Federal Financial Institutions Examination Council

A N N UA L R E P O R T 2012

Board of Governors of the System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration, Offi ce of the Comptroller of the Currency, State Liaison Committee

FFIEC_AR12_cover_solid-blue.indd 1 3/1/2013 4:15:21 PM

Federal Financial Institutions Examination Council

A N N UA L R E P O R T 2012

Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration, Offi ce of the Comptroller of the Currency, State Liaison Committee

MEMBERS OF THE COUNCIL

John Munn, Director, Nebraska Department of Banking & Finance; Richard Cordray, Director, Consumer Financial Protection Bureau; Debbie Matz, FFIEC Chairman, Chairman, National Credit Union Administration; Daniel K. Tarullo, Member, Board of Governors of the Federal Reserve System; Thomas Curry, FFIEC Vice Chairman, Comptroller of the Currency, Office of the Comptroller of the Currency; Martin J. Gruenberg, Chairman, Federal Deposit Insurance Corporation.

LETTER OF TRANSMITTAL

Federal Financial Institutions Examination Council Arlington, VA 22226 March 29, 2013

The President of the Senate The Speaker of the House of Representatives

Pursuant to the provisions of section 1006(f) of the Financial Institutions Regulatory and Interest Rate Control Act of 1978 (12 U.S.C. § 3305), I am pleased to submit the 2012 Annual Report of the Federal Financial Institutions Examination Council.

RespectfullyRespectfully,

Debbie Matz Chairman

TABLE OF CONTENTS

vii Message from the Chairman 1 Overview of the Federal Financial Institutions Examination Council Operations 3 Record of Council Activities 5 State Liaison Report 7 Activities of the Interagency Staff Task Forces 21 The Federal Regulatory Agencies and their Supervised Institutions 30 Assets, Liabilities, and Net Worth of U.S. Commercial Banks, Savings Institutions, and Credit Unions as of December 31, 2012 31 Income and Expenses of U.S. Commercial Banks, Savings Institutions, and Credit Unions for Twelve Months Ending December 31, 2012 33 Appendix A: Relevant Statutes 39 Appendix B: 2012 Audit Report 49 Appendix C: Maps of Agency Regions and Districts 55 Appendix D: Organizational Listing of Personnel

v

MESSAGE FROM THE CHAIRMAN

I am honored to have served as the Reform and Consumer Protection Chairman of the Federal Financial Act, the member-agency principals Institutions Examination Coun- designated higher-level, senior cil for the past two years. Over staff members to serve on the ASC this time, the Council emphasized Board. With the ASC Board’s high- cooperative and collaborative level strategic guidance, the ASC approaches to promote uniformity made progress in developing a in the supervision of financial insti- phased approach to implement the tutions as appropriate. We made appraisal complaint hotline and progress in providing the financial website and drafting updated pro- industry necessary guidance, rais- posed policy statements. Efforts ing the visibility of the Appraisal continue to finalize preparations Subcommittee in light of its new for the appraisal complaint hotline statutory responsibilities, and opening in March 2013. increasing state-of-the-art training The Council provided 95 ses- to examiners. sions of courses and conferences The Council, through our task through the Task Force on Exam- forces, released significant guid- iner Education and the FFIEC ance communications highlight- Examiner Education Office. ing risk areas, including Interest Almost 3,500 federal regulatory FFIEC Chairman Debbie Matz Rate Risk and Outsourced Cloud and state supervisory agency Computing. Our follow-up to the staff received superior training on January 2010 Interest Rate Risk many industry-specific topics. A Management Advisory provided specialized FFIEC course focusing additional guidance regarding on significant consumer compli- risk mitigation expectations and ance issues was developed in 2012, practices. Our Statement on Out- and two Consumer Compliance sourced Cloud Computing high- Specialists Conferences are sched- lighted key risk considerations, uled in 2013. particularly the importance of due diligence when implementing this The Council continues to fulfill our technology service model. Our pro- mission of promoting uniformity f supervision, where feasible, posed Social Media Guidance dis- o throughout the financial industry. cussed consumer protection and compliance laws and their appli- In addition, through guidance and ff training, we identified emerg- cability to activities conducted sta through social media. These Coun- ing risks providing institutions the cil issuances support our mission opportunity to avoid or mitigate their adverse consequences. of promoting consistent supervi- sion of financial institutions. I appreciate the opportunity to With renewed focus and addi- have led this distinguished Coun- cil and look forward to continue tional responsibilities assigned to the Appraisal Subcommittee (ASC) working with my colleagues to by the Dodd-Frank Wall Street advance future FFIEC initiatives.

vii

OVERVIEW OF THE FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL OPERATIONS

The Federal Financial Institu- The Council is responsible for licensed by a state, and are also tions Examination Council (FFIEC developing uniform reporting eligible to perform appraisals in or Council) was established on systems for federally supervised federally related transactions; and March 10, 1979, pursuant to title financial institutions, their hold- (4) monitoring the practices, pro- X of the Financial Institutions ing companies, and the nonfinan- cedures, activities, and organiza- Regulatory and Interest Rate cial institution subsidiaries of those tional structure of the Appraisal Control Act of 1978 (FIRIRCA), institutions and holding compa- Foundation, a nonprofit educa- Public Law 95-630. The purpose nies. It conducts schools for exam- tional corporation established by of title X, cited as the Federal iners employed by the five fed- the U.S. appraisal industry. Financial Institutions Examina- eral member agencies represented The Secure and Fair Enforcement tion Council Act of 1978, was to on the Council and makes those for Mortgage Lending Act of 2008 create a formal interagency body schools available to employees of (SAFE Act), enacted as title V of empowered to prescribe uniform state agencies that supervise finan- the Housing and Economic Recov- principles, standards, and report cial institutions. ery Act of 2008, established the forms for the federal examina- The Council was given additional responsibility for the federal finan- tion of financial institutions by the cial institution regulatory agencies, Board of Governors of the Federal statutory responsibilities by sec- tion 340 of the Housing and Com- through the FFIEC and in conjunc- Reserve System (FRB), the Fed- tion with the Farm Credit Admin- eral Deposit Insurance Corpora- munity Development Act of 1980, Public Law 96-399. Among these istration (FCA), to develop and tion (FDIC), the National Credit maintain a system for registering Union Administration (NCUA), responsibilities are the implemen- tation of a system to facilitate pub- employees of depository institu- and the Office of the Comptrol- tions and certain of their subsid- ler of the Currency (OCC) and to lic access to data that depository institutions must disclose under iaries’ loan originators with the make recommendations to pro- the Home Mortgage Disclosure Act Nationwide Mortgage Licensing mote uniformity in the supervi- of 1975 (HMDA) and the aggrega- System and Registry (NMLSR). sion of financial institutions. To tion of annual HMDA data, by cen- The SAFE Act and implementing encourage the application of uni- sus tract, for each metropolitan sta- regulations require certain infor- form examination principles and tistical area. mation about loan originators to standards by the state and fed- be furnished to the NMLSR con- eral supervisory authorities, the Title XI of the Financial Institutions cerning an employee’s identity, Council established, in accordance Reform, Recovery, and Enforce- including (A) fingerprints for sub- with the requirement of FIRIRCA, ment Act of 1989 established the mission to the Federal Bureau of an advisory State Liaison Com- Appraisal Subcommittee within the Investigation and any governmen- mittee (SLC). In accordance with Council. The functions of the sub- tal agency or entity authorized to the Financial Services Regulatory committee are (l) monitoring the receive such information for a state Relief Act of 2006, the Chair of the requirements, including a code of and national criminal history back- SLC was added as a voting mem- professional responsibility, estab- ground check and (B) personal ber of the Council in October 2006. lished by states for the certification history and experience, includ- In accordance with the Dodd- and licensing of individuals who ing authorization for the NMLSR Frank and are qualified to perform apprais- to obtain information related to Consumer Protection Act of 2010 als in connection with federally any administrative, civil, or crimi- (Dodd-Frank Act), the Director of related transactions; (2) monitoring nal findings by any governmen- the Consumer Financial Protec- the appraisal standards established tal jurisdiction. On July 21, 2011, tion Bureau (CFPB) was added as by the federal financial institution pursuant to the Dodd-Frank Act, a voting member of the Council regulatory agencies and the former the authority for rulemaking and in July 2011, replacing the Direc- Resolution Trust Corporation; (3) authority to develop and maintain tor of the former Office of Thrift maintaining a national registry of the NMLSR generally was trans- Supervision. appraisers who are certified and ferred to the CFPB.

1 Members of the Council • Information Sharing are funded in several ways. Most of the Council’s funds are derived • Reports The Council has six members, and from assessments on its five fed- in 2012 it was comprised of • Supervision eral member agencies. It receives • a member of the FRB, appointed • Surveillance Systems tuition fees from non-agency by the Chairman of the Board; attendees to cover some of the The Council has a Legal Advisory costs associated with its examiner • the Chairman of the FDIC; Group (LAG), composed of the education program. • the Chairman of the NCUA; general or chief counsel of each member entity, to provide sup- In 2012, the FRB continued to pro- • the Comptroller of the port to the Council and staff in vide budget and accounting ser- Currency; the substantive areas of concern. vices to the Council. The Council is supported by a small, full-time • the Director of the CFPB; and The task forces and the LAG pro- vide research and develop analyti- administrative staff in its opera- • the Chairman of the SLC. cal papers and proposals on the tions office and in its examiner issues that the Council addresses. education program, which are Six staff task forces effectively In addition, the Council also has located at the FDIC's L. William administer the full spectrum of an Agency Liaison Group, com- Seidman Center in Arlington, Vir- projects in the Council’s functional prised of senior officials respon- ginia. Each Council staff member areas, including but not limited to sible for coordinating the FFIEC is detailed (some permanently) researching future enhancements work of their respective agencies’ from one of the five federal mem- for reporting, examiner training staff members. ber agencies represented on the products, and examiner guidance. Council. The task forces are each comprised of six senior officials, drawn from Administration of the Council the five federal member agencies, and a representative of the SLC. The Council holds regular meet- Each is tasked with one of the fol- ings at least twice a year. Other lowing subject matters: Council meetings may be con- vened whenever called by the • Consumer Compliance Chairman or four or more Council • Examiner Education members. The Council’s activities

2 RECORD OF COUNCIL ACTIVITIES

The Federal Financial Institutions Examination Council in session.

The following section is a chrono- Explanation. The Council is Report data. Task Order #8 also logical record of the official actions required to approve task orders includes a reallocation of funds taken by the FFIEC during 2012, that exceed a specific dollar within the budget and a setting pursuant to the Federal Financial amount. Task Order #8 covers aside of funds for a bonus pay- Institutions Examination Council funds for CDR enhancements to ment to the contractor should per- Act of 1978, as amended, and the (1) improve the National Informa- formance goals be met. Home Mortgage Disclosure Act of tion Center’s CDR structure and 1975 (HMDA), as amended. the Uniform Bank Performance Report (UBPR) pages, (2) add an January 26, 2012 online UBPR User’s Guide, (3) January 26, 2012 cover UBPR Bulk Downloads, (4) Action. Approved the CDR Steer-

modify calculations on the Micro ing Committee’s Task Order #9. Action. Approved the Central Data Data Reference Manual start dates, Explanation. The Council is Repository (CDR) Steering Com- and (5) provide a data patch to required to approve task orders mittee’s Task Order #8. correct derived March 2008 Call that exceed a specific dollar

3 sors, and the National Association amount. Task Order #9 covers February 27, 2012 of State Credit Union Supervisors. funds for CDR enhancements Action. Approved the appointment to support the functionality of six task force chairs. request by the FDIC’s Examina- tion Tools Suite (ETS) program, Explanation. The chairs for all six October 31, 2012 which includes new web service standing task forces are approved Action. Approved CDR Contract methods to provide information annually and are drawn from man- Re-Compete Process, naming the required to create UBPR pages agement and staff of the five fed- FDIC to serve as the procurement with the ETS application. eral member agencies and rep- agent. resentatives of the State Liaison Committee (SLC). Explanation. The current CDR con- February 1, 2012 tract for system support to pro- cess the Consolidated Reports Action. Approved the issuance of March 8, 2012 of Condition and Income (Call the Council’s annual interagency Report) and the UBPR will expire awards. Action. Approved the 2011 annual in November 2013. An interagency report of the Council to the team identified and analyzed Explanation. The Council has an Congress. alternatives for continuing system interagency awards program support beyond November 2013, that recognizes individuals of the Explanation. The legislation estab- and a case recommending one of member agencies who have pro- lishing the Council requires that, the alternatives was presented to vided outstanding service to the not later than April l of each year, the Council for consideration. Council on interagency projects the Council publish an annual and programs during the previ- report covering its activities during ous year. the preceding year. December 3, 2012 Action. Approved the 2013 Council February 27, 2012 March 19, 2012 budget. Action. Approved selection of the Action. Approved re-appointment Explanation. The Council is Appraisal Subcommittee Chair, of SLC member, David Cotney, required to approve the annual Peter W. Gillispie, U.S. Depart- Massachusetts Division of Banks budget that funds the Council's ment of Housing and Urban Commissioner. staff, programs, and activities. Development. Explanation. The Council appoints Explanation. The Council is two of the SLC members. The required to approve the selec- remaining three members are des- tion of the Appraisal Subcommit- ignated by the Conference of State tee Chair, who serves a two-year Banking Supervisors, the American term. Council of State Savings Supervi-

4 STATE LIAISON REPORT

State Liaison Committee (from the left to right): David Cotney (MA), Douglas Foster (TX), Chairman John Munn (NE), Charles A. Vice (KY), and Harold E. Feeney (TX).

