Risk Management Manual of Examination Policies - FDIC

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SECURITIES AND DERIVATIVES Section 3.3 FAS 140 Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities (Effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001) FAS 138 Accounting for Certain Derivative Instruments and Certain Hedging Activities-an amendment of FASB Statement No. 133 FAS 134 Accounting for Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise FAS 115 Accounting for Certain Investments in Debt and Equity Securities FAS 107 Disclosures About Fair Value of Financial Instruments FAS 65 Accounting for Certain Mortgage Banking Activities FAS 91 Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases FAS 52 Foreign Currency Translation FIN-41 Offsetting of Amounts Related to Certain Repurchase and Reverse Repurchase Agreements FIN-39 Offsetting of Amounts Related to Certain Contracts FTB 94-1 Application of Statement 115 to Debt Securities Restructured in a Troubled Debt Restructuring FTB 87-3 Accounting for Mortgage Servicing Fees and Rights FTB 79-19 Investor’s Accounting for Unrealized Losses on Marketable Securities Owned by an Equity Method Investee PB 4 Accounting for Foreign Debt/Equity Swaps SOP 90-3 Definition of the Term “Substantially the Same” for Holders of Debt Instruments, as Used in Certain Audit Guides and a Statement of Position DSC Risk Management Manual of Examination Policies 3.3-24 Securities and Derivatives (12-04) Federal Deposit Insurance Corporation
CASH AND DUE FROM BANKS Section 3.4 TYPES OF ACCOUNTS Cash accounts include U.S. and foreign currency and coin on hand or in transit, clearings, and cash items. The phrase “due from banks” is used to describe bank assets that consist of demand and time deposits maintained in other banks to facilitate the transfer of funds. Cash Every bank must maintain a certain amount of U.S. and/or foreign currency and coin on hand. To avoid having excess nonearning assets and to minimize exposure to misappropriation and robbery, each bank should establish a policy to maintain cash balances at the minimum levels necessary to serve its customers. The amount will vary from bank to bank depending on the anticipated needs of customers, with a reasonable allowance made for unusual demands. Part 326 of the FDIC Rules and Regulations requires that procedures for the safekeeping of currency be established. Clearings Clearings are checks, drafts, notes and other items a bank has cashed or received for deposit that are drawn on other local banks, and cleared directly with them. Such items usually can be exchanged more efficiently between or among local banks than through correspondent banks or the Federal Reserve System. Many communities with two or more banks have organized formal clearinghouse associations which have adopted rules governing members in the exchange of checks. Such associations often extend those arrangements to banks in other nearby cities and towns. In most banks, clearings will be found in the department responsible for processing checks. Proof and transit were once two separate functions in a bank: proving the work (proof) and sending the out-of-town cash items for collection (transit). In recent years, many banks have combined those two functions, which may be centralized or decentralized, manual or automated, depending upon the size of the bank and the volume of transactions. However, no matter who performs the function or how large the bank, the objectives of a proof and transit system are the same: to forward items for collection so that funds are available as soon as possible; to distribute all incoming checks and deposits to their destinations; to establish whether deposit totals balance with the totals shown on deposit tickets; to prove the totals of general ledger entries and other transactions; to collect data for computing the individual customer's service charges and determining the availability of customer's funds; and to accomplish the assigned functions at the lowest possible cost. When data processing systems are in use, it is common practice to post all properly encoded debit items, regardless of whether an overdraft is created. The resulting preliminary overdraft list, together with the items charged, is then reviewed by bank employees and unapproved items are reversed and separated as bookkeepers' return items. The total of the resulting common practice is to post all properly encoded debit items, regardless of whether an overdraft is created. Cash Items Cash items are checks or other items in process of collection payable in cash upon presentation. A separate control of all such items is generally maintained on the bank's general ledger and supported by a subsidiary record of individual amounts and other pertinent data. Cash items and related records usually are in the custody of one employee at each banking office who is designated as the collection, or exchange, teller. In normal daily operations, all banks have items which are charged to demand deposits but which cannot be charged to individual accounts because of insufficient funds, no accounts, etc. Such items are commonly known return items or rejected or unposted debits and may consist of checks received in the ordinary course of business, loan payments, or other debit memos. In some banks, such items are separated and an entry is made reclassifying them to a separate asset account. Other banks do not use a separate asset account, including the items in a subsidiary control account in the individual demand deposit ledgers. In that case, the account would have a debit balance and would be credited when the bank returns the checks to their sources. Cash items not in process of collection should be included on the bank's books in an appropriate account and shown as other assets. These items are payable upon presentation but the bank has elected to accumulate them for forwarding to the payer on a periodic basis. If the items are not immediately payable in cash upon presentation, or were not paid when presented and, after a predetermined period of time, require further collection effort, they also should be included in a noncash asset account, such as "suspense accounts," and shown under "other assets." Examples are checks held to avoid overdrafts and other checks for which there are no funds for immediate payment. Many banks establish a three-day limit, after which all items not collected must automatically be transferred from "cash items" to "suspense accounts." Refer to the Other Assets section of this Manual for additional comments on cash items not in process of collection. DSC Risk Management Manual of Examination Policies 3.4-1 Cash and Due From Banks (12-04) Federal Deposit Insurance Corporation
