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BOARD OF GOVERNORS

OF THE

FEDERAL RESERVE SYSTEM

WASHINGTON, D.C. 20551 

DIVISION OF SUPERVISION 

AND REGULATION

SR 13-21 

December 17, 2013 

Revised December 16, 2022 

TO THE OFFICER IN CHARGE OF SUPERVISION 

AT EACH FEDERAL RESERVE BANK AND TO HOLDING COMPANIES WITH 

LESS THAN $10 BILLION IN TOTAL CONSOLIDATED ASSETS

Revision history: 

As of December 16, 2022, this letter was revised to modify its applicability to holding companies

supervised by the Federal Reserve with less than $10 billion in total consolidated assets.

Previously, this letter applied to the supervision of holding companies with $10 billion or less in 

total consolidated assets. This modification was made to better align with the supervisory 

portfolio definitions described on the Board’s public website. 

On March 6, 2019, this letter and attachment were updated to modify inspection frequency and 

scope expectations for holding companies with total consolidated assets between $1 billion and 

$3 billion. The inspection frequency and scope expectations were modified for this population of 

holding companies to align with updated statutory requirements as authorized by the Economic 

Growth, Regulatory Relief, and Consumer Protection Act. The Act authorized an increase in the 

asset threshold from less than $1 billion to less than $3 billion for the examination frequency of 

insured depository institutions (12 CFR 208.64) and the Board’s Small Bank Holding Company 

and Savings and Loan Holding Company Policy Statement (12 CFR Appendix C to Part 225). 

References were also updated to reflect that non-commercial and non-insurance SLHCs are 

assigned RFI ratings, effective February 1, 2019. 

SUBJECT: Inspection Frequency and Scope Expectations for Bank Holding Companies

and Savings and Loan Holding Companies that are Community Banking Organizations

Applicability: This letter applies to bank holding companies (BHCs) and savings and loan 

holding companies (SLHCs) with less than $10 billion in total consolidated assets. 

 

The Federal Reserve relies on periodic on- and off-site inspections to assess the safety 

and soundness of supervised BHCs and SLHCs (hereafter referred to as holding companies). 
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This SR letter updates the minimum inspection frequency and scope expectations for supervised 

holding companies with of less1 than $10 billion in total consolidated assets to: 

• Conform inspection frequency and scope expectations for SLHCs with less than $10 

billion in total consolidated assets to those applicable to BHCs of the same size;

• Clarify the scoping expectations for targeted inspections conducted at holding companies 

with total consolidated assets between $3 billion and less than $10 billion; and 

• Modify the expectations for targeted inspections for “3,” “4,” and “5”-rated holding 

companies with total consolidated assets between $3 billion and less than $10 billion. 

These frequency and scope expectations vary depending on whether a holding company 

has been designated “complex,” with more complicated holding companies subject to more 

frequent and in-depth review. If needed for supervisory purposes, Reserve Banks may inspect a 

holding company with greater frequency and scope than described in this letter. 

Definition of “Complex” Holding Companies

The determination of whether a holding company is “complex” should be made at least 

annually by the responsible Reserve Bank. Utilizing surveillance screens and other information 

obtained through supervisory or applications processes, Reserve Banks should update the 

complexity designation of a company as its activities or condition changes. The determination of 

a holding company’s complexity should take into account a number of factors. These factors 

include the size and structure of the company; the extent of intercompany transactions between 

insured depository institution subsidiaries and the holding company or uninsured subsidiaries of 

the holding company; the risk, scale, and complexity of activities of any nondepository 

subsidiaries;2

 and the degree of leverage at the holding company, including the extent of its debt 

outstanding to the public. Companies should also be designated “complex” if material risk 

management processes for the holding company and its affiliates are consolidated at the parent 

company. 

