Federal Financial Institutions Examination Council, Washington, DC 20006

ANNUAL REPORT 1993

Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision : .[ MEMBERS OF THE COUNCIL

Andrew C. Hove, Jr., Chairman Jonathan L. Fiechter, Vice Chairman Acting Chairman Acting Director Federal Deposit Insurance Corporation Office of Thrift Supervision

JohnP. La Ware Eugene A. Ludwig Norman E. D'Amours Member Comptroller of the Currency Chairman Board of Governors of the Office of the Comptroller of the Currency National Credit Union Administration Federal Reserve System

LETTER OF TRANSMITTAL

Federal Financial Institutions Examination Council Washington, D.C. March 25, 1994

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 USC 3305), I am pleased to submit the 1993 Annual Report of the Federal Financial Institutions Examination Council. ~L.~ Andrew C. Hove Chairman

TABLE OF CONTENTS

vii Message from the Chairman 1 The Federal Financial Institutions Examination Council 3 Record of Actions of the Council 7 State Liaison Committee Report 9 Administration of the Council 11 Activities of the Interagency Staff Groups 21 The Federal Financial Institutions Regulatory Agencies and Their Supervised Institutions 25 Assets, Liabilities, and Net Worth of U.S. Commercial Banks and Thrift Institutions as of June 30, 1992 26 Income and Expenses of U.S. Commercial Banks and Thrift Institutions for the Twelve Months Ending June 30, 1992 29 Appendix A: Relevant Statutes 33 Appendix B: 1992 Audit Report 37 Appendix C: Maps of Agency Regions and Districts

v

MESSAGE FROM THE CHAIRMAN

Andrew C. Hove, Jr.

The Federal Financial Institutions operated successfully in 1993. Examination Council (FFIEC) expe­ Major accomplishments during the rienced a year of change in 1993. year include the Policy Statement Following the death of William on the Allowance for Loan and Taylor, Chairman of the Federal Lease Losses as well as significant Deposit Insurance Corporation progress toward an agreement for (FDIC), and pursuant to the the capital implications of "re­ Council's regular two-year rota­ course" arrangements. These tion of the Chairmanship, I became projects had been underway for Chairman of the FFIEC as well as several years and we believe the Acting Chairman of the FDIC. extensive development time con­ During this transitional period I tributed to quality products. requested that the task force chairs and members of the State Liaison Finally, I would like to offer a note of appreciation to the hard work of Committee temporarily remain the many dedicated staff members in their capacities in as much as of the FFIEC, the five constituent there were tasks to accomplish agencies, and the State Liaison within a rapidly changing regula­ members. It is with this commit­ tory environment. ment that I believe 1994 will also be With the assistance of agency and a successful and productive year state representatives, the Council for the Council.

vii

THE FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL

The Federal Financial Institutions the Council promote consistency in ally related transactions, including Examination Council (Council) 'was federal examinations and progres­ a code of professional responsibil­ established on March 10, 1979, pur­ sive and vigilant supervision over­ ity; (2) monitoring the appraisal suant to title X of Public Law 95-630, all. Under the Financial Institutions standards established by the fed­ the Financial Institutions Regulatory Reform, Recovery, and Enforce­ eral financial institutions regulatory and Interest Rate Control Act of ment Act of 1989 (FIRREA), the agencies and the Resolution Trust 1978 (FIRA). The purpose of title X, Council was authorized also to de­ Corporation; (3) maintaining a na­ entitled the Federal Financial Insti­ velop and administer training semi­ tional registry of appraisers who tutions Examination Council Act of nars in risk management for the are certified and licensed by a state 1978, was to create a formal inter­ employees of the agencies repre­ and to perform appraisals in feder­ agency body empowered to pre­ sented on the Council and the em­ ally related transactions; and (4) scribe uniform principles, stan­ ployees of insured financial monitoring the practices, proce­ dards, and report forms for the institutions. dures, activities, and organizational federal examination of financial in­ structure of the Appraisal Founda­ stitutions by the Board of Gover­ The Council was given additional tion, a nonprofit educational corpo­ nors of the Federal Reserve System, statutory responsibilities under the ration established by the appraisal the Federal Deposit Insurance Cor­ Housing and Community Develop­ industry in the United States. poration, the National Credit Union ment Act of 1980 (section 340 of Administration, the Office of the Public Law 96-399, October 8, The Council has five members: the Comptroller of the Currency, and 1980). Among these responsibilities Comptroller of the Currency, the the Office of Thrift Supervision, are the implementation of a system Chairman of the Federal Deposit and to make recommendations to to facilitate public access to data Insurance Corporation, a member promote uniformity in the supervi­ that depository institutions must of the Board of Governors of the sion of financial institutions. The disclose under the Home Mortgage Federal Reserve System appointed Council is also responsible for de­ Disclosure Act of 1975 (HMDA) by the Chairman of the Board, the veloping uniform reporting systems and the aggregation of annual Chairman of the National Credit for federally supervised financial HMDA data, by census tract, for Union Administration Board, and institutions, their holding compa­ each metropolitan statistical area. the Director of the Office of Thrift nies, and the nonfinancial institu­ Supervision. Also, to encourage the tion subsidiaries of those institu­ In 1989, title XI of FIRREA estab­ application of uniform examination tions and holding companies. It lished the Appraisal Subcommittee principles and standards by the conducts schools for examiners em­ within the Examination Council. state and federal supervisory au­ ployed by the five agencies repre­ The functions of the subcommittee thorities, the Council has estab­ sented on the Council and makes are (1) monitoring the requirements lished, in accordance with the re­ those schools available to employ­ established by states for the certifi­ quirement of the statute, an ees of state agencies that supervise cation and licensing of individuals advisory State Liaison Committee financial institutions. It was the who are qualified to perform ap­ composed of five representatives of overall intent of the legislation that praisals in connection with feder- state supervisory agencies.

1

RECORD OF ACTIONS OF THE COUNCIL

The Examination Council in Session 1993.

The following section is a chrono­ tal fair value information by in­ submit its 1993 mortgage insurance logical record of the official actions sured depository institutions in an­ application data for processing and taken by the Federal Financial Insti­ nual reports filed pursuant to the distribution along with the tutions Examination Council dur­ audit and reporting requirements Council's HMDA data. ing 1993 pursuant to sections 1006, of Section 36 of the Federal Deposit 1007, 1009A of Public Law 95-630, Insurance Act and in "reports of Explanation. Section 304(£) of the Federal Financial Institutions condition" filed with the Council's HMDA requires the Council to Examination Council Act of 1978; four banking agencies. implement a system to facilitate ac­ sections 121 and 122 of Public Law cess to data required to be dis­ 102-242, the Federal Deposit Insur­ Explanation. Section 121 of FDICIA closed on home mortgage financing ance Corporation Improvement Act requires the federal banking agen­ characteristics for each metropoli­ of 1991 (FDICIA); and section 304 cies to 'jointly develop a method for tan statistical area. Availability of of Public Law 94-200, the Home insured depository institutions to the disclosure data for the mort­ Mortgage Disclosure Act (HMDA). provide supplemental fair market gage insurers' estimated 1.2 million value disclosures for their assets annual applications is expected to and liabilities, to the extent feasible enable researchers to determine the February 9 and practicable, in certain reports extent to which declinations by Action. Unanimously approved the filed with the agencies. mortgage lenders are the result of mortgage insurers' refusal to pro­ 1992 annual report of the Council to Section 1006(c) of the Federal Fi­ the Congress. vide insurance against default in lo­ nancial Institutions Examination cations considered risky. Explanation. The legislation estab­ Council Act authorizes the Council lishing the Council requires that, to develop uniform reporting sys­ not later than April1 of each year, tems for federally supervised finan­ December16 the Council publish an annual re­ cial institutions. In addition, section port covering its activities during 121 of FDICIA indicates that the Action. Unanimously approved rec­ the preceding year. agencies shall maintain uniform ac­ ommending that the four federal counting standards. banking agencies seek public com­ ment on a Notice of Proposed March 31 August 10 Rulemaking and an Advance No­ Action. Unanimously approved tice of Proposed Rulemaking con­ publishing a request for public Action. Unanimously approved the cerning the regulatory capital treat­ comment on certain issues pertain­ request by the Mortgage Insurance ment of recourse arrangements and ing to the disclosure of supplemen- Companies of America (MICA) to direct credit substitutes.

3 Explanation. The Notice of Proposed estimation of credit losses. The matting. The approved system is Rulemaking the Council recom­ policy also describes examiner re­ expected to significantly reduce mends to the agencies would for­ sponsibilities for assessing the these delays and enhance the over­ mally define the term "recourse" ALLL, including quantitative guid­ all state/federal early warning and expand the definition of the ance that can be used by examiners systems. term "direct credit substitute" and to check the reasonableness of an would reduce the risk-based capital institution's ALLL methodology. charge for low-level recourse ar­ The goal of the Interagency Policy December 16 rangements. The proposal would Statement is to provide uniform Action. Unanimously approved require higher amounts of risk­ guidance for determining adequate clarifications to the instructions for based capital to be maintained allowances and to ensure that all the reporting of information on against certain direct credit substi­ insured institutions and examiners small business loans and small tutes. The recommended Advance understand the agencies' allowance farm loans and the deferral of Notice of Proposed Rulemaking policies. changes in the format of the small sets forth a ratings-based "multi­ business and farm loan schedule in level" approach that would base a December 16 the "reports of condition" filed by financial institution's risk-based insured depository institutions with capital charge on its relative risk of Action. Unanimously approved a the four federal banking agencies loss in certain asset securitizations. request by the State Liaison Com­ until after revised Community Re­ mittee to provide state banking de­ investment Act (CRA) regulations partments access to Call Report are adopted by the agencies. December 16 data in the same format and at the Action. Unanimously approved rec­ same time the electronically sub­ Explanation. In 1992 the "reports of ommending that the four federal mitted data is currently available to condition" filed by insured banks, banking agencies adopt the Inter­ the Council agencies. thrifts, and U.S. branches of foreign agency Policy Statement on the Al­ banks were revised to provide for Explanation. State banking depart­ the annual collection of data on lowance for Loan and Lease Losses ments sought to expand their early (ALLL). small business loans and small warning analysis capabilities by ob­ farm loans as mandated by Section Explanation. The Interagency Policy taining early access to electronically 122 of FDICIA. A review of the ini­ Statement discusses the nature and submitted Call Report data. Previ­ tial data reported as of June 30, purposes of the ALLL, the respon­ ously, state banking departments 1993, revealed that certain adjust­ sibilities of an institution's board of relied upon information that had ments to the reporting require­ directors and management to main­ been reformatted by the federal ments and certain instructional tain an adequate ALLL, and the agencies, with the attendant delays clarifications would improve the factors they should consider in the associated with editing and refor- quality of the loan data gathered. Because proposed changes in infor­ mation gathered for CRA may indi­ cate the need for revisions to the data collected in the "reports of condition," interim revisions to the reporting requirements were de­ ferred to limit the burden of regula­ tory reporting changes.

December 16 Action. Unanimously approved proposed changes to the bank Call Reports for 1994. Explanation. The Council approved recommendations for information to be collected by the banking agen­ cies, which primarily affect the fol­ lowing areas of the Call Reports: (1) Council discussion. reporting of bank holdings of secu-

4 rities to incorporate the effects of Fi­ in Savings Act enacted in Title II securities holdings among three nancial Accounting Standards of FDICIA on December 19, 1991. categories: held-to-maturity, Board Statement No. 115, "Account­ available-for-sale, and trading ing for Certain Investments in Debt • November IS-Rescinded the securities. The accounting and Equity Securities;" (2) the col­ 1980 policy statement that out­ standard provides a different lection of data on sales of mutual lined specific requirements of the accounting treatment for each funds and annuities; and (3) addi­ CRA when a revised CRA state­ category. tional information about off-balance ment published in 1989 super­ sheet derivative contracts and the seded the original statement. • October 4-Approved a revision trading positions of larger banks. to the Country Exposure Report The approved recommendations for U.S. Branches and Agencies also included revised instructional Task Force on Reports of Foreign Banks (form FFIEC 019) that will reduce reporting guidance on the offsetting of on-bal­ • April 16-Approved optional tax ance sheet amounts associated with burden. The revision raises the worksheets to assist banks, par­ threshold for reporting exposures off-balance sheet derivative con­ ticularly small banks, in the cal­ tracts and on reorganizations. to foreign nations other than the culation of reasonable estimates branch or agency's home country of their net deferred tax assets from a total adjusted exposure of and/ or liabilities and their appli­ $5 million to $20 million, effec­ Actions Taken by the Council's cable income taxes for Call Re­ tive March 31, 1994. Task Forces under Delegated port purposes in accordance with Authority Financial Accounting Standards Board Statement No. 109, "Ac­ counting for Income Taxes," that Task Force on Supervision Task Force on Consumer took effect in 1993. Compliance • April 7-Adopted a policy state­ • August 10-Announced that in­ ment on electronic funds transfer • February 16-Adopted revised sured banks and thrifts should (EFT) switches and network ser­ Interagency Questions and An­ adopt Financial Accounting Stan­ vices to alert financial institu­ swers Regarding Community Re­ dards Board Statement No. 115, tions to the risks associated with investment to provide useful "Accounting for Certain Invest­ switch and network services in guidance to agency personnel, ments in Debt and Equity Securi­ retail EFT systems. financial institutions, and the ties" (FASB 115), for regulatory " December 20-Adopted a super­ public. reporting purposes in 1994, with visory issuance to alert senior • July 29-Approved Truth in Sav­ early adoption permitted in 1993. management of each Council ings procedures covering ac­ This new accounting standard agency and all examining person­ counts held by consumers at de­ provides that for financial report­ nel to the risks associated with pository institutions. These . ing purposes, depository institu­ electronic imaging systems in fi­ procedures implement the Truth tions should divide their nancial institutions.

