Federal Financial Institutions Examination Council

A N N U A L R E P O R T 2015

Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, State Liaison Committee ii MEMBERS OF THE COUNCIL

Richard Cordray, Director, Consumer Financial Protection Bureau; Debbie Matz, Chairman, National Credit Union Administration; Daniel K. Tarullo, FFIEC Chairman, Member, Board of Governors of the Federal Reserve System; Martin J. Gruenberg, FFIEC Vice Chairman, Chairman, Federal Deposit Insurance Corporation; Thomas J. Curry, Comptroller of the Currency, Office of the Comptroller of the Currency; David J. Cotney, Commissioner of Banks, Commonwealth of Massachusetts.

iii iv LETTER OF TRANSMITTAL

Federal Financial Institutions Examination Council Arlington, VA 22226 March 31, 2016

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

Pursuant to the provisions of section 1006(f) of the Financial Institutions Regulatory and Interest Rate Control Act of 1978 (12 U.S.C. § 3305), I am pleased to submit the 2015 Annual Report of the Federal Financial Institutions Examination Council.

Respectfully,

Daniel K. Tarullo Chairman

v vi TABLE OF CONTENTS

ix Chart of Selected Abbreviations xi Message from the Chairman

1 Overview of the Federal Financial Institutions Examination Council Operations

5 Record of Council Activities

7 State Liaison Committee Report

9 Activities of the Interagency Staff Task Forces

25 The Federal Financial Institution Regulatory Agencies and their Supervised Institutions

34 Assets, Liabilities, and Net Worth of U.S. Commercial Banks, Savings Institutions, and Credit Unions as of December 31, 2015

35 Income and Expenses of U.S. Commercial Banks, Savings Institutions, and Credit Unions for Twelve Months Ending December 31, 2015

37 Appendix A: Relevant Statutes

43 Appendix B: 2015 Audit Report

57 Appendix C: Maps of Agency Regions and Districts

63 Appendix D: Organizational Listing of Personnel

vii viii CHART OF SELECTED ABBREVIATIONS

ACSSS...... American Council of State Savings FinCEN...... Financial Crimes Enforcement Network Supervisors FIRIRCA...... Financial Institutions Regulatory and ALG...... Agency Liaison Group Interest Rate Control Act of 1978 AML...... Anti-Money Laundering FIRREA...... Financial Institutions Reform, Recovery, ASC ...... Appraisal Subcommittee and Enforcement Act of 1989 Assessment...... Cybersecurity Assessment Tool FRB...... Board of Governors of the Federal BCP...... Business Continuity Planning Reserve System BHC...... Bank Holding Company FSOC...... Financial Stability Oversight Council BSA...... Bank Secrecy Act HMDA...... Home Mortgage Disclosure Act of 1975 Call Report...... Consolidated Reports of Condition and IBA...... International Banking Act of 1978 Income IRR...... Interest Rate Risk CCIWG...... Cybersecurity and Critical Infrastructure IT...... Information Technology Working Group IT Handbook...... Information Technology Examination CDR...... Central Data Repository Handbook CFPB...... Consumer Financial Protection Bureau LAG...... Legal Advisory Group Council...... Federal Financial Institutions MOU...... Memorandum of Understanding Examination Council NASCUS ...... National Association of State Credit CRA...... Community Reinvestment Act of 1977 Union Supervisors CSBS...... Conference of State Bank Supervisors NCUA...... National Credit Union Administration DIF...... Deposit Insurance Fund NCUSIF...... National Credit Union Share Insurance Dodd-Frank Act....Dodd-Frank Wall Street Reform and Fund Consumer Protection Act of 2010 NIST...... National Institute of Standards and EEO...... Examiner Education Office Technology EGRPRA...... Economic Growth and Regulatory OCC...... Office of the Comptroller of the Paperwork Reduction Act of 1996 Currency FDIC...... Federal Deposit Insurance Corporation OMB...... Office of Management and Budget FDICIA...... Federal Deposit Insurance Corporation PRA...... Paperwork Reduction Act of 1995 Improvement Act of 1991 RESPA...... Real Estate Settlement Procedures Act of FFIEC...... Federal Financial Institutions 1974 Examination Council SDRWG...... Structure Data Reconciliation Working FFIEC 002...... Report of Assets and Liabilities of U.S. Group Branches and Agencies of Foreign Banks SIFI...... Systemically Important Financial FFIEC 002S...... Report of Assets and Liabilities of a Institution Non-U.S. Branch that is Managed or SLC...... State Liaison Committee Controlled by a U.S. Branch or Agency of SLHC...... Savings and Loan Holding Company a Foreign (Non-U.S.) Bank SLR...... Supplementary Leverage Ratio FFIEC 019...... Country Exposure Report for U.S. SOD...... Summary of Deposits Branches and Agencies of Foreign Banks TFCC...... Task Force on Consumer Compliance FFIEC 030...... Foreign Branch Report of Condition TFEE...... Task Force on Examiner Education FFIEC 030S...... Abbreviated Foreign Branch Report of TFIS...... Task Force on Information Sharing Condition TFOR...... Task Force on Reports FFIEC 101...... Regulatory Capital Reporting for TFOS...... Task Force on Supervision Institutions Subject to the Advanced TFSS...... Task Force on Surveillance Systems Capital Adequacy Framework TILA...... Truth in Lending Act of 1968 FFIEC 102...... Market Risk Regulatory Report for TSP...... Technology Service Provider Institutions Subject to the Market Risk TWG...... Technology Working Group Capital Rule UBPR...... Uniform Bank Performance Report FHC...... Financial Holding Company