The State Liaison Committee An SLC member may have his bers to serve as chairman for 12 (SLC) consists of five representa- or her two-year term extended months. The Council elects two of tives from state regulatory agen- by the appointing organiza- the five members of the SLC. The cies that supervise financial insti- tion for an additional, consecu- American Council of State Sav- tutions. The representatives are tive two-year term. Each year, ings Supervisors, the Conference appointed for two-year terms. the SLC elects one of its mem- of State Bank Supervisors (CSBS),

5 and the National Association of Financial Institutions Examina- Curry, Comptroller of the Cur- State Credit Union Supervisors tion Council (FFIEC) staff for all rency, Office of the Comptroller designate the other three mem- administrative matters. of the Currency; Richard Cordray, bers. The members of the SLC Director, Consumer Financial Pro- serve as an important conduit to In connection with its role on the tection Bureau (CFPB); Steven their state colleagues and repre- Council, the SLC meets in per- Antonakes, Associate Director, sent state supervisory interests son before each Council meeting Division of Supervision-Enforce- before the Council. to review the agenda and discuss ment & Fair Lending, CFPB; Paul topics of interest which may come Sanford, Acting Chief of Staff, The SLC is represented on the before the Council. The SLC wel- Division of Supervision-Enforce- Council’s task forces and work- comes leadership and policymak- ment & Fair Lending, CFPB; and ing groups by state supervisors ers from the FFIEC member agen- Judith Dupre, Executive Secretary, from around the country. The cies to meet with them during FFIEC. CSBS provides staff support to the these briefings to engage in infor- SLC representatives and serves as mal dialogue. Those who partici- the primary liaison to the Federal pated this year included Thomas

6 ACTIVITIES OF THE INTERAGENCY STAFF TASK FORCES

Task Force on Consumer Compliance The Task Force on Consumer Compliance promotes policy coor- dination, a common supervisory approach, and uniform enforce- ment of consumer protection laws and regulations. The task force identifies and analyzes emerging consumer compliance issues and develops proposed policies and procedures to foster consistency among the agencies. Addition- ally, the task force reviews legisla- tion, regulations, and policies at the state and federal level that may have a bearing on the compliance responsibilities of the member agencies. During 2012, the task force relied on the Home Mortgage Disclosure Act (HMDA)/Community Rein- vestment Act (CRA) Data Collec- Task Force on Consumer Compliance meeting. tion Subcommittee and several ad hoc working groups to carry agency approval process is under Additionally, the 2013 budget for out its mission. The task force way, after which the Guidance will HMDA and CRA data process- meets monthly to address and be published in the Federal Regis- ing was approved by the task force resolve common issues in com- ter for a 60-day comment period during its September 10, 2012, pliance supervision. While sig- in January 2013 before finalization meeting and was part of the overall nificant issues or recommenda- by the agencies after their consid- budget package approved by the tions are referred to the Council eration of comments. The working Council at its December 3, 2012, for action, the Council has dele- group collaborated with the Infor- meeting. gated to the task force the author- mation Technology Subcommittee ity to make certain decisions and of the Task Force on Supervision recommendations. Consumer Compliance Specialists on specifics within the Guidance. Conference

HMDA/CRA Data Collection In 2012, the task force collaborated Initiatives Addressed in 2012 with the Task Force on Examiner Subcommittee Activities Social Media Guidance Education and the FFIEC Exam- The 2010 census data were iner Education Office to develop The task force formed a working released in June 2012. The CRA and plan the Consumer Compli- group to draft guidance on con- and HMDA data were processed ance Specialists Conference. The sumer compliance issues related and aggregated, and were released conference addresses supervisory to social media, culminating in the to the public on September 18, updates and emerging issues for approval of the Social Media Guid- 2012, through the FFIEC web- experienced examiners. The pro- ance at the September 10, 2012, site, http://www.ffiec.gov/press/ gram was originally planned for task force meeting. The individual pr091812.htm. October 2012, but was rescheduled

7 for January 2013 due to Hurricane implementing regulation on risk- Remittance Transfer Rule Sandy and will be offered again in based pricing notices. Examination Procedures October 2013. The task force formed a working Regulation Z () group to develop examination pro- Fair Credit Reporting Act (FCRA) Examination Proceduress cedures to assess compliance with Examination Procedures On July 12, 2012, the task force the new remittance rule issued In March 2012, the task force approved updates to examination pursuant to section 1073 of the approved FCRA examination pro- procedures related to Regulation Dodd-Frank Act, which amends cedures that reflect changes con- Z. Primarily, these updates were Regulation E, which implements tained in the Dodd-Frank Act. The technical changes required as a the Electronic Fund Transfer Act. act amended the FCRA to require result of the Dodd-Frank Act, such The procedures will be issued the disclosure on FCRA adverse as changes to the numbering of before the rule goes into effect. action notices of a credit score sections and the relocation of vari- that is used in taking any adverse ous footnotes. Garnishment Rule Examination action based “in whole or in part Procedures Substantive changes to the limi- on any information in a consumer tations on fees charged prior to The task force has formed a work- report.” In addition, the exam the opening of an account, as well ing group to develop examination procedures incorporated Dodd- as corrections to the civil liabil- procedures that will be used by Frank Act changes to the FCRA’s ity provisions and the open-end the agencies to evaluate deposi- annual percentage rate calcula- tory institutions’ compliance with tion were also incorporated and the garnishment rule issued by the approved. Treasury Department and federal benefits agencies. When finalized, the Treasury Department rule will Consumer Compliance Specialists Conference require financial institutions to Speakers: take steps to alleviate the hard- Left: Debbie Matz, FFIEC Chairman, ship experienced by account hold- Chairman, National Credit Union ers who receive certain types of Administration and Richard Cordray, federal benefits when the garnish- Director, Consumer Financial Protection Bureau. ment process occurs. Below: Thomas Curry, FFIEC Vice Chairman, Comptroller of the Currency, Office of the Comptroller of the Currency. Task Force on Examiner Education The Task Force on Examiner Edu- cation oversees the FFIEC’s exam- iner education program on behalf of the Council. The task force promotes interagency education through timely, cost-efficient, state-of-the-art training programs for federal and state examiners and agency staff. The task force develops programs on its own ini- tiative and in response to requests from the Council, Council task forces, and suggestions brought forth by Examiner Education Office (EEO) staff. The EEO also maintains development groups which have been established to provide ongoing content guidance for classes and conferences. Devel-

8 opment group members consist of Each fall, EEO staff prepares Initiatives Addressed in 2012 subject matter experts (SMEs) from a training calendar based on each FFIEC member entity des- demand from the FFIEC mem- The task force has continued to ignated by their task force mem- ber agencies and state financial ensure that the FFIEC’s educa- bers. Development group mem- institution regulators, which is tional programs meet the needs of bers help the EEO ensure that the then approved by the task force. agency personnel, are cost–effec- course content is relevant, current, The EEO staff schedules, delivers, tive, and are widely available. The and meeting the agencies’ training and evaluates training programs task force meets monthly with needs. throughout the year. the EEO staff to discuss emerging

2012 FFIEC Training by Agency and Sponsored—Actual, as of December 31, 2012

FRB FDIC State State Event Name FRB Sponsored FDIC Sponsored NCUA OCC CFPB FCA FHFA Other Total

Advanced BSA/AML Conference 31 14 32 12 3 28 3 0 0 8 131 Advanced Cash Flow Concepts & Analysis: Beyond 42 10 53 0 7 39 0 3 0 1 155 Advanced Commercial Credit Analysis 16 9 33 13 3 27 0 5 0 0 106 Advanced Fraud Investigation Techniques for Examiners 7 4 7 0 4 5 0 0 1 0 28 Anti-Money Laundering Workshop 13 10 38 11 5 0 2 0 0 2 81 Asset Management Forum 27 7 42 14 0 14 0 0 0 0 104 Capital Markets Conference 42 26 59 14 12 19 2 7 9 0 190 Capital Markets Specialists Conference 36 14 90 4 2 14 1 13 6 2 182 Cash Flow Construction and Analysis 42 17 88 13 13 46 0 2 0 0 221 Commercial Real Estate 57 17 180 54 22 48 0 0 3 1 382 Community Financial Institutions Lending Forum 20 10 35 7 6 18 0 2 0 0 98 Consumer Compliance Specialists Conference 0 0 0 0 0 0 0 0 0 0 0 Distressed Commercial Real Estate Analysis 30 17 160 33 12 29 0 0 1 2 284 Financial Crimes Seminar 24 16 177 7 18 30 0 2 2 4 280 Fraud Identification On-line Training 1 0 23 0 0 7 1 1 2 0 35

Fundamentals of Fraud 0 0 11 4 11 12 10 1 3 2 54 Information Technology Conference 43 11 35 5 7 33 1 13 7 4 159 Information Technology Symposium 0 0 0 0 0 0 0 0 0 0 0 Instructor Training School 31 1 0 0 3 3 9 3 0 0 50 International Banking School 15 5 12 0 0 2 0 0 0 1 35

International Banking (Self-study) 2 3 9 0 0 6 2 0 1 3 26 Payments Systems Risk Conference 30 4 30 7 12 21 6 0 2 2 114 Real Estate Appraisal Review School II 20 16 34 0 4 19 0 2 0 0 95 Real Estate Appraisal Review I (On-line) 5 0 24 0 2 0 0 0 1 0 32 Supervisory Updates & Emerging Issues 84 29 152 15 10 49 9 12 8 0 368

Structured Finance: Investment Analysis & Risk Management 29 5 52 0 9 8 0 2 6 0 111 Testifying School 1 0 15 0 2 10 2 0 0 1 31 Grand Total 648 245 1,391 213 167 487 48 68 52 33 3,352 Percentage 19.33 7.31 41.50 6.35 4.98 14.53 1.43 2.03 1.55 0.98 100 Combined Agency and Sponsored Percentage 26.64 NA 47.85 NA 4.98 14.53 1.43 2.03 1.55 0.98 100

9 Supervision’s Information Tech- nology (IT) Subcommittee and the /Anti-Money Laundering (BSA/AML) Working Group. In 2012, the EEO staff, in conjunc- tion with the IT Subcommittee, continued to coordinate revisions to the IT Examination Handbook InfoBase. Additionally, the EEO staff, in conjunction with the BSA/ AML Working Group, continued to update the BSA/AML Examina- tion Manual InfoBase.

Facilities The FFIEC rents office space, classrooms, and lodging facilities Task Force on Examiner Education meeting. at the Federal Deposit Insurance Corporation’s Seidman Center in Arlington, Virginia. This facil- topics, to review feedback from Conference was rescheduled, due ity offers convenient access to each course and conference, and to Hurricane Sandy, from October two auditoriums and numerous to develop a framework for future 2012 to January 2013 and a second classrooms. courses and conferences. The solid session is planned for October partnership between the task force 2013. principals and the EEO staff pro- The Task Force on Examiner motes open and regular commu- Course Catalogue and Education approves the devel- nication that continues to result Schedule opment and maintenance of the in high quality, well-received InfoBase product. The InfoBase The course catalogue and sched- training. content is created and updated ule are available online at www. The EEO administered 95 sessions by members of the Task Force on ffiec.gov/exam/education.htm. of courses and conferences during 2012. The total number of attend- ees at these task force sponsored training sessions equaled 3,352 (see table on the previous page for details of participation by pro- gram and agency). A fourth Senior Program Admin- istrator was added to the staff to assist with the increased train- ing demands from the agencies and states. Also during 2012, the EEO, in collaboration with the Task Force on Consumer Com- pliance, planned the Consumer Compliance Specialists Confer- ence, designed to provide con- tinuing education to examiners with advanced consumer compli- Cyber Crime Trends Panel during FFIEC’s Financial Crimes Seminar at the FDIC’s Virginia ance examination experience. The Square Hove Auditorium.

10 To obtain a copy, contact: Karen K. Smith, Manager FFIEC Examiner Education Office 3501 Fairfax Drive Room B-3030 Arlington, VA 22226-3550 Phone: (703) 516-5588

Task Force on Information Sharing The Task Force on Information Sharing promotes the sharing of electronic information among the Council member agencies in sup- port of the supervision, regulation, and deposit insurance responsibili- ties of financial institution regu- Task Force on Information Sharing meeting. lators. The task force provides a forum for Council member agen- Council member agencies and a develop technological solutions cies to discuss and address issues repository of communications and that enhance data sharing and to affecting the quality, consistency, documents critical to information coordinate the automated transfer efficiency, and security of inter- sharing. of data files between the Council agency information sharing. agencies. The group tracks weekly The task force has established Significant matters are referred, developments to provide timely three working groups to address with recommendations, to the resolutions of data exchange technology development issues, Council for action, and the task issues. force has delegated authority to perform interagency reconcilia- from the Council to take certain tion of financial institution struc- The TWG continues to develop actions. ture data, and to develop inter- necessary links and processes to agency identity management. In exchange electronic documents, To the extent possible, the agencies addition, the task force receives develop an inventory of future build on each other’s information demonstrations and reports on technology projects, and upload databases to minimize duplica- agency, financial industry, and information to the collabora- tion of effort and promote consis- other Council initiatives pertain- tive website where documents tency. The agencies participate in ing to technology development and critical materials pertain- a program to share, in accordance (including the production and ing to interagency information with agency policy, electronic ver- development status of the inter- exchanges are stored. sions of their reports of examina- agency Central Data Repository). tion, inspection reports, and other Structure Data Reconciliation communications with financial institutions. The agencies also pro- The task force’s Structure Data vide each other with access to their Initiatives Addressed in 2012 Reconciliation Working Group organizations’ structure, as well Technology Issues (SDRWG) continued to recon- as financial and supervisory infor- cile structure data about financial mation on their regulated entities. The mission of the task force is to institutions regulated by Coun- The task force and its working identify and implement technolo- cil agencies to ensure that the groups use a collaborative web- gies to make the sharing of inter- information the agencies report site to share information among agency data more efficient and to is consistent and accurate. The the Council member agencies. accommodate changes in agency SDRWG’s quarterly reconcile- The task force maintains a “Data databases and technologies. The ments have greatly resolved struc- Exchange Summary” listing the task force’s Technology Working ture data discrepancies among the data files exchanged among the Group (TWG) meets monthly to agencies.

11 Identity Management fields be required in the ILDR. The Central Data Repository (CDR) working group is currently seek- Steering Committee to make busi- The Identity Management Work- ing final approvals of communica- ness decisions needed to ensure ing Group continued with its tions to banks from the member the continued success of the CDR efforts to begin developing an agencies. system, monitor its ongoing per- Identity Management technology formance, and report on its sta- framework within the Council tus. The CDR is a secure, shared agencies. These continuing efforts Task Force on Reports database for collecting, managing, are based on a 2010 white paper validating, and distributing data The law establishing the Council developed and presented to the reported in the quarterly Con- and defining its functions requires agencies’ Chief Information Offi- solidated Reports of Condition the Council to develop uniform cers. This document discussed and Income () filed by reporting systems for federally the new information challenges insured banks and savings asso- supervised financial institutions presented by the recent financial ciations. The CDR also processes and their holding companies and reforms and sought a consensus and distributes the Uniform Bank subsidiaries. To meet this objec- on the scope and urgency of the Performance Report (UBPR) under tive, the Council established the efforts needed to meet these chal- the oversight of the Task Force on Task Force on Reports. The task lenges going forward. Surveillance Systems. force helps to develop inter- Coordination with Other Interagency agency uniformity in the report- Information Sharing Entities ing of periodic information that is needed for effective supervision Initiatives Addressed in 2012 In 2012, the task force continued and other public policy purposes. Reporting Requirements for the to coordinate with new inter- As a consequence, the task force Consolidated Reports of Condition agency information sharing enti- is concerned with issues such as and Income ties including the Financial Stabil- the review and implementation of ity Oversight Council (FSOC) and proposed revisions to reporting The task force continued to con- the Office of Financial Research requirements; the development duct monthly interagency confer- (OFR). These coordination efforts and interpretation of reporting ence calls during 2012 to discuss enable the task force to keep instructions, including responding Call Report instructional matters apprised of new and emerging to inquiries about the instructions and related accounting issues to issues and to monitor progress from reporting institutions and the reach uniform interagency posi- on initiatives such as the Global public; the application of account- tions on these issues. Legal Entity Identifier initiative. ing standards to specific transac- tions; the development and appli- Thrift Financial Report (TFR)-to-Call Interagency Loan Data Report cation of processing standards; the Report Migration monitoring of data quality; and the Effective March 31, 2012, all sav- The task force created an inter- assessment of reporting burden. In ings associations migrated from agency working group to review addition, the task force works with filing the TFR to filing the Call and enhance the interagency loan other organizations, including the Report. During the latter half of data report (ILDR) pursuant to a Securities and Exchange Com- 2011, savings associations received Conference of State Bank Super- mission, the Financial Accounting information to assist them in con- visors inquiry in April 2011. The Standards Board, and the Ameri- verting to the Call Report and ILDR Working Group first met can Institute of Certified Public establishing an account with the in July 2011. The ILDR guid- Accountants. The task force is also CDR for the submission of Call ance from 2002 lists 82 possible responsible for any special projects Report data. The first quarter 2012 fields in the ILDR. Of those, five related to these subjects that the Call Report Supplemental Instruc- fields were required to be pro- Council may assign. tions included a separate section vided with an ILDR submission. for savings associations, address- The ILDR Working Group rec- To help the task force carry out its ing aspects of the Call Report that ognized that the highest super- responsibilities, working groups differ from the TFR. visory value could be achieved are organized as needed to handle by receiving data more consis- specialized or technical account- 2012 Call Report Revisions tently in the ILDR. As a result, in ing, reporting, instructional, and 2012, the ILDR Working Group processing matters. In this regard, After receiving approval under recommended that 25 additional the task force has established a the Paperwork Reduction Act

12 tive March 31, 2013. This schedule, which OMB approved in January 2013, will be applicable to institu- tions with $1 billion or more in total assets. Although the agencies considered alternative approaches to collecting loan origination data in an effort to address industry comments on the proposal, the task force decided not to pursue implementation of this proposed new schedule in the Call Report. Institutions were notified of these decisions in the fourth quarter of 2012.