5

STATE LIAISON COMMITTEE REPORT

In section 1007 of Public Law 95- organizations during a period of un­ 630, the Congress authorized the certainty and change within the establishment of the State Liaison member agencies. Committee (SLC) "to encourage the application of uniform examination The SLC was successful in initiating principles and standards by state and obtaining approval for a project and federal supervisory agencies." that will give state banking agencies The SLC carries out this responsibil­ electronic access to federal Call Re­ port data, in the same format and at ity by assuming an active advisory role in all Council deliberations, es­ the same time as the data is avail­ pecially when matters pertaining able to their federal counterparts. directly to joint state and federal This data will now allow state bank regulatory concerns or jurisdic­ regulators to develop their own early warning systems, as well as tional overlaps are at issue. The pri­ State Liaison Committee mary objectives of the SLC are to Back row: Gavin Gee (left), Idaho; Margie Muller, speed the process of identifying po­ foster communication and coopera­ Maryland; Jim Gilleran, California; front row: tential problem situations. The sys­ Harold Lee, Wisconsin; and Sarah Hargrove, tem development and implementa­ tion between state and federal su­ Pennsylvania. pervisory authorities and to reduce tion is expected to be completed and on-line for state use in early redundant supervisory procedures. 1994. The SLC believes that the Council may have his or her two-year term can effectively coordinate activities extended by the appointing organi­ The SLC also participated in the de­ among the federal agencies and be­ zation for an additional, consecu­ velopment of the Interagency Policy tween federal agencies and their tive two-year term. Each year, the Statement on the Allowance for state counterparts to economize on SLC elects one of its members to Loan and Lease Losses by recom­ the combined state and federal serve as chair for twelve months. mending key revisions regarding resources devoted to the supervi­ Of the five members, two are se­ the internal r~view function con­ sion and regulation of financial lected by the Council. The other ducted by lending institutions. institutions. three are designated by the Ameri­ The committee was also involved in can Council of State Savings Super­ The Council provides the SLC with discussions on consumer compli­ visors (ACSSS), the Conference of a staff position. This staff support ance issues, including the proposed State Bank Supervisors (CSBS), allows the SLC members to be fully revisions to the Community Rein­ and the National Association of informed on Council matters and to vestment Act, and the implementa­ State Credit Union Supervisors participate in all Council activities, tion of changes to the Home Mort­ (NASCUS). A list of the SLC including task force assignments gage Disclosure Act mandated by members appears on page 10 of and other projects. FDICIA. this report. Throughout 1993 the SLC continued Organization to participate with the Council, of­ Participation in Examination fering advice and the state perspec­ The SLC consists of five representa­ Council Activities tive on a wide range of matters tives of state agencies that super­ brought before the Council. The SLC vise financial institutions. The rep­ During 1993, the SLC remained ac­ remains firmly committed to contin­ resentatives are appointed for tive in Council initiatives, often ued cooperation between state and two-year terms. An SLC member working through their constituent federal regulatory authorities.

7

ADMINISTRATION OF THE COUNCIL

Training Facility in Arlington, Vir­ " Coordinating the production and ginia. Each Council staff member is distribution of the quarterly Uni­ detailed from one of the five agen­ form Bank Performance Report cies represented on the Council but and related data. is considered an employee of the Council. • Coordinating the collection, pro­ duction, and distribution of All Council employees are in the Home Mortgage Disclosure Act Office of the Executive Secretary. data. The major responsibilities of the Of­ fice of the Executive Secretary are • Managing the Council's exam- the following: iner-education program. The five interagency staff task Council Chairman Hove and Executive " Scheduling Council meetings, forces and the Legal Advisory Secretan; Cleaver preparing agendas for Council Group (LAG) provide most of the meetings, preparing minutes staff support in the substantive ar­ of Council meetings, andre­ eas of concern to the Council. The Regular meetings of the Council are viewing all material for Council task forces and the LAG are re­ held quarterly. Special meetings consideration. sponsible for the research and other may be scheduled whenever mat­ " Monitoring the work of all inter­ investigative work done by agency ters of high priority must be consid­ agency staff groups involved in staff members on behalf of the ered without delay. the Council's activities and help­ Council and for reports and policy The Council's activities are funded ing staff groups set priorities and recommendations prepared for in several ways. Most of the define key issues. consideration by the Council. Also, the Council has established the Council's funds derive from semi­ " Undertaking special projects and annual assessments on the five Agency Liaison Group, an inter­ studies as requested by the agency group of senior officials re­ agencies represented on the Coun­ Council. cil. The Council is reimbursed for sponsible for the overall coordina­ the services it provides to support " Working closely with members tion of efforts by their respective preparation of the quarterly Uni­ of the State Liaison Committee agencies' staff members in support form Bank Performance Report. It to ensure adequate communica­ of the Council. The Executive Secre­ also receives tuition fees from tion among the members, the tary of the Council is an ex officio nonagency attendees to cover some Council, and the interagency member of the five interagency of the costs associated with its ex­ staff groups. staff task forces as well as the aminer-education program. Agency Liaison Group. The staff " Coordinating public-information time and other resources expended The Council receives budget and activities, including preparation on Council-related projects in 1993 accounting services from the Fed­ and distribution of Council press were provided by the five agencies eral Reserve Board, whose control­ releases. without reimbursement and are not ler serves as the Council's control­ " Maintaining liaison with the reflected in the Council budget. ler. The Council has a small Congress and with federal de­ Without those contributions by the full-time administrative staff in its partments and agencies. agencies and the individual staff operations office, and its examiner­ members, significant progress on education program is administered " Preparing the Council's annual Council projects during 1993 would by staff located at its Examiner report to the Congress. have been impossible.

9 Organization, December 31, 1993 Council Staff Officers Gerald A. Edwards (FRB) David H. Martens (OTS) Members of the Council Joe M. Cleaver Alonzo S. Swann (NCUA) Executive Secretary Andrew C. Hove, Chairman (Acting) Chairman KeithJ.Todd Supervision Task Force Federal Deposit Insurance SLC Coordinator and Assistant John C. Price, Jr. Chairman Corporation (FDIC) Executive Secretary (OTS) Kent D. Buckham (NCUA) Jonathan L. Fiechter, Vice Chairman Susan F. Krause (OCC) (Acting) Director Interagency Staff Groups Stanley J. Poling (FDIC) Office of Thrift Supervision (OTS) Richard Spillenkothen (FRB) Norman E. D'Amours Agency Liaison Group Chairman Susan F. Krause (OCC) Surveillance Systems Task Force National Credit Union John C. Price, Jr. (OTS) Jack P. Jennings, (Acting) Chairman Administration (NCUA) D. Michael Riley (NCUA) (FRB) John P. LaWare John W. Stone (FDIC) Richard W. Jones (FDIC) Member Frederick M. Struble (FRB) Renee Valliere (NCUA) Board of Governors of the Nancy A. Wentzler (OTS) Federal Reserve System (FRB) Legal Advisory Group Michael P. Yuenger (OCC) Eugene A. Ludwig Douglas H. Jones, Chairman Comptroller of the Currency (FDIC) Office of Comptroller Robert M. Fenner (NCUA) Members of the Appraisal of the Currency (OCC) Carolyn B. Lieberman (OTS) Subcommittee J. Virgil Mattingly (FRB) Fred D. Finke, Chairman Robert B. Serino (OCC) (OCC) State Liaison Committee Morris Carter (HUD) Consumer Compliance Task Force Diana L. Garmus (OTS) Margie H. Muller, Chair Janice M. Smith, Chairwoman Robert F. Miailovich (FDIC) State Bank Commissioner (FDIC) Rhoger H Pugh (FRB) Maryland Timothy R. Burniston (OTS) Alonzo S. Swann (NCUA) GavinM. Gee Stephen M. Cross (OCC) Bureau Chief, Financial Glenn E. Loney (FRB) Institutions Bureau William P. Ryan (NCUA) Idaho Examiner Education Task Force James E. Gilleran Sidney M. Sussan, Chairman Superintendent of Banks (FRB) California Paul J. Barsnica (OCC) Sarah H. Hargrove Martin F. Kushner (NCUA) Secretary of Banking Dave Smith (OTS) Pennsylvania Georgia S. Smith (FDIC) Harold N. Lee, Jr. Reports Task Force Commissioner, Office of Commissioner of Savings Robert F. Storch, Chairman and Loan (FDIC) Wisconsin Gary H. Christensen (OCC)

10 ACTIVITIES OF THE INTERAGENCY STAFF GROUPS

Task Force on Consumer Compliance The Task Force on Consumer Com­ pliance promotes policy coordina­ tion and uniform enforcement of consumer laws by the five agencies represented on the Council. It is composed of senior personnel who are knowledgeable in consumer compliance matters. The task force identifies and studies problems concerning consumer compliance and fosters uniformity in the poli­ cies and procedures used by mem­ ber agencies. The task force is responsible for those laws and regulations that protect consumers who conduct business with financial institutions. The task force also addresses other legislation, regulations, or policies Back row: Doug Jones (left), Chairman of the Legal Advison; Group; Fred Finke, Chairman of the at the state and federal levels that Appraisal Subcommittee; John Price, Chairman of the Supervision Task Force; Bob Storch, Chairman of potentially affect agencies' con­ the Reports Task Force; front row:Jack Jennings, Acting Chairman of the Surveillance Systems Task Force; and Sid Sussan, Chairman of the Examiner Education Task Force. sumer compliance responsibilities. Throughout 1993, the task force un­ dertook projects to enhance the su­ Section 1006 of Public Law 95-630 To administer projects in all of pervisory agencies' efforts to assist sets forth the functions of the Coun­ those functional areas effectively, examiners, financial institutions, cil. Briefly summarized, these func­ the Council established the follow­ and community groups in their at­ tions are the following: ing five interagency staff task tempts to implement and comply forces: • Establish uniform principles, with the Community Reinvestment standards, and report forms for • Consumer Compliance Act (CRA), the Home Mortgage the examination of financial in­ Disclosure Act (HMDA), and the ·... '. stitutions and make recommen­ • Examiner Education fair-lending laws. dations for uniformity in other The CRA Subcommittee responded • Reports supervisory matters. to numerous comments and re­ • Develop uniform reporting • Supervision quests during 1993 from the finan­ systems for federally super­ cial institutions industry and com­ vised institutions, their holding • Surveillance Systems munity organizations regarding companies, and subsidiaries of CRA concerns and uniform policy those institutions and holding Each task force includes one senior positions. The CRA Subcommittee companies. official from each agency. The updated and reorganized the "In­ Council also established the Legal teragency Questions and Answers • Conduct schools for examiners Advisory Group, composed of a Regarding CRA" during the second employed by the federal supervi­ senior legal officer from each quarter of 1993. This document, sory agencies and make those agency. The task forces and the Le­ which is an expansion of questions schools available to employees gal Advisory Group provide re­ and answers revised in 1992, was of state supervisory agencies un­ search and analytical papers and well received again in 1993 and has der conditions specified by the proposals on the issues that the become a frequently used commu­ Council. Council addresses. nication device.