ix x MESSAGE FROM THE CHAIRMAN

their awareness of cybersecurity 2015. These meetings were risks they may face. supplemented by published notices soliciting comments on The Council’s Cybersecurity specific categories of regulations. and Critical Infrastructure To me, a productive EGRPRA Working Group (CCIWG) exercise will be one that results continued to promote in changes in regulation and coordination across the supervisory practices that, federal and state financial in turn, yield a significant institution regulatory agencies reduction in regulatory burden, on critical infrastructure and especially for smaller firms, cybersecurity issues. While while still promoting the each FFIEC member agency is safety and soundness of all responsible for the execution insured depository institutions, of its supervision program to and protecting both the address cybersecurity risk, Deposit Insurance Fund and the coordinated work that financial stability. The FFIEC occurs through the FFIEC is committed to ensuring that supports those activities by this end is achieved. The identifying gaps in the agencies’ agencies are now systematically FFIEC Chairman Daniel K. Tarullo examination procedures and analyzing and considering training in order to strengthen all comments that have been the oversight of cybersecurity received with the goal of As the new chairman of the readiness. prioritizing recommendations Federal Financial Institutions and acting as quickly as possible Examination Council (FFIEC or The Council has also continued to adopt them. Council), I am pleased to report its work on the second that the Council furthered its decennial interagency review As the following report mission of promoting unifor- of regulations mandated describes, the Council and its mity in the supervision and by the Economic Growth task forces and subcommittees consistency in the examination and Regulatory Paperwork have been engaged in many of financial institutions. Reduction Act of 1996 other important initiatives (EGRPRA). While the EGRPRA throughout 2015. One of the Council’s notable review aims to identify achievements this past year was outdated, unnecessary, or I appreciate the Council’s the issuance of a Cybersecurity unduly burdensome regulations accomplishments this past year Assessment Tool, an aid to as they apply to all insured and the work of the dedicated assist financial institutions depository institutions, the FFIEC staff, the constituent in identifying their risks and review is especially focused member agencies, and the State assessing their cybersecurity on the burden imposed on Liaison Committee to bring preparedness. The Council smaller depository institutions. about these accomplishments. developed this assessment In order to hear comments and We will continue to work tool in consultation with the suggestions from the public as together on an interagency basis intelligence community, law to how regulatory burden can to advance our common mission enforcement, and homeland be reduced, FFIEC members of promoting uniformity and security agencies and believes held five EGRPRA outreach consistency in the supervision of that it will help firms increase meetings over the course of financial institutions.

