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Safety & Soundness Supervision

A key responsibility of the Federal Reserve banks is to regulate and supervise banking operations within their respective districts. Here in the Eighth District, financial institutions receive regular, risk-appropriate safety and soundness exams. During these exams, our examiners assess a bank's financial condition, as well as its risk management practices. They review the bank's overall balance sheet and the practices it has in place to monitor, identify and control risks. Compliance with federal and state regulations is also reviewed. Upon the completion of its examination, the financial institution receives a rating that reflects its current condition. The exam also addresses any supervisory concerns that might warrant further attention.

Information Technology

All financial institutions use technology regardless of their size and product/service complexity in their daily operational environments. Information Technology examinations are conducted to ensure our banks evaluate and manage the overall business and cyber risk associated with computer hardware, core banking software, software applications/programs, sensitive customer information, email and vendor relationships.

Trust

Financial institutions with trust powers have a duty to adhere to their contracted fiduciary responsibilities. Our examiners review the trust activities of these financial institutions to ensure they adhere to their fundamental fiduciary duties.

Examiners consider a variety of issues when determining the effectiveness in which a financial institution carries out these duties. They assess the following areas: management, operations, internal controls and audit, earnings performance, compliance and asset management.

How the regulation and supervision process works

When Congress passes a law that impacts the financial industry, the Federal Reserve, sometimes in cooperation with other federal agencies -- often drafts regulations that determine how the law will be implemented.

    Regulation

  • 1. Congress
    votes to approve legislation; President signs into law

  • 2. Federal Reserve
    drafts, proposes and invites public comment on regulations that specify how laws are implemented

  • 3. American Public
    institutions, individuals and others review proposed regulations and respond with comments and suggestions

  • 4. Federal Reserve
    considers public input, finalizes regulations, and issues and disseminates final regulations publicly, including rationale for actions

    Supervision

  • 5. Federal Reserve
    issues and disseminates publicly the procedures Reserve Bank examiners will use to evaluate institutions' compliance with laws and regulations

  • 6. Federal Reserve Banks
    train examiners to evaluate institutions' compliance with regulations

  • 7. Federal Reserve Examiners
    conduct on- and off-site examinations and inspections of regulated institutions to determine their compliance with regulations

  • 8. Regulated Institutions
    implement internal practices to ensure that they are in compliance with regulations