11 The CRA Subcommittee will be ac­ disclosure statements and MSA ag­ Task Force sponsored, under FFIEC tively involved throughout 1994 gregate reports in each Central auspices, the first interagency con­ with President Clinton's CRA Re­ Depository by May 1994. ference to provide training for se­ form Initiative. In response to the nior compliance examiners. This President's mandate, which empha­ The 1992 data were the first to be advanced training program focused sizes performance over process, the based on the 1990 census. Delays on compliance examination issues financial institution regulatory were experienced by the U.S. Cen­ involving CRA, HMDA, fair lend­ agencies jointly issued proposed sus Bureau in publishing all census ing, appraisals, community devel­ changes to the CRA regulations in materials needed by HMDA report­ opment lending, adjustable rate the fourth quarter of 1993. Upon ing institutions. To promote accu­ mortgages, and the Truth in Sav­ approval of final regulations in rate reporting, the HMDA Subcom­ ings regulation. Speakers dis­ 1994, the Subcommittee will revise mittee produced a 1993 update of cussed current rules and proce­ the current CRA examination pro­ "A Guide to HMDA Reporting; dures of these often controversial cedures and continue to provide Getting It Right!" As a result of this issues and highlighted trends and uniform guidance to financial insti­ and other steps to encourage error­ expectations for future regulatory tutions and examiners. free reporting-such as provision changes. of free software to many FFIEC During 1993, the HMDA Subcom­ agencies' reporting institutions­ The Examination Procedures Sub­ mittee supervised the collection of the rate of detectable errors in the committee issued uniform Truth in a greatly expanded database. More final aggregate data was lower than Savings examination procedures than 12 million records of loans 0.4%, well below the 4.4% error rate that were adopted and imple­ and applications were reported-a of the 1991 data. mented by all agencies during 1993. 57% increase over 1991 data-due primarily to refinancings spurred In addition to the new CD-ROM by low interest rates. To facilitate data products, the HMDA Task Force on public access to this mass of data, Subcommittee's plans for 1994 in­ Examiner Education the records were made available to clude publication by the FFIEC of Central Depositories nationwide in data submitted by the Mortgage In­ The purpose of the interagency microfiche, in addition to paper surance Companies of America training program is to provide reports. Because continuing high (MICA). More than 1.2 million in­ high-quality training that fosters rates of refinancings have surance records are expected to be uniformity among examiners of dif­ prompted expectations of a simi­ reported annually by MICA's eight ferent agencies. Courses and con­ larly dramatic increase in the data member insurers, revealing the ferences, which are developed and for 1993, the Subcommittee has de­ same approval versus rejection ra­ overseen by interagency working veloped two new CD-ROM prod­ tios by race, gender, and income as groups, include the expertise and ucts that will make 1992 raw data HMDA data. MICA's data will be opinions of numerous specialists. available to the public by April published alongside HMDA data; it All programs are produced under 1994 and will have 1992 individual will not aggregated with HMDA the guidance of the interagency data. MICA's 1994 disclosure will Task Force on Examiner Education. include only data for the fourth quarter of 1993. The Council is increasingly offering banker outreach seminars. Under During 1993, a consultant engaged the auspices of the Council, the five in 1992 by the FFIEC reviewed ex­ member agencies provide seminars isting fair lending examination pro­ on risk management. The Council cedures and training programs of has authorized fair lending/CRA each member agency. The final re­ seminars for 1994. (More informa­ port, including recommendations tion is provided on these seminars for procedures in situations where below-see Program Initiatives.) enforcement action seems war­ ranted, was issued and is being The Council develops and offers evaluated. Uniform Fair Housing various conferences and courses I Act and Equal Credit Opportunity aimed at examiners of financial in­ Act examination procedures are ex­ stitutions and other agency staff pected to be adopted and imple­ members. Conferences enable ex­ mented as appropriate during 1994. aminers to better understand the banking innovations they encounter Janice Smith, Chairwoman of the Consumer Early in 1993, in response to and to keep abreast of legal and Compliance Task Force FDICIA, the Consumer Compliance regulatory changes. Workshops aid

12 in transferring skills needed by ex­ sists of examiners and other staff Programs are produced on a coop­ aminers. Programs are open to state members from the member agen­ erative basis. When many agencies and foreign financial-institution ex­ cies, the states, and other partici­ are involved, the pool of potential aminers. State examiners generally pating agencies. Industry specialists instructors is larger, selecting the register through a member agency serve as guest speakers in many of appropriate specialist is easier, and but may register directly with the the programs. Interagency course the quality of instruction is greatly Council. Staff members from the development committees provide enhanced. A large pool of instruc­ Farm Credit Administration and, guidance on the selection of topics tors also reduces the teaching bur­ occasionally, from the Secret Ser­ and guest speakers. den on an individual agency. An vice and the Treasury Department agency with little expertise in a also attend the programs. The The goals of the training program new, specialized area has quick and Council has offered seminars for are the following: inexpensive access to the needed bankers since 1990. • To foster uniformity of examiner training. education through joint sponsor­ Several courses and conferences are Since its inception in 1979, the ship of interagency training. Council has provided training to offered numerous times during the 39,039 students. This number in­ • To develop and offer high-qual­ year. This makes it easier to sched­ cludes 1,697 attendees at Risk Man­ ity courses, seminars, and con­ ule individual examiners to take agement Planning seminars since ferences that meet the needs of training when it is timely for the the program began in 1990. Except financial-institution examiners. student. It also provides a choice of for the latter program, students session dates so the examiner can • To provide training opportuni­ have been federal and state regula­ be absent from an examination at ties for state and foreign super­ tors and foreign bank regulators. In the least detrimental time. visory agencies of financial recent years, the Council's training institutions. volume has ranged from 4,000 to Costs 5,000 students each year. During • To promote efficiency in train­ 1993, a curriculum of seventeen ing by eliminating duplication With interagency training, offering courses and conferences was avail­ where agencies' training needs one course for several agencies is able. The cadre of instructors con- coincide. often less costly than each agency

Actual Student Training at FFIEC Courses, by Agency, 1993

Course FDIC cx::c FRB OTS NCUA FCA Other Total Conducting Meetings with Management 5 5 EDP Symposium 4 3 3 1 11 Information Systems & Technology 44 63 42 13 3 3 168 Instructor Training 48 94 56 2 200 International Banking School 13 21 123 2 159 ManagementVVorkshop 257 141 44 56 8 507 Testifying 17 21 14 9 1 62 Emerging Issues 120 126 90 5 341 E-Issues Multi-national 11 38 36 85 Income Property Lending 278 148 122 6 13 567 Off-Balance-Sheet Risk 212 143 289 54 6 32 4 740 Trust 39 86 42 7 174 VVhite-Collar Crime 321 120 200 62 11 9 723 International Banking Self-Study 28 43 85 156 Payment Systems Risk 52 18 176 5 3 254 Consumer Compliance 29 67 46 16 1 4 163 Subtotal 1,469 1,133 1,368 230 28 78 9 4,315

Risk Management 52 11 63 Total Agency Training 1,469 1,185 1,379 230 78 9 4,378

13 FFIEC Training: Number of For 1993, the average training cost were also open to senior examiners. Sessions and Total Enrollment, was approximately $270 per atten­ The seminars had three goals: dee. State financial-institution su­ 1979-93 • To encourage top management pervisors paid a rate based on the to evaluate its present risk-man­ Number of Total estimated agency cost. Attendees agement systems and make im­ Year Sessions Enrollment from agencies other than those of' provements if needed. 1979 6 120 the states and the members of the Council paid $350 for each course • To provide a conceptual frame­ 1980 62 1,350 attendee and $450 for each confer­ work in which financial institu­ ence attendee. At the end of the fis­ 1981 85 1,702 tions can develop a systematic cal year a budgetary surplus was approach to managing risk on a 1982 83 1,622 credited to the member agencies. bankwide basis. 1983 88 1,816 • To encourage full dialogue be­ Facilities tween executive management 1984 80 1,799 and boards of directors regard­ 1985 81 1,842 Beginning in April1991, the Coun­ ing their institution's system of cil training staff moved its opera­ managing risks. 1986 102 2,296 tions to the FDIC facility near the Although topics changed somewhat 1987 126 3,446 Virginia Square Metro Station in Arlington, Virginia. This facility of­ from session to session, the follow­ 1988 107 3,174 fers convenient access to a 100-seat ing areas were discussed: 1989 90 2,784 auditorium and to lodging. The • The Risk-Management Process: Council leases its office and class­ Identifying, Assessing, and Con­ 1990 110 3,780 room space at market rates. , trolling Risk 1991 84 3,153 Regional programs are usually con­ • Risk Management Is a Profit­ 1992 85 4,143 ducted in the cities in which Dis­ Generating Process trict or Reserve Bank offices of the 1993 88 4,315 member agencies are located. When • Risk/Return Analysis of Bank class size permits, courses are con­ Products Total 1,277 37,342 ducted in agency facilities at no • Risk of Fraud and Insider Abuse Risk Management Planning Program cost to the Council. • The Impact of FDICIA on Inter- 1990 1 Bankers 110 est Rate Risk Management Examiners 0 Program Initiatives • Credit Risk Management 1991 3 Bankers 411 At its December meeting, the Coun­ • Merger and Acquisition Risks Examiners 17 cil approved a new seminar for 1992 3 Bankers 637 bankers called Fair Lending/CRA. • Managing Securities Risks Examiners 53 The purpose of the seminar is to • Credit Risk and Documentation educate top management of finan­ 1993 2 Bankers 406 cial institutions regarding the need • Creating a Risk-Management Examiners 63 for improved methods to ensure Organization fair lending and compliance with Total 1,286 39,039 During 1993, seminars were held in regulations. This seminar will be held in major cities around the Cincinnati and Los Angeles. Ap­ proximately 200 senior bank execu­ country. tives attended each session. For developing and conducting courses 1994, sessions will be conducted in on the same subject. Participating Risk Management Training for Houston and New York City. agencies provide instructors free Industry Executives of charge and in proportion to their The New York session of Risk-Man­ In response to section 1218 of enrollment, so costs are kept low. agement Planning will address the FIRREA, the Council conducted Each agency provides financial leading edge of risk-management two seminars for bankers in 1993 support for the school in propor­ practice. The session will empha­ on risk-management planning. tion to its planned utilization. This size newer risk-management infor­ enrollment-based, cost-sharing These seminars were aimed prima­ mation systems and measuring and plan is used in lieu of a stated rate rily at chief executive officers of in­ pricing the risk component of bank of tuition. sured financial institutions; they products, especially loans.

14 During 1993 there was also in­ management and others who want three presentations during the creased specialization and better to improve their skills in leading week. Some presentations are vid­ targeted conferences. For ex­ meetings. eotaped for critical review. The ample, an Emerging Issue Confer­ course provides guidance in in­ ence for Multinational Examiners EDP Symposium structional techniques, lesson plan­ was offered in addition to several ning, and use of audiovisual aids. sessions of Emerging Issues­ The EDP Symposium is a week­ This course has a considerable mul­ Community and Regional, which long meeting of senior data-pro­ tiplier effect in terms of its effect on were aimed at examiners of cessing examiners who address an numerous other courses. All poten­ smaller institutions. emerging area of supervisory con­ tial instructors for Council schools cern chosen by the EDP Subcom­ who have no teaching experience International Banking Curriculum mittee of the Task Force on Super­ must take this course before begin­ vision. The symposium is not a ning their teaching duties. Ten ses­ The international banking cur­ course in the usual sense: the pri­ sions were conducted during the riculum was extensively revised. mary flow of information is from year. Because its objectives were al­ the participants to the course lead­ most entirely knowledge-based, ers. During the week, participants Management Workshop the basic international banking develop and refine a consensus re­ course, International Bank I, was port. The report is submitted to the This workshop is a one-week, gen­ replaced with a self-study course. Task Force on Supervision, which eral skill-building course designed This is a cost-saving substitute for weighs its possible effects on ex­ to strengthen and expand the prac­ classroom training, and more amination policies and procedures. tical application of basic manage­ than 150 course manuals were Attendance is limited to twelve ment concepts. Attendees bring as­ provided to the member agencies. leading EDP examiners per session. sessments of their skills completed International Banking II and In­ The session conducted in 1993 ad­ by themselves and by colleagues or ternational Capital Markets were dressed the Impact of Changing subordinates and administer self­ replaced by a new intermediate Technology on the Regulatory Ex­ assessment questionnaires in class. level International Banking amination Process. These assessments are scored and School. Since 1988, the OCC has evaluated on scales that present a conducted the Advanced Foreign Instructor Training picture of each attendee's manage­ Exchange School and has made ment ability and style. Basic con­ the sessions available to the other This course prepares examiners for cepts are presented through lec­ member agencies. teaching in agency and Council tures, videotapes, and small group . schools. Participants plan and)give discussions. The desired results are

Courses Offered in 1993 Conducting Meetings with Management This one-week course gives partici­ pants practice and confidence in or­ ganizing and leading meetings with financial institution management. Emphasis is on the final "exit meet­ ing" conducted at the close of many examinations. Each attendee leads three meetings with small groups in which other participants role-play as officers and directors of an insti­ tution. Difficult meeting circum­ stances and problem reports are the subjects of the exercises. Video­ taped replays are used in post-pre­ sentation critiques. The targeted audience for the course is commis­ sioned examiners who are begin­ ning to lead final discussions with Betty Mills of FDIC teaching the Management Workshop course

