
What is a bank examination?
The OCC examines national banks pursuant to the authority conferred by 12 USC 481 and the requirements of 12 USC 1820(d). These requirements establish minimum frequencies and scopes for examinations, known as the "supervisory cycle."
Two basic examination types:
1. Full-scope, on-site review of bank
- Occurs once every "supervisory cycle" (generally, every 12–18 months)
- Focuses on three main areas:
- Competence of bank management
- Quality of bank assets, principally loans ("safety and soundness")
- Compliance with federal banking regulations
2. Review of specialty areas. Examiners are also required to ensure a bank is meeting its legal obligations in the following areas
- Asset Management - includes trust and fiduciary activities, fiduciary-related services, transfer agent activities, and retail brokerage.
- Bank Information Technology (BIT) - determining that the electronic records produced by a bank’s automated systems are valid and reliable.
- Bank Secrecy Act (BSA) - verifying that a bank is keeping accurate records and filing necessary reports about currency transactions. Includes anti-money laundering measures and counter-terrorist financing measures.
- Community Reinvestment Act (CRA) - the CRA requires that a bank's record in helping meet the credit needs of its entire community be evaluated periodically.
When and how the full-scope examination and the specialty examinations take place depends on the size and complexity of the bank. The exact process differs for
- Midsize and Large banks
- Community Banks
- Newly Chartered (De Novo) Banks
- Federal Branches and Agencies
- Special Supervision (Troubled) Banks
- Trust Banks
- Credit Card banks and other special purpose banks