TO: Department and Division Heads and All Examining and Legal Personnel

PURPOSE

This issuance establishes content, format and update requirements for
documenting supervisory information in the Supervisory Monitoring System
(SMS). It also explains how the supervisory cycle is documented in SMS.

REFERENCES

This issuance replaces SMS guidance contained in EB 87-1 (REV), which is
hereby rescinded. This issuance should be read in conjunction with EC
258, OCC Supervision Policy.

BACKGROUND

SMS is an automated system OCC personnel use to record and communicate
narrative and statistical information on institutions of supervisory
interest to the OCC. It is the OCC\'s primary source of information
about the supervisory strategy, current condition and compliance
performance of each bank. OCC personnel document the scope, findings and
conclusions of supervisory activities; commitments made by the
institution; progress in implementing corrective actions; and OCC
follow-up and monitoring of an institution in SMS.

All levels of OCC personnel and other federal bank regulators use SMS to
review the condition of individual institutions or groups of
institutions. The system documents the supervisory cycle (see EC 258)
with concise summaries of an institution\'s supervisory profile and
activities. SMS is not an electronic version of the working papers.
Detailed supporting documentation should be maintained in working papers
at appropriate duty locations.

STANDARDS FOR INFORMATION ENTRY IN SMS

This issuance details the information to be entered in SMS concerning
institutions of supervisory interest to the OCC, including banks,
holding companies, federal branches/agencies of foreign banks and
independent data processing servicers. That information can relate to
examination activities, legal questions, accounting opinions, corporate
applications and enforcement actions.

All OCC personnel, including examiners, attorneys, accountants, and
corporate analysts, must record **findings and conclusions** in SMS (or
other systems accessible through SMS) when they are relevant to the
supervision of an institution. Information must be complete, accurate
and timely since it is used by all OCC personnel and other regulatory
agencies. The attachment to this issuance details documentation
requirements for SMS.

All OCC personnel must record **narrative information** in SMS to
summarize findings and conclusions concerning institutions of
supervisory interest to the OCC. Narratives should be concise and
summary in nature. It is important to record all required information,
but it is also important not to obscure that information with excessive
detail. The risk posed by the institution generally dictates the volume
of information that should be entered in SMS.

All OCC personnel must review and update **statistical information** in
SMS while recording findings and conclusions material to the supervision
of any institution of supervisory interest to the OCC. Portfolio
managers are responsible for ensuring that statistical information in
SMS on their assigned institutions is complete, accurate and timely.

No OCC office may require additional documentation in SMS that is
inconsistent with this issuance or that applies to all banks supervised
by that office. However, OCC offices may establish operating procedures
regarding entry of information into SMS and may require additional
pertinent information to be entered in SMS for individual banks, on an
exception basis. Any such requirements established by OCC offices must
not reduce users\' ability to quickly find pertinent information.

DOCUMENTING THE SUPERVISORY CYCLE IN SMS

The supervisory cycle begins with an assessment of risk areas in an
institution. The portfolio manager then reviews and updates the
institution\'s supervisory profile in the Overall Summary Comments (OSC)
application of SMS. Throughout the supervisory cycle, the portfolio
manager reviews and updates the Background, Condition and Strategy
comments.

As an approved supervisory strategy is carried out, examiners open
analyses to document the scope, findings, conclusions and follow-up of
examinations. Analyses are opened for every examination, including
periodic financial and other offsite reviews, performed during the
institution\'s supervisory cycle. Ratings, loan classifications and
violations of law are recorded in the Supervisory Data application.
Whenever a Report of Examination is issued, it must be documented in the
Tracking application.

All other supervisory activities are summarized in the Other Significant
Events (OSE) application. Examples of activities recorded in OSE include
board meetings, discussions with and examinations by other regulators,
media coverage, chain bank reviews, Supervisory Review Committee
decisions, operating plan exceptions, legal and accounting opinions,
early warning reviews and correspondence from the institution, such as
OREO, dividend and fixed asset requests. Any special supervision
activities also are recorded in the Enforcement Actions application.

The supervisory cycle ends with the completion of all the activities
necessary for a full scope, onsite examination as set out in the
supervisory strategy (see EC 258). The portfolio manager concludes the
supervisory cycle of an institution by recording a full scope, onsite
examination type analysis in SMS. The portfolio manager also verifies
that all required ratings, asset statistics and violations of law, where
applicable, have been updated in the Supervisory Data record. When
required by EC 258, the reviewing official verifies that a report of
examination has been sent to the institution and a board meeting has
been held before finalizing the analysis record.

RESPONSIBLE OFFICE

For further information, contact Supervisory Information, Office of the
Chief National Bank Examiner, (202) 874-5190.

Donald G. Coonley

Acting Senior Deputy Comptroller

Bank Supervision Policy

Clifton A. Poole, Jr.

Acting Senior Deputy Comptroller

Bank Supervision Operations

Attachment 17 pages