15 an improved self-perception as a Emerging Issues estate law and environmental is­ manager, greater knowledge of sues. The conference is open only to good management techniques, and This conference, aimed at senior ex­ commissioned examiners who have improved management practices. aminers, provides authoritative considerable involvement with As a prerequisite, participants analysis of contemporary and commercial real estate lending. should have between three and ten emerging technical issues confront­ Conference length may vary but is years' examining experience. Ap­ ing the regulatory and banking generally three and one-half days. proximately thirty sessions, includ­ communities. It is attended by Most attendees are assumed to ing numerous regional ones, are many field office managers. The have had a basic course in real es­ provided yearly. first two sessions were offered in tate finance or appraisal. 1992. In 1993 two versions of the conference were available, one for Testifying examiners of multinational and su­ Information Systems and Technology per-regional institutions and one This workshop is designed for com­ The Information Systems and Tech­ for examiners of community and nology conference is designed to missioned examiners who are likely regional institutions. Nine sessions to testify at a hearing or trial in the update senior data-processing ex­ of this four-and-one-half-day con­ foreseeable future. Only those who aminers on current developments ference will be conducted in 1994. are scheduled to testify imminently in data processing, software, sys­ The following will be among the are encouraged to attend. Attor­ tems development, security con­ topics: neys who role-play as prosecutors, trols, telecommunications, net­ defense counsel, and judges con­ • Changing Aspects of FDICIA works, auditing, computer fraud, duct a mock trial of an actual case. switches, data center operations, Instructors report that they also • A Banker's View of Emerging and many other topics. The confer­ benefit from participating in the Issues ence features guest speakers who are recognized authorities in their course. Examiners review their tes­ • FASB 114 and 115 timony by videotape and receive fields. Topics vary from session to critiques from trial attorneys. Spe­ • Mutual Funds session. One session, which ran for four and one-half days, was con­ cial thanks are due to the Depart­ • Mortgage Securities Update ment of Justice for providing many ducted in 1993, and another will be of the attorney-instructors. In 1993, • Mortgage Servicing Rights conducted in 1994. the highlight of many sessions was • Fair Lending a summary meeting in the cham­ International Banking • Derivatives bers of the Honorable Stanley The International Banking confer­ Sporkin, U.S. District Judge for the • Where Is the Economy Going? ence is a two-day, advanced pro­ District of Columbia. Four sessions gram dealing with international are planned for 1994. • Common Report of Examination credit, legislative and regulatory is­ • Update on Interest Rate Risk sues, and recent international bank­ Management ing innovations. Speakers are lead­ Conferences ing international bankers and • Evaluating the Newly Merged senior staff members of the banking Institution Consumer Compliance regulatory agencies. The conference • Globalization of White Collar is designed for those specialized ex­ A conference on consumer compli­ Crime aminers who have ongoing respon­ ance was offered for the first time sibilities in the international bank­ in 1993. Its purpose was to update Income Property Lending ing or financial arenas. This senior compliance examiners on conference is conducted as needed. current and prospective develop­ This conference aims to provide ex­ ments in the area of regulation. aminers with the skills needed to Off-Balance-Sheet Risk Speakers were nationally recog­ assess the assumptions built into nized leaders from industry and se­ real estate market studies, feasibil­ The purpose of this conference is to nior staff members from the regula­ ity studies, and appraisals. It em­ improve examiners' understanding tory agencies. The Consumer phasizes appraisal analysis, con­ of the incentives and risks of finan­ Compliance Task Force provides struction lending, construction loan cial institutions' off-balance-sheet leadership in the selection of topics disbursements, workout situation, activities. Risk assessment of and speakers. It is expected that and problem-solving. Topics standby letters of credit, loan com­ this conference will be offered in al­ change from time to time, but ses­ mitments, financial futures and op­ ternate years. sions have frequently included real tions, foreign exchange, interest

16 creased emphasis on detection of fraud and insider abuse. It is gener­ ally attended by senior examiners, although it is open to any examiner with at least two years' examining experience. It covers major types of fraudulent activity and insider abuse, including real estate fraud, investment securities fraud, com­ puter fraud, and money laundering and the Bank Secrecy Act. Detec­ tion and investigation techniques are stressed. Red flags signaling in­ stitutional and individual types of fraud are discussed. Each attendee gains familiarity with the relevant criminal statutes as well as the preservation of evidence, inter­ viewing, testifying, and the preven­ Richard Hewitt addressing the FFIEC White Collar Crime Conference tion of fraud. Numerous sessions are conducted each year and one regional session was conducted in rate swaps, and a wide range of after an Off-Balance-Sheet Risk 1993. other capital-market products is conference. emphasized. In 1993, the Task Course Catalogue and Schedule Force on Examiner Education Trust agreed that there was a need for a A course catalogue and schedule more advanced edition of this pro­ The Trust conference emphasizes are available from the Council gram. In 1994, in addition to the Rew initiatives affecting trust bank­ training office: seven regular programs, two Off­ ing. Topics vary from session to Balance Sheet Risk Conferences session, and the sessions feature FFIEC Examiner Education with Emphasis on Capital Market guest speakers who are recognized 3501 Fairfax Drive Issues will be conducted. The first leaders in the trust industry. Room 3086 Arlington, Virginia 22226-3550 advanced program will be held in Attendance is limited to senior ex­ New York. amination personnel who specialize in fiduciary activities. Topics cov­ Task Force on Reports Payment Systems Risk ered in the 1993 session were cor­ porate trust, trust department Section 1006(c) of Public Law 95- This conference improves examin­ fraud, corporate trust risk, recent 630 requires the Council to develop ers' understanding of the risks in­ Department of Labor enforcement uniform reporting systems for fed­ volved in payment systems, the activity, new rules for deposit in­ erally supervised financial institu­ methods used to minimize these surance for trust departments and tions and their holding companies risks, and the means of evaluating employee benefit plans, a trustee's and subsidiaries. To meet this ob­ these risks in the examination pro­ perspective of securitization, envi­ jective, the Council established the cess. Topics include functions of ronmental risk management, regu­ Task Force on Reports, which has payment/ settlement/ message sys­ lation of trust department's trust also received other responsibilities tems, risks associated with wire companies from a state's perspec­ related to the development of inter­ transfers, risks associated with day­ tive, and bank mutual fund activi­ agency uniformity in the reporting light overdrafts, legal consider­ ties, including current trust depart­ of periodic information needed for ations, and potential insurance ment practices and activities and a effective supervision. The task force risks. This program has been exten­ legislative and regulatory update. is thus concerned with such issues sively revised to incorporate all of as the development and interpreta­ the regulatory changes that went White Collar Crime tion of reporting instructions; the into effect January 1, 1994. To facili­ application of accounting standards tate attendance at both conferences, This one-week conference became to specific transactions; the publica­ some sessions of Payment Systems an interagency project several years tion and distribution of reports; the Risk are conducted immediately ago as a result of the agencies' in- development and application of

17 processing standards; the monitor­ ment, deferred tax assets in excess ing the June 10, 1993, guidance on ing of data quality; the assessment of a proposed regulatory capital in-substance foreclosures and of reporting burden; and the liaison limit, and intangible assets that nonaccrualloans were issued to with other organizations, including have been grandfathered for regu­ banks as part of their third quarter the Securities and Exchange Com­ latory capital purposes. New an­ 1993 Call Report materials. mission, the Financial Accounting nual reporting requirements for Standards Board (FASB), and the small business and small farm lend­ On December 16,1993, the Council American Institute of Certified ing data, which had been devel­ approved several changes to the Public Accountants. The task force oped pursuant to section 122 of Call Report for 1994 that the bank­ is also responsible for any special FDICIA, became effective for all in­ ing agencies have since submitted to projects related to these subjects sured banks, thrifts, and U.S. OMB for its approval. A number of that the Council may assign. To branches of foreign banks as of June these revisions in the Call Report re­ help carry out its responsibilities, 30, 1993. Banks received advance quirements result from a new ac­ working groups are organized as notification about all of the new counting standard governing the ac­ needed to handle accounting, re­ Call Report requirements and the counting for investments in debt porting, instructional, and process­ related instructions at year-end and equity securities (FASB State­ ing matters of a specialized or tech­ 1992. Updated pages for the Call ment No. 115), which banks must nical nature. Report instruction books were dis­ adopt in 1994. Other revisions are tributed to banks with their first intended to identify the extent of quarter 1993 Call Report forms. The bank involvement in the sale of mu­ Activities of the Task Force updated pages also included other tual funds and annuities and the instructional revisions necessitated amount of income derived from During 1993, the task force's activi­ by a new accounting standard on these nondeposit investment prod­ ties were focused primarily on the accounting for income taxes, FASB ucts. As a first step toward im­ Reports of Condition and Income Statement No. 109, that banks had proved disclosures about interest (Call Report), both with respect to to adopt for Call Report purposes rate, foreign exchange rate, and the information collected in the re­ in 1993. other commodity and equity con­ port and the instructions for its tracts, larger banks will provide preparation. The Call Report is To assist smaller banks with the re­ limited additional data pertaining to filed by insured commercial banks porting of deferred taxes and appli­ these off-balance-sheet derivative and FDIC -supervised savings cable income taxes in their Call Re­ contracts. Information will also be banks. The task force also contin­ ports in accordance with FASB collected on trading liabilities and ued to examine the disclosure of Statement No. 109, the task force on the original maturities of other fair values in reports filed with the developed income tax worksheets. borrowed money. In addition, the regulatory agencies. In addition, These worksheets, which smaller Council approved, on an interim ba­ the task force, in conjunction with banks were encouraged but not re­ sis, the offsetting by banks of on­ the Task Force on Supervision, be­ quired to use, were distributed to balance-sheet amounts associated gan to identify and evaluate the ef­ banks in April1993 while they were with derivative contracts in their fect of a new accounting standard completing their first quarter Call Call Reports in accordance with on loan impairment on the regula­ Reports. FASB Interpretation No. 39 pending tory agencies' supervisory policies clarification of an interpretive issue and reporting requirements. Interagency guidance on the report­ under Interpretation No. 39. ing of in-substance foreclosures and After approval by the U.S. Office of on returning certain nonaccrual In approving certain new deriva­ Management and Budget (OMB), a loans to accrual status was released tives disclosures in the Call Reports number of revisions to the Call Re­ on June 10, 1993, as part of the for larger banks on December 16, port took effect in the first and sec­ administration's credit availability 1993, the Council also requested the ond quarters of 1993. Many of the initiatives. As another part of these task force to identify the additional revisions resulted from provisions initiatives, the Call Report instruc­ Call Report disclosures about banks' of the Federal Deposit Insurance tions were revised as of June 30, use of derivatives that are needed Corporation Improvement Act of 1993, to eliminate an instruction for effective supervision of these ac­ 1991 (FDICIA). The first quarter that was not consistent with gener­ tivities. The task force was directed Call Report changes covered off­ ally accepted accounting principles to complete its study by February balance-sheet assets, preferred de­ that had required selling banks to 15, 1994, to enable these additional posits, uninsured deposits, past­ report certain loans for the pur­ Call Report requirements for de­ due and nonaccrualloans and chase of foreclosed property as rivatives to be implemented as early leases that are partially or wholly "other real estate owned." Revised as June 30, 1994, if considered ap­ guaranteed by the U.S. govern- Call Report instructions incorporat- propriate by the Counc:il. An inter-

18 agency derivatives working group in certain regulatory reports. These supervisory officials of the constitu­ is assisting the task force in this reports are the Call Report, the ent agencies. Meetings are held pe­ assignment. Thrift Financial Report, and the Re­ riodically to address and resolve port of Assets and Liabilities of U.S. common supervisory issues. The At the request of OMB, the task Branches and Agencies of Foreign task force has a standing subcom­ force performed an assessment of Banks, as well as the annual reports mittee to address electronic-data­ the practical utility of the annual re­ filed by insured institutions subject processing (EDP) issues. Ad hoc porting requirements for loans to to the audit and reporting require­ working groups are created as small businesses and small farms ments of section 112 of FDICIA. needed to handle particular that became effective as of June 30, Based on its review of the nearly projects and assignments. 1993, for insured banks, thrifts, and 190 comment letters received and U.S. branches of foreign banks. further discussion by the task force, From an initial review of the data recommendations concerning how Activities of the Task Force reported at that date, the task force the agencies should proceed with found no reason to change the basis fair market value disclosure will be During 1993, the task force and its of reporting for small business and submitted to the Council in 1994. working groups were involved in a small farm loans. The review also number of projects. The standing revealed the need for certain in­ Following the May 1993 issuance of subcommittee produced several structional clarifications that a new accounting standard on loan products, and the ad hoc subcom­ should improve the quality of the impairment, FA~B Statement No. mittees, which are formed to deal data when they are next reported in 114, an interagency working group with a specific issue, were also 1994. At its December 16, 1993, was established to assist the task active. meeting, the Council approved the forces on Supervision and Reports The subcommittee on EDP was of­ assessment prepared by the task in addressing the supervisory and ficially established in 1979. The sub­ force and the recommended in­ regulatory reporting implications of committee sponsors symposiums, structional clarifications. The agen­ the standard that takes effect in maintains the FFIEC EDP Examina­ cies submitted the assessment to 1995. The working group has iden­ tion Handbook, manages the ex­ OMB in early 1994. tified a series of implementation is­ amination of Multiregional Data sues along with recommended ap­ Processing Servicers (MOPS), and On October 4, 1993, the task force, proaches for dealing with these acting under delegated authority, coordinates the Shared Application issues. The decisions that are Software Review (SASR) program. approved a revision to the Country reached on the issues of a supervi­ Exposure Report for U.S. Branches Each year, the subcommittee also sory nature will affect the regula­ sponsors a conference on informa­ and Agencies of Foreign Banks tory reporting guidance and im­ (form FFIEC 019) that will reduce tion systems and technology. The pairment-related disclosures for the July 1993 conference focused on reporting burden. The revision Call Report and Thrift Financial Re­ raises the threshold for reporting current developments in EDP and port that will be developed by the featured nationally recognized ex­ exposures to foreign nations other Task Force on Reports in 1994. than the branch or agency's home perts as speakers. country from a total adjusted expo­ As a result of subcommittee recom­ sure of $5 million to $20 million, ef­ Task Force on Supervision mendations, the task force ap­ fective March 31, 1994. proved an Interagency Supervisory The jurisdiction of the Task Force Statement on EFT Switches and Section 121 of FDICIA requires the on Supervision includes all matters Network Services and an Inter­ federal banking and thrift agencies relating to the supervision and ex­ agency Document on Control and to jointly develop a method for in­ Security Risks in Electronic Imag­ sured banks, thrifts, and U.S. amination of depository institu­ ing Systems. branches of foreign banks to pro­ tions. The goal of the task force is to improve the quality and effective­ vide supplemental disclosure of the In 1993, eight MOPS examinations ness of all aspects of the supervi­ estimated fair market value of as­ were conducted of service bureaus sory process. Significant issues are _sets and liabilities, to the extent fea­ that provide data processing to ap­ referred, with recommendations, to sible and practicable, in reports that proximately 3,000 financial institu­ the Council for action. The Council these insured institutions file with tions. Three SASR reviews of turn­ has delegated authority to the task the agencies. At its March 31, 1993, key software products were also force to make other decisions, pro­ meeting, the Council approved the conducted during the year. In Sep­ vided all members of the task force publication of a request for public tember 1993, the subcommittee are in agreement. comment on several issues pertain­ held a symposium on the impact of ing to fair market value disclosure Task force members are the senior changing technology on the regula-

