Risk Management Manual of Examination Policies - FDIC

REPORT OF EXAMINATION INSTRUCTIONS Section 16.1
exists. When applicable, this summary should be the first comment after the summary comment. However, the
exact order should depend on its relative importance.
Reminder: Only the FDIC's Board of Directors is authorized to make a finding of "unsafe or unsound banking
practices." Therefore, do not use the statutory words "unsafe or unsound" in comments concerning management's
practices. However, certain factual events allow examiners to note that an institution is in an unsafe and unsound
condition. Synonyms and other descriptive terms such as "undesirable, unacceptable, or objectionable" are
permissible when commenting on unsafe and unsound practices.
Prompt Corrective Action - Present a summary of Prompt Corrective Action (PCA) provisions derived from the
detailed analysis presented on the Compliance with Enforcement Actions page.
CAMELS Components
Each CAMELS component must be addressed on the ECC page. Address in order of priority and risk, although
some latitude is allowed to facilitate clear and effective communication. After each component heading, indicate the
rating assigned (e.g. Capital – 1). The narrative for each component must include an assessment and support of the
rating assigned. If applicable, examiner recommendations and management responses would also be detailed here.
When examination recommendations are included, rationale should be provided. Refer to the Basic Examination
Concepts and Guidelines section of the DSC Risk Management Manual of Examination Policies (Manual) for rating
definitions and specific items to consider when evaluating each component. Also refer to other related sections of
the Manual when analyzing component areas.
The length and level of comment detail should be consistent with the rating assigned; that is, generally brief
comments for 1- and 2-rated components and progressively more detailed for 3-, 4-, and 5-rated components. As the
commentary expands to properly discuss the 3-, 4-, or 5-rated components, it is especially important that examiners
use effective organization and presentation techniques, so that examination findings and recommendations are
communicated clearly. Subheadings and bullet points are encouraged to improve readability. Spacing and modified
text attributes (bold, italics, etc.) should be used to draw attention to management responses, as appropriate. In
particularly lengthy comments on a CAMELS component, it may be helpful to begin the narrative with a concise
summary or bullet points of the major issues to be covered under that component.
Disposition of Assets Classified Loss
When appropriate, this would be discussed within the Asset Quality segment of the ECC page.
Note: Except in formal cases under Section 8 of the FDI Act, make a request for the institution to charge off a
portion of loans classified Doubtful only when State law or policy requires. Follow guidance contained in the
Securities and Derivatives section of the Manual when securities are adversely classified Doubtful or Loss. Other
asset categories against which valuation reserves are not normally maintained require a judgment regarding a
recommendation for charge-off.
Note: Comments should not include recommendations regarding acquisition or disposition of specific assets.
Specialty Examinations
Concurrent specialty examinations submitted under separate cover (Information Technology (IT),
Municipal/Government Securities Dealers, Transfer Agent, or Trust) – Unless the following exception applies, do
not reference these examinations on the ECC page. Exception: Material weaknesses disclosed in these separate,
concurrent, specialty examinations may be summarized on the ECC page, or, in such cases, the reader should at
minimum be instructed to refer to the separate specialty examination Report. Such summaries or references should
generally be made as the last topic prior to the “Meetings with Management and the Board of Directors” discussion,
unless the significance of the findings warrants higher priority.
DSC Risk Management Manual of Examination Policies 16.1-7 Report of Examination Instructions (12-04)
Federal Deposit Insurance Corporation