In the second quarter of 2012, the task force began evaluating sev- eral recommendations from the banking agencies and the Con- sumer Financial Protection Bureau Task Force on Reports meeting. (CFPB) for potential Call Report revisions to be implemented in 2013. As it considered these (PRA) from the U.S. Office of Man- and nonaccrual purchased credit- potential reporting changes, the agement and Budget (OMB), the impaired loans. Several new items task force also sought to limit the Federal Deposit Insurance Cor- to meet deposit insurance assess- extent to which the changes would poration (FDIC), the Board of ment needs, for which approval apply to community institutions. Governors of the Federal Reserve had been received from OMB in In the fourth quarter, the task force System (FRB), and the Office of connection with a substantial revi- agreed to include several revisions the Comptroller of the Currency sion of the Call Report assessment in a proposal to be issued for com- (OCC) (collectively, the bank- data schedule that took place in ment. The proposed Call Report ing agencies) implemented a lim- 2011, also were added to the Call revisions, which generally would ited number of revisions to the Report in June 2012. These addi- take effect in June 2013, include Call Report in March and June tional assessment items apply consumer deposit account balance 2012. The revisions had initially only to large and highly complex data, details on service charges on been issued for public comment institutions and institutions own- consumer deposit accounts, infor- in November 2011. Two reporting ing another insured depository mation about and data on interna- changes were made in March 2012 institution. tional remittance transfers, deposi- in connection with the initial filing tory institution trade names used of the Call Report by savings asso- 2013 Call Report Revisions on physical branches and Inter- ciations: new items for reporting net Web sites that differ from an on Qualified Thrift Lender compli- The banking agencies’ Novem- institution’s legal title, the total ance and revisions to certain items ber 2011 Call Report proposal also liabilities of an institution’s par- used to calculate the leverage contained new schedules for the ent depository institution holding capital ratio denominator. Instruc- collection of disaggregated loan company that is not a bank or sav- tional revisions in March 2012 loss allowance data and selected ings and loan holding company, included guidance on the account- loan origination data from larger and a scope revision to an existing ing and reporting treatment for institutions, which generated sub- item in the equity capital recon- capital contributions in the form of stantive comments. After modify- ciliation. The proposal would also cash or notes receivable. Report- ing the proposed loan loss allow- contain new and revised items for ing changes that took effect in June ance schedule in response to use in the FDIC’s deposit insur- 2012 included new items for mort- comments received, the task force ance pricing model for large and gage loan representation and war- approved the addition of this new highly complex institutions as well ranty reserves as well as past due schedule to the Call Report effec- as instructional revisions to imple-

13 ment October 2012 definitional information received from survey banking agency subject matter amendments to this model in the respondents on the usage of the experts met periodically during FDIC’s assessment regulations, data in the Call Report to deter- 2012 to discuss and begin devel- supplemented by a tabular presen- mine where possible burden- oping potential revisions to the tation of two-year default prob- reducing revisions may be made. Call Report’s regulatory capital abilities by type of consumer loan. schedule and the Advanced Capi- The proposed collection of con- Central Data Repository tal Adequacy Framework Regu- sumer deposit account balances latory Reporting Requirements and pricing model data would During 2012, the banking agen- (FFIEC 101 report) as well as pos- apply to institutions with $1 billion cies continued to devote signifi- sible new market risk reporting or more and $10 billion or more cant staff resources to enhance requirements. These efforts will in total assets, respectively. Pub- the CDR for the processing of the continue under the task force’s lication of an initial PRA Federal quarterly Call Report, produc- auspices during 2013. Register notice seeking comment tion of the UBPR, and the public In June 2012, the banking agen- for 60 days on these proposed Call data distribution (PDD) of those cies requested comment on three Report revisions is expected in data. Savings associations were notices of proposed rulemaking February 2013. successfully transitioned into the CDR during the March 2012 Call that would revise and replace Report processing cycle. their current regulatory capital Statutory Review of the Call Report standards. The banking agen- In September 2012, the banking cies also adopted a joint final rule Under the auspices of the task agencies implemented a major revising their market risk capi- force, staff from the banking agen- CDR enhancement release. The tal rules in June 2012. Banking cies, the CFPB, and State Liaison September release included UBPR agency subject matter experts met Committee completed a review processing improvements, secu- periodically during 2012 to dis- of “the information and sched- rity enhancements, and UBPR cuss and begin developing poten- ules that are required to be filed integration with the new FDIC tial revisions to the Call Report’s by an insured depository institu- Examination Tools Suite. regulatory capital schedule and tion” in the Call Report, which the Advanced Capital Adequacy was mandated by section 604 of In preparation for the expira- Framework Regulatory Reporting the Financial Services Regulatory tion of the current CDR contract Requirements (FFIEC 101 report) Relief Act of 2006. The task force on November 30, 2013, an inter- as well as possible new market surveyed 153 users representing agency procurement working risk reporting requirements. These diverse groups within the bank- group was formed to author the efforts will continue under the ing agencies, the CFPB, and state Statement of Work and Request task force’s auspices during 2013. supervisory authorities to iden- for Proposal (RFP). On October tify the purposes for which each 31, 2012 the Council approved During the recent financial cri- group uses each reported data proceeding with a solicitation for sis, the banking agencies found item, the extent of usage for each services to support Call Report that the level of detail provided in item, and the frequency with and UBPR processing under a the current version of the Coun- which each item is needed. The new CDR contract. The RFP was try Exposure Report (FFIEC 009 survey was completed in Septem- then issued to approved vendors. report) was insufficient to cap- ber and the results were evaluated The new CDR contract is expected ture the evolving risks from U.S. by an interagency working group to be awarded by April 2013. institutions’ foreign exposures. that presented its findings to the Beginning in the second quarter task force, which reported on the Other Activities of 2012, banking agency subject results of the review to the FFIEC matter experts developed recom- principals in November 2012. Sec- In June 2012, the banking agen- mended enhancements to increase tion 604 also requires that, after cies requested comment on three the usefulness of this report and completing the review of the notices of proposed rulemaking the related publicly available reports, the banking agencies are that would revise and replace Country Exposure Information to reduce or eliminate the contin- their current regulatory capital Report (FFIEC 009a report) for ued collection of information that standards. The banking agen- policy makers, bank supervisors, they determine is “no longer nec- cies also adopted a joint final rule and market participants. In broad essary or appropriate.” In 2013, revising their market risk capital terms, the proposed revisions the task force will consider the rules in June 2012. Accordingly, to the FFIEC 009 report would

14 increase the number of counter- party categories, add informa- tion on the type of claims being reported, provide detail on a lim- ited number of risk mitigants, add more detailed reporting of credit derivatives, add the United States as a country for which exposures are reported, and expand the reporting panel to include sav- ings and loan holding companies. The FFIEC 009a report would be expanded to include additional information for those individual countries for which the disclo- sure threshold is triggered. Pub- lication of an initial PRA Federal Register notice seeking comment for 60 days on these proposed reporting revisions is expected in January 2013. Subject to the com- ments received, the revisions to Task Force on Supervision meeting. the FFIEC 009 and 009a reports would take effect June 30, 2013. The task force has one subcommit- provides a mechanism for the tee and one permanent working agencies to review and share group: information on mission-critical Task Force on Supervision software applications, such as • The Information Technology (IT) loans, deposits, credit, BSA/ The Task Force on Supervision Subcommittee serves as a forum AML, general ledger systems coordinates and oversees mat- to address information sys- and other critical software tools ters relating to safety-and-sound- tems and technology policy that are used by financial insti- ness supervision and examina- issues as they relate to financial tutions. These programs help tion of depository institutions. institutions and their technol- the agencies identify poten- It provides a forum for Council ogy service providers (TSPs). tial systemic risks and provide members to promote quality, The IT Subcommittee develops examiners with information consistency, and effectiveness in and maintains the FFIEC Infor- that can reduce the time and examination and other supervi- mation Technology Examina- resources needed to examine sory practices. While significant tion Handbook, which consists IT-related processing opera- issues are referred, with recom- of a series of topical booklets tions, software, and outsourced mendations, to the Council for addressing issues such as infor- services at user financial insti- action, the Council has delegated mation security. Through the tutions. In conjunction with the to the task force the authority to FFIEC, the federal banking Task Force on Examiner Edu- make certain decisions and rec- agencies coordinate the inter- cation, the IT Subcommittee ommendations, provided all task agency Multi-Regional Data sponsors an annual Informa- force members agree. Meetings Processing Servicer (MDPS) tion Technology Conference for are held regularly to address and examination and Shared Appli- examiners. resolve common supervisory cation Software Review (SASR) issues. The task force has also programs. Through the MDPS • The Bank Secrecy Act/Anti- established and maintains super- program, the agencies con- Money Laundering (BSA/ visory communication protocols duct joint IT examinations of AML) Working Group seeks to to be used in emergencies. These the largest and most complex enhance coordination of BSA/ protocols are periodically tested TSPs that provide critical data AML training, guidance, and through exercises with task force processing and related banking policy. Working group coordi- members and key supervisory services to regulated financial nation includes ongoing com- personnel. institutions. The SASR program munication between federal

15 and state banking agencies and to promote the consistent applica- alternatives for prudently restruc- the Financial Crimes Enforce- tion of the 2010 Interagency Advi- turing credit facilities as appropri- ment Network. The BSA/AML sory on Interest Rate Risk Manage- ate. The effects of natural disasters Working Group also meets ment. The advisory and FAQs, on the agricultural industry are periodically with other federal which were adopted by the federal often transitory, and prudent loan agencies, including the Inter- banking agencies, the NCUA, and modification efforts can help sta- nal Revenue Service, Securi- the SLC, address practices essen- bilize borrowers, benefit the long- ties and Exchange Commis- tial to effective risk management, term interests of financial institu- sion, U.S. Commodity Futures including stress test assumption tions and their stakeholders, and Trading Commission, Treasury development that reflects the insti- contribute to the health of local Department’s Office of Ter- tution’s experience, and compre- economies. rorist Financing and Financial hensive model validation. The Crimes, and the Office of For- FAQs reaffirm supervisory expec- Charter Conversions/Dodd-Frank eign Assets Control. The BSA/ tations for institutions to man- Restrictions AML Working Group builds age interest rate risk exposures on existing practices and works using processes and systems com- On November 26, 2012, the FRB, to strengthen the activities mensurate with their complexity, the FDIC, and the OCC, in con- that are already being pursued business models, risk profile, and junction with the Conference of by other formal and informal scope of operations. State Bank Supervisors, published interagency groups providing an Interagency Statement on Sec- oversight of various BSA/AML Stress Testing by Community Banks tion 612 of the Dodd-Frank Act: matters. BSA/AML training, Restrictions on Conversions of Trou- guidance, and policy include In response to questions from the bled Banks. An interagency group (1) procedures and resource task force, the FRB, FDIC, and developed the guidance, which materials for examination pur- OCC prepared a document enti- explains the requirements of sec- poses, (2) joint examiner train- tled Statement to Clarify Supervisory tion 612 and the processes through ing related to the FFIEC’s BSA/ Expectations for Community Banks, which certain banks or savings AML Examination Manual, (3) which was issued jointly on May associations should apply to con- outreach to the banking indus- 14, 2012. The Statement addresses vert their charters. Insured deposi- try on BSA/AML policy matters, the agencies’ supervisory expecta- tory institutions should consider and (4) other issues related to tion that all banking organizations, the statement in connection with consistency of BSA/AML regardless of size, should have the 2009 FFIEC Statement on Regu- supervision. the capacity to analyze the poten- latory Conversions, which covers tial impact of adverse outcomes a broader range of circumstances The task force also establishes ad on their financial condition. It also than section 612 and remains in hoc working groups to handle reaffirms that community banks effect. individual projects and assign- are not required or expected to ments, as needed. conduct the types of stress testing Information Technology specifically articulated in agencies’ rules and guidance to implement Financial institutions’ significant Initiatives Addressed in Dodd-Frank Act requirements use of information technology ser- 2012 directed at larger organizations. vices, whether generated inter- nally or obtained from third-party Interest Rate Risk Management Financial Institutions Affected by service providers, contributes to While some degree of interest rate Drought Conditions their operational risk environ- risk is inherent in the business of ment in general and their data banking, institutions are expected To assist financial institutions security risk in particular. A major to have sound risk-management and borrowers in areas affected effort of the IT Subcommittee and practices in place for monitoring, by severe drought conditions, the agencies is maintaining the FFIEC measuring, and where necessary, Council published a Statement on Information Technology Examination mitigating their exposure to inter- the Impact of Drought Conditions on Handbookk (IT Handbook) and pro- est rate risk. On January 12, 2012, Financial Institutions on October 16, viding guidance to the industry the FFIEC released a “frequently 2012. The statement encourages and the agencies’ field examiners asked questions” (FAQs) docu- institutions to work constructively on emerging IT issues and risks. ment in response to questions and with borrowers and to consider The IT Handbook is updated and

