FRB Richmond did not retain the e-mails of two retired FRB Richmond officials responsible for supervising the Reserve Bank's supervisory team at Waccamaw from 2008 through April 2011. Supervision is a delegated function performed by the Reserve Banks on behalf of the Board. In this instance, we confirmed that FRB Richmond does not have its own policies governing records retention, and it follows the Board's Records Retention and Disposition Schedule. This schedule requires supervisory records, including e-mails, to be retained for five years. However, interviewees from FRB Richmond Information Technology (IT) indicated that the Reserve Bank retains e-mails of former employees for two months.14 The absence of these records created a scope limitation for our evaluation, which impaired our ability to fully assess the circumstances surrounding the vetting of the capital-raise transaction.
As part of our review, we requested the e-mails of certain FRB Richmond officials. To obtain the e-mails, we met with FRB Richmond IT and the Federal Reserve Bank of Philadelphia (FRB Philadelphia) Groupware Leadership Center. FRB Richmond IT provides for and supports the technological needs of all FRB Richmond staff, and the FRB Philadelphia Groupware Leadership Center coordinates and oversees the planning, implementation, and functional enhancement of the Federal Reserve System's enterprise collaboration and messaging services and provides central support services.
During our review period, FRB Richmond followed the Board Records Retention and Disposition Schedule, which requires that supervisory records, including e-mails, be retained for five years. After the five-year retention period, records can be destroyed when no longer needed for administrative purposes. Our review of FRB Richmond e-mails revealed that FRB Richmond IT did not retain, for the required period of time, the e-mails for two retired senior FRB Richmond officials who supervised Waccamaw from 2008 through April 2011.
An FRB Richmond IT supervisor stated that FRB Richmond's standard practice is to retain e-mails for two months following an employee's departure, unless directed otherwise by senior management. As a separate process, the FRB Philadelphia Groupware Leadership Center also retains e-mails for approximately two weeks after an employee leaves a Reserve Bank. FRB Richmond's practice of purging the e-mails of senior officials directly involved in supervising state member banks did not comply with the Board's records retention schedule. Both officials supervised the examination team at Waccamaw and served as points of contact for Waccamaw management. Our inability to access these records created a scope limitation for our evaluation, which impacted our ability to fully assess the events surrounding the vetting of the capital-raise transaction.
In February 2013, the Board and several Reserve Banks performed a self-assessment to evaluate the management of Board records for supervision and regulation activities. The objectives of the assessment included (1) creating a standard methodology for Reserve Banks to evaluate their supervision and regulation records management program and (2) informing the Federal Reserve System about supervision and regulation records management by documenting the results. FRB Richmond participated in the records management self-assessment, assessing its compliance with the Board's records retention policy and its internal processes, policies, and procedures for records management. FRB Richmond's assessment noted several opportunities for improvements, which included developing new policies, implementing a new document management system, establishing organizational accountabilities for records management responsibilities, and increasing staff education and training. We intend to conduct future follow-up activities to assess the extent to which the actions described in this section are responsive to the concerns raised in this finding.
We recommend that the Director of the Division of Banking Supervision and Regulation
The Director of the Division of Banking Supervision and Regulation agreed with our recommendations. In his response to recommendations 1 and 2, the Director stated that Banking Supervision and Regulation staff concurred that supervisory records must be retained in accordance with the Board Records Retention and Disposition Schedule and will continue to reinforce with Reserve Banks the importance of preserving departing examination staff members' supervisory records in accordance with Board policy. Banking Supervision and Regulation staff intend to work with other Board staff to ensure compliance with Board policy and to assess the extent to which the actions taken are responsive to our findings.
The actions described by the Director of Banking Supervision and Regulation appear to be responsive to our recommendations. We plan to follow up on the Board's actions to ensure that the recommendations are fully addressed.