Supervision and Surveillance Approach

The frequency and scope of on- and off-site inspections should be adjusted based on the 

results of examinations of a company’s depository institution subsidiaries and off-site quarterly 

surveillance. Whether the inspection is conducted on- or off-site will depend on the level and 

nature of the risks involved, the holding company’s ability to manage those risks, and the 

Reserve Bank’s ability to acquire the necessary information to analyze the activity off-site. If 

information obtained off-site is not sufficient for the Reserve Bank to determine the condition or 

assess the activity of the company to assign a rating, the Reserve Bank should conduct an on-site 

inspection (full-scope or targeted, as appropriate). 

To facilitate prompt follow-up on changes in a company’s performance and condition, 

the Federal Reserve maintains distinct surveillance programs for small holding companies (less 

1

 With the issuance of this letter, SR letter 02-1, “Revisions to Bank Holding Company Supervision Procedures for 

Organizations with Total Consolidated Assets of $5 Billion or Less” is superseded. 

2

 For SLHCs, consideration should be given to whether the holding company is a legacy unitary SLHC, and if so, 

the type and extent of the activities in which the company engages. Guidance on ratings, examination frequency, and 

complexity classifications for supervised insurance organizations is available in SR letter 22-8, “Framework for the 

Supervision of Insurance Organizations.”
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than $3 billion in total consolidated assets) and larger holding companies. Surveillance screens 

for holding companies with $3 billion or more in total consolidated assets focus on identifying 

those companies reporting financial results that seem to be inconsistent with their current 

supervisory ratings, as well as activities conducted outside of depository institution subsidiaries. 

For small holding companies, quarterly surveillance screens focus on the identification of 

potential parent company and nondepository subsidiary issues that may adversely affect 

affiliated depository institutions. In particular, these screens address parent company cash flow, 

intercompany transactions, parent company leverage, and consolidated capital ratios, when 

applicable. Screens also assist in maintaining up-to-date complexity designations and are 

updated periodically to reflect industry trends and conditions as well as changes in regulatory 

reporting requirements. 

Frequency and Scope of Inspections of Holding Companies with Total Consolidated Assets 

between $3 Billion and Less Than $10 Billion

Complex holding companies in satisfactory condition are inspected at least once per 

calendar year, while noncomplex holding companies may be inspected every other year. The 

Reserve Banks should attempt to conduct inspections of holding companies with total 

consolidated assets between $3 billion and less than $10 billion shortly after the examination of 

the lead depository subsidiary is completed. These holding companies are assigned a complete 

RFI rating (component ratings, subcomponent ratings, and a composite rating) regardless of their 

complexity.3

 

Depending on their condition and complexity, holding companies in this category will 

receive full-scope inspections or targeted inspections. At a minimum, a full-scope inspection 

should include sufficient procedures to reach an informed judgment regarding the assigned 

ratings for the factors addressed by the RFI rating system, evaluating the organization’s methods 

of managing and controlling its risk exposures, and ascertaining whether management and 

directors fully understand and are actively monitoring the organization’s exposure to those risks. 

A targeted inspection is designed to focus intensively on one or more specific areas, 

activities, or problems relating to a holding company. Targeted inspections of holding 

companies with total consolidated assets between $3 billion and less than $10 billion should 

focus primarily on parent company leverage, parent company cash flow, nondepository 

subsidiaries, consolidated capital (when applicable), and intercompany transactions. Targeted 

inspections may also cover other applicable areas, such as deficient risk management practices at 

the holding company. 

In addition, because compliance with laws and regulations is a statutory factor that must 

be considered as part of any supervisory review of an application or notice by a holding 

company, it is important that Reserve Bank staff ensure that compliance with relevant laws and 

regulations, including any commitments provided by a holding company in connection with an 

application or notice, is evaluated and addressed in written inspection reports. 

Complex Holding Companies 

3

 See SR letter 19-4/ CA letter 19-3, “Supervisory Rating Systems for Holding Companies with Consolidated 

Assets Less Than $100 Billion.”
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• If a complex holding company is rated composite “1” or “2,” a full-scope, on-site 

inspection should be completed annually. 