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DSC Risk Management Manual of Exami
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INDEX Section 0.1 Policies, Procedu
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INDEX Section 0.1 Liquidity Managem
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INDEX Section 0.1 Introduction 14.1
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BASIC EXAMINATION CONCEPTS AND GUID
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CAPITAL Section 2.1 INTRODUCTION Pu
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CAPITAL Section 2.1 Interests in As
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CAPITAL Section 2.1 the holder prio
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CAPITAL Section 2.1 • Qualifying
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CAPITAL Section 2.1 application sub
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CAPITAL Section 2.1 may leave the b
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CAPITAL Section 2.1 procedures empl
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CAPITAL Section 2.1 growth and rema
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ASSET QUALITY Section 3.1 INTRODUCT
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LOANS Section 3.2 INTRODUCTION The
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LOANS Section 3.2 Qualifications of
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LOANS Section 3.2 to the ALLL), an
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LOANS Section 3.2 PORTFOLIO COMPOSI
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LOANS Section 3.2 • Require reaso
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LOANS Section 3.2 Internal Controls
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LOANS Section 3.2 continue to suppo
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LOANS Section 3.2 board of director
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LOANS Section 3.2 the institution's
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LOANS Section 3.2 such as for lives
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LOANS Section 3.2 Classification Gu
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LOANS Section 3.2 checks; terms in
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LOANS Section 3.2 • Sublicensee B
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LOANS Section 3.2 similar propertie
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LOANS Section 3.2 policies and proc
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LOANS Section 3.2 Moreover, since t
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LOANS Section 3.2 generally should
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LOANS Section 3.2 exercise control
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LOANS Section 3.2 Problems in this
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LOANS Section 3.2 that reveal other
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LOANS Section 3.2 Other loans of qu
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LOANS Section 3.2 be determined whe
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LOANS Section 3.2 time period elaps
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Page 187 and 188: INTERNAL ROUTINE AND CONTROLS Secti
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INTERNAL ROUTINE AND CONTROLS Secti
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RELATED ORGANIZATIONS Section 4.3
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RELATED ORGANIZATIONS Section 4.3 c
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RELATED ORGANIZATIONS Section 4.3 U
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RELATED ORGANIZATIONS Section 4.3 i
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RELATED ORGANIZATIONS Section 4.3 A
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RELATED ORGANIZATIONS Section 4.3 c
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RELATED ORGANIZATIONS Section 4.3 S
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RELATED ORGANIZATIONS Section 4.3 w
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RELATED ORGANIZATIONS Section 4.3 r
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RELATED ORGANIZATIONS Section 4.3 A
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FIDELITY AND OTHER INDEMNITY PROTEC
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VIOLATIONS OF LAWS AND REGULATIONS
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VIOLATIONS OF LAWS AND REGULATIONS
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MISCELLANEOUS BANKING ACTIVITIES Se
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EARNINGS Section 5.1 structure will
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EARNINGS Section 5.1 demand is low)
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EARNINGS Section 5.1 2. Certain dir
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EARNINGS Section 5.1 capital and al
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LIQUIDITY AND FUNDS MANAGEMENT Sect
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SENSITIVITY TO MARKET RISK Section