16 maintained electronically using ing to be another form of out- examinations. The banking agen- the FFIEC InfoBase vehicle. Dur- sourcing with the same basic risk cies also use the data from these ing the year, certain enhancements characteristics and risk-manage- reports in their automated moni- were made to the IT Handbook ment requirements as traditional toring systems to identify potential InfoBase, including the addition forms of outsourcing. The guid- or emerging problems in insured of a "What's New" function on the ance addresses key risk consider- financial institutions. home page that may be used to ations associated with outsourced monitor recent changes and, going cloud computing activities and A UBPR is produced for each forward, to access a historical list- identifies applicable risk mitiga- insured bank and savings asso- ing of changes. A new “Reference tion considerations contained in ciation in the United States that is Materials” section also was added. the various booklets that comprise supervised by the FRB, FDIC, or the IT Handbook. OCC. UBPR data are also available On October 31, 2012, the FFIEC to all state bank supervisors. While published an update of the Super- the UBPR is principally designed vision of Technology Service Provid- BSA/AML Working Group to meet the examination and sur- ers Booklet of the IT Handbook. The BSA/AML Working Group is veillance needs of the federal and Concurrently, the FRB, FDIC, responsible for maintaining and state banking agencies, the task and OCC issued new Administra- providing timely updates to the force also makes the UBPR avail- tive Guidelines for the Implementa- BSA/AML Examination Manual. able to financial institutions and tion of the Interagency Program for The working group sponsored its the public through a public web- the Supervision of Technology Ser- sixth FFIEC Advanced BSA/AML site, www.ffiec.gov/UBPR.htm. vice Providers. The booklet con- Specialists Conference in July tains guidance for examiners and 2012. Feedback from the confer- financial institutions on the super- ence was positive. The agencies Initiatives Addressed in 2012 vision of third-party technology continued to share information service providers (TSPs). It also with the Financial Crimes Enforce- Thrift Financial Report Consolidation outlines the Risk-Based Examina- ment Network and with the Office into Call Report tion Priority Ranking Program of Foreign Assets Control. and includes an appendix describ- When the Dodd-Frank Act dis- ing the Uniform Rating System for solved OTS, OCC and FDIC man- Information Technology, which dated that thrift institutions for- the agencies use for financial insti- Task Force on merly regulated by OTS begin tutions and their TSPs. Although Surveillance Systems filing Call Reports no later than closely related to the booklet, the March 31, 2012. The task force The Task Force on Surveillance guidelines are not part of the IT determined that all thrift institu- Systems oversees the develop- Handbook. tions will be placed into the exist- ment and implementation of uni- ing FDIC-insured savings bank In response to a growing number form interagency surveillance and asset-based peer groups. There are of financial institutions outsourc- monitoring systems. It provides currently four FDIC-insured sav- ing all or part of their security a forum for the member agen- ings bank peer groups: insured management function, the IT Sub- cies to discuss best practices to savings banks having assets less committee issued guidance enti- be used in those systems and to than $100 million, insured savings tled Managed Security Service Pro- consider the development of new banks having assets between viders. The guidance is in the form financial analysis tools. The task $100 million and $300 million, of an appendix to the Outsourcing force’s principal objective has been insured savings banks having Technology Service Providers Book- to develop and produce the Uni- assets between $300 million and let. The new appendix addresses form Bank Performance Report $1 billion, and insured savings the risks associated with Managed (UBPR). UBPRs present financial banks having assets greater than Security Service Providers engage- data and peer group statistics of $1 billion. As of March 31, 2012, ment and offers guidance to assist individual financial institutions thrift institutions were placed institutions in mitigating the risks. for current and historical peri- in the existing FDIC-insured sav- ods. These reports are important ings bank asset-based peer groups. On July 10, 2012, the FFIEC issued tools for completing supervisory guidance entitled Outsourced Cloud evaluations of a financial institu- The task force agreed to cre- Computing. The FFIEC member tion’s condition and performance, ate supplementary peer groups agencies consider cloud comput- as well as for planning onsite based on savings banks’ owner-

17 UBPR Fiduciary and Related Ser- vices pages were completed. The updated pages now provide users with a more complete view of an institution’s fiduciary activities.

Enhancements to UBPR Ratio Documentation In 2011, the task force explored different options for presenting technical data to explain UBPR ratios. The task force agreed to develop an online UBPR techni- cal reference manual as well as an electronic version in PDF format. In September 2012, the task force completed an online UBPR User’s Guide, which is based on the CDR system taxonomy. Concur- rently, the task force completed a rewrite of the companion PDF Task Force on Surveillance Systems meeting. UBPR User’s Guide, which was re-focused as a technical reference ship status: mutually owned or In 2011, the working group con- manual with much of its content stock-owned. The newly created cluded its review and agreed on derived from the online UBPR supplemental savings bank peer the metrics to be modified, added, User’s Guide. The UBPR User’s groups provide pre-defined cus- or deleted. Modifications were Guide has long been a critical tomized peer groups that many made based on perspectives of a supplement to the UBPR. With the examiners should find useful. broad group of users, resulting new online version, users are pro- When generating a UBPR for a in a significantly improved UBPR vided real-time access to all ratio savings bank or thrift institu- page. Analytical elements were calculations and detailed informa- tion, users will have the option to added to take full advantage of tion on components of each ele- select the standard savings bank newly collected data. The task ment. The online format signifi- asset-based peer group or the force approved the working cantly improves the accessibility new supplemental savings bank group’s recommendations. In to updated calculations when ele- peer group based on the institu- September 2012, the enhance- ments are changed. tion’s ownership structure, either ments to the UBPR liquidity mutually owned or stock-owned. and funding metrics were UBPR Delivered to a Wide Audience The asset-based savings bank completed. peer group remains the default UBPRs for December 31, 2011; selection when a UBPR is gener- Enhancements to Fiduciary Activities March 31, 2012; June 30, 2012; and September 30, 2012, were pro- ated for any thrift institution or Ratios savings bank. The new supple- duced and delivered during 2012 mental savings bank peer groups In 2010, the task force approved to federal and state banking agen- were implemented in September a working group to review cies. Additionally, the UBPR web- 2012. UBPR treatment of fiduciary site was utilized to deliver the data obtained from Call Report same data to financial institutions Schedule RC-T. In 2011, the work- and the general public. The task Enhancements to Liquidity and ing group concluded its review force strives to deliver the most Funding Ratios and agreed on the metrics to be up-to-date UBPR data to all users. In 2010, the task force approved modified, added, or deleted. The Thus, current and historic UBPR a working group to review UBPR task force approved the working data is updated nightly. Frequent treatment of liquidity measures group’s recommendations. In Sep- updating allows the UBPR to and overall funding analysis. tember 2012, the enhancements to remain synchronized with new

18 Call Report data as it is being sub- accuracy and consistency of all tution to the performance of a mitted by financial institutions. UBPR concepts (which includes user-defined custom peer group. descriptions, narratives, and Other Activities formulas), contained in both Custom Peer Group Tool the online and PDF UBPR • Content Working Group—The User’s Guide. The Custom Peer Group Tool task force has agreed to estab- allows industry professionals, reg- lish a UBPR working group to ulators, and the general public to perform a complete review of create custom peer groups based the UBPR (excluding the fidu- Information Available on the on financial and geographical cri- ciary data activities and liquid- UBPR Website teria. The tool can then display all UBPR pages with peer group ity pages that were reviewed UBPR Availability in 2010 and 2011) and make statistics and percentile rankings recommendations for potential To provide broad industry and derived from the custom peer enhancements. public access to information about group. The Custom Peer Group the financial condition of insured Tool can re-compute the entire

• Technology Working Group —The financial institutions, the task UBPR using a custom peer group task force has agreed to estab- force publishes UBPR data for of up to 2,000 financial institutions lish a UBPR working group each institution shortly after the and deliver the results usually to look at ways to improve underlying Call Report is filed in within seconds. the usability of the UBPR. For the CDR. The UBPR is frequently example, the development of refreshed to reflect amendments Bulk Data Download various visualization options to underlying Call Report data The UBPR database within the (i.e. graphs, charts) and the cre- and to incorporate any content- CDR containing all data appear- ation of a mobile application based changes agreed to by the ing on report pages for all finan- will be explored. task force. The online UBPR is a cial institutions may be down- dynamic report that is closely syn- • Supplementary Analysis Work- loaded as either a delimited file chronized with the underlying ing Group —The task force has or in XBRL format. The service is Call Report. agreed to establish a UBPR free, and downloads are typically working group to identify other fast. analytics (besides the UBPR) Other UBPR Reports that could be developed and Please visit www.ffiec.gov/UBPR. maintained under the purview Several web-based statistical htm for additional information of the task force. reports supporting UBPR analysis about the UBPR, including status, are also available and are updated descriptions of pending changes,

• Review of the online and PDF nightly on the website. These and the UBPR Users Guide. The UBPR User’s Guide —The new reports (1) summarize the perfor- site also provides access to the online UBPR User’s Guide and mance of all UBPR peer groups reports described above. For ques- related PDF UBPR User’s Guide (determined by size, location, and tions about the UBPR, contact are based on the existing CDR business line), (2) detail the dis- support by calling 1-888-237-3111, system taxonomy. Because tribution of UBPR performance e-mailing [email protected], or the taxonomy is very exten- ratios for financial institutions in writing the Council at: sive, consisting of thousands of each of these peer groups, (3) list UBPR and Call Report concepts, the individual financial institu- FFIEC the task force agreed to review tions included in each peer group, 3501 Fairfax Drive, Room B7081a the taxonomy to ensure the and (4) compare a financial insti- Arlington, VA 22226-3550

19

THE FEDERAL FINANCIAL INSTITUTION REGULATORY AGENCIES AND THEIR SUPERVISED INSTITUTIONS

The FRB, FDIC, OCC, and NCUA to operate insured entities in the have primary federal supervisory United States and accept retail jurisdiction over 14,189 domes- deposits must organize under tically chartered banks, savings separate U.S. charters. Existing associations, and federally insured insured retail branches may con- credit unions. On December 31, tinue to operate as branches. The 2012, these financial institutions IBA also subjects those U.S. offices held total assets of just over $17.6 of foreign banks to many provi- trillion. The FRB has primary fed- sions of the eral supervisory responsibility for and the Bank Holding Company commercial bank holding com- Act. The IBA gives primary exam- panies (BHCs) and, as of July 21, ining authority to the OCC, FDIC, 2011, for savings and loan holding and various state authorities for companies (SLHCs). the offices within their jurisdic- tions. The IBA also gives the FRB Three banking agencies on the residual examining authority over Council have authority to over- all U.S. banking operations of for- see the operations of U.S. branches eign banks. The Dodd-Frank Act and agencies of foreign banks. The provides statutory authority to the International Banking Act of 1978 CFPB to conduct examinations of (IBA) authorizes the OCC to license insured depository entities with federal branches and agencies of total assets over $10 billion and foreign banks and permits U.S. their affiliates (in addition to cer- branches that accept only whole- tain nonbank entities) to ensure sale deposits to apply for insurance consumer financial products and with the FDIC. According to the services conform to certain federal Federal Deposit Insurance Corpo- consumer financial laws. ration Improvement Act of 1991 (FDICIA), foreign banks that wish Board of Governors of the — State member banks (i.e., Federal Reserve System state-chartered banks that are members of the Federal The Federal Reserve Board (FRB) Reserve System); was established in 1913. It is headed by a seven-member Board — BHCs, including FHCs; of Governors; each member is — SLHCs;1 appointed by the President, with the advice and consent of the Sen- — Edge Act and agreement ate, for a 14-year term. Subject to corporations; select non- confirmation by the Senate, the bank financial firms; President selects one Board mem- — International operations ber to serve a four-year term as of banking organiza- Chairperson and two members to tions headquartered in serve as Vice Chairs; one serves the United States and the in the absence of the Chairperson domestic activities of for- and the other is designated as Vice eign banking organiza- Chair for Supervision. The Chair- tions, in conjunction with person also serves as a voting the responsible licensing member of the Financial Stability authorities; as well as, Oversight Council. One member of the Board of Governors serves — Nonbank financial firms as the Board’s representative to the designated as systemically FFIEC. The FRB’s activities most important by the Financial relevant to the work of the Council Stability Oversight Council are the following: (FSOC). • overseeing the quality and effi- Other supervisory and regulatory ciency of the examination and responsibilities of the FRB include supervision function of the 12 monitoring compliance by enti- Federal Reserve Banks; ties under the Board’s jurisdic- tion with other statutes (e.g., the • developing, issuing, implement- money-laundering provisions of ing, and communicating regula- the Bank Secrecy Act), monitoring tions, supervisory policies, and compliance with certain statutes guidance, and taking appropri- that protect consumers in credit ate enforcement actions appli- and deposit transactions, regulat- cable to those organizations that ing margin requirements on secu- are within the FRB’s supervi- rities transactions, and regulat- sory oversight authority; ing transactions between banking • approving or denying appli- affiliates. cations for mergers, acquisi- tions, and changes in control by 1. The FRB’s role as supervisor of BHCs, state member banks and BHCs FHCs, and SLHCs is to review and (including financial holding assess the consolidated organization’s companies (FHCs)); applica- operations, risk-management systems, tions for foreign operations of and capital adequacy to ensure that the holding company and its nonbank sub- member banks and Edge Act sidiaries do not threaten the viability and agreement corporations; of the company’s depository institu- and applications by foreign tions. In this role, the FRB serves as the banks to establish or acquire “umbrella supervisor” of the consoli- dated organization. In fulfilling this U.S. banks and to establish U.S. role, the FRB relies, to the fullest extent branches, agencies, or represen- possible, on information and analysis tative offices; and provided by the appropriate supervi- sory authority of the company’s bank, • supervising and regulating: securities, or insurance subsidiaries.

