Federal Deposit Insurance Corporation
Office of Inspector General
Federal Deposit Insurance Corporation - Office of Inspector General

Offsite Reviews of 1- and 2-Rated Institutions

Wednesday, December 18, 2019

The Federal Deposit Insurance Corporation (FDIC) Office of Inspector General has issued a report on the FDIC’s Offsite Review Program. 

The Federal Deposit Insurance Act requires onsite examinations of FDIC-insured financial institutions at least once during each 12-month period.  Between onsite examinations, an institution’s financial condition may change.  Therefore, the FDIC designed the Offsite Review Program to identify emerging supervisory concerns and potential problems between onsite examinations so that it could adjust supervisory strategies appropriately. 

We evaluated whether (1) the Offsite Review Program identified highly rated institutions (those rated “1” and “2”) with emerging supervisory concerns; (2) the Program resulted in the FDIC appropriately adjusting the supervisory strategies for these institutions in a timely manner; and (3) the adjusted supervisory strategies were effective.

We found that the Offsite Review Program identified 1- and 2-rated institutions with emerging supervisory concerns related to rapid growth, noncore funding, deteriorating financial trends, or those identified by Regional Offices.  However, the FDIC should:

  • Evaluate additional methods and new technologies to identify institutions with other types of emerging supervisory concerns.  These could include concerns related to internal controls, credit administration, and management practices;
  • Enhance the Offsite Review Procedures to provide detailed guidance for Case Managers regarding the offsite review process, such as determining the scope and methodology of offsite reviews; and
  • Provide Case Managers with training to ensure consistent application of offsite review procedures.

When an emerging supervisory concern was identified for highly rated institutions, we found that the FDIC appropriately adjusted its supervisory strategy in a timely manner; and the adjusted supervisory strategies were effective. 

We made three recommendations to improve the Program.  Management agreed with all recommendations.

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