[Federal Register Volume 86, Number 153 (Thursday, August 12, 2021)]
[Notices]
[Pages 44364-44366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17230]


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FEDERAL DEPOSIT INSURANCE CORPORATION

RIN 3064-ZA27


Request for Information on the Federal Deposit Insurance 
Corporation's Supervisory Approach to Examinations During the Pandemic

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Notice and request for information (RFI).

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SUMMARY: The FDIC is seeking information and comments from financial 
institutions for which the FDIC is the primary Federal regulator 
regarding the FDIC's supervisory approach to examinations during the 
pandemic, including on-site and off-site activities, use of technology, 
and communication methods.

DATES: Comments must be received by October 12, 2021.

ADDRESSES: You may submit comments, identified by RIN 3064-ZA27, by any 
of the following methods:
    <bullet> Agency website: https://www.fdic.gov/resources/regulations/federal-register-publications/. Follow the instructions for 
submitting comments on the Agency website.
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#7c1f1311111912080f3c1a18151f521b130a"><span class="__cf_email__" data-cfemail="c9aaa6a4a4aca7bdba89afada0aae7aea6bf">[email protected]</span></a>. Include RIN 3064-ZA27 in the 
subject line of the message.
    <bullet> Mail: James P. Sheesley, Assistant Executive Secretary, 
Attention: Comments RIN 3064-ZA27, Federal Deposit Insurance 
Corporation, 550 17th Street NW, Washington, DC 20429.
    <bullet> Hand Delivery/Courier: Comments may be hand-delivered to 
the guard station at the rear of the 550 17th Street NW building 
(located on F Street) on business days between 7:00 a.m. and 5:00 p.m., 
EST.
    <bullet> Public Inspection: All comments received will be posted 
without change to https://www.fdic.gov/resources/regulations/federal-register-publications/, including any personal information provided, 
for public inspection. Paper copies of public comments may be ordered 
from the FDIC Public Information Center, 3501 North Fairfax Drive, Room 
E-1002, Arlington, VA 22226, or by telephone at 877-275-3342 or 703-
562-2200.

FOR FURTHER INFORMATION CONTACT: Rae-Ann Miller, Senior Deputy 
Director, Division of Risk Management Supervision, <a href="/cdn-cgi/l/email-protection#ef9d828683838a9daf898b868cc1888099"><span class="__cf_email__" data-cfemail="e3918e8a8f8f8691a385878a80cd848c95">[email protected]</span></a>, 
202-898-3898; Michelle L. Cahill, Acting Senior Deputy Director, 
Division of Depositor and Consumer Protection; Bill Piervincenzi, 
Supervisory Counsel, Supervision, Legislation and Enforcement Branch, 
Legal Division, Federal Deposit Insurance Corporation, 550 17th Street 
NW, Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

Background Information

    The FDIC has been performing on-site examinations of FDIC-
supervised institutions since 1934, during which examiners review 
institutions' records and meet with institution management and Boards 
of Directors to discuss findings. Safety and soundness examinations are 
conducted in accordance with Section 10(d) of the Federal Deposit 
Insurance Act (FDI Act). Section 10(d) requires the appropriate federal 
banking agency for an insured depository institution to conduct a full-
scope, on-site examination at least once every 12 months, but permits a 
longer cycle--at least once every 18 months--for insured depository 
institutions that meet certain criteria.\1\
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    \1\ See Section 10(b) and 10(d) of the Federal Deposit Insurance 
Act. (12 U.S.C. 1820). See also 83 FR 67033 (December 28, 2018).
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    The FDIC also performs consumer compliance and Community 
Reinvestment Act (CRA) examinations to promote adherence to federal 
consumer protection and fair lending laws and regulations and the CRA. 
FDIC policy requires full-scope consumer compliance examinations to be 
conducted every 12 to 36 months depending on certain criteria such as 
an insured depository institution's total assets and prior consumer 
compliance and CRA examination ratings. The Gramm-Leach-Bliley Act 
established intervals between CRA examinations for insured depository 
institutions with assets at certain levels and based on specific 
criteria.
    For a number of years prior to the Coronavirus Disease 2019 (COVID-
19) pandemic, the FDIC has been leveraging advances in technology to 
allow examiners to conduct certain examination functions off-site that 
were previously performed on-site. The FDIC believes this leveraging of 
technology has improved the efficiencies in the examination process and 
helped reduce burden on the institution, enabling examiners to be more 
targeted and risk focused in the work performed on-site.
    On March 13, 2020, by Proclamation 9994, the President of the 
United States

[[Page 44365]]

declared a National Emergency concerning the COVID-19 pandemic. The 
next day, the FDIC Chairman issued a mandatory telework order for all 
employees, consistent with the FDIC's Continuity of Operations Plan and 
its continued balancing of risks and mitigations under the FDIC 
Pandemic Influenza Plan. This telework order provided, among other 
things, that unless otherwise directed, all examination activity of 
FDIC-supervised institutions to be conducted off-site.
    By leveraging prior efforts and existing technology systems, 
examiners have continued the FDIC examination program despite pandemic 
conditions.
    In light of the experience of the last year, and as we look ahead, 
the FDIC wants to leverage what worked well in the off-site examination 
context to see what lessons we can learn about streamlining and 
improving the efficiency and efficacy of our examinations as we plan 
for future examinations.

