Risk Management Manual of Examination Policies - FDIC

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SUSPICIOUS ACTIVITY AND CRIMINAL VIOLATIONS Section 10.1 proceeds, income, or other funds derived from such property, for any purpose other than to meet actual, reasonable, and necessary expenses of the property shall be fined or imprisoned. Identity Theft Penalty Enhancement Act Public Law 108- 275 This law enhances the penalties for individuals who knowingly transfer, possess, or use the means of identification of another person to commit a serious Federal predicate offense including various portions of United States Code relating to banking. Suspicious Activity and Criminal Violations (12-04) 10.1-10 DSC Risk Management Manual of Examination Policies Federal Deposit Insurance Corporation
INTERNATIONAL BANKING Section 11.1 INTRODUCTION This section of the Manual of Examination Policies looks at international banking from the broadest of perspectives. It begins by addressing the concept of country risk, including transfer risk, which is perhaps the single overarching risk of all international banking operations and impacts all international activities. This section then discusses international activities of U.S. banks, including foreign lending, investments, placements, funds management, and foreign exchange, which are the most significant international products and services offered by financial institutions. Within the foreign lending component, a significant amount of attention is given to trade finance, which is a particularly important segment of U.S. banks’ international credit exposures and an especially important part of cross-border lending of state nonmember banks. Foreign exchange activities, on the other hand, are very specialized and only relatively few FDIC-supervised institutions engage in foreign exchange to a significant degree. The section then turns to international banking from a different point of view. It discusses how U.S. banks may be owned by or otherwise associated with foreign entities, including foreign banks. Supervision of foreign banking organizations (FBOs) is a primary part of this latter discussion. Also discussed are parallel-owned banking organizations (PBOs), where there is common ownership of domestic and foreign banks outside of a bank holding company structure (i.e. similar to chain banks). This section concludes with discussions of certain laws relevant to international banking and a glossary of international banking terms. This section has been geared to meet the basic needs of an FDIC examiner encountering international banking. Examiners needing more extensive guidance may wish to refer to examination manuals of the Federal Reserve or Comptroller of the Currency. The International Section in Washington may also have additional resources at its disposal to assist with unusual situations. Overview of U.S. Bank International Activity The last few decades have witnessed distinct growth in the ability of firms and countries to access the global capital markets. During this time span, access to capital (bank credit, equity and/or fixed income bond issuance) has become more abundant and competitive. However, failure to price, select, and manage international risks, both on- and off-balance sheet, has resulted in well publicized reductions in profitability, operating losses, and sizable capital charges, particularly during the late 1990s through 2001 (Asian Crisis 1997; as well as, Russian-1998, Ecuador -1999, and Argentine-2001 sovereign defaults). While the number of U.S. banks significantly involved in international finance is relatively small, certain large banks have notable volumes. Moreover, smaller banks have also allocated significant capital and resources to international banking in select markets. Given the extent of risk introduced by a sovereign country, particularly an emerging market economy, it is necessary that the examiner understand and review international activities when assessing a bank's overall condition. The international operation of a bank may be conducted in a separate division or department even though many of the activities parallel those performed elsewhere in the bank. Large banks typically operate an international division, which may include a network of foreign branches, subsidiaries, and affiliates. Smaller banks or those with limited international activity often use only a separate department in conjunction with a network of foreign correspondent banks. In either case, the international section will usually have its own management and staff, as well as distinct accounting systems and controls. Examination Objectives The objectives of examining an international department are basically the same as those of examining other areas of the bank. However, some modification of examination techniques and procedures may be required because of the specialized nature of international banking. Documentation and accounting procedures for international operations may differ from domestic banking, and the department may operate under separate laws and regulations. The examination of the international department is usually conducted concurrently with the commercial examination of the bank. Pre-examination planning should be used to determine the scope of the examination and personnel requirements. A good starting point is to review a bank's most recent Uniform Bank Performance Report (UBPR), Reports of Condition (for information concerning onbalance sheet assets and liabilities - foreign debt securities RC-B(6b); bankers’ acceptances RC 9&18; loans to foreign banks RC-C2; or off-balance sheet instruments, including letters of credit RC-L4 and OTC derivatives RC- L 12) and examination reports. These reports will indicate the existence of an international department, foreign branches or subsidiaries, the volume of international activity, and the nature of the bank's international business. Review of the bank’s most current 009, 009a, and 019 Country Exposure Reports can also assist in determining DSC Risk Management Manual of Examination Policies 11.1-1 International Banking (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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LOANS Section 3.2 individual apprai
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LOANS Section 3.2 controls over its
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LOANS Section 3.2 consistent with t
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LOANS Section 3.2 such funds, the m
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LOANS Section 3.2 security interest
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LOANS Section 3.2 unambiguous terms
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LOANS Section 3.2 Trustees are sele
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LOANS Section 3.2 be valid but cert
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LOANS Section 3.2 Overview of the S
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LOANS Section 3.2 Although some ins
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LOANS Section 3.2 • Portfolio gro
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LOANS Section 3.2 pricing decisions
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LOANS Section 3.2 trends, condition
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LOANS Section 3.2 provide additiona
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SECURITIES AND DERIVATIVES Section
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CASH AND DUE FROM BANKS Section 3.4
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CASH AND DUE FROM BANKS Section 3.4
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PREMISES AND EQUIPMENT Section 3.5
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PREMISES AND EQUIPMENT Section 3.5
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OTHER REAL ESTATE Section 3.6 Under
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OTHER ASSETS AND LIABILITIES Sectio
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OFF-BALANCE SHEET ACTIVITIES Sectio
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MANAGEMENT Section 4.1 INTRODUCTION
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MANAGEMENT Section 4.1 consequently
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MANAGEMENT Section 4.1 overdue, ren
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MANAGEMENT Section 4.1 money launde
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MANAGEMENT Section 4.1 management l
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MANAGEMENT Section 4.1 • An adequ
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MANAGEMENT Section 4.1 • Troubled
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MANAGEMENT Section 4.1 management i
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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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Page 319 and 320: BANK SECRECY ACT, ANTI-MONEY LAUNDE
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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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