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BANK SECRECY ACT, ANTI-MONEY LAUNDE
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BANK FRAUD AND INSIDER ABUSE Sectio
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SUSPICIOUS ACTIVITY AND CRIMINAL VI
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INTERNATIONAL BANKING Section 11.1
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APPLICATIONS Section 12.1 Effective
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APPLICATIONS Section 12.1 for compa
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APPLICATIONS Section 12.1 be tantam
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APPLICATIONS Section 12.1 accept sh
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APPLICATIONS Section 12.1 consideri
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APPLICATIONS Section 12.1 accepted
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APPLICATIONS Section 12.1 The FDIC
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APPLICATIONS Section 12.1 employee
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APPLICATIONS Section 12.1 including
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APPLICATIONS Section 12.1 Branch cl
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APPLICATIONS Section 12.1 its accep
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APPLICATIONS Section 12.1 examinati
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MEMORANDUMS OF UNDERSTANDING Sectio
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CIVIL MONEY PENALTIES Section 14.1
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CMP MATRIX (Continued) Points Sugge
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FORMAL ADMINISTRATIVE ACTIONS Secti
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REPORT OF EXAMINATION INSTRUCTIONS
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BANK OF ANYTOWN ANYTOWN ANY COUNTY
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Examination Conclusions and Comment
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Risk Management Assessment 99999 1.
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Violations of Laws and Regulations
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Information Technology Assessment (
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Fiduciary Activities Assessment (Co
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Comparative Statements of Financial
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Recapitulation of Securities 99999
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Items Subject to Adverse Classifica
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Analysis of Loans Subject to Advers
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Assets with Credit Data or Collater
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Capital Calculations 99999 Tier 1 C
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Comparative Statements of Income an
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Extensions of Credit to Directors/T
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Confidential - Supervisory Section
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In-House Information Technology 999
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Directors/Trustees and Officers 999
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INTERNATIONAL REPORT PAGES AND WORK
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Analysis of the Country Exposure Ma
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International Loans, Acceptances, a
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International Loans, Acceptances, a
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Foreign Exchange Activities 99999 N
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Position Analysis - Other Currencie
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Revaluation and Income/Loss Analysi
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Policy and Procedures 99999 1. (a)
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Policy and Procedures (Continued) 9
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Audit and Internal Controls - Inter
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Parallel-Owned Banking Organization
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REPORT OF INVESTIGATION INSTRUCTION
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FDIC Report of Investigation THIS R
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Description of the Transaction INVE
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FINANCIAL HISTORY AND CONDITION Ass
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FINANCIAL HISTORY AND CONDITION (Co
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ADEQUACY OF THE CAPITAL STRUCTURE G
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ADEQUACY OF THE CAPITAL STRUCTURE (
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FUTURE EARNINGS PROSPECTS Assess th
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FUTURE EARNINGS PROSPECTS (Continue
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GENERAL CHARACTER OF THE MANAGEMENT
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IV. GENERAL CHARACTER OF THE MANAGE
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Interview Comments IV. GENERAL CHAR
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RISK TO THE FUNDS As a general matt
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VI. CONVENIENCE AND NEEDS OF THE CO
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OTHER PERTINENT INFORMATION If appl
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Source: Application for Federal Dep
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Service Continuity & Monitoring OTH
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Risk Management Manual of Examination Policies - FDIC

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