xi xii OVERVIEW OF THE FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL OPERATIONS

The Federal Financial Institutions Membership, Organization, of projects in the Council’s Examination Council (FFIEC and Administration of the functional areas, including but or Council) was established on Council not limited to researching future March 10, 1979, pursuant to title enhancements for reporting, X of the Financial Institutions Members of the Council examiner training products, and Regulatory and Interest Rate examiner guidance. The task Control Act of 1978 (FIRIRCA), By statute, the Council has six forces are each composed of six Public Law 95-630. The voting members. The most recent senior officials, one drawn from purpose of title X, cited as the revision to the membership each of the five federal member Federal Financial Institutions occurred in 2010 through a agencies and one drawn from the Examination Council Act of provision in the Dodd-Frank Wall SLC. Each is tasked with one of 1978, was to create a formal Street Reform and Consumer the following subject matters: interagency body empowered Protection Act (Dodd-Frank Act). to prescribe uniform principles, Thus, since 2011 the Council • Consumer Compliance standards, and report forms Members are: for the federal examination • Examiner Education of financial institutions by • a member of the Board of the constituent agencies, and Governors of the Federal • Information Sharing to make recommendations Reserve System (FRB), to promote uniformity in appointed by the Chairman of • Reports the supervision of financial the Board; institutions. The Council is • Supervision responsible for developing • the Chairman of the Federal uniform reporting systems for Deposit Insurance Corporation • Surveillance Systems federally supervised financial (FDIC); institutions, their holding The Council also has a Legal companies, and the nonfinancial • the Chairman of the National Advisory Group (LAG), institution subsidiaries of Credit Union Administration composed of the general or chief those institutions and holding (NCUA); counsel from each of the member companies. It conducts schools entities, to provide advice and for examiners employed by the • the Comptroller of the Currency other support on legal matters five federal member agencies of the Office of the Comptroller of interest to the Council. The represented on the Council and of the Currency (OCC); task forces and the LAG provide makes those schools available to research and develop analytical employees of state agencies that • the Director of the Consumer papers and proposals on the supervise financial institutions. Financial Protection Bureau issues that the Council addresses. (CFPB); and In addition, the Council has an To encourage the application of Agency Liaison Group (ALG), uniform examination principles • the Chairman of the State composed of senior officials and standards by the state and Liaison Committee (SLC). responsible for coordinating the federal supervisory authorities, FFIEC work of their respective the Council established, in Interagency Task Forces and members’ staff. accordance with the requirement Liaisons of FIRIRCA, the State Liaison Administration of the Council Committee (SLC). Six staff task forces effectively administer the full spectrum The Chairmanship of the Council