• The following apply for a complex holding company rated composite “3,” “4,” or “5.” 

o A full-scope, on-site inspection should be completed annually. 

o If the primary supervisor has conducted an interim examination or changed the rating 

at the lead depository institution, Reserve Bank staff should conduct an additional 

targeted inspection and update the holding company rating if necessary. The targeted 

inspection may be conducted off-site and should start within 60 days of receiving the 

examination report for the lead depository institution.

• Interim inspections between regular full-scope, on-site inspections are not required. 

However, additional follow-up, including interim inspections, may be necessary in 

response to off-site surveillance program results. 

Noncomplex Holding Companies 

• If a noncomplex holding company is rated composite “1” or “2,” an off-site targeted 

inspection should be completed every two years. 

• The following apply for a noncomplex holding company rated composite “3,” “4,” or 

“5.” 

o A full-scope, off-site inspection should be completed annually. 

o If the primary supervisor has conducted an interim examination or changed the rating 

at the lead depository institution, Reserve Bank staff should conduct an additional 

targeted inspection and update the holding company rating if necessary. This targeted 

inspection may be conducted off-site and should start within 60 days of receiving the 

examination report for the lead depository institution. 

• Interim inspections between regular full-scope inspections are not required. However, 

additional follow-up, including interim inspections, may be necessary in response to offsite surveillance program results.

Frequency and Scope of Review of Holding Companies with Less Than $3 Billion in Total 

Consolidated Assets

The supervisory cycle for these holding companies generally is determined by the 

examination frequency of the lead depository institution. Complex companies in this size 

category are assigned a complete RFI rating; others are assigned only a risk management rating 

and a composite rating. All ratings assigned should be promptly entered into the National 

Examination Database (NED) and communicated to the company, Board staff, and appropriate 

state and federal regulatory authorities as soon as possible, but generally no later than 90 days 

after receipt of the lead depository institution examination report. 

Although off-site review of small holding companies will be appropriate in many cases, 

in some instances it may be necessary to conduct an on-site review for complex holding 

companies, as discussed below. In those cases when an on-site review is expected, the findings 

of that review and the assigned ratings should be communicated to the company no later than 

120 days after receipt of the lead depository institution examination report. Documentation for 

the ratings and off-site or on-site reviews will generally consist of the examination reports for the 

depository institution subsidiaries, a copy of the transmittal letter communicating the ratings to 
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the company, information related to relevant System surveillance results, and memoranda 

supporting any on-site review conducted. A meeting between Reserve Bank staff and the 

company’s board of directors to communicate findings is not required, but should be conducted 

when warranted by supervisory concerns. 

Complex Holding Companies 

• An off-site review should be conducted upon receipt of the lead depository institution 

examination report or an updated rating from the primary supervisor using surveillance 

results and relevant supervisory and financial information. If the information obtained 

off-site is not sufficient for the Reserve Bank to determine the overall condition of the 

company and to assign a complete RFI rating, the Reserve Bank should conduct an onsite review of the company. 

• Any on-site review should be targeted at those areas where additional information or 

analysis is needed to assign a complete supervisory rating.

Noncomplex Holding Companies 

• If all subsidiary depository institutions have a management component rating and a 

composite supervisory rating of “1” or “2” and no material holding company issues are 

otherwise indicated, the Reserve Bank should assign only a composite rating and risk 

management rating to the holding company based on the ratings of the lead depository 

institution. 

• If one or more subsidiary depository institutions have a management component rating or 

a composite supervisory rating of “3,” “4,” or “5” or a material holding company issue is 

otherwise indicated, an off-site review should be completed upon receipt of the lead 

depository institution examination report or an updated rating from the primary 

supervisor using surveillance results and relevant supervisory and financial 

information. If the information obtained off-site is not sufficient for the Reserve Bank to 

determine the overall condition of the company and to assign a risk management rating 

and a composite rating, contact the holding company to obtain more information. 

