FEDERAL FINANCIAL INSTITUTIONS

The Financial Institutions Regulatory and Interest Rate Control Act of 1978 created the Federal Financial Institutions Examination Council. Its purpose is to promote consistency in the examination and supervision of financial institutions.

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In the council are the...

• Comptroller of the Currency,
• one governor of the Federal Reserve System,
• the director of the Office of Thrift Supervision, and
• the chairmen of the FDIC and National Credit Union Administration Board.

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The council’s purpose is...

• the “establishment of uniform principles and standards and report forms for the examination of financial institutions.”
• to make recommendations on matters of common concern to supervisors,
• to conduct schools for examiners,
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• to provide training seminars on risk management,
• to periodically meets with a liaison committee composed of 5 representatives from state financial regulatory agencies.

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Other council responsibilities include...

• helping maintain uniformity among federal banking agencies in identifying problem
  institutions and
• classifying loans that involve country risk or are
  large credits shared by several different banks.

In 1989, as directed by Congress, the council monitors the real estate appraisal requirements established by federal regulatory agencies and the appraiser certification and licensing standards of each state.

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In most areas, agencies represented on the council maintain their independence. While the council has achieved greater
consistency in dealing with supervisory issues and reporting forms, its recommendations have not always been adopted uniformly.

Federal Bank Regulatory Agencies of the United States

Federal Deposit Insurance Corporation

The Banking Act of 1933 established this agency. It directly supervises (enforces) and examines insured state-chartered banks which are not members of the Federal Reserve System.

Like the Federal Reserve, the FDIC is an independent federal agency. It has 5 directors, one of whom is the Comptroller of the Currency. Another is the director of the Office of Thrift Supervision. Three others are appointed by the President for a term of 6 years. One of the appointees is designated as Chairman of the FDIC for a 5-year term. While the headquarters are in Washington DC, there are 8 regional supervisory offices.

While the FDIC supervises a large number of banks, its main function is to insure the deposits at commercial banks and thrifts. Before a bank obtains deposit insurance, it applies to the FDIC to receive approval. FDIC insurance responsibilities extend to protecting insured depositors, acting as receiver for failed banks, and administering insurance funds. The fund is financed with assessments on insured banks.

The FDIC is authorized to make special examinations of any insured bank when necessary to determine the condition of the bank for insurance reasons. Since 1983, the FDIC has been involved in bank examinations of certain problem banks not directly under its supervision. To eliminate redundant examinations, the FDIC's current policy is to be involved in the examination supervised by other agencies. This is only when the examination represents a simultaneous effort or are confined to special occassions.

The FDIC has a variety of enforcement powers in its supervisory capacity. These include...

• terminating deposit insurance,


• issuing cease and desist orders,


• removing bank officials and other affiliated parties, and


• levying fines at state non-member banks.

The FDIC can recommend or pursue enforcement actions against other insured institutions and may appoint itself as conservator or receiver to reduce insurance fund losses.

In 1989, the FDIC gained authority to insure thrifts through the Savings Association Insurance Fund. The FDIC may initiate examinations of insured thrifts for insurance purposes. The FDIC can prevent thrifts from pursuing activities that would pose a serious threat to the fund. Apart from these powers, the FDIC supervises state-chartered savings banks.