Off-Site/On-Site Procedures

    Prior to the pandemic, the FDIC established the following 
instructions for examiners regarding expectations for off-site and on-
site examination activities. The FDIC is the in the process of 
reviewing those instructions and identifying opportunities to enhance 
them by incorporating lessons learned from the pandemic.

Safety and Soundness

    Each safety and soundness examination has an on-site component, 
consistent with the requirements of Section 10(d) of the Federal 
Deposit Insurance Act. Per the FDIC's Risk Management Supervision (RMS) 
Manual of Examination Policies, Section 21.1 Examination Planning,\2\ 
during the examination planning stage, the FDIC Examiner-in-Charge 
(EIC) is expected to identify examination activities that are 
appropriate for off-site review and those that are better suited for 
on-site review after considering the institution's business model, risk 
profile, and complexity.
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    \2\ https://www.fdic.gov/regulations/safety/manual/section21-1.pdf.
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    The determination of the extent of off-site or on-site for each 
examination activity depends, in part, on the type and extent of 
electronic information available and whether the activity requires 
interaction with institution personnel.
    Examiners are encouraged to conduct a number of activities off-
site, such as:
    <bullet> Reviewing historical financial and supervisory data and 
performing initial analysis of capital, earnings, liquidity, and 
sensitivity to market risk; and
    <bullet> Reviewing the institution's written policies and 
procedures.
    Regarding credit review, examiners may conduct the following types 
of actions off-site:
    <bullet> Reviewing loan policies; and
    <bullet> Reviewing performance report ratio data and management 
reports.
    Examiners are currently expected to conduct certain activities on-
site:
    <bullet> Conducting in-depth discussions with management, including 
exit meetings; and
    <bullet> Observing and assessing institution operations and 
internal controls.

Consumer Compliance and CRA

    FDIC compliance and CRA examinations primarily involve three 
stages: pre-examination planning; review and analysis, both off-site 
and on-site; and communicating findings to institution management. Pre-
examination planning is generally completed off-site in advance of the 
examination start date.
    The extent to which consumer compliance and CRA examinations are 
conducted off-site varies. Examiners generally consider conducting 
certain examination activities off-site to promote efficient and 
effective examinations, and to minimize disruptions to an institution's 
normal business activities; other examination activities are more 
efficiently and effectively conducted on-site. For example, consumer 
compliance staff have found that, generally, it is more efficient to 
perform robust transaction testing on-site. In addition, consistent and 
open communication benefits from in-person meetings with institution 
management.

FDIC Use of Technology

    The FDIC regularly evaluates and implements technology and process 
changes to improve regulatory effectiveness and efficiency. Some 
examples of technology improvements include:
    <bullet> File exchange: The FDIC has many systems that permit 
financial institutions to provide electronic documents to the FDIC on a 
secure basis.
    <bullet> Interactive software: The FDIC has been able to leverage 
technology to collaborate during examinations with other regulators as 
well as bankers.

Request for Comments From Interested Parties

    The FDIC is issuing this RFI seeking feedback and comments from 
FDIC-supervised financial institutions regarding the FDIC's supervisory 
approach to examinations during the pandemic, including the impact of 
off-site activities on institution operations, the effectiveness of 
technology used to carry out off-site activities, and the effectiveness 
of communication methods used to support off-site activities. 
Specifically, the FDIC is seeking comment on what worked well in the 
off-site examination context to inform plans for future examinations, 
consistent with applicable law and the purpose of examinations.
    The FDIC encourages comments from financial institutions for which 
the FDIC is the primary regulator. The FDIC also welcomes comments from 
other interested members of the public, including, but not limited to, 
other financial institutions or companies, individual depositors and 
consumers, consumer groups, trade associations, and others.

Suggested Topics for Commenters

On-Site and Off-Site Activities

    1. In your experience, what FDIC examination activities have been 
best adapted to completion on an off-site basis? Please explain, 
including why these activities are performed best or are most effective 
using an off-site approach.
    2. In your experience, what FDIC examination activities have not 
been as well suited to completion on an off-site basis? Please explain, 
including why these activities are best suited for completion on or are 
most effective using an on-site approach.
    3. What criteria are useful in determining FDIC examination 
activities best suited for completion on either an off-site or on-site 
basis? Please explain.

Use of Technology

    4. In your experience, what FDIC technologies used in conjunction 
with off-site examination activities have worked well? Please explain.
    5. In your experience, what FDIC technologies used in conjunction 
with off-site examination activities could be improved? Please explain.
    6. What new or emerging technologies would support additional off-
site examination activities? Please explain, including any potential 
impediments to adoption or deployment.

Communication Methods

    7. What communication methods used during FDIC off-site 
examinations worked well? Please explain.
    8. What communication methods used during FDIC off-site 
examinations could be improved? Please explain.

[[Page 44366]]

    9. Should the FDIC continue to use secure email as an alternative 
to hardcopy mail, including when providing outgoing supervisory 
correspondence? Please explain.

Federal Deposit Insurance Corporation.
    Dated at Washington, DC, on August 5, 2021.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2021-17230 Filed 8-11-21; 8:45 am]
BILLING CODE 6714-01-P


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