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Board Report:  August 31, 2012

Audit of the Small Community Bank Examination Process


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  • Report Summary

  • Full Report:


On February 10, 2012, we received a request from the Chairman of the Senate Committee on Banking, Housing, and Urban Affairs to review the Board's examination process for small community banks, including examination timeliness and how the Board ensures consistency in the administration of examinations throughout the Federal Reserve System. We also reviewed the ability of Board-regulated institutions to question examination results through the Federal Reserve System's Ombudsman program or other appeals processes and the frequency and results of examination appeals.

We found that the Board's examination oversight includes Federal Reserve System-wide supervision and communication, detailed examiner guidance, training, and quality assurance. This structure is designed to ensure consistency of state member bank examinations throughout the Federal Reserve System. We found that, generally, Reserve Banks issued examination reports within the time frame required by the Board's Commercial Bank Examination Manual. We also found that all 12 Reserve Banks have established appeals policies that follow Board guidance.

Our report contained one recommendation designed to improve the reliability of the data in the Board's National Examination Data System database. We recommended that the Director of the Board's Division of Banking Supervision and Regulation (BS&R) improve controls for verifying the accuracy of the data entered into the National Examination Data System. The Director of BS&R agreed with the summary conclusions in the report and stated that BS&R had initiated a Federal Reserve System-wide effort to strengthen the examination database management reviews.