19 tory examination process. The rec­ proposal also would use ratings to mation on the composition of ommendations made as a result of match the risk-based capital assess­ other real estate owned. This this symposium will be imple­ ment more closely to an institution's schedule provides details on mented by the subcommittee in relative risk in certain asset other real estate oJned by type. 1994. securitizations. On December 16, 1993, the Council approved issuing • Added an analysis section on During 1993, a working group, op­ the recourse proposal for public mortgage servicing activities. erating under the auspices of the comment. task force, completed the develop­ • Updated risk-based capital in the ment of common interagency guid­ Work continues in other areas. One UBPR to incorporate changes in ance on the allowance for loan and working group is reviewing issues the calculation of capital and lease losses (ALLL). The policy relating to the implementation of risk-based assets. Specifically, statement discussed the nature and Financial Accounting Standards grandfathered intangible assets purpose of the allowance, the re­ Board Statement No. 114, "Ac­ and disallowed deferred tax as­ sponsibilities of an institution's counting by Creditors for Impair­ sets have been included in the board of directors and management ment of a Loan." Another working risk-based capital analysis. The to maintain an adequate allowance, group, which formed in mid-1992 UBPR continues to use the FDIC and the responsibilities of examin­ to examine the feasibility of devel­ risk-based premium assessments ers in assessing the allowance, in­ oping capital standards for trust methodology for estimating risk­ cluding quantitative guidance that operations, is continuing its efforts. based capital for banks that are can be used to check the reasonable­ not required to report all data on ness of an institution's allowance Call Report Schedule RC-R. Cur­ methodology. The quantitative rently estimated risk-based capi­ Task Force on Surveillance tal data is not provided on guidance provided in the policy Systems statement was: printed UBPRs, but only in elec­ tronic form to the banking super­ • 50% of doubtful assets The Task Force on Surveillance Sys­ visors. tems oversees the development and • 15% of substandard assets and implementation of uniform inter­ • Revised the calculations for secu­ agency surveillance and monitoring rities yields and volatile liability 111 for nonclassified assets, in gen- eral, estimated credit losses over systems. Historically, the task dependence. The definitions of the upcoming twelve months. force's primary objective has been securities yields were changed to to develop and produce the Uni­ allow use of 90-day averages in The goal of the interagency policy form Bank Performance Report all calculations. Volatile liability statement was to provide uniform (UBPR). This report is an analytical dependence was changed by ex­ guidance for the determining ad­ tool created for supervisory pur­ panding the definition of tempo­ equate allowances and to ensure poses. It is used to monitor the con­ rary investments. ?iti?n ~nd performance of banking that all federally-insured banking " Revised the capital analysis page. and thrift institutions and examin­ mshtuhons on a quarterly basis and to identify potential or emerging All references to primary and ers understand the agencies' allow­ secondary capital were removed ance policies. The policy statement problems in those financial institu­ tions. A UBPR is produced quar­ and replaced by additional infor­ was adopted by the Council on De­ mation on intangible assets and cember 16, 1993. ~erly for ea~h commer~ial barl~ and msured savmgs bank m the Uhited details on the causes of changes in total equity. While risk-based Also during 1993, another working States that is supervised by th1~ group operating under the over­ Board of Governors of the Federal capital was adopted as the regu­ sight of the task force completed Reserve System, the Federal De­ latory standard in 1990, detail on work on a proposal to develop capi­ posit Insurance Corporation, or the primary and secondary capital tal rules for recourse transactions Office of the Comptroller of the was kept in the UBPR for three that are consistent among the agen­ Currency. years to provide some historical cies. The proposed rule would re­ perspective. vise the risk-based capital standards During 1993, the Surveillance Task Force and Surveillance Working • Produced and distributed four to address the regulatory capital quarterly versions of the UBPR. Group completed the following treatment of recourse arrangements The federal banking agencies projects: and direct credit substitutes that ex­ each received UBPR data in elec­ pose banks, bank holding compa­ • Expanded the analysis of loan tronic format. State banking nies, and savings associations to charge-offs and loan mix analy­ agencies received two sets of credit risk. A separate preliminary sis to incorporate detailed infor- UBPRs for banks in their respec-

20 tive states. Some state banking • Review and modify the tax o UBPR data will be provided to agencies have begun develop­ equivalency calculation in the each federal banking agency each mental work on systems to re­ UBPR. quarter. ceive UBPR data in electronic " Rewrite the UBPR Users Guide form. Additionally, printed • Two copies of the UBPRs will be (in perfect bound format) to in­ made available to state bank su­ UBPR reports were sent to all corporate all previous updates. banks. More than 9,000 copies of pervisors for banks in their state. individual bank UBPRs were " Review and consider redefining Alternatively, the printed reports provided to the general public. current peer group definitions. may be requested in tape form. o • State banking agencies may also " The task force obtained Council Develop new end-user reports approval of a system to distrib­ from existing UBPR data. purchase UBPR data files in elec­ ute Call Report data electroni­ • Convert the UBPR to a revised tronic form. cally to the state banking agen­ database if cost savings can be o UBPRs and Call Report data will cies. This system will provide shown. be made available to the public state agencies access to edited Produce four quarterly versions of for a fee. Call Report information in the the UBPR. Distribute copies to fed­ same time frames that the fed­ eral and state agencies, banks, and Copies of UBPRs may be purchased eral agencies have access. by the general public for $45.00. the general public. The UBPR Users Guide, which de­ " One supplement to the UBPR scribes the content of the report and Users Guide was distributed to While the UBPR is primarily a su­ pervisory tool for the three federal defines ratio calculations, is avail­ the regulatory agencies and able for $25.00. The peer group re­ banks, detailing the enhance­ banking agencies, it is also used ex­ tensively by others. Copies of the port, showing average ratios for all ments and revisions noted peer groups, is available for $65.00. above. UBPR are routinely distributed to banks and state banking agencies as The state average report is available " The task force decided to reprint described below. In addition to the for of $45.00. Peer group and state the Users Guide annually in a 9,000 UBPRs distributed in printed average percentile distribution re­ perfect bound format to ensure form, several institutions have also ports are available for $65.00 and that all users have a complete acquired UBPR data in electronic $45.00, respectively. Standardized and up-to-date guide. form. UBPR quarterly data on magnetic tape are available for $400.00. Infor­ Several projects are planned for A major goal of the task force is to mation on ordering items may be 1994 that should provide further en­ ensure timely production and distri­ obtained by calling (202) 634-6526 hancements to the UBPR: bution of UBPRs and related data. or by writing the Council: The following distribution policy Federal Financial Institutions " Enhance the UBPR treatment of will continue: interest rate sensitivity by incor­ Examination Council porating duration analysis data • Each insured bank will receive 2100 Pennsylvania Avenue, N.W. to be collected for risk- based one copy of the current UBPR Suite 200 capital purposes. per quarter. Washington, D.C. 20037

21 . :1, THE FEDERAL FINANCIAL INSTITUTIONS REGULATORY AGENCIES AND THEIR SUPERVISED INSTITUTIONS

The five federal regulatory agencies board of governors. Each member tory institutions are required to represented on the Council have is appointed by the President, with hold at the Reserve Banks and par­ primary federal supervisory juris­ the advice and consent of the Sen­ tially from non-interest-bearing diction over about 26,300 domesti­ ate, for a fourteen-year term. Sub­ Federal Reserve notes (currency) is­ cally chartered banks, thrift institu­ ject to confirmation by the Senate, sued by the Reserve Banks. The Re­ tions, and credit unions. On June the President selects two board serve Banks pay assessments, 30, 1993, these financial institutions members to serve four-year terms which are used to meet the FRB's held total assets of more than $5.4 as Chairman and Vice Chairman. expenses. trillion. The Board of Governors of The FRB' s activities that are most the Federal Reserve System (FRB) relevant to the work of the Council and the Office of Thrift Supervision are the following: The Federal Deposit Insurance (OTS) also have primary federal su­ Corporation pervisory responsibility for com­ • Examines, supervises, and regu­ mercial bank holding companies lates state member banks, bank The Congress created the FDIC in and for savings and loan holding holding companies, and Edge 1933 with a mission to insure bank companies respectively. and agreement corporations. deposits and reduce the economic disruptions caused by bank fail­ The three banking agencies on the • Approves or denies applications ures. Management of the FDIC is Council have authority to oversee for mergers acquisitions, and vested in a Board of Directors, the operations of U.S. branches and changes in control by state mem­ which consists of five members. agencies of foreign banks. The In­ ber banks and bank holding Three of the directors are appointed ternational Banking Act of 1978 au­ companies. by the President, with the advice thorizes the Office of the Comptrol­ • Approves or denies applications and consent of the Senate, for six­ ler of the Currency (OCC) to license year terms. One of these three is federal branches and agencies of for foreign operations of member banks. designated by the President as foreign banks and permits U.S. Chairman for a term of five years branches that accepts only whole­ • Supervises U.S. offices of foreign and another is designated as Vice sale deposits to apply for insurance banks. Chairman. The other two Board with the Federal Deposit Insurance members are the Comptroller of the Corporation (FDIC). Foreign banks Policy decisions are implemented Currency and the Director of the that wish to operate insured entities by the FRB and by the twelve Fed­ Office of Thrift Supervision. No in the U.S. and accept retail depos­ eral Reserve Banks, each of which more than three Board members its must, per FDICIA, organize un­ has operational responsibility may be of the same political party. der separate U.S. charters. Existing within a specific geographical area. insured retail branches may con­ Each Reserve Bank has a president The FDIC's supervisory activity is tinue to operate as branches. It also and other officers and employs a organized into eight regions, each subjects those U.S. offices to many staff of bank examiners who exam­ of which is headed by a regional di­ provisions of the Federal Reserve ine state member banks and inspect rector. Bank liquidation activities Act and the Bank Holding Company bank holding companies located are divided among four regions, Act. The act gives primary examin­ within the Reserve Bank's District. each of which is also headed by a ing authority to the OCC, the FDIC, All national banks must be mem­ regional director (liquidation). and the various state authorities for bers of the Federal Reserve System. the offices within their jurisdictions State-chartered banks may apply The FDIC administers two federal and gives the FRB residual examin­ and be accepted for membership. deposit insurance funds, the Bank ing authority over all U.S. banking Insurance Fund (BIF) and the Sav­ operations of foreign banks. Funding for the Reserve Banks is ings Association Insurance Fund derived from interest received on (SAIF). The basic insured amount Treasury and federal-agency securi­ for a depositor is $100,000 at each The Board of Governors of the ties held as assets by the Reserve insured depository institution. The Federal Reserve System Banks. The funds for these invest­ BIF is funded through assessments ments are derived partially from paid by insured commercial banks, The FRB was established in 1913. It non-interest-earning reserves that certain federal and state savings is headed by a seven-member member banks and other deposi- banks, and industrial banks, as well