• Any off-site review should be targeted, as appropriate, at those areas where additional 

information or analysis is needed to develop the risk management and composite ratings. 

Surveillance Guidelines for Holding Companies with Less Than $3 Billion in Total 

Consolidated Assets

Upon the receipt and finalization of FR Y-9 data, Board surveillance staff provides each 

Reserve Bank with the results of the small holding company surveillance screens on a quarterly 

basis. Reserve Banks should evaluate this information and make a determination as to any

appropriate supervisory actions within 45 days of receipt. In doing so, Reserve Banks should 

determine whether the screen results reveal that the holding company or its affiliates could pose 

or exacerbate a material risk to a depository institution subsidiary. If the screen results reveal no 

basis for a significant concern, no further action is needed. Reserve Banks should also review 

the quarterly FR Y-8 data for transactions between an insured depository institution and its 

affiliates that are subject to Section 23A of the Federal Reserve Act and Regulation W. Reserve 

Banks should document their FR Y-8 reviews and follow up on any potential violations. 

If a Reserve Bank determines that the results of the quarterly surveillance review reveal 

the potential for material risk to a depository institution, the Reserve Bank should take 
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appropriate follow-up action within 90 days after initially receiving the surveillance results from 

the Board. Follow-up actions may include: 

• Contacting the holding company to obtain more information; 

• Requesting from the holding company a corrective action plan; 

• Implementing heightened monitoring procedures; or 

• Updating the holding company’s complexity designation. 

If an on-site review is recommended for a complex holding company, the review should 

commence within 90 days of the Reserve Bank’s initial notification of the surveillance results 

from the Board. The ratings assigned as a result of the on-site review should be promptly 

entered into NED and communicated to the company, Board staff, and appropriate state and 

federal regulatory authorities within 120 days of that notification. 

Questions and Contact Information

 Questions or comments concerning the inspection activities of holding companies may be 

sent via the Board’s public website.4

Michael S. Gibson

Director

Division of Supervision and Regulation

Attachment: 

• Small Holding Company Inspection Scope and Frequency (Revised December 16, 2022) 

Supersedes: 

• SR letter 02-1, “Revisions to Bank Holding Company Supervision Procedures for 

Organizations with Total Consolidated Assets of $5 Billion or Less” (Inactive) 

Cross-References: 

• SR letter 22-8, “Framework for the Supervision of Insurance Organizations” 

• SR letter 19-4 / CA letter 19-3, “Supervisory Rating Systems for Holding Companies 

with Consolidated Assets Less Than $100 Billion” 

• SR letter 13-10, “Format for Safety-and-Soundness Reports of Examination and 

Inspection for Community State Member Banks and Holding Companies Rated 

Composite ‘4’ or ‘5’” (Inactive) 

• SR letter 13-8 / CA letter 13-5, “Extension of the Use of Indicative Ratings for Savings 

and Loan Holding Companies” (Inactive) 

• SR letter 11-11 / CA letter 11-5, “Supervision of Savings and Loan Holding Companies 

(SLHCs)” (Inactive) 

• SR letter 04-18, “Bank Holding Company Rating System” (Inactive) 

4

 See http://www.federalreserve.gov/apps/contactus/feedback.aspx. 
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Attachment SR letter 13-21 Revised: December 16, 2022

Asset Size

Complexity3 Complex Noncomplex Complex Noncomplex

Type of 

Rating Complete RFI rating Complete RFI rating Complete RFI rating

Risk management rating and composite ratings 

only

Rating of 1, 

2, or 3

Rating of 4, 

or 5

Full scope on-site inspection is expected 

annually. 

Additional targeted follow-up may be needed in 

response to off-site surveillance program results.

Off-site targeted inspection is expected every 

two years.