22 Policy decisions are implemented System, are chartered, regulated, by the FRB or under delegated and supervised by the OCC. State- authority to the Director for the chartered banks may apply to Division of Banking Supervision and be accepted for membership and Regulation, the Director for in the Federal Reserve System, the Division of Consumer and after which they are subject to the Community Affairs, and to the supervision and regulation of the 12 Federal Reserve Banks—each FRB, which is coordinated with the of which has operational respon- state’s banking authority. Insured sibility within a specific geo- state-chartered banks that are not graphical area. The Reserve Bank members of the Federal Reserve Districts are headquartered in System are regulated and super- Boston, New York, Philadelphia, vised by the FDIC. The FRB also Cleveland, Richmond, Atlanta, has overall responsibility for for- Chicago, St. Louis, Minneapolis, eign banking operations, including Kansas City, Dallas, and San Fran- both U.S. banks operating abroad cisco. Each Reserve Bank has a and foreign banks operating president (chief executive officer) branches within the United States. who serves for five years and is appointed by the Reserve Bank’s The Dodd-Frank Act directs the class B and class C directors, FRB to collect assessments, fees, and other executive officers who and other charges that are equal report directly to the president. to the expenses incurred by the Among other responsibilities, a Federal Reserve to carry out its Reserve Bank employs a staff of responsibilities with respect to examiners who examine state supervision of (1) BHCs and member banks and Edge Act and SLHCs with assets equal to or agreement corporations, conduct greater than $50 billion and (2) BHC inspections, and examine the all nonbank financial companies international operations of foreign supervised by the FRB. banks—whose head offices are Additionally, the Dodd-Frank usually located within the Reserve Act created an independent CFPB Bank’s District. When appropri- within the Federal Reserve System. ate, examiners also visit the over- seas offices of U.S. banking orga- The FRB covers the expenses of the nizations to obtain financial and CFPB’s operations with revenue it operating information to evaluate generates principally from assess- adherence to safe and sound bank- ments on the 12 Federal Reserve ing practices. Banks. National banks, which must be members of the Federal Reserve

23 Consumer Financial tion relevant to the identifica- Protection Bureau tion of risks to consumers and the proper functioning of finan- The Consumer Financial Protec- cial markets; tion Bureau (CFPB) was created in 2010 by the Dodd-Frank Act and • issuing rules, orders, and guid- assumed transferred authorities ance implementing federal con- from other federal agencies, and sumer financial laws; other new authorities, on July 21, • taking appropriate enforcement 2011. The CFPB is an independent action to address violations agency and is funded principally of federal consumer financial by transfers from the FRB up to a laws; and limit set forth in the statute. The CFPB requests transfers from the • supervising covered entities Board in amounts that are reason- to assess compliance with fed- ably necessary to carry out its mis- eral consumer financial laws sion. Funding is capped at a pre- and detect financial risks to set percentage of the total 2009 consumers. operating expenses of the Fed- The CFPB has statutory author- eral Reserve System, subject to an ity to conduct examinations to annual adjustment. The Director ensure that consumer financial of the CFPB serves on the FDIC products and services conform to Board of Directors and the Finan- certain federal consumer financial cial Stability Oversight Council. laws, and for related purposes. The CFPB seeks to foster a con- The CFPB’s supervision program sumer financial marketplace oversees: where customers can clearly see • Insured depository entities with prices and risks up front and can total assets over $10 billion and easily make product comparisons; their affiliates. These institu- in which no one can build a busi- tions collectively hold more ness model around unfair, decep- than 80 percent of the banking tive, or abusive practices; and that industry’s assets. works for American consumers, responsible providers, and the • Certain nondepository enti- economy as a whole. To accom- ties regardless of size—mort- plish this, the CFPB works to help gage companies (originators, consumer financial markets oper- brokers, and servicers, as well ate by making rules more effec- as related loan modification tive, by consistently and fairly or foreclosure relief services enforcing those rules, and by firms), payday lenders, and empowering consumers to take private education lenders. The more control over their economic CFPB can also supervise the lives. larger players, or “larger par- ticipants,” as defined by rule, The Dodd-Frank Act sets forth the in consumer financial markets, following functions for the CFPB: and certain nondepository enti- • conducting financial education ties that it determines are pos- programs; ing a risk to consumers in con- nection with the offering or

• collecting, investigating, and provision of consumer financial responding to consumer products or services. In 2012, complaints; the CFPB began identifying • collecting, researching, moni- other markets in which it will toring, and publishing informa- supervise the larger partici-

24 pants and published final rules The CFPB’s supervisory activi- that allow it to supervise larger ties are conducted by the Divi- participants in the sion of Supervision, Enforcement, Fair Lending and Equal Oppor-

— consumer reporting market tunity. The division is headquar- (these entities have more tered in Washington, D.C., with than $7 million in annual regional offices in San Francisco receipts resulting from con- (West), Chicago (Midwest), New sumer reporting) and York (Northeast), and Washing- — consumer debt collection ton, D.C. (Southeast). Examination market (these entities have staff is assigned to one of the four annual receipts of more regions. than $10 million result- ing from consumer debt collection).

25 Federal Deposit Insurance Corporation must continually eval- Corporation uate and effectively manage how changes in the economy, finan- Congress created the Federal cial markets, and banking system Deposit Insurance Corporation affect the adequacy and viability of (FDIC or Corporation) in 1933 to the DIF. When an insured deposi- promote stability and public con- tory institution fails, the FDIC fidence in our nation’s banking ensures that the financial institu- system. The FDIC accomplishes tion’s customers have timely access its mission by insuring deposits, to their insured deposits and other examining and supervising finan- services. cial institutions for safety and soundness and consumer pro- The FDIC provides the public with tection, and managing receiver- a sound deposit insurance system ships. In its unique role as deposit by supplying comprehensive sta- insurer, the FDIC works in coop- tistical information on banking; eration with other federal and identifying and analyzing emerg- state regulatory agencies to iden- ing risks; conducting research that tify, monitor, and address risks supports deposit insurance, bank- to the Deposit Insurance Fund ing policy, and risk assessment; (DIF) posed by insured depository assessing the adequacy of the DIF; institutions. and maintaining an effective and fair risk-based premium system. Management of the FDIC is vested in a five-member Board of Direc- The Dodd-Frank Act revised the tors. No more than three board statutory authorities governing the members may be of the same FDIC’s management of the DIF. political party. Three of the direc- As a result, the FDIC developed a tors are appointed by the Presi- comprehensive, long-range man- dent, with the advice and consent agement plan for the DIF to reduce of the Senate, for six-year terms. pro-cyclicality in the deposit insur- One of the three appointed direc- ance system and maintain a posi- tors is designated by the Presi- tive fund balance even during a dent as Chairman for a five-year banking crisis. The plan sets an term and another is designated appropriate target fund size and a as Vice Chairman. The other two strategy for assessment rates and board members are the Comptrol- dividends. Pursuant to the compre- ler of the Currency and the Direc- hensive plan, the FDIC adopted a tor of the CFPB. The Chairman also Restoration Plan to ensure that the serves as a member of the Financial reserve ratio reaches the statutory Stability Oversight Council. mandates required by the Dodd- Frank Act in a timely manner. Also pursuant to the Dodd-Frank Act, Operational Structure the FDIC amended its regulations to define the assessment base as The FDIC’s operations are orga- average consolidated total assets nized into three major program minus average tangible equity, areas: insurance, supervision, rather than domestic deposits and receivership management. A (which, with minor adjustments, it description of each of these areas has been since 1935). follows: The FDIC also continued its efforts Insurance: The FDIC maintains sta- to improve risk differentiation bility and public confidence in the by issuing a rule that revised the U.S. financial system by providing assessment system applicable to deposit insurance. As insurer, the large insured depository institu-

26 tions to (1) better reflect risk in a Reinvestment Act, without regard financial stability, the FDIC has timely manner, (2) differentiate to the size of an institution. backup examination authority to large institutions during periods of include certain bank holding com- good economic conditions, and (3) These two divisions are further panies and systemically- impor- take into account the losses that the organized into six regional offices tant financial companies desig- FDIC may incur if such an institu- located in Atlanta, Chicago, Dal- nated by the FSOC for supervision tion fails. las, Kansas City, New York, and by the FRB. San Francisco; and two area offices Supervision: The FDIC has primary located in Boston (reports to New The Division of Resolutions and federal regulatory and supervisory York) and Memphis (reports to Receiverships maintains person- authority over insured state-char- Dallas). In addition to the regional nel in its field office in Dallas and tered banks that are not members and area offices, the FDIC main- its temporary satellite office in of the Federal Reserve System and tains 86 field offices for risk man- Jacksonville, Florida; it also main- for state-chartered savings asso- agement and 76 field offices for tains staff in each of the FDIC ciations. As deposit insurer, the compliance, with dedicated exam- regional and area offices. FDIC also has backup examination iners assigned to many of the larg- and enforcement authority over all est financial institutions. insured institutions. Accordingly, Receivership Management: Office of Complex Financial the FDIC can examine for insur- Institutions ance purposes any insured finan- Bank resolutions are handled cial institution, either directly or by the Division of Resolutions The Office of Complex Financial in cooperation with state or other and Receiverships. In protect- Institutions (OCFI) is an organi- federal supervisory authorities. The ing insured deposits, the FDIC zation within the FDIC created to FDIC can also recommend that the is charged with resolving failed provide a comprehensive focus appropriate federal banking agency depository institutions at the least to the supervisory, insurance, take action against an insured insti- possible cost to the DIF. In car- and resolution risks posed by the tution and may do so itself if it rying out this responsibility, the largest and most complex finan- deems necessary. The Dodd-Frank FDIC engages in several activi- cial institutions. The organization Act also authorizes the FDIC to ties, including paying off deposi- ensures the effective evaluation, manage the failure of systemically tors, arranging the purchase of analysis, management, and miti- significant firms. assets and assumption of liabili- gation of risk related to large and ties of failed institutions, effecting complex financial institutions. The FDIC’s supervisory activities insured deposit transfers between OCFI develops strategies, metrics, for risk management and consumer institutions, creating and operat- and supervisory plans to ensure protection are primarily organized ing temporary bridge banks until readiness to conduct the resolu- into two divisions, the Division a resolution can be accomplished, tion of large and complex finan- of Risk Management Supervision and using its conservatorship cial institutions, thereby reduc- (RMS) and the Division of Deposi- powers. ing loss exposure to the DIF and tor and Consumer Protection mitigating systemic risks. OCFI (DCP). RMS oversees the safety Also, the Dodd-Frank Act vests the FDIC with authority to resolve defines and executes the FDIC's and soundness of FDIC-supervised evolving role in the oversight institutions. DCP oversees the a failing systemically important financial company, including a of large financial firms, includ- FDIC’s consumer protection func- ing the expanded responsibilities tions, including its examination and bank holding company, if use of that authority would avoid or assigned the FDIC by the Dodd- enforcement programs for FDIC- Frank Act. This operational group supervised institutions with assets mitigate potential adverse conse- quences for the financial system, complements and enhances the of $10 billion or less. Under the FDIC’s operational activities, as Dodd-Frank Act, the FDIC retains and complies with other statutory standards. Consistent with these they relate to systemically signifi- examination and enforcement cant institutions. authority for several laws and regu- responsibilities, as well as its role lations, including the Community on the FSOC helping to promote

27 National Credit Union zation Fund, which has bor- Administration rowing authority from the U.S. Treasury and assessment The National Credit Union authority to resolve corporate Administration (NCUA), estab- credit union issues; and lished by Congress in 1970 through section 1752a of the Fed- • manage the Central Liquid- eral Credit Union Act, is the inde- ity Facility, created to improve pendent federal agency that super- the financial stability of credit vises the nation’s federal credit unions by providing liquidity union system. A three-member to the credit union system. bipartisan board, appointed by the The NCUA also has statutory President for six-year terms, man- authority to examine and super- ages the NCUA. The President vise NCUSIF-insured, state-char- also selects one board member to tered credit unions in coordina- serve as the Chairman. The Chair- tion with state regulators. man also serves as a member of the Financial Stability Oversight The NCUA is headquartered in Council. Alexandria, Virginia, and has five regional offices across the United The NCUA’s main responsibilities States to administer its responsi- are as follows: bilities for chartering and super- • charter, regulate, and supervise vising credit unions. Addition- more than 4,200 federal credit ally, the Asset Management and unions in the United States and Assistance Center located in Aus- its territories; tin, Texas, manages the recov- ery of assets for liquidated credit • administer the National Credit unions. NCUA examiners conduct Union Share Insurance Fund on-site examinations and supervi- (NCUSIF), which insures sion of each federal credit union member share accounts in just and selected state-chartered credit over 6,800 federal and state- unions. The NCUA is funded by chartered credit unions; the credit unions it regulates and • administer the Temporary Cor- insures. porate Credit Union Stabili- Office of the Comptroller • chartering banks and issuing of the Currency interpretations related to per- missible banking activities; The Office of the Comptroller of the Currency (OCC) is the oldest • establishing and communicat- federal bank regulatory agency, ing regulations, policies, and established as a bureau of the Trea- operating guidance applicable sury Department by the National to banks; and Currency Act of 1863. It is headed • supervising the national sys- by the Comptroller of the Cur- tem of banks and savings rency, who is appointed to a five- associations through on-site year term by the President with the examinations, off-site moni- advice and consent of the Senate. toring, systemic risk analyses, The Comptroller is also a Direc- and appropriate enforcement tor of the FDIC and a member of activities. the Financial Stability Oversight Council. To meet its objectives, the OCC maintains a nationwide staff of The OCC was created by Congress bank examiners and other pro- to charter, regulate, and supervise fessional and support personnel. national banks. On July 21, 2011, Headquartered in Washington, pursuant to the Dodd-Frank Act, DC, the OCC has four district the OCC assumed supervisory offices, which are located in Chi- responsibility for federal savings cago, Dallas, Denver, and New associations, as well as rulemak- York. In addition, the OCC main- ing authority relating to all savings tains a network of 73 field offices associations. The OCC regulates and 20 satellite locations in cities and supervises 1,338 national banks throughout the United States, as and trust companies, 573 federal well as resident examiner teams savings associations, and 47 fed- in 23 of the largest - eral branches of foreign banks— ing companies and an examining accounting for approximately 71 office in London, England. percent of the total assets of all U.S. commercial banks, federal sav- The Comptroller receives advice ings associations, and branches of on policy and operational issues foreign banks. The OCC seeks to from an Executive Committee ensure that national banks and fed- comprised of senior agency offi- eral savings associations (collec- cials who lead major business tively “banks”) safely and soundly units. manage their risks, comply with The OCC is funded primarily by applicable laws, compete effec- semiannual assessments on banks, tively with other providers of finan- interest revenue from its invest- cial services, offer products and ment in U.S. Treasury securities, services that meet the needs of cus- and other fees. The OCC does not tomers, and provide fair access to receive congressional appropria- financial services and fair treatment tions for any of its operations. of their customers. The OCC’s mission-critical pro- grams include:

29 ASSETS, LIABILITIES, AND NET WORTH of U.S. Commercial Banks, Savings Institutions, and Credit Unions as of December 31, 20121 Billions of dollars

Savings Credit U.S. Commercial Banks2 U.S. Institutions4 Unions3 Branches and OCC FDIC Agencies Regu- Regu- State of lated lated State Non- Foreign Federal State Federal State Item Total National Member5 Member Banks6 Charter Charter7 Charter Charter

Total assets 17,613 9,271 2,005 2,122 2,134 719 340 557 465

Total loans and receivables (net) 8,639 4,627 909 1,358 519 414 217 322 273 Loans secured by real estate8 4,444 2,277 506 830 31 289 191 168 152 Consumer loans9 1,604 919 70 246 – 87 6 156 120 Commercial and industrial loans 1,778 988 224 232 273 35 20 2 4 All other loans and lease receivables10 984 554 125 76 215 10 3 – 1 LESS: Allowance for loan and lease losses 170 111 16 25 – 7 3 4 4 Federal funds sold and securities purchased under agreements to resell 729 500 30 16 180 1 1 – 1 Cash and due from depository institutions11 2,256 801 358 177 674 64 29 80 73 Securities and other obligations12 3,402 1,858 478 415 165 192 67 131 96 U.S. government obligations13 745 242 77 87 60 27 53 115 84 Obligations of state and local governments14 263 125 46 80 – 6 6 – – Other securities 2,394 1,491 355 248 105 159 8 16 12 Other assets15 2,586 1,485 231 155 595 48 26 24 22