23 as through income from invest­ The FDIC has primary federal regu­ Resolution Trust Corporation Refi­ ments in U.S. government securi- latory and supervisory authority nancing, Restructuring and Im­ . ties. The SAIF, which was created over insured state-chartered banks provement Act of 1991 relieved the in 1989 as a successor to the former that are not members of the Federal FDIC of its management responsi­ Federal Savings and Loan Insur­ Reserve System; however, it has the bilities for the Resolution Trust ance Corporation (FSLIC), receives authority to examine for insurance Company (RTC), the agency assessment premiums from insured purposes any insured financial insti­ charged through at least January 1, savings associations. The FDIC sets tution, either directly or in coopera­ 1995, with resolving failure cases assessment rates, which had his­ tion with state or other federal su­ involving institutions that were for­ torically been fixed at the same rate pervisory authorities. FDICIA gives merly insured by the FSLIC. The for all institutions insured by the the FDIC back-up enforcement au­ FDIC Chair is a member of the BIF and likewise similar rates for all thority over all insured institutions, Thrift Depositor Protection Over­ institutions insured by the SAIF. Ef­ that is, the FDIC can recommend sight Board, which oversees RTC fective January 1, 1993, the FDIC that the appropriate federal agency operations, and RTC employees are established a risk-based assessment take action against an insured insti­ on assignment from the FDIC. system for all depository institu­ tution and may do so itself if the tions insured by BIF or SAIF as re­ primary supervisory agency fails to quired under the Federal Deposit do so. The FDIC's supervisory au­ The National Credit Union Insurance Corporation Improve­ thority has been expanded to per­ Administration ment Act of 1991 (FDICIA). mit it to deny authorization for in­ The NCUA, established by an act of Administrative and supervisory ex­ sured state-chartered banks to engage in any activity impermis­ the Congress in 1934, is the agency penses of the FDIC are charged to that heads the nation's federal the BIF or to the SAIF as appropri­ sible for a national bank if it deter­ mines that the activity would pose credit union system. A three-mem­ ate. The Secretary of the Treasury ber bipartisan board appointed by will provide such amounts as may a significant risk to the BIF or if the institution is not in compliance the President for six-year terms be needed to cover losses incurred manages the NCUA. The President by the SAIF through fiscal year with applicable capital standards. The FDIC may also prohibit activi­ also selects a member to serve as 1998, provided that the required Chairman of the board. certifications are made. Also, the ties that pose a serious threat to the FDIC's authority to borrow from SAIF and otherwise limit the pow­ The main responsibilities of the the U.S. Treasury was increased by ers of state-chartered savings asso­ NCUA are the following: ciations to those permitted for a FDICIA to $30 billion for the use of • It charters, examines, and super­ both funds. The FDIC has the au­ federal savings association. The FDIC has, in consultation with vises more than 7,700 federal thority to impose special assess­ credit unions nationwide. ments to provide sufficient income other federal supervisory agencies, to repay borrowings from the Trea­ established minimum capital levels • It administers the National sury if it determines that such as­ below which institutions are Credit Union Share Insurance sessments are necessary. deemed to be "critically undercapi­ Fund (NCUSIF), which insures talized" and, as such, are subject to 97 percent of member share ac­ Any depository institution that is seizure and/ or closure if no longer counts in nearly 12,400 of the engaged in the business of receiv­ viable. country's federal and state-char­ ing deposits may be insured by the tered credit unions. FDIC after application to, examina­ In protecting insured deposits, the tion by, and approval of the FDIC. FDIC is charged with resolving the • It manages the Central Liquidity After considering the financial his­ problems of insured depository in­ Facility, a central bank for credit tory and condition of an applicant, stitutions at the least possible cost unions that provides financial its capital adequacy, prospects for to the deposit insurance fund. In stability to the credit union future earnings, management, risk carrying out this responsibility, the system. to the insurance fund, and needs of FDIC engages in several activities, The NCUA also has statutory au­ the community, the FDIC may ap­ including deposit payoffs, arrang­ thority to examine and supervise prove or deny an application for in­ ing the purchase of assets and as­ NCUSIF-insured, state-chartered surance. This approval authority sumption of liabilities of failed in­ credit unions in coordination with was expanded by FDICIA to in­ stitutions, effecting insured deposit state agencies. clude national banks, all state-char­ transfers between institutions, cre­ tered banks that are members of the ating and operating temporary The NCUA has six regional offices Federal Reserve System, and fed­ bridge banks until a resolution can across the country that administer eral and state-chartered savings be accomplished, and using its its responsibility to charter and su­ associations. conservatorship powers. pervise credit unions. Its examiners

24 conduct annual, on-site examina­ while remaining efficient com­ To carry out its mission, the OTS is tions of each federal credit union. petitors in the financial services organized into five main divisions: Tax dollars do not fund NCUA; it markets. • Washington Operations includes is supported by the credit unions it supervisory operations, policy, regulates and insures. The principal supervisory tools of the OCC are on-site examination information resources manage­ activities and ongoing analysis of ment, and the administration The Office of the Comptroller national bank operations. As appro­ program areas of OTS. This divi­ of the Currency priate, the OCC issues rules and sion develops national policy regulations concerning bank lend­ guidelines to enhance statutes The OCC is the oldest federal bank ing, bank investment, and other as­ and regulations, establishes pro­ regulatory agency, having been es­ pects of bank operations. grams to implement new policies tablished as a bureau of the Treasury and laws, develops and main­ Department by the National Cur­ The OCC is organized geographi­ tains surveillance systems that rency Act of 1863. It is headed by cally into six districts, each headed monitor the condition of the in­ the Comptroller, who is appointed by a Deputy Comptroller. The dustry and assist in identifying to a five-year term by the President, agency is funded through assess­ emerging supervisory problem with the advice and consent of the ments on the assets of national areas, develops and maintains fi­ Senate. The Comptroller also serves banks and by fees charged for cor­ nancial management and infor­ as a director of the FDIC and as di­ porate applications. mation systems, maintains hu­ rector of the Neighborhood Rein­ man resources programs, vestment Corporation. Office of Thrift Supervision processes thrift institution appli­ The OCC is the regulator and su­ cations, provides special super­ pervisor of the national banking The OTS was established as a bu­ vision of selected thrift institu­ system. As such, it currently regu­ reau of the Treasury Department in tions, and performs other related lates and supervises about 3,400 na­ August 1989 and became opera­ functions. tional banks, with total assets of tional in October 1989 as part of a major reorganization of the regula­ • Regional Operations conducts about $2.0 trillion, representing the examination and supervision tory structure for thrift institutions about 57 percent of the total assets of thrift institutions in the five mandated by FIRREA. In that act, of all U.S. commercial banks. It is OTS regions to ensure the safety the Congress gave OTS authority to the only federal banking agency and soundness of the industry. It charter federal thrift institutions with authority to charter commer­ also oversees the training and cial banks. It shapes the structure of and serve as the primary regulator of the approximately 1,750 federal development of federal thrift the national banking system regulators through accredited and state-chartered thrift institu­ through its authority to approve or programs. The regional offices deny applications for new bank tions belonging to the SAIF. The OTS carries out this responsibility are headquartered in Jersey City, charters, for the establishment of Atlanta, Chicago, Dallas, and by adopting regulations governing branches, and for mergers of na­ San Francisco. tional banks. the savings and loan industry, by examining and supervising thrift • The Chief Counsel provides a The national interest requires that institutions and their affiliates, and full range of legal services to the the United States have a safe and by taking whatever action is neces­ agency, including drafting regu­ stable financial system that pre­ sary to enforce their compliance lations, representing the agency serves public confidence and makes with federal law and regulations. in court, and taking enforcement available a wide variety of financial Besides overseeing thrift institu­ actions against savings institu­ services in a competitive market­ tions, the OTS also regulates, exam­ tions that violate laws or regula­ place. The OCC serves this interest ines, and supervises holding com­ tions. This office also processes by maintaining and promoting a panies that own thrift institutions corporate filings required by the system of bank supervision and and controls their acquisition of Securities Exchange Act of 1934. regulation that accomplishes the thrift institutions. following: • Congressional Affairs interacts The OTS is headed by a Director with members of the Congress, • Promotes safety and soundness appointed by the President and congressional staff members, by requiring that national banks confirmed by the Senate to serve a and committee members on be­ adhere to sound management five-year term. The OTS Director half of the OTS as well as execu­ principles and comply with the also serves on the boards of the tive-level personnel at other fed­ law. FDIC and the RTC and is also a di­ eral agencies to accomplish the • Encourages banks to satisfy cus­ rector of the Neighborhood Rein­ legislative objectives of the tomer and community needs vestment Corporation. agency. This division dissemi-

25 nates information to the Con­ directives, objectives, and ac­ documented actions of the OTS gress pertaining to supervisory, tions of the agency by establish­ and its predecessor, the Federal regulatory, and enforcement ac­ ing and maintaining effective li­ Home Loan Bank Board; re­ tivities and policies of the OTS aisons with the media, the sponds to Freedom of Informa­ and manages congressional-liai­ general public, the thrift indus­ tion Act requests; and maintains son programs. try, all government agencies, and a public reference room for other key constituencies. This di­ viewing securities filings and • Public Affairs oversees the re­ vision provides a full range of other public documents. lease of information concerning audiovisual services, including OTS regulations, policies, and creation of original designs for The OTS is a nonappropriated key developments within the agency publications, graphics, agency and thus uses no tax money agency. It convenes press confer­ desktop publishing, and editorial to fund its operations. Its expenses ences and distributes news re­ and production assistance. The are met by fees and assessments on leases to the public. It communi­ division also maintains an the thrift institutions it regulates. cates and explains policy archive of business records and

i

. I

26 ASSETS, LIABILITIES, AND NET WORTH of U.S. Commercial Banks and Thrift Institutions as of June 30, 19931 Billions of dollars

u.s. SAIF-Insured Branches Institutions and U.S. Commercial Banks2 Agencies Savings and Loan Credit of Associations Unions3 Foreign BIF- State Banks Insured State Non- Savings Federal State Savings Federal State Item Total National Member Member Banks Charter Charter Banks Charter Charter

Total assets 5,492 2,008 688 850 698 254 155 93 476 169 101

Total loans and lease receivables (net) 3,202 1,195 343 499 295 165 120 70 373 89 53 Loans secured by real estate4 1,664 501 121 259 50 154 117 67 345 31 19 Consumer loans5 520 229 50 108 7 3 3 28 58 34 Commercial and industrial loans 713 337 98 100 165 5 1 1 4 1 1 All other loans and lease receivables6 368 160 84 43 80 1 t t t LESS: Allowance for possible loan and lease losses 63 32 10 11 2 1 1 4 1 Federal funds sold and securities purchased under agreements to resell 199 91 22 31 42 5 1 2 3 2 Cash and due from depository institutions7 427 160 55 52 134 11 1 1 7 4 2 Securities and other obligations8 1,112 395 136 226 85 63 22 14 59 70 42 U.S. government obligations9 804 339 111 187 49 40 8 5 17 30 18 Obligations of state and local governments10 76 32 13 28 * 3 * t t Other secmities 232 24 12 11 36 20 14 9 42 40 24 Other assets11 552 167 132 42 142 10 11 6 34 5 3

Total liabilities 5,117 1,853 641 774 698 234 143 86 442 154 92

Total deposits and shares12 3,994 1,524 450 688 355 211 114 75 335 151 91 Federal funds purchased and securities sold under agreements to repurchase 366 155 62 41 75 7 6 2 16 2 Other borrowings13 435 112 76 34 112 14 20 7 60 Other liabilities14 322 62 53 11 156 2 3 2 31 1 1 Networth15 373 155 47 76 * 20 12 7 34 14 8

Memorandtun: Number of institutions reporting 26,338 3,442 969 6,760 583 410 501 473 765 7,804 4,631

Symbols Appearing in Tables their foreign branches, foreign subsidiar- 6. Loans to financial instituions, loans for * =Less than $500 million ies, branches in Puerto Rico and U.S. ter- purchasing or carrying securities, loans to t =Not available separately ritories and possessions, and FDIC-in- finance agricultural production and other t =Not applicable sured banks in Puerto Rico and U.S. loans to farmers (except loans secured by territories and possessions. Excludes bank real estate), loans to states and political holding companies. subdivisions and public authorities, and Footnotes to Tables 3. The credit union data are for federally in- miscellaneous types of loans. 1. The tables cover institutions, including sured credit unions only. 7. Vault cash, cash items in process of col- those in Puerto Rico and U.S. territories 4. Loans secured by residential property, lection, and balances with U.S. and for- and possessions, insured by the FDIC or commercial property, farmland (includ- eign banks and other depository institu- NCUSIF. All branches and agencies of ing improvements), and unimproved tions, including demand and time foreign banks in the United States, but ex- land, and construction loans secured by deposits and certificates of deposit for all eluding any in Puerto Rico and U.S. terri- real estate. For SAIF-insured institutions, categories of institutions. SAIF-insured tories and possessions, are included also includes mortgage-backed securities. institutions data are for cash and demand whether or not insured. The tables ex- 5. Loans, except those secured by real estate, deposits only; time deposits are included elude Edge Act and Agreement Corpora- in "Other securities." to individuals for household, family, and tions that are not subsidiaries of U.S. other personal expenditures, including 8. Government and corporate securities, in- commercial banks. both installment and single-payment eluding mortgage-backed securities and :; 2. Reflects the fully consolidated statements loans. Net of unearned income on install- of FDIC-insured U.S. banks-including mentloans. Notes continue on the next page

