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BOARD OF GOVERNORS 

OF THE: 

FEOERAL RESERVE SYSTEM 

WASHINGTON, D. C. 20551 

November 18,2013 

SANDRA F. BRAUNSTEIN 

DIRECTOR 

DIVISION OF CONSUMER 

AND COMMUNITY AFFAIRS 

CA 13-19 

TO THE OFFICERS AND MANAGERS IN CHARGE OF CONSUMER AFFAIRS 

SECTIONS: 

SUBJECT: Community Bank Risk-Focused Consumer Compliance Supervision Program 

Applicability to Community Banking Organizations: This guidance applies to the supervision 

of community banking organizations, defined as institutions supervised by the Federal Reserve 

with total consolidated assets of $10 billion or less. 

Effective January 1, 2014, the Federal Reserve is adopting the attached Community Bank 

Risk-Focused Consumer Compliance Supervision Program ("Program") for state member banks 

with consolidated assets of $10 billion or less and their subsidiaries (community banking 

organizations). The new program is designed to promote strong compliance risk management 

practices and consumer protection at state member community banks. Under the updated 

program, consumer compliance examiners will base the examination intensity more explicitly on 

the individual financial institution's risk profile, including its consumer compliance culture and 

how effectively it identifies and manages consumer compliance risk. We expect that the new 

program will enhance the efficacy of our supervision program and reduce regulatory burden on 

many community banking organizations. 

The Program provides an enhanced risk assessment process based on current information 

about a financial institution's products and services, as well as related legal and regulatory 

factors, the environment in which the institution operates, and its compliance risk management 

practices. Through the risk assessment process, examiners will gain an understanding of a 

financial institution's compliance culture; its processes for identifying, measuring, monitoring, 

and controlling risks; its practices regarding the treatment of consumers; and the potential for 

consumer harm. Based on the level of residual risk identified in the risk assessment process, a 

customized work program will be developed that includes examination activities consistent with 

the size, complexity, and risk profile of the institution's products, services, and business lines. 

The Program also incorporates ongoing supervision, typically a supervisory contact close 

to the mid-cycle between consumer compliance examinations. However, in some cases when the 

institution's risk profile is high or it changes materially as a result of the addition of more 

complex or higher-risk strategies, more frequent contacts may be appropriate. Ongoing 

supervision is intended to identify and, if necessary, address significant changes in the 
institution's compliance risk management program or in the level of consumer compliance risk 

present and ensure that supervisory information is up to date. 

Please see the Community Bank Risk-Focused Consumer Compliance Supervision 

Program Executive Summary for an overview of the program and the Community Bank RiskFocused Consumer Compliance Supervision Program document for the complete program. This 

Program replaces the Risk-Focused Consumer Compliance Supervision Program (CA 03-13) for 

state member community banks. 

Please distribute this letter and its attachments to Federal Reserve-supervised community 

banking organizations, supervisory staff, and examiners. 

Questions on this letter and the new program should be directed to Carol Evans, Assistant 

Director, at (202) 452-2051; Cathy Gates, Senior Project Manager, at 202-452-2099; or Lanette 

Meister, Senior Supervisory Consumer Financial Services Analyst, at (202) 452-2705 in the · 

Division of Consumer and Community Affairs. In addition, questions may be sent via the 

Board's public website. 1 

Attachments: 

• Community Bank Risk-Focused Consumer Compliance Supervision Program 

• Community Bank Risk-Focused Consumer Compliance Supervision Program Executive 

Summary 

Supersedes: 

• CA 03-13 "Risk-Focused Consumer Compliance Supervision Program" 

• CA 01-4 "Alternative Fair Lending Examination Procedures" 

1 See http://www.federalreserve.gov/apps/contactus/feedback.aspx. 

2