Fed Changes How It Supervises Bank Holding Companies

Effective Jan. 1, 2002, the Federal Reserve has revised its supervision program for small, healthy bank holding companies (BHCs). As a result, the Fed will redirect available resources toward both state member banks and large, complex or problem BHCs.

This new approach principally affects holding companies with less than $1 billion in assets. The most noticeable change is that all existing requirements for on-site inspections have been eliminated for small, healthy BHCs. Under most circumstances, the Fed will perform its supervision utilizing in-house information. The Fed, however, will conduct on-site inspections, full-scope or targeted, to investigate troubling issues or obtain additional information required to assess the company and assign a rating.

As always, our supervision activities will be ongoing. When the Fed receives a regulator's examination report for the BHC's lead subsidiary bank, the Fed will conduct an internal review and assign a bank holding company rating. Furthermore, the supervisory rating assigned to small "non-complex" companies has been simplified. These holding companies will receive only a composite and management rating.

The revisions also promote more flexible use of targeted or limited on-site reviews of holding companies that have consolidated assets between $1 billion and $5 billion. These reviews, supplemented by other information, may be used to fulfill the prior requirement to conduct full-scope inspections for institutions in this size range.

If you have questions about these revisions, please contact either Carl Anderson at (314) 444-8481 or David Walker at (314) 444-8764. You also may reach them toll-free by dialing 1-800-333-0810, ext. 44-8481 and 44-8764.