District Circular Letters
June 18, 1998
BANKING SUPERVISION AND REGULATION:
INTERAGENCY PROGRAM FOR SUPERVISING U.S. OPERATIONS OF FOREIGN BANKING
ORGANIZATIONS
To Edge Act Corporations,
U.S. Branches and Agencies of Foreign Banks,
and Others Concerned
in the Twelfth Federal Reserve District
Enhanced Guidelines for the FBO Supervision Program
Several years ago, the Federal Reserve, together with other federal and
state bank supervisors, implemented a coordinated interagency program
for supervising the U.S. operations of foreign banking organizations (the
"FBO Supervision Program"). The supervising agencies are pleased to introduce
major enhancements to this program, which are described in the enclosed
"Guidelines for the FBO Supervision Program." The overall objectives are
to streamline the program and to better align it with the Framework for
Risk-Focused Supervision of Large Complex Institutions. The modifications
will also help to foster better consolidated supervision of FBOs by strengthening
the communication of supervisory findings regarding the U.S. offices of
foreign banks to home country supervisors who have ultimate responsibility
for the organizations' consolidated worldwide operations.
Taken together, these modifications should enhance interagency communication
and collaboration, alleviate burden on foreign banks, streamline the Federal
Reserve's internal operations, and improve the communication of supervisory
findings to home country supervisors.
The principal changes to the FBO Supervision Program are as follows:
- Ongoing ad-hoc communications with foreign supervisors will be supplemented
and strengthened by the implementation of procedures calling for written
notification to the home country supervisor of the results of the supervisory
assessment of the combined U.S. operations of each foreign banking organization.
- Certain elements of the Federal Reserve's Framework for Risk-Focused
Supervision of Large Complex Institutions will be applied to foreign
banking organizations. The process currently utilized for designing
and executing the supervisory program for the U.S. operations of an
FBO will be upgraded by applying of those elements of the supervision
framework for large U.S. banking organizations that are relevant to
foreign banks.
- Strength of Support Assessments ("SOSAs") for a homogeneous group
of FBOs from the same country may be combined into a single document;
this will facilitate peer group analysis and result in more efficient
use of resources.
- A comprehensive revision of the Review of the Home Country Financial
System will only be required on an as-needed basis when there are significant
changes or developments affecting the banking or financial system of
a particular country. Updates will still be prepared on an annual basis.
- The FBO Desktop, the automated platform for facilitating information
sharing and collaboration in the supervision of foreign institutions,
will be used for the transmission of information by Reserve Banks participating
in the FBO Supervision Program. In addition, the FBO Desktop will be
enhanced to include an expanded range of supervisory documents.
- Certain internal processing routines have been streamlined and simplified.
Others have been improved because the FBO Desktop facilitates transmission
of information.
These procedures have been discussed with Reserve Banks and other participants
in the FBO program and are in keeping with the framework for Risk-Focused
Supervision of Large Complex Institutions as presented in SR
letter 97-24.
For Additional Information
For additional information regarding the enhanced FBO Supervision Program,
please contact our Banking Supervision and Regulation Department, at (415)
974-2911.
FEDERAL RESERVE BANK OF SAN FRANCISCO
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