27 INCOME AND EXPENSES of U.S. Commercial Banks and Thrift Institutions for the Twelve Months Ending June 30, 19931 Billions of dollars

SAIF-Insured Institutions u.s. U.S. Commercial Banks2 Branches Savings and Loan Credit and Associations Unions3 Agencies BIF- State of Insured State Non- Foreign Savings Federal State Savings Federal State Item Total National Member Member Banks16 Banks Charter Charter Banks Charter Charter

Operating income 401 184 57 68 10 13 8 40 13 8 Interest and fees on loans 249 104 27 46 7 11 7 32 9 6 Other interest and dividend income 73 38 13 11 2 1 1 3 2 2 All other operating income 78 42 17 11 1 1 * 5 1 Operating expenses 335 154 47 55 8 11 7 36 11 6 Salaries and benefits 67 32 11 13 1 1 1 5 2 1 Interest on deposits and shares 121 50 14 20 4 5 4 16 5 3 Interest on other borrowed money 33 17 5 3 1 2 1 4 Provision for loan and lease losses 32 15 6 6 1 * 3 1 All other operating expenses 80 40 11 13 1 2 1 8 2 2

Net operating income 66 30 10 13 2 2 1 4 2 2

Securities gains and losses * * * * * * *

Income taxes 20 9 3 4 1 1 1 :j: :j:

Net income 46 21 7 9 1 1 1 3 2 1

Memorandum: Number of institutions reporting 25,755 3,442 969 6,760 410 501 473 765 7,804 4,631

obligations of states and political subdivi­ counts, and miscellaneous assets. For 13. Interest-bearing demand notes issued to sions and of U.S. government agencies U.S. branches and agencies of foreign the U.S. Treasury, borrowing from Fed­ and corporations. For SAIF-insured insti­ banks, also includes net due from head eral Reserve Banks and Federal Home tutions, also includes time deposits and office and other related institutions. For Loan Banks, subordinated debt, limited­ excludes mortgage-backed securities. SAIF-insured institutions, also includes life preferred stock, and other equity investment in service corporation nondepositborrowing. 9. U.S. Treasury securities and securities and subsidiaries. obligations of U.S. government agencies 14. Depository institutions' own mortgage borrowing, liability for capitalized leases, and corporations. 12. Demand, savings, and time deposits, in­ liability on acceptances executed, various cluding certificates of deposit at commer­ 10. Securities issued by states and political accrual accounts, and miscellaneous li­ cial banks, U.S. branches and agencies of subdivisions and public authorities, ex­ abilities. For U.S. branches and agencies foreign banks, and savings banks; credit cept for savings and loan associations and of foreign banks, also includes net due to balances at U.S. agencies of foreigr,t banks; U.S. branches and agencies of foreign head office and other related institutions. banks that do not report these securities and share balances at savings and loan separately. Loans to states and political associations and credit unions, including 15. Capital stock, surplus, capital reserves, subdivisions and public authorities are certificates of deposit, NOW accounts, and undivided profit. included in "All other loans and lease and share draft accounts. For U.S. com­ 16. U.S. branches and agencies of foreign receivables." mercial banks, includes deposits in for­ banks are not required to file reports of eign offices, branches in U.S. territories income. 11. Customers' liabilities on acceptances, real and possessions, and Edge Act and property owned, various accrual ac- Agreement Corporation Subsidiaries. NOTE: Because of rounding, details may not sum to totals. 28 APPENDIX A: RELEVANT STATUTES

Title X of Public Law 95-630 (3) the term "financial institu­ Expenses of the Council tion" means a commercial bank, a Title X of Public Law 95-630, which savings bank, a trust company, a Sec. 1005. One-fifth of the costs establishes the Federal Financial In­ savings and loan association, a and expenses of the Council, in­ stitutions Examination Council, building and loan association, a cluding the salaries of its employ­ reads, as amended, as follows: homestead association, a coop­ ees, shall be paid by each of the fed­ erative bank, or a credit union. eral financial institutions regulatory Sec. 1001. This title may be cited agencies. Annual assessments for as the "Federal Financial Institu­ such share shall be levied by the tions Examination Council Act of Council based upon its projected 1978." Establishment of the Council budget for the year, and additional assessments may be made during Sec. 1004. (a) There is established the year if necessary. Purpose the Financial Institutions Examina­ Sec. 1002. It is the purpose of this tion Council which shall consist title to establish a Financial Institu­ of- Functions of the Council tions Examination Council which (1) the Comptroller of the shall prescribe uniform principles Currency, Sec. 1006. (a) The Council shall es­ and standards for the Federal ex­ tablish uniform principles and stan­ (2) the Chairman of the Board amination of financial institutions dards and report forms for the ex­ by the Office of the Comptroller of of Directors of the Federal De­ posit Insurance Corporation, amination of financial institutions the Currency, the Federal Deposit which shall be applied by the fed­ Insurance Corporation, the Board (3) a Governor of the Board of eral financial institutions regulatory of Governors of the Federal Reserve Governors of the Federal Reserve agencies. System, the Office of Thrift Super­ System designated by the Chair­ vision and the National Credit man of the Board, (b )(1) The Council shall make Union Administration, and make recommendations for uniformity recommendations to promote uni­ (4) the Director of the Office of in other supervisory matters, formity in the supervision of these Thrift Supervision, and such as, but not limited to, classi­ financial institutions. The Council's (5) the Chairman of the Na­ fying loans subject to country risk, identifying financial institu­ actions shall be designed to pro­ tional Credit Union Administra­ tions in need of special supervi­ mote consistency in such examina­ tion Board. tions to insure progressive and sory attention, and evaluating the vigilant supervision. (b) The members of the Council soundness of large loans that are shall select the first chairman of the shared by two or more financial Council. Thereafter the chairman­ institutions. In addition, the Definitions ship shall rotate among the mem­ Council shall make recommenda­ tions regarding the adequacy of Sec. 1003. As used in this title- bers of the Council. supervisory tools for determining (1) the term "Federal financial (c) The term of the Chairman of the impact of holding company institutions regulatory agencies" the Council shall be two years. operations on the financial insti­ means the Office of the Comp­ (d) The members of the Council tutions within the holding com­ troller of the Currency, the Board may, from time to time, designate pany and shall consider the abil­ of Governors of the Federal other officers or employees of their ity of supervisory agencies to Reserve System, the Federal respective agencies to carry out discover possible fraud or ques­ Deposit Insurance Corporation, their duties on the Council. tionable and illegal payments and the Office of Thrift Supervision, practices which might occur in and the National Credit Union (e) Each member of the Council the operation of financial institu­ Administration; shall serve without additional com­ tions or their holding companies. pensation but shall be entitled to (2) the term "Council" means reasonable expenses incurred in (2) When a recommendation of the Financial Institutions Exami­ carrying out his official duties as the Council is found unacceptable nation Council"; and such a member. by one or more of the applicable

29 federal financial institutions regu­ a reasonable allowance for neces­ agencies, including reports of ex­ latory agencies, the agency or sary expenses incurred in attending amination of financial institutions agencies shall submit to the meetings. or their holding companies from Council, within a time period whatever source, together with specified by the Council, a writ­ workpapers and correspondence ten statement of the reasons the Administration files related to such reports, recommendation is unacceptable. whether or not a part of the reports, Sec. 1008. (a) The Chairman of the and all without any deletions. (c) The Council shall develop uni- Council is authorized to carry out form reporting systems for feder­ and to delegate the authority to ally supervised financial institu­ carry out the internal administra­ Risk Management Training tions, their holding companies, and tion of the Council, including the non-financial institution subsidiar­ appointment and supervision of Sec. 1009A (a) Seminars. The ies of such institutions or holding employees and the distribution of Council shall develop and adminis­ companies. The authority to de­ business among members, employ­ ter training seminars in risk man­ velop uniform reporting systems ees, and administrative units. agement for its employees and the shall not restrict or amend the re­ employees of insured financial in­ quirements of section 12(i) of the (b) In addition to any other au­ stitutions. Securities Exchange Act of 1934. thority conferred upon it by this title, in carrying out its functions (b) Study of Risk Management (d) The Council shall conduct under this title, the Council may schools for examiners and assistant Training Program. Not later than utilize, with their consent and to end of the one-year period begin­ examiners employed by the federal the extent practical, the personnel, financial institutions regulatory ning on the date of the enactment of services, and facilities of the federal the Financial Institutions Reform, agencies. Such schools shall be financial institutions regulatory Recovery, and Enforcement Act of open to enrollment by employees of agencies, Federal Reserve Banks, State financial institutions supervi­ 1989, the Council shall- and Federal Home Loan Banks, sory agencies and employees of the with or without reimbursement (1) conduct a study on the feasi­ Federal Housing Finance Board un­ therefor. bility and appropriateness of es­ der condition specified by the tablishing a formalized risk man­ Council. (c) In addition, the Council may- agement training program (e) Nothing in this title shall be (1) subject to the provisions of designed to lead to the certifica­ construed to limit or discourage Title 5, United States Code, relat­ tion of Risk Management Ana­ federal regulatory agency research ing to the competitive service, lysts; and and development of new financial classification, and General Sched­ (2) report to the Congress the institutions supervisory methods ule pay rates, appoint and fix the results of such study. and tools, nor to preclude the field compensation of such officers testing of any innovation devised and employees as are necessary by any federal regulatory agency. to carry out the provisions of this title, and to prescribe the author­ Audit by the Comptroller (f) Not later than April1 of each ity and duties of such officers and General year, the Council shall prepare an employees; and annual report covering its activities Sec. 1010. Section 117 of the Ac­ during the preceding year. (2) obtain the services of such counting and Auditing Act of 1950, experts and consultants as are as amended by the Federal Banking necessary to carry out the provi­ Agency Audit Act (Public Law 95-320), is further amended by: State Liaison sions of the title. (1) redesignating clauses (A), Sec. 1007. To encourage the appli­ (B), and (C) of subsection (e)(1) as cation of uniform examination prin­ Access to Information by the (B), (C), and (D), respectively, ciples and standards by state and Council and inserting in subsection (e)(1) federal supervisory agencies, the the clause "(A) of the Financial Council shall establish a liaison Sec. 1009. For the purpose of car­ Institutions Examination Coun­ committee composed of five repre­ rying out this title, the Council shall cil;" immediately following "au­ sentatives of state agencies which have access to all books, accounts, dits"; and supervise financial institutions records, reports, files, memoranda, which shall meet at least twice a papers, things, and property be­ (2) striking out in subsection year with the Council. Members of longing to or in use by federal fi­ (e)(2) "and (C)" and inserting in the liaison committee shall receive nancial institutions regulatory lieu thereof "(C), and (D)".

I 30 I Sec. lOll. Establishment of Ap­ tate access to data required to be the Council to enable it to carry out praisal Subcommittee disclosed under this section. Such the provisions of subsection (a). system shall include arrangements There shall be within the Council a for a central depository of data in (c)The data and tables required subcommittee to be known as the each primary metropolitan statisti­ pursuant to subsection (a) shall be "Appraisal Subcommittee," which cal area, metropolitan statistical made available to the public by no shall consist of the designees of the area, or consolidated metropolitan later than December 31 of the year heads of the federal financial insti­ statistical area that is not composed following the calendar year on tutions regulatory agencies. Each of designated primary metropolitan which the data are based. such designee shall be a person statistical areas. Disclosure state­ who has demonstrated knowledge ments shall be made available to the and competence concerning the ap­ public for inspection and copying at praisal profession. Excerpts from Title XI of Public such central depository of data for LawlOl-73 all depository institutions which are required to disclose information Sec. 1103. Functions of Appraisal Excerpts from Title III of under this section (or which are ex­ Subcommittee. Public Law 94-200 empted pursuant to section 306(b)) (a) In General. The Appraisal Following are those sections of title and which have a home office or Subcommittee shall- III of Public Law 94-200, the Home branch office within such primary Mortgage Disclosure Act, as amended, metropolitan statistical area, metro­ (1) monitor the requirements es­ that affect the Federal Financial In­ politan statistical area, or consoli­ tablished by states for the certifi­ stitutions Examination Council. dated metropolitan statistical area cation and licensing of individu­ that is not composed of designated als who are qualified to perform primary metropolitan statistical appraisals in connection with Findings and Purpose areas. federally regulated transactions, including a code of professional Sec.302 (a) The Congress finds responsibility; that some depository institutions have sometimes contributed to the Compilation of Aggregate Data (2) monitor the requirements decline of certain geographic areas established by the federal finan­ Sec. 310 (a) Beginning with data by their failure pursuant to their cial institutions regulatory agen­ for calendar year 1980, the Federal chartering responsibilities to pro­ cies and the Resolution Trust Financial Institutions Examination vide adequate home financing to Corporation with respect to- Council shall compile each year, for qualified applicants on reasonable each primary metropolitan statisti­ (A) appraisal standards for terms and conditions. cal area, metropolitan statistical federally related transactions (b) The purpose of this title is to area, or consolidated metropolitan under their jurisdiction, and provide the citizens and public offi­ statistical area that is not composed (B) determinations as to cials of the United States with suf­ of designated primary metropolitan which federally related transac­ ficient information to enable them statistical areas, aggregate data by tions under their jurisdiction to determine whether depository census tract for all depository insti­ require the services of a state institutions are filling their obliga­ tutions which are required to dis­ certified appraiser and which tions to serve the housing needs of close under section 304 or which are require the services of a state li­ the communities and neighbor­ exempt pursuant to section 306(b). censed appraiser. hoods in which they are located The Council shall also produce and to assist public officials in their tables indicating, for each primary (3) maintain a national registry determination of the distribution of metropolitan statistical area, metro­ of state certified and licensed ap­ public sector investments in a man­ politan statistical area, or consoli­ praisers who are eligible to per­ ner designed to improve the pri­ dated metropolitan statistical area form appraisals in federally re­ vate investment environment. that is not composed of designated lated transactions; and primary metropolitan statistical ar­ eas, aggregate lending patterns for (4) transmit an annual report Maintenance of Records and various categories of census tracts to the Congress not later than Public Disclosure grouped according to location, age January 31 of each year which of housing stock, income level and describes the manner in which Sec.304 (f) The Federal Financial racial characteristics. each function assigned to the Institutions Examination Council, Appraisal Subcommittee has been in consultation with the Secretary, (b) The Board shall provide staff carried out during the preceding shall implement a system to facili- and data processing resources to year.