Total liabilities 15,872 8,240 1,781 1,868 2,134 634 299 499 417

Total deposits and shares16 12,702 6,766 1,588 1,659 1,008 545 258 475 403 Federal funds purchased and securities sold under agreements to repurchase 783 340 56 31 327 20 9 – – Other borrowings17 1,201 623 63 145 261 55 28 18 8 Other liabilities18 1,185 511 73 33 538 14 4 6 6

Net worth19 1,742 1,031 224 254 1 85 41 58 48

Memorandum: Number of institutions reporting 14,189 1,294 843 4,018 228 547 440 4,272 2,547

Footnotes to Tables 1. The table covers institutions, including 3. Data are for federally insured natural land (including improvements) and those in Puerto Rico and U.S. territories person credit unions only. unimproved land; and construction and possessions, insured by the Fed- loans secured by real estate. eral Deposit Insurance Corporation or 4. Reflects fully consolidated statements of Savings Institutions—including Stock 9. Includes loans, except those secured National Credit Union Savings Insur- by real estate, to individuals for house- ance Fund. All branches and agencies of Savings Banks, Mutual Savings Banks, Stock Savings & Loan Associations, and hold, family, and other personal expen- foreign banks in the United States, but ditures including both installment and excluding any in Puerto Rico and U.S. Mutual Savings & Loan Associations that are Federally Chartered or that are single payment loans. Net of unearned territories and possessions, are covered income on installment loans. whether or not insured. Excludes Edge State Chartered and not Federal Reserve Act and agreement corporations that Members. 10. Includes loans to financial institu- are not subsidiaries of U.S. commercial 5. Includes State Member Savings tions, for purchasing or carrying secu- banks. Banks and State Member Cooperative rities, to finance agricultural produc- Banks. tion and other loans to farmers (except 2. Reflects fully consolidated state- those secured by real estate), to states ments of FDIC-insured U.S. commer- 6. These institutions are not required to file and political subdivisions and public cial banks—including their foreign reports of income. authorities, and miscellaneous types of branches, foreign subsidiaries, branches 7. Includes State Chartered Savings Asso- loans. in Puerto Rico and U.S. territories and ciations formerly regulated by the Office possessions, and FDIC insured banks in of Thrift Supervision. Puerto Rico and U.S. territories and possessions. Excludes bank holding 8. Includes loans secured by residential companies. property, commercial property, farm- Notes continue on the next page

30 INCOME AND EXPENSES of U.S. Commercial Banks, Savings Institutions, and Credit Unions for the Twelve Months Ending December 31, 20121 Billions of dollars

Savings Credit U.S. Commercial Banks2 Institutions4 Unions3

OCC FDIC Regu- Regu- State lated lated State Non- Federal State Federal State Item Total National Member5 Member Charter Charter7 Charter Charter Operating income: 768 469 90 118 48 15 28 23 Interest and fees on loans 404 233 40 79 25 10 17 14 Other interest and dividend income 103 69 13 11 5 2 3 2 All other operating income 261 167 37 28 18 3 8 7

Operating expenses: 570 348 66 86 35 12 23 19 Salaries and benefits 194 120 27 28 7 4 8 7 Interest on deposits and shares 47 22 5 10 4 2 4 3 Interest on other borrowed money 25 15 2 4 2 1 1 – Provision for loan and lease losses 61 39 4 10 5 1 2 2 All other operating expenses 244 152 28 35 17 4 8 7

Net operating income 198 121 24 32 13 3 5 4

Securities gains and losses 8 6 1 1 – – – –

Extraordinary items – – – – – – – –

Income taxes 58 37 7 8 5 1 – –

Net income 147 90 18 24 8 2 5 4

Memorandum: Number of institutions reporting 13,961 1,294 843 4,018 547 440 4,272 2,547

11. Includes vault cash, cash items in pro- public authorities are included in “All 17. Includes interest-bearing demand notes cess of collection, and balances with other loans and lease receivables.” issued to the U.S. Treasury, borrowing U.S. and foreign banks and other from Federal Reserve Banks and Fed- depository institutions (including 15. Customers' liabilities on acceptances, eral Home Loan Banks, subordinated demand and time deposits and cer- real property owned, various accrual debt, limited life preferred stock, and tificates of deposit for all categories of accounts, and miscellaneous assets. For other nondeposit borrowing. institutions). U.S. branches and agencies of foreign banks, also includes net due from head 18. Includes depository institutions' own 12. Includes government and corporate office and other related institutions. mortgage borrowing, liability for capi- securities, including mortgage-backed talized leases, liability on acceptances 16. Includes demand, savings, and time securities and obligations of states and executed, various accrual accounts, deposits, (including certificates of political subdivisions and of U.S. gov- and miscellaneous liabilities. For U.S. deposit at commercial banks, U.S. ernment agencies and corporations. branches and agencies of foreign banks, branches and agencies of foreign also includes net owed to head office 13. U.S. Treasury securities and securities banks, and savings banks), credit bal- and other related institutions. of, and loans to, U.S. government agen- ances at U.S. agencies of foreign banks cies and corporations. and share balances at credit unions 19. Includes capital stock, surplus, capital (including certificates of deposit, NOW reserves, and undivided profits. 14. Securities issued by states and politi- accounts, and share draft accounts). cal subdivisions and public authori- For U.S. commercial banks, includes NOTE: Data are rounded to nearest billion. ties, except for U.S. branches and agen- deposits in foreign offices, branches in Consequently some information may cies of foreign banks that do not report U.S. territories and possessions, and not reconcile precisely. Additionally, these securities separately. Loans to Edge Act and Agreement corporation balances less than $500 million will states and political subdivisions and subsidiaries. show as zero.

31

APPENDIX A: RELEVANT STATUTES

Federal Financial Institutions and loan association, a home- The term of the Chairman of the Examination Council Act stead association, a cooperative Council shall be two years. bank, or a credit union. 12 U.S.C. § 3301. Declaration of (d) Designation of officers and purpose employees 12 U.S.C. § 3303. Financial It is the purpose of this chapter to Institutions Examination Council The members of the Council may, establish a Financial Institutions from time to time, designate other (a) Establishment; composition Examination Council which shall officers or employees of their prescribe uniform principles and There is established the Financial respective agencies to carry out standards for the Federal exami- Institutions Examination Council their duties on the Council. nation of financial institutions which shall consist of— (e) Compensation and expenses by the Office of the Comptrol- (1) the Comptroller of the ler of the Currency, the Federal Each member of the Council shall Currency, Deposit Insurance Corporation, serve without additional compen- the Board of Governors of the Fed- (2) the Chairman of the Board sation but shall be entitled to rea- eral Reserve System, the Federal of Directors of the Federal sonable expenses incurred while Home Loan Bank Board, and the Deposit Insurance Corporation, carrying out his official duties as National Credit Union Adminis- such a member. tration and make recommenda- (3) a Governor of the Board of tions to promote uniformity in Governors of the Federal Reserve the supervision of these financial System designated by the Chair- 12 U.S.C. § 3304. Costs and expenses institutions. The Council’s actions man of the Board, of Council shall be designed to promote con- (4) the Director of the One-fifth of the costs and expenses sistency in such examination and Consumer Financial Protection of the Council, including the sala- to insure progressive and vigilant Bureau,1 ries of its employees, shall be paid supervision. (5) the Chairman of the by each of the Federal financial National Credit Union institutions regulatory agencies. 12 U.S.C. § 3302. Definitions Administration Board; and Annual assessments for such share shall be levied by the Council As used in this chapter— (6) the Chairman of the State based upon its projected budget (1) the term “Federal finan- Liaison Committee for the year, and additional assess- ments may be made during the cial institutions regulatory agen- (b) Chairmanship cies” means the Office of the year, if necessary. Comptroller of the Currency, the The members of the Council shall select the first chairman of the Board of Governors of the Fed- 12 U.S.C. § 3305. Functions of Council. Thereafter the chairman- eral Reserve System, the Federal Council Deposit Insurance Corporation, ship shall rotate among the mem- the Office of Thrift Supervision, bers of the Council. (a) Establishment of principles and standards and the National Credit Union (c) Term of office Administration; The Council shall establish uni- (2) the term “Council” means 1. The Dodd Frank Wall Street Reform form principles and standards the Financial Institutions Exami- and Consumer Protection Act of 2010 and report forms for the examina- nation Council; and amended several provisions in the rel- tion of financial institutions which evant statutes, including excerpts con- shall be applied by the Federal tained in this appendix. Changes are (3) the term “financial institu- financial institutions regulatory tion” means a commercial bank, shown as bolded and italicized. The amendments relating to the Consumer agencies. a savings bank, a trust company, Financial Protection Bureau became a savings association, a building effective on July 21, 2011. (b) Making recommendations

33 regarding supervisory matters and The Council shall conduct schools sonable allowance for necessary adequacy of supervisory tools for examiners and assistant exam- expenses incurred in attending iners employed by the Federal meetings. (1) The Council shall make financial institutions regulatory Members of the Liaison Commit- recommendations for uniformity agencies. Such schools shall be tee shall elect a chairperson from in other supervisory matters, open to enrollment by employ- among the members serving on such as, but not limited to, clas- ees of State financial institutions the committee. sifying loans subject to country supervisory agencies and employ- risk, identifying financial insti- ees of the Federal Housing Finance 12 U.S.C. § 3307. Administration tutions in need of special super- Board under conditions specified visory attention, and evaluat- by the Council. (a) Authority of Chairman of ing the soundness of large loans Council that are shared by two or more (e) Affect on Federal regulatory financial institutions. In addition, agency research and development The Chairman of the Council is the Council shall make recom- of new financial institutions super- authorized to carry out and to del- mendations regarding the ade- visory agencies egate the authority to carry out quacy of supervisory tools for the internal administration of the Nothing in this chapter shall be Council, including the appoint- determining the impact of hold- construed to limit or discourage ing company operations on the ment and supervision of employ- Federal regulatory agency research ees and the distribution of busi- financial institutions within the and development of new financial holding company and shall con- ness among members, employees, institutions supervisory methods and administrative units. sider the ability of supervisory and tools, nor to preclude the field agencies to discover possible testing of any innovation devised (b) Use of personnel, services, fraud or questionable and illegal by any Federal regulatory agency. and facilities of Federal financial payments and practices which institutions regulatory agencies, might occur in the operation (f) Annual report Federal Reserve banks, and Fed- of financial institutions or their Not later than April 1 of each eral Home Loan Banks. holding companies. year, the Council shall prepare an In addition to any other authority (2) When a recommendation annual report covering its activi- conferred upon it by this chapter, of the Council is found unac- ties during the preceding year. in carrying out its functions under ceptable by one or more of the (g) Flood insurance this chapter, the Council may uti- applicable Federal financial insti- lize, with their consent and to the tutions regulatory agencies, the The Council shall consult with extent practical, the personnel, ser- agency or agencies shall submit and assist the Federal entities for vices, and facilities of the Federal to the Council, within a time lending regulation, as such term is financial institutions regulatory period specified by the Coun- defined in section 4121(a) of Title agencies, Federal Reserve banks, cil, a written statement of the 42, in developing and coordinating and Federal Home Loan Banks, reasons the recommendation is uniform standards and require- with or without reimbursement unacceptable. ments for use by regulated lend- therefore. ing institutions under the national (c) Development of uniform flood insurance program. (c) Compensation, authority, reporting system and duties of officers and employ- ees; experts and consultants The Council shall develop uniform 12 U.S.C. § 3306. State liaison reporting systems for federally In addition, the Council may— supervised financial institutions, To encourage the application of their holding companies, and non- uniform examination principles (1) subject to the provisions of financial institution subsidiaries of and standards by State and Federal Title 5 relating to the competitive such institutions or holding com- supervisory agencies, the Council service, classification, and Gen- panies. The authority to develop shall establish a liaison committee eral Schedule pay rates, appoint uniform reporting systems shall composed of five representatives and fix the compensation of such not restrict or amend the require- of State agencies which supervise officers and employees as are ments of section 78l(i) of Title 15. financial institutions which shall necessary to carry out the provi- meet at least twice a year with the sions of this chapter, and to pre- (d) Conducting schools for Council. Members of the liaison scribe the authority and duties of examiners and assistant examiners com-mittee shall receive a rea- such officers and employees; and

34 (2) obtain the services of such “Appraisal Subcommittee,” which comment on a particular cate- experts and consultants as are shall consist of the designees of gory or categories of regulations, necessary to carry out the provi- the heads of the Federal financial requesting commentators to sions of this chapter. institutions regulatory agencies, identify areas of the regulations the Bureau of Consumer Finan- that are outdated, unnecessary, 12 U.S.C. § 3308. Access to books, cial Protection, and the Federal or unduly burdensome. accounts, records, etc., by Council Housing Finance Agency. Each such designee shall be a person (c) Complete review For the purpose of carrying out who has demonstrated knowl- The Council or the appropri- this chapter, the Council shall edge and competence concern- ate Federal banking agency shall have access to all books, accounts, ing the appraisal profession. At ensure that the notice and com- records, reports, files, memoran- all times at least one member of ment period described in sub- dums, papers, things, and property the Appraisal Subcommittee shall section (b)(2) of this section is belonging to or in use by Federal have demonstrated knowledge conducted with respect to all regu- financial institutions regulatory and competence through licen- lations described in subsection (a) agencies, including reports of sure, certification, or professional of this section not less frequently examination of financial institu- designation within the appraisal than once every 10 years. tions or their holding companies profession. from whatever source, together (d) Regulatory response with workpapers and correspon- dence files related to such reports, 12 U.S.C. § 3311. Required review of The Council or the appropriate whether or not a part of the report, regulations Federal banking agency shall— and all without any deletions. (a) In general (1) publish in the Federal Register a summary of the com- Not less frequently than once 12 U.S.C. § 3309. Risk management ments received under this sec- every 10 years, the Council and training tion, identifying significant each appropriate Federal bank- issues raised and providing (a) Seminars ing agency represented on the comment on such issues; and Council shall conduct a review of The Council shall develop and all regulations prescribed by the administer training seminars in (2) eliminate unnecessary reg- Council or by any such appro- risk management for its employ- ulations to the extent that such priate Federal banking agency, ees and the employees of insured action is appropriate. respectively, in order to identify financial institutions. outdated or otherwise unneces- (e) Report to Congress (b) Study of risk management sary regulatory requirements Not later than 30 days after car- training program imposed on insured depository rying out subsection (d)(1) of this institutions. Not later than end of the 1-year section, the Council shall submit period beginning on August 9, (b) Process to the Congress a report, which 1989, the Council shall— shall include— In conducting the review under (1) conduct a study on the fea- subsection (a) of this section, the (1) a summary of any signifi- sibility and appropriateness of Council or the appropriate Fed- cant issues raised by public com- establishing a formalized risk eral banking agency shall— ments received by the Council management training program and the appropriate Federal designed to lead to the certifica- (1) categorize the regulations banking agencies under this sec- tion of Risk Management Ana- described in subsection (a) of tion and the relative merits of lysts; and this section by type (such as con- such issues; and sumer regulations, safety and (2) report to the Congress the soundness regulations, or such (2) an analysis of whether results of such study. other designations as deter- the appropriate Federal bank- mined by the Council, or the ing agency involved is able to address the regulatory burdens 12 U.S.C. § 3310. Establishment of appropriate Federal banking associated with such issues by Appraisal Subcommittee agency); and regulation, or whether such bur- There shall be within the Council a (2) at regular intervals, pro- dens must be addressed by leg- subcommittee to be known as the vide notice and solicit public islative action.

