For each of the last two premium cycles, for example, the FDIC has flagged some 200 1A-rated institutions for further supervisory review. For some of these banks, the result may be an insurance downgrade. The screens used include financial ratios that can be indicative of a high-risk appetite, such as concentrations, growth, high asset yields, and the like. This screening and review process is an interagency effort that will evolve, and will benefit from the input of all interested persons. Second, there may be ways to enhance our use of supervisory information.
Examiners have a wealth of information about risk-management practices of insured institutions.
To some extent this is already being done, through the various risk matrices and other risk-focused supervisory approaches used by individual agencies. Refining the use of financial and supervisory information would be a way of building on the underlying pricing philosophy and procedures we already have in place. We should also be willing to consider enhancing existing procedures with new conceptual approaches, specifically a more systematic use of information generated by the market. Here, I would like to return to one of the questions I raised earlier. The announcement last week of the newly created Working Group on Public Disclosure is an exciting development.