District Circular Letters
December 18, 1997
BANKING SUPERVISION AND REGULATION:
GUIDANCE CONCERNING
THE REPORTING OF COMPUTER-RELATED
CRIMES BY FINANCIAL INSTITUTIONS
RISK-FOCUSED FRAMEWORK FOR SUPERVISION OF LARGE COMPLEX INSTITUTIONS
SURVEY OF DISCLOSURES ABOUT
TRADING AND DERIVATIVES ACTIVITIES
OF BANKS AND SECURITIES FIRMS
To Bank Holding Companies, State Member Banks,
Edge Act Corporations, U.S. Branches and Agencies
of Foreign Banks, and Others Concerned
in the Twelfth Federal Reserve District
Guidance Concerning the Reporting of Computer-Related Crimes by Financial
Institutions
The Federal Bureau of Investigation, working with Federal Reserve staff
and representatives from the other federal banking agencies as well as
other federal law enforcement agencies, has developed a guidance concerning
the reporting of violations of the federal criminal statute relating to
computer crimes, 18 U.S.C. § 1030 (Fraud and Related Activity in
Connection with Computers) in Suspicious Activity Reports (SARs). This
guidance is intended to facilitate the timely and accurate reporting of
apparent violations of this law to law enforcement and bank supervisory
agencies.
The attached guidance describes the provisions of 18 U.S.C. § 1030 and
gives some examples of conduct that may violate the law. It also tells
you how to report violations in a SAR. We would appreciate your bringing
this matter to the immediate attention of all personnel in your organization
responsible for reporting suspicious activity.
Risk-Focused Framework for Supervision of Large
Complex Institutions
The Federal Reserve Board has developed a handbook, Framework
for Risk-Focused Supervision of Large Complex Institutions, to enhance
the effectiveness of its supervisory processes for state member banks,
bank holding companies, and foreign banking organizations. The Board's
letter (SR 97-24[SUP])
detailing this handbook is attached.
Survey of Disclosures about Trading and Derivatives
Activities of Banks and Securities Firms
The Basle Committee on Banking Supervision and the
Technical Committee of the International Organisation of Securities Commissions
(IOSCO) has issued Survey of Disclosures about Trading and Derivatives
Activities of Banks and Securities Firms, a joint report on the public
disclosure of trading and derivatives activities of banks and securities
firms worldwide.
This joint report provides an overview of the disclosures
about trading and derivatives activities in the 1996 annual reports of
a sample of the largest, internationally active banks and securities firms
in the G-10 countries, and notes improvements since 1993. The analysis
builds, in part, upon a framework used by the Federal Reserve in analyzing
the trading and derivatives disclosures of major U.S. banking organizations.
In total, seventy-nine major banks and securities
firms in the G-10 countries comprised the sample reviewed for the 1993
- 1996 period, representing over $14 trillion in total assets and over
$83 trillion in notional amounts of derivative instruments. Disclosures
in the 1995 and 1996 annual reports of a major securities firm in Hong
Kong were also reviewed.
The analysis revealed that there have been general
improvements as well as voluntary innovations in the annual report disclosures
of a number of large, internationally active banks and securities firms.
In particular, there were notable improvements in quantitative disclosures
about market risk in 1996 and 1995. However, despite encouraging advances
in disclosure practices by a number of institutions in the G-10 countries,
many institutions continued to disclose very little about their trading
and derivatives activities.
In addition, the report includes recommendations
made by the Basle Committee and IOSCO in 1995 for further improvements
in disclosures of qualitative and quantitative information about institutions'
involvement in trading and derivatives activities, including their risk
exposures and risk management policies, and the earnings impact of these
activities.
The report's recommendations draw on concepts developed
in the Discussion Paper on Public Disclosure of Market and Credit Risks
by Financial Intermediaries released by the Euro-currency Standing Committee
of the G-10 central banks in September 1994, and in the joint report of
the Basle Committee and the IOSCO Technical Committee, Framework for Supervisory
Information About the Derivatives Activities of Banks and Securities Firms,
issued in May 1995.
Copies
To request copies of Framework for Risk-Focused Supervision
of Large Complex Institutions and the Basle Committee and IOSCO joint
report on the public disclosure of trading and derivatives activities
of banks and securities firms via mail, please contact our Corporate Services
Department at (415) 974-2748. These documents are not available via fax
due to their length.
Internet Access
The Board's letters and guidances are available via
the Board of Governor's internet site (http://www.federalreserve.gov/). Survey
of Disclosures about Trading and Derivatives Activities of Banks and Securities
Firms is available via the BIS website (http://www.bis.org/).
Additional Information
For additional information regarding these matters,
please contact our Banking Supervision and Regulation Department, at (415)
974-2932 [for the guidance concerning reporting of computer-related crimes
by financial institutions], at (415) 974-2998 [for the risk-focused framework
for supervision of large complex institutions], and (415) 974-3177 [for
the survey of disclosures about trading and derivatives activities of
banks and securities firms].
FEDERAL RESERVE BANK OF SAN FRANCISCO
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