35 Excerpts from Statute ceding year. The report shall sions of the Appraisal Subcom- Governing Appraisal also detail the activities of the mittee shall be made by the vote Subcommittee Appraisal Subcommittee, includ- of a majority of its members. The ing the results of all audits of subject matter discussed in any 12 U.S.C. § 3332. Functions of State appraiser regulatory agen- closed or executive session shall be Appraisal Subcommittee cies, and provide an account- described in the Federal Register (a) In general ing of disapproved actions and notice of the meeting. warnings taken in the previous The Appraisal Subcommittee year, including a description of shall— the conditions causing the dis- Excerpts from Home Mortgage (1) monitor the requirements approval and actions taken to Disclosure Act established by States— achieve compliance. 12 U.S.C. § 2801. Congressional (A) for the certification (6) maintain a national reg- findings and declaration of purpose and licensing of individuals istry of appraisal management (a) Findings of Congress who are qualified to perform companies that either are regis- appraisals in connection with tered with and subject to super- The Congress finds that some federally related transactions, vision of a State appraiser cer- depository institutions have some- including a code of profes- tifying and licensing agency or times contributed to the decline of sional responsibility; and are operating subsidiaries of a certain geographic areas by their Federally regulated financial failure pursuant to their charter- (B) for the registration and institution. ing responsibilities to provide ade- supervision of the operations quate home financing to qualified and activities of an appraisal (b) Monitoring and reviewing applicants on reasonable terms management company; and Foundation and conditions. The Appraisal Subcommittee shall (2) monitor the requirements monitor and review the practices, (b) Purpose of chapter established by the Federal finan- procedures, activities, and organi- cial institutions regulatory The purpose of this chapter is to zational structure of the Appraisal agencies with respect to— provide the citizens and public Foundation. officials of the United States with (A) appraisal standards for sufficient information to enable federally related transactions 12 U.S.C. § 3333. Chairperson of them to determine whether depos- under their jurisdiction, and Appraisal Subcommittee; term of itory institutions are filling their Chairperson; meetings (B) determinations as to obligations to serve the housing which federally related trans- (a) Chairperson needs of the communities and actions under their jurisdic- neighborhoods in which they are tion require the services of a The Council shall select the Chair- located and to assist public offi- State certified appraiser and person of the subcommittee. The cials in their determination of the which require the services of a term of the Chairperson shall be distribution of public sector invest- State licensed appraiser; two years. ments in a manner designed to (b) Meetings; quorum; voting improve the private investment (3) maintain a national regis- environment. try of State certified and licensed The Appraisal Subcommittee shall appraisers who are eligible to meet in public session after notice (c) Construction of chapter perform appraisals in federally in the Federal Register, but may Nothing in this chapter is intended related transactions; and close certain portions of these to, nor shall it be construed to, meetings related to personnel and (4) Omitted. encourage unsound lending prac- review of preliminary State audit tices or the allocation of credit. (5) transmit an annual reports, at the call of the Chairper- report to the Congress not later son or a majority of its members * * * * * than June 15 of each year that when there is business to be con- describes the manner in which ducted. A majority of members of 12 U.S.C. § 2803. Maintenance of each function assigned to the the Appraisal Subcommittee shall records and public disclosure Appraisal Subcommittee has constitute a quorum but 2 or more been carried out during the pre- members may hold hearings. Deci- * * *

36 (f) Data disclosure system; oper- metropolitan statistical area that ing, for each primary metropoli- ation, etc. is not comprised of designated tan statistical area, metropolitan primary metropolitan statistical statistical area, or consolidated The Federal Financial Institutions areas. metropolitan statistical area that Examination Council, in consul- is not comprised of designated tation with the Secretary, shall * * * * * primary metropolitan statistical implement a system to facilitate areas, aggregate lending patterns access to data required to be dis- for various categories of census closed under this section. Such 12 U.S.C. § 2809. Compilation of aggregate data tracts grouped according to loca- system shall include arrange- tion, age of housing stock, income ments for a central depository of (a) Commencement; scope of level, and racial characteristics. data in each primary metropoli- data and tables tan statistical area, metropolitan (b) Staff and data processing statistical area, or consolidated Beginning with data for calendar resources metropolitan statistical area that year 1980, the Federal Financial The Board shall provide staff and is not comprised of designated Institutions Examination Council data processing resources to the primary metropolitan statistical shall compile each year, for each Council to enable it to carry out areas. Disclosure statements shall primary metropolitan statistical the provisions of subsection (a) of be made available to the pub- area, metropolitan statistical area, this section. lic for inspection and copying at or consolidated metropolitan sta- such central depository of data for tistical area that is not comprised (c) Availability to public all depository institutions which of designated primary metro- are required to disclose informa- politan statistical areas, aggre- The data and tables required pur- tion under this section (or which gate data by census tract for all suant to subsection (a) of this sec- are exempted pursuant to section depository institutions which are tion shall be made available to the 2805(b) of this title) and which required to disclose data under public no later than December 31 have a home office or branch section 2803 of this title or which of the year following the calendar office within such primary metro- are exempt pursuant to section year on which the data is based. politan statistical area, metropoli- 2805(b) of this title. The Council tan statistical area, or consolidated shall also produce tables indicat-

37

APPENDIX B: 2012 AUDIT REPORT

Deloitte & Touche LLP 555 12th St. N.W. Washington, DC 20004-1207 USA Tel: +1 202 879 5600 Fax: +1 202 879 5309 www.deloitte.com

INDEPENDENT AUDITORS’ REPORT

To the Federal Financial Institutions Examination Council:

We have audited the accompanying financial statements of the Federal Financial Institutions Examination Council (the “Council”) which are comprised of the balance sheets as of December 31, 2012 and 2011, and the related statements of operations, and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

The Council’s management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of the financial statements in accordance with auditing standards generally accepted in the United States of America and in accordance with the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit of the financial statements involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Council’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Council's internal control. Accordingly, we express no such opinion. An audit of the financial statements also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Member of Deloitte Touche Tohmatsu

39

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Council as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Report on Internal Control Over Financial Reporting and on Compliance Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated February 28, 2013, on our consideration of the Council’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Council’s internal control over financial reporting and compliance.

February 28, 2013

Member of Deloitte Touche Tohmatsu

40 FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Balance Sheets

As of December 31, 2012 2011 ASSETS CURRENT ASSETS Cash $ 638,550 $ 543,453 Accounts receivable from member organizations 885,200 785,708 Accounts receivable from non-menbers—net 189,930 91,520

Total current assets 1,713,680 1,420,681

NONCURRENT ASSETS

Furniture and equipment leased—net 97,929 137,625 Central Data Repository software—net 3,393,963 5,138,312 Home Mortgage Disclosure Act software—net 1,716,718 2,273,492

Total noncurrent assets 5,208,610 7,549,429

TOTAL ASSETS $ 6,922,290 $ 8,970,110

LIABILITIES AND CUMULATIVE RESULTS OF OPERATIONS

CURRENT LIABILITIES

Accounts payable and accrued liabilities payable to member organizations $ 840,720 $ 805,796 Other accounts payable and accrued liabilities 484,866 285,947 Accrued annual leave 38,880 22,971 Capital lease payable 41,040 39,376 Deferred revenue 3,950,737 3,125,930

Total current liabilities 5,356,243 4,280,020

LONG-TERM LIABILITIES Capital lease payable 61,786 102,825 Deferred revenue 1,159,944 4,285,874 Deferred rent 10,085 9,996

Total long-term liabilities 1,231,815 4,398,695

Total liabilities 6,588,058 8,678,715

CUMULATIVE RESULTS OF OPERATIONS 334,232 291,395

TOTAL LIABILITIES AND CUMULATIVE RESULTS OF OPERATIONS $ 6,922,290 $ 8,970,110

See notes to financial statements.

41 FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Statements of Operations

For the years ended December 31, 2012 2011 REVENUES Assessments on member organizations $ 687,332 $ 687,107 Central Data Repository 5,398,279 4,936,912 Home Mortgage Disclosure Act 3,999,638 3,727,927 Tuition 3,605,056 3,246,549 Community Reinvestment Act 949,761 946,928 Uniform Bank Performance Report 396,883 351,646

Total revenues 15,036,949 13,897,069

EXPENSES

Data processing 4,392,625 4,164,479 Professional fees 4,277,394 4,121,224 Salaries and related benefits 2,023,401 1,781,660 Depreciation 3,371,828 2,869,594 Rental of office space 264,989 264,989 Adminstration fees 261,000 281,000 Travel 277,321 242,659 Other seminar expenses 22,694 33,526 Rental and maintenance of office equipment 33,612 27,544 Office and other supplies 34,145 56,237 Printing 23,561 18,389 Postage 1,419 2,564 Miscellaneous 10,123 5,046

Total expenses 14,994,112 13,868,911

RESULTS OF OPERATIONS 42,837 28,158

CUMULATIVE RESULTS OF OPERATIONS—Beginning of year 291,395 263,237

CUMULATIVE RESULTS OF OPERATIONS—End of year $ 334,232 $ 291,395

See notes to financial statements.

42 FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Statements of Cash Flows

For the years ended December 31, 2012 2011 CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES Results of operations $ 42,837 $ 28,158 Adjustments to reconcile results of operations to net cash provided by operating activities: Depreciation 3,371,828 2,869,594 (Increase) decrease in assets: Accounts receivable from member organizations (99,492) 490,542 Other accounts receivable (98,410) 12,921 Increase (decrease) in liabilities: Accounts payable and accured liabilities payable to member organizations 34,924 (33,356) Other accounts payable and accrued liabilities 113,238 (284,515) Accrued annual leave 15,909 (4,775) Deferred revenue (current and non-current) (2,583,162) (2,080,991) Deferred rent 89 3,391

Net cash provided by operating activities 797,761 1,000,969

CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES Capital expenditures (660,365) (1,169,016)

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES Capital lease payments (42,299) (35,315)

NET INCREASE (DECREASE) IN CASH 95,097 (203,362)

CASH BALANCE—Beginning of year 543,453 746,815

CASH BALANCE—End of year $ 638,550 $ 543,453

See notes to financial statements.

43 Notes to Financial Statements as of and for its financial statements in accordance with assumptions that affect the reported amounts the Years Ended December 31, 2012 and 2011 accounting principles generally accepted in of assets and liabilities and the disclosure of the United States (GAAP). contingent assets and liabilities at the date 1. Organization and Purpose of the financial statements and the reported Revenues—Assessments are made on member amounts of revenues and expenses during the The Federal Financial Institutions Examina- organizations to fund the Council's operations reporting period. Actual results could differ tion Council (the Council) was established based on expected cash needs. Amounts over- from those estimates. under Title X of the Financial Institutions Reg- or under-assessed due to differences between ulatory and Interest Rate Control Act of 1978. actual and expected cash needs are presented Allowance for Doubtful Accounts—Accounts The purpose of the Council is to prescribe uni- in the “Cumulative Results of Operations” line receivable for non-members are shown net form principles and standards for the federal item during the year and then may be used to of the allowance for doubtful accounts. examination of financial institutions and to offset or increase the next year’s assessment. Accounts receivable considered uncollectible make recommendations to promote unifor- Deficits in “Cumulative Results of Opera- are charged against the allowance account in mity in the supervision of these financial insti- tions” can be recouped in the following year’s the year they are deemed uncollectible. The tutions. The five agencies represented on the assessments. allowance for doubtful accounts is adjusted Council during 2012, referred to collectively as monthly, based upon a review of outstand- member organizations, are as follows: The Council provides training seminars in ing receivables. The allowance for doubt- the Washington, D.C. area and at locations ful accounts is $0 and $59 for 2012 and 2011, • Board of Governors of the Federal Reserve throughout the country for member organi- respectively. System (FRB) zations and other agencies. The Council also

• Consumer Financial Protection Bureau coordinates the production and distribution 3. Transactions with Member Organizations (CFPB) of the Uniform Bank Performance Reports • Federal Deposit Insurance Corporation (UBPR) through the FDIC. Tuition and UBPR 2012 2011 (FDIC) revenue are adjusted at year-end to match Accounts Receivable • National Credit Union Administration expenses incurred as a result of providing (NCUA) education classes and UBPR services. For dif- Board of Governors • Office of the Comptroller of the Currency ferences between revenues and expenses, of the Federal (OCC) member agencies are assessed an additional Reserve System $ 211,061 $ 132,539 In accordance with the Financial Services amount or credited a refund based on each Consumer Financial Regulatory Relief Act of 2006, a representa- member’s proportional cost for the Examiner Protection Bureau 42,253 0 Federal Deposit Insur- tive state regulator was added as a full voting Education and UBPR budget. The Council rec- ance Corporation 268,871 194,230 member of the Council in October 2006. ognizes revenue from member agencies for expenses incurred related to the Community National Credit Union The Council was given additional statutory Reinvestment Act, and the Home Mortgage Administration 42,370 46,051 responsibilities by Section 340 of the Housing Disclosure Act. The Council also recognizes Office of the Comp- and Community Development Act of 1980, revenue from other agencies and mortgage troller of the Public Law 96-399. Among these responsi- insurance companies related to the Home Currency 320,695 412,888 bilities are the implementation of a system to Mortgage Disclosure Act. $ 885,200 $ 785,708 facilitate public access to data that depository institutions must disclose under the Home Capital Assets—Furniture and equipment is Accounts Payable and Mortgage Disclosure Act of 1975 (HMDA) recorded at cost less accumulated deprecia- Accrued Liabilities and the aggregation of annual HMDA data, tion. Depreciation is calculated on a straight- by census tract, for each metropolitan statisti- line basis over the estimated useful lives of Board of Governors cal area. the assets, which range from four to ten years. of the Federal Upon the sale or other disposition of a depre- Reserve System $ 545,770 $ 494,234 On July 21, 2010, the Dodd-Frank Wall Street ciable asset, the cost and related accumulated Consumer Financial Reform and Consumer Protection Act of 2010 depreciation are removed and any gain or Protection Bureau 5,397 0 (Dodd-Frank Act) was signed into law. This loss is recognized. The Central Data Reposi- Federal Deposit Insur- legislation substituted the director of the Con- tory (CDR) and the HMDA processing system, ance Corporation 161,700 175,940 sumer Financial Protection Bureau for the internally developed software projects, are National Credit Union director of the Office of Thrift Supervision recorded at cost as required by the Internal Administration 28,470 27,080 (OTS) as a member of the Council effective Use Software Topic of Financial Accounting Office of the Comp- July 21, 2011. Standards Board (FASB) Accounting Stan- troller of the dards Codification (ASC). Currency 99,383 108,542 The Council’s financial statements do not $ 840,720 $ 805,796 include financial data for the Council’s Deferred Revenue —Deferred revenue includes Appraisal Subcommittee (the Subcommittee). cash collected and accounts receivable related Operations The Subcommittee was created pursuant to to CDR and the HMDA processing system. Public Law 101–73, Title XI of the Financial Council operat- Institutions Reform, Recovery, and Enforce- Deferred Rent— The lease for office and class- ing expenses ment Act of 1989. Although it is a subcom- room space contains scheduled rent increases reimbursed by mittee of the Council, the Appraisal Subcom- over the term of the lease. As required by members $ 687,332 $ 687,107 mittee maintains separate financial records FASB ASC 840 Topic Leases, scheduled rent FRB-provided admin- and administrative processes. The Council is increases must be considered in determin- istrative support $ 261,000 $ 281,000 not responsible for any debts incurred by the ing the annual rent expense to be recognized. FRB-provided data Appraisal Subcommittee, nor are Appraisal The deferred rent represents the difference processing $ 4,392,625 $ 4,164,479 Subcommittee funds available for use by the between the actual lease payments and the Council. rent expense recognized.