 

Additional targeted follow-up may be needed in 

response to off-site surveillance program results.

Off-site reviews culminate in the issuance of a 

transmittal letter communicating the ratings to the 

company. Information in the transmittal letter 

review focuses on parent and nonbanking 

activities. Examiners also rely on the primary 

regulator’s work on the subsidiary insured 

depository institution and relevant surveillance 

results. 

A letter-format report template has been developed for supervision staff completing reports for holding companies that receive a complete RFI 

rating and have a composite rating of 1, 2, or 3. See the Consolidated Supervision of Regional Holding Companies section of the Bank Holding 

Company Supervision Manual for more information.

Letter-format report of inspection may be prepared as described in the Community Bank Supervision Process section of the Commercial Bank 

Examination Manual. 

3.) Complexity factors include the size and structure of the company; the extent of intercompany transactions between insured depository institution subsidiaries and the holding company or uninsured subsidiaries of the holding company; the risk, 

scale and complexity of activities of any nondepository subs; and the degree of leverage at the holding company, including the extent of its debt outstanding to the public. Other factors are also noted in the text of SR letter 13-21 "Inspection Frequency 

and Scope Expectations for Bank Holding Companies and Savings and Loan Holding Companies that are Community Banking Organizations."

2.) Full-scope inspection covers all areas of interest to the Federal Reserve in depth; targeted inspections will focus intensely on one or two activities. See the Bank Holding Company Supervision Manual for more information.

1.) The scope and frequency expectations listed above are applicable to bank holding companies and savings and loan holding companies.

Small Holding Company Inspection Scope and Frequency1 Scope and Frequency

2 Report Expectations

Off-site review should be conducted 

upon receipt of the lead DI exam report 

or an updated rating from the primary 

supervisor using surveillance results and 

relevant supervisory and financial 

information. If the information obtained offsite is not sufficient for the Reserve Bank 

to determine the overall condition of the 

company and to assign a complete RFI 

rating, the Reserve Bank should conduct 

an on-site review of the company. 

Any on-site review should be targeted at 

those areas where additional information 

or analysis is needed to assign a complete 

supervisory rating.

If all subsidiary DIs have a management 

component rating and a composite supervisory 

rating of “1” or “2” and no material holding 

company issues are otherwise indicated, the 

Reserve Bank should assign only a composite 

rating and risk management rating to the 

holding company based on the ratings of the 

lead DI.

If one or more subsidiary DIs have a management 

component rating or a composite supervisory 

rating of “3,” “4,” or “5” or a material holding 

company issue is otherwise indicated, an off-site 

review is expected upon receipt of the lead DI 

exam report or an updated rating from the 

primary supervisor using surveillance results and 

relevant supervisory and financial information. If 

the information obtained off-site is not sufficient for 

the Reserve Bank to determine the overall 

condition of the company and to assign a risk 

management rating and a composite rating, 

contact the holding company to obtain more 

information.

Rating of 3, 

4, or 5

Full scope on-site inspection is expected 

annually. 

If the primary supervisor has conducted an interim 

examination or changed the rating at the lead 

depository institution (DI), the Reserve Bank should 

conduct an additional targeted inspection and 

update the rating if necessary. The targeted 

inspection may be conducted off-site and should 

start within 60 days of receiving the examination 

report for the lead DI. 

Additional targeted follow-up may be needed in 

response to off-site surveillance program results.

Full-scope off-site inspection is expected 

annually. 

If the primary supervisor has conducted an 

interim examination or changed the rating at the 

lead DI, the Reserve Bank staff should conduct 

an additional targeted inspection and update the 

rating if necessary. This targeted inspection may 

be conducted off-site and should start within 60 

days of receiving the examination report for the 

lead DI.

Additional targeted follow-up may be needed in 

response to off-site surveillance program results.

Rating of 1 

or 2

$3 Billion to Less Than $10 Billion Less than $3 Billion