31 (b) Monitoring and Reviewing Foundation. The Appraisal Subcom­ mittee shall monitor and review the practices, procedures, activities, and organizational structure of the Appraisal Foundation. Sec. ll04. Chairperson of Ap­ praisal Subcommittee: Term of Chairperson; meetings. (a) Chairperson. The Council shall select the Chairperson of the subcommittee. The term of the Chairperson shall be two years.

32 APPENDIX B: 1993 AUDIT REPORT

To the Federal Financial Institutions Examination Council

In our opinion, the accompanying ments in accordance with generally that our audit provides a reason­ balance sheet and the related state­ accepted auditing standards and able basis for the opinion expressed ments of revenues and expenses Government Auditing Standards is­ above. The financial statements of and fund balance and of cash flows sued by the Comptroller General the Federal Financial Institutions present fairly, in all material re­ of the United States. These stan­ Examination Council for the year spects, the financial position of dards require that we plan and ended December 31, 1992, were the Federal Financial Institutions perform the audit to obtain reason­ audited by other independent Examination Council at December able assurance about whether the accountants whose report dated 31, 1993, and the results of its op­ financial statements are free of February 12, 1993, expressed an erations and its cash flows for the material misstatement. An audit unqualified opinion on those year in conformity with generally includes examining, on a test basis, statements. accepted accounting principles. evidence supporting the amounts These financial statements are the and disclo- sures in the financial responsibility of the Council's man­ statements, assessing the account­ agement; our responsibility is to ing principles used and significant express an opinion on these state­ estimates made by management, Price Waterhouse ments based on our audit. We and evaluating the overall financial Washington, D.C. conducted our audit of these state- statement presentation. We believe February 25, 1994

33 FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Balance Sheet as of December 31, 1993 and 1992

ASSETS 1993 1992

CURRENT ASSETS Cash, held by Board of Governors of the Federal Reserve System $1,098,600 $ 38,966 Accounts receivable from member organizations 322,851 551,278 Other accounts receivable 122,168 292,015 Total current assets 1,543,619 882,259 FURNITURE AND EQUIPMENT Furniture and equipment, at cost 203,776 190,500 Less accumulated depreciation 124,708 103,278 Net furniture and equipment 79,068 --87,222 LEASEHOLD IMPROVEMENTS, net of amortization 75,567 83,848 Total assets $1,698,254 $1,053,329

LIABILITIES AND FUND BALANCE CURRENT LIABILITIES Accounts payable to member organizations $ 621,692 $ 397,797 Other accounts payable and accrued liabilities 38,235 103,297 Accrued annual leave 43,187 51,904 Total current liabilities 703,114 552,998 DEFERRED RENT (Note 5) 154,074 132,914 FUND BALANCE 841,066 367,417 Total liabilities and fund balance $1,698,254 $ 1,053,329

The accompanying notes are an integral part of these statements.

34 FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Statement of Revenues and Expenses and Fund Balance for the Years Ended December 31, 1993 and 1992

1993 1992

REVENUES Assessments to member organizations $ 1,856,000 $ 1,621,500 Tuition 1,214,216 1,183,541 Other revenue (Note 4) 1,737,469 1,377,949 Total revenues 4,807,685 4,182,990 EXPENSES Salaries and related benefits 1,142,748 1,110,798 Data processing 1,828,609 1,347,345 Rental of office space 608,080 549,479 Professional fees 194,603 139,959 Travel 140,672 106,147 Printing 78,280 103,588 Rental and maintenance of office equipment 67,086 66,871 Office and other supplies 51,829 43,961 Administrative fees 44,800 43,000 Postage 36,847 34,528 Depreciation 35,404 24,788 Books and subscriptions 21,150 46,513 Telephone 19,207 20,863 Miscellaneous 64,721 92,525 Total expenses 4,334,036 3,730,365 REVENUES OVER EXPENSES 473,649 452,625 FUND BALANCE, Beginning of year 367,417 (85,208) FUND BALANCE, End of year $ 841,066 $ 367,417

The accompanying notes are an integral part of these statements.

Notes to Financial Statements of the heads of those agencies which comprise (3) Transactions with Member Organizations the Council and the designee of the head of the The five member organizations are each as­ (1) Organization and Purpose Department of Housing and Urban Develop­ ment. Although it is a subcommittee of the sessed one-fifth of the expected cash needs The Federal Financial Institutions Examination Council, the Appraisal Subcommittee maintains based on the annual operating budget. Each Council (the "Council") was established under separate financial records and administrative member organization was assessed $371,200 in title X of the Financial Institutions Regulatory processes. The Council's financial statements do 1993 and $324,300 in 1992. not include financial data for the Appraisal Sub­ and Interest Rate Control Act of 1978. The pur­ The Board of Governors of the Federal Reserve committee other than that presented in note 4. pose of the Council is to prescribe uniform prin­ System provided administrative support ser­ ciples and standards for the federal examination (2) Significant Accounting Policies vices to the Council at a cost of $44,800 for 1993 of financial institutions and to make recommen­ and $43,000 for 1992. dations to promote uniformity in the supervi­ Revenues and Expenses-Assessments made on sion of these financial institutions. The five member organizations for operating expenses Member organizations provide office space, agencies which are represented on the Council, and additions to property are calculated based data processing, and printing services to the referred to hereafter as member organizations, on expected cash needs. Assessments, other rev­ Council. The Council paid member organiza­ are as follows: enues, and operating expenses are recorded on tions $2,073,900 in 1993 and $1,606,100 in 1992 for these items. Board of Governors of the Federal Reserve System the accrual basis of accounting. Federal Deposit Insurance Corporation Furniture and Equipment-Furniture and equip­ The Council coordinates the production and dis­ National Credit Union Administration ment is recorded at cost less accumulated depre­ tribution of the Uniform Bank Performance Re­ Office of the Comptroller of the Currency ciation. Depreciation is calculated on a straight­ ports (UBPR) through the Federal Deposit Insur­ Office of Thrift Supervision line basis over the estimated useful lives of the ance Corporation (FDIC). The Council is reimbursed for the direct cost of the operating The Appraisal Subcommittee of the Council was assets, which range from four to ten years. Upon the sale or other disposition of a depreciable as­ expenses it incurs for this project. created pursuant to Public Law 101-73, title XI set, the cost and related accumulated deprecia­ of the Financial Institutions Reform, Recovery, Council employees are paid through the payroll and Enforcement Act of 1989. The functions of tion are removed from the accounts and any gain or loss is recognized. systems of member organizations. Salaries and the Appraisal Subcommittee are related to the fringe benefits, including retirement benefit plan certification and licensing of individuals who Leasehold Improvements-Leasehold improve­ perform appraisals in connection with federally ments are amortized on a straight-line basis over related real estate transactions. Members of the the shorter of the term of the related lease or the Appraisal Subcommittee consist of the designees estimated useful life of the improvements. Notes continue on the following page.

35 FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Statement of Cash Flows Increase (Decrease) in Cash for the Years Ended December 31, 1993 and 1992

1993 1992

CASH FLOWS FROM OPERATING ACTIVITIES Revenues over (under) expenses $ 473,649 $ 452,625 Adjustments to reconcile revenues over (under) expenses to net cash provided by operating activities: Depreciation 35,404 24,788 Decrease (increase) in accounts receivable and prepaid expenses 398,274 (482,023) Increase (decrease) in accounts payable and accrued liabilities 158,833 (93,766) (Decrease) in accrued annual leave (8,717) (12,687) Increase in deferred rent 21,160 132,914 Net cash provided by operating activities 1,078,603 21,851 CASHFLOWSFROMINVESTINGACTIVITIES Proceeds from disposals of furniture and equipment 6,470 Capital expenditures {18,969) {154,862) Net cash used in investing activities (18,969) (148,392) NET INCREASE (DECREASE) IN CASH 1,059,634 (126,541) CASH BALANCE, Beginning of year 38,966 165,507 CASH BALANCE, End of year $1,098,600 $ 38,966

The accompanying notes are an integral part of these statements.

Notes to Financial Statements-continued The Council produces and distributes reports ciples, must be considered in determining the under the Home Mortgage Disclosure Act annual rent expense to be recognized by the (HMDA). The Council received $299,294 in Council. The deferred rent represents the differ­ contributions, disbursed on behalf of the Coun­ 1993 and $226,136 in 1992 from the Department ence between the actual lease payments and the cil are reimbursed in full to these organizations. of Housing and Urban Development (HUD) to rent expense recognized. The Council does not have any postretirement fund HUD's participation in the HMDA project. benefit liabilities due to the fact that Council em­ The balance of the HMDA revenue for 1993 and (6) Commitments ployees are included in the plans of the member 1992 was received from the member agencies. organizations. The Council has entered into operating leases to The Council coordinated and provided certain secure office and classroom space for periods Member organizations are not reimbursed for administrative support to the UBPR project. ranging from two to six years. Minimum future the costs of personnel who serve as Council The Council received $217,935 in 1993 and rental commitments under those operating members and on the various task forces and $202,619 in 1992 for operating expenses in­ leases having an initial or remaining committees of the Council. The value of these curred in support of the UBPR project. noncancelable lease term in excess of one year at contributed services has not been included in December 31, 1993, are as follows: the accompanying financial statements. The Council provided space and certain admin­ istrative support to the Appraisal Subcommit­ 1994 $ 601,160 (4) Other Revenue tee. The Council received $179,548 in 1993 and 1995 489,336 $159,825 in 1992 from the Appraisal Subcom­ 1996 456,039 mittee for those services. 1997 429,627 1993 1992 1998 429,627 The Council provided space to the Board of Home Mortgage $2,405,789 Disclosure Act $1,117,980 $ 822,850 Governors of the Federal Reserve System Uniform Bank (Board). The Council received $124,542 in 1993 and $91,957 in 1992 in rent from the Board. Performance Report 217,935 202,619 Rental expenses under these operating leases Appraisal Subcommittee 179,548 159,825 (5) Deferred Rent were $593,300 and $506,100 in 1993 and 1992, Rental 124,542 91,957 respectively. Sale of HMDA Data 86,122 92,450 During 1992 the Council entered into a lease for Miscellaneous 11,342 8,248 office space. This lease contains rent abatements $1,737,469 $1,377,949 and scheduled rent increases which, in accor­ dance with generally accepted accounting prin-

36 APPENDIX C: MAPS OF AGENCY REGIONS AND DISTRICTS

38 Board of Governors of the Federal Reserve System 39 Federal Deposit Insurance Corporation 40 National Credit Union Administration 41 Office of the Comptroller of the Currency 42 Office of Thrift Supervision THE FEDERAL RESERVE SYSTEM DISTRICTS

~ ~~HAWAII

12

38 FEDERAL DEPOSIT INSURANCE CORPORATION REGIONS (SUPERVISION)

PUERTO RICO VIRGIN CJ ISLANDS ~~HAWAII

~

San Francisco Region New York Region

39 NATIONAL CREDIT UNION ADMINISTRATION

AMERICAN PUERTO RICO VIRGIN SAMOA ISLANDS ~~HAWAII c;:>c.~ "CP'

1

40 COMPTROLLER OF THE CURRENCY DISTRICT ORGANIZATION

PUERTO RICO VIRGIN .1::::::::> ISLANDS Western ~>HAWA!l

Northeastern

41 OB8CEOF~SUPERVffiON

C:::> PUERTO RICO VIRGIN West ISLANDS ~~HAWAII c::>~-.

Southeast

42