2. Significant Accounting Policies Estimates—The preparation of financial state- ments in conformity with GAAP requires Basis of Accounting—The Council prepares management to make estimates and Notes continue on the following page.

44 The Council does not directly employ person- 2012 2011 2012 2011 nel, but rather member organizations detail Deferred Revenue Accounts Payable and personnel to support Council operations. Accrued Liabilities Beginning balance $ 2,273,492 $ 2,783,868 These personnel are paid through the pay- Related to CDR roll systems of member organizations. Sala- Additions 0 0 ries and fringe benefits, including retirement Less revenue benefit plan contributions, are reimbursed to Payable to UNISYS recognized (556,774) (510,376) these organizations. The Council does for the CDR Ending balance $ 1,716,718 $ 2,273,492 not have any post-retirement or post- project $ 219,762 $ 216,012 employment benefit liabilities since Coun- cil personnel are included in the plans of the CDR Financial Activity—The Council is fund- Current portion member organizations. Due to organizational ing the project by billing the three partici- deferred revenue $ 556,774 $ 556,774 Long-term deferred changes resulting from the Dodd-Frank Act, pating Council member organizations (FRB, revenue 1,159,944 1,716,718 the OCC absorbed all financial related activity FDIC, and OCC). Activity for the years ended Total Deferred of the OTS on July 21, 2011. December 31, 2012 and 2011, is as follows: Revenue $ 1,716,718 $ 2,273,492 Member organizations are not reimbursed for Total HMDA Revenue the costs of personnel who serve as Council 2012 2011 members and on the various task forces and Deferred Revenue The Council recog- committees of the Council. The value of these nized the following contributed services is not included in the Beginning balance $ 5,138,312 $ 6,708,927 revenue from: accompanying financial statements. Additions 1,031,009 748,906 Member organi- Less revenue zations for the 4. Central Data Repository (CDR) recognized (2,775,358) ( (2,319,52 1) production and distribution of In 2003, the Council entered into an agree- Ending balance $ 3,393,963 $ 5,138,312 reports under the ment with UNISYS to enhance the methods Current portion HMDA (includes and systems used to collect, validate, process, the deferred rev- and distribute Call Report information, and deferred revenue $ 3,393,963 $ 2,569,156 Long-term deferred enue recognized to store this information in CDR. CDR was in 2012) $ 3,111,398 $ 2,857,085 placed into service in October 2005. At that revenue 0 2,569,156 time, the Council began depreciating the CDR Total Deferred Department of on the straight-line basis over its estimated Revenue $ 3,393,963 $ 5,138,312 Housing and useful life of 63 months. In 2009, the Coun- Urban Develop- cil reevaluated the useful life of CDR and ment's participa- Total CDR Revenue decided to extend the estimated useful life by tion in the HMDA an additional 36 months based on enhanced Deferred revenue project 546,809 556,207 functionality of the software. The Council recognized $ 2,775,358 $ 2,319,521 Mortgage insurance records depreciation expenses and recognizes Hosting and companies for the same amount of revenue. The Council also maintenance HMDA-related pays for hosting and maintenance expenses revenue 2,622,921 2,617,391 work 341,431 314,635 for CDR and recognizes the associated rev- Total CDR Revenue $ 5,398,279 $ 4,936,912 enue from members. In 2012, the Council had Total HMDA enhancements made to CDR of $1,031,009. Revenue $ 3,999,638 $ 3,727,927 Some of these enhancements, which affect Depreciation the asset value, were paid for directly by the Depreciation for the Capital asset HMDA FDIC. This non-cash event in the amount of CDR project $ 2,775,358 $ 2,319,521 $282,040 is excluded from the Statement of Beginning balance $ 2,783,868 $ 2,783,868 Cash Flows. 5. Home Mortgage Disclosure Act (HMDA) Total asset 2012 2011 $ 2,783,868 $ 2,783,868 FRB provides maintenance and support for Less accumulated Capital Asset CDR the HMDA processing system. In 2007, the depriciation (1,067,150) (510,376) Council began a rewrite of the entire HMDA Beginning balance $20,120,566 $19,371,661 processing system, which went into service in HMDA software— Software placed in 2011. At that time the Council began depre- net $ 1,716,718 $ 2,273,492 use during the ciating the system on the straight-line basis year 1,031,009 748,905 over its estimated useful life of 60 months. The Depreciation Council records depreciation expenses and Total asset 21,151,575 $ recognizes the same amount of revenue each Depreciation for year. The Council also pays for maintenance the HMDA Rewrite Less accumulated expenses for the HMDA processing system project $ 556,774 $ 510,376 depreciation (17,757,612) (14,982,254) and recognizes the associated revenue from the members and non-members. The financial Central Data activity associated with the processing system Repository for the years ended December 31, 2012 and software—net $ 3,393,963 $ 5,138,312 2011 is as follows: Notes continue on the following page.

45 6. Operating Leases equipment is $39,697 and $39,697 for 2012 8. Subsequent Events and 2011, respectively. Contingent rentals The Council entered into an operating lease for excess usage of the printing equipment There were no subsequent events that with the FDIC in January 2010 to secure amounted to $20,544 and $13,531 in 2012 and require adjustments to or disclosures in the office and classroom space. Minimum annual 2011, respectively. financial statements as of December 31, 2012. payments under the operating lease having Subsequent events were evaluated through an initial or remaining non-cancelable lease The future minimum lease payments required February 28, 2013, which is the date the term in excess of one year at December 31, under the capital leases and the present value financial statements were available to be 2012 are as follows: of the net minimum lease payments as of issued. December 31, 2012 are as follows: Years ending December 31, Amount Years ending December 31, Amount 2013 268,292 2013 599,089 2014 271,772 2014 59,089 2015 31,738 Total minimum lease payments $ 540,064 Total minimum lease payments 149,916 Rental expenses under this operating lease were $264,989 and $264,989 as of December Less amount representing 31, 2012 and 2011, respectively. maintenance (42,733) Net minimum lease payments 107,183 7. Capital Leases In December 2009 and November 2010, Less amount representing interest (4,357) the Council entered into capital leases for Net minimum lease payments 102,826 printing equipment. Furniture and equipment includes $198,485 for the capital leases. Less current maturities of capital Accumulated depreciation is $100,556 and lease payments (41,040) $60,860 for 2012 and 2011, respectively. The depreciation expense for the printing Long-term capital lease obligations $ 61,786

46

Deloitte & Touche LLP 555 12th St. N.W. Washington, DC 20004-1207 USA Tel: +1 202 879 5600 Fax: +1 202 879 5309 www.deloitte.com

INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Federal Financial Institutions Examination Council:

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Federal Financial Institutions Examination Council (the “Council”), as of and for the years ended December 31, 2012 and 2011, and the related notes to the financial statements, and have issued our report thereon dated February 28, 2013.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the Council's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Council’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Council’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Council’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The

Member of Deloitte Touche Tohmatsu

47

results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Council’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

February 28, 2013

Member of Deloitte Touche Tohmatsu

48 APPENDIX C: MAPS OF AGENCY REGIONS AND DISTRICTS

50 Board of Governors of the Federal Reserve System 51 Consumer Financial Protection Bureau 52 Federal Deposit Insurance Corporation 53 National Credit Union Administration 54 Office of the Comptroller of the Currency

49 THE FEDERAL RESERVE SYSTEM DISTRICTS

WA ME MT ND MN 1

VT MI NY WI 9 NH Boston SD OR WY Minneapolis 2 MA CT CA ID RI NV IA PA NJ NE MI OH 3 New York UT IL Philadelphia 7 ChicagoChicagoChicago IN Cleveland 12 MD CO DE WV San Francisco MO 4 Washington, D.C. 10 KS Kansas City St. Louis Richmond VA KY AZ 8 NC NM OK 5 AR TX TN SC MS AL GA Atlanta

Dallas LA 6

FL 11

ALASKA

HAWAII

12

50 CONSUMER FINANCIAL PROTECTION BUREAU

WA ME MT ND MN Northeast

VT MI NY WI NH SD OR WY MA CT CA ID RI NV IA PA New York NE MI UT Chicago IN OH NJ MD CO DE MO WV KS Midwest Washington, D.C. San Francisco West IL VA KY AZ NC NM OK TN AR TX SC GA MS AL

LA Southeast

FL

ALASKA

PUERTO RICO

HAWAII

West Northeast

51 FEDERAL DEPOSIT INSURANCE CORPORATION REGIONS (SUPERVISION AND COMPLIANCE)

WA ME MT ND MN New York

VT MI RegionNY WI NH SD OR WY MA CT CA ID Kansas City RI NV IA PA NJ NE MI UT IL OH Region IN MD CO Chicago DE San Francisco MO WV KS Region Region VA KY AZ NC TN NM OK AR TX SC MS AL GA Atlanta LA Region Dallas Region FL

ALASKA PUERTO RICO VIRGIN ISLANDS

HAWAII

GUAM

San Francisco Region New York Region

* Two area offices are located in Boston (reports to New York) and Memphis (reports to Dallas)

52 NATIONAL CREDIT UNION ADMINISTRATION

WA ME MT ND MN

VT MI NY WI NH SD OR WY I MA Albany I CT CA ID RI NV IA MI PA NJ NE UT IN OH II MD I CO IV DE MO WV Washington, DC KS V IL VA KY II AZ NC NM OK TN AR TX III SC GA MS AL Atlanta Tempe LA

FL

Austin

ALASKA

PUERTO RICO VIRGIN ISLANDS HAWAII

GUAM

V III

53 COMPTROLLER OF THE CURRENCY DISTRICT ORGANIZATION

WA MT ME ND MN ID OR VT NY WI NH MI SD Northeastern WY MA Central District District CT CA RI New York NV IA NE PA UT OH Chicago IN NJ DE CO Washington, DC MO IL WV MD Western District Denver VA KS KY

AZ NC NM OK TN TX AR SC GA MS AL

Dallas Southern District LA

FL

Western District Northeastern District

AK HI

Guam Virgin Islands Puerto Rico

54 APPENDIX D: ORGANIZATIONAL LISTING OF PERSONNEL

Organization, Douglas Foster Task Force on Examiner Education December 31, 2012 Commissioner Texas Department of Savings Matthew J. Biliouris, Chairman Members of the Council and Mortgage Lending (NCUA) Norbert Cieslack (FRB) Debbie Matz, Chairman Charles A. Vice Chairman Charlotte Corley (SLC Commissioner Representative/Mississippi) National Credit Union Kentucky Department of Administration (NCUA) Mira Marshall (CFPB) Financial Institutions Philip D. Mento (FDIC) Thomas Curry, Vice Chairman Thomas E. Rollo (OCC) Comptroller of the Currency Council Staff Officer Task Force on Information Sharing Office of the Comptroller of the Currency (OCC) Judith E. Dupre Robin Stefan, Chairman (OCC) Executive Secretary Daniel K. Tarullo John Kolhoff (SLC Member Representative, Michigan) Board of Governors of the Michael Kraemer (FRB) Federal Reserve System (FRB) Interagency Staff Groups Jami Pictroski (CFPB) Todd Roscoe (NCUA) Martin J. Gruenberg Agency Liaison Group Terrie Templemon (FDIC) Chairperson Larry Fazio (NCUA) Federal Deposit Insurance Task Force on Reports Corporation (FDIC) John C. Lyons (OCC) Arthur W. Lindo (FRB) Robert F. Storch, Chairman (FDIC) Richard Cordray Sandra Thompson (FDIC) Robert T. Maahs (FRB) Director Steven Antonakes (CFPB) LeAnn M. Meyer (SLC Consumer Financial Protection Mary Beth Quist (SLC Representative/Iowa) Bureau (CFPB) Representative/CSBS) Kerry Morse (CFPB) John Munn Kathy K. Murphy (OCC) State Liaison Committee (SLC) Legal Advisory Group Virginia L. Phillips (NCUA) Chairman Michael J. McKenna, Chairman Director Task Force on Supervision Nebraska Department of (NCUA) Banking & Finance Julie L. Williams (OCC), John Lyons, Chairman (OCC) retired 9/12 Steven Antonakes (CFPB) Scott Alvarez, (FRB) Matthew Biliouris (NCUA) Richard J. Osterman, Jr. (FDIC) State Liaison Committee (SLC) Michael S. Gibson (FRB) Meredith Fuchs (CFPB) Sandra Thompson (FDIC) John Munn, Chairman Margaret Liu (SLC Charles A. Vice (SLC Member) Director Representative/CSBS) Nebraska Department of Task Force on Surveillance Systems Banking & Finance Task Force on Consumer Compliance Robin Stefan, Chairman (OCC) David Cotney April Breslaw, Chairman (CFPB) Matt Mattson (FRB) Commissioner Luke H. Brown (FDIC) Charles Collier (FDIC) Massachusetts Division of Banks David Cotney (SLC Member) Abhishek Agarwal (CFPB) Harold E. Feeney Carol Evans (FRB) Lucinda V. Johnson (NCUA) Commissioner Grovetta N. Gardineer (OCC) Kyle Thomas (SLC Texas Credit Union Department Moisette I. Green (NCUA) Representative/CSBS)

55 Staff Members of the FFIEC Shown are the FFIEC staff mem- bers at the Seidman Center in Arlington, Virginia, where they have their offices and classrooms for examiner education programs.

Federal Financial Institution Examination Council staff members (from the left to right): Michelle Clark, Ernie Larkins, Juliet Pradier, David Vallee, Cathy Pritchard, Martin Goaslind, Judith Dupre, Darlene Callis, Karen Smith, Jennifer Herring, Robert Basinger, Rosanna Piccirilli, Cynthia Curry-Daniel, and Melanie Middleton.

56