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Fed Changes How It Supervises Bank Holding Companies

Monday, July 1, 2002

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.