1 rotates among the federal the constituent agencies each the aggregation of annual HMDA members for two-year terms in designated personnel to study data, by census tract, for each the following order: OCC, FRB, title X, analyze the agencies' metropolitan statistical area. FDIC, CFPB, and NCUA. The responsibilities, and prepare Council holds regular meetings at recommendations for performing The Financial Institutions least twice a year. Other Council the required duties. The heads Reform, Recovery, and meetings may be convened of the constituent agencies, Enforcement Act of 1989 whenever called by the Chairman acting through the Interagency or four or more Council members. Coordinating Committee, then Most of the Council’s funds are established a task force composed In 1989, the Financial Institutions derived from assessments on its of representatives from each Reform, Recovery, and five federal member agencies. agency to develop the necessary Enforcement Act (FIRREA) Additionally, it receives tuition mechanism to establish the abolished the Bank Board and fees from non-FFIEC member Council. The task force prepared established the Office of Thrift agency attendees to cover some option papers and legal opinions Supervision (OTS). Accordingly, of the costs associated with its for the Council on organization the Director of the OTS assumed examiner education program. It structure, rules of operation, the Council seat previously held also receives funding from the funding, priorities, and other by the Bank Board representative. U.S. Department of Housing necessary matters pertinent to the and Urban Development for establishment of a functioning Title XI of FIRREA established collecting, processing, and Council. The Council organized the Appraisal Subcommittee reporting data under the Home and held its first meeting on (ASC) within the Council. The Mortgage Disclosure Act of 1975 March 16, 1979. At the first ASC’s mission statement is (HMDA). meeting of the Council, the “to provide federal oversight organizations were represented of State appraiser regulatory The FRB continued to provide by John G. Heimann, Comptroller programs and a monitoring budget and accounting services of the Currency of the OCC; Irvine framework for the Appraisal to the Council. The Council H. Sprague, Chairman of the Foundation and the Federal is supported by a small, full- FDIC; J. Charles Partee, Governor Financial Institutions Regulatory time administrative staff in of the FRB; Robert H. McKinney, Agencies in their roles to protect its operations office and in its Chairman of the Federal federal financial and public policy examiner education program, Home Loan Bank Board (Bank interests in real estate appraisals which are located at the FDIC's Board); and Lawrence Connell, utilized in federally related L. William Seidman Center Administrator of the NCUA. transactions.” The ASC consists in Arlington, Virginia. Each of seven individuals appointed Council staff is detailed (some by the heads of the five federal The Housing and Community permanently) from one of the regulatory agencies represented Development Act of 1980 five federal member agencies on the Council and the Federal represented on the Council. Housing Finance Agency and the The Council was given additional U.S. Department of Housing and statutory responsibilities by Urban Development. The ASC is A Brief Statutory History of section 340 of the Housing and largely autonomous and performs the Council Community Development Act of its duties independently of the 1980, Public Law 96-399. Among direct supervision and oversight The Financial Institutions these responsibilities are the of the Council. The Council’s Regulatory and Interest Rate implementation of a system to responsibilities with respect to the Control Act of 1978 facilitate public access to data ASC include (1) selection of the that depository institutions must chairman of the ASC, (2) approval Upon passage of FIRIRCA, disclose under the HMDA and of any adjustment of the amount

2 of the ASC’s annual registry fee the regulations prescribed by 2008, enacted as title V of the for appraisers that exceeds the the agencies to identify those Housing and Economic Recovery statutorily defined amount, (3) that are outdated or otherwise Act of 2008, established the approval of any determination by impose unnecessary regulatory responsibility for the federal the ASC to waive any certification requirements on insured banking agencies, through the or licensing requirement based depository institutions and Council and in conjunction with on a scarcity of appraisers in eliminate unnecessary regulations. the Farm Credit Administration, connection with federally related Although not required to, the to develop and maintain a transactions within a state, and (4) NCUA elects to participate in the system for registering employees approval of any proposal by the decennial review process. The of depository institutions and ASC to grant extensions to states CFPB is required to complete a certain of their subsidiaries’ loan to comply with new regulations review of each significant rule originators with the Nationwide governing establishment of five years after it takes effect, in a Mortgage Licensing System appraisal management company process separate from EGRPRA. and Registry. On July 21, 2011, registration and supervision pursuant to the Dodd-Frank Act, systems. the authority for rulemaking and The Financial Services authority to develop and maintain Regulatory Relief Act of 2006 the licensing system generally was The Economic Growth transferred to the CFPB. and Regulatory Paperwork Congress passed the Financial Reduction Act of 1996 Services Regulatory Relief Act of The Dodd-Frank Wall Street 2006 that provided for the election Reform and Consumer Additional responsibility was of a Chairman for the SLC from Protection Act of 2010 given to the Council by the among the five SLC members EGRPRA to submit reports to and for the addition of the SLC Congress on the regulatory Chairman as a voting member of In 2010, Congress enacted the reviews that its constituent the Council in October 2006. Dodd-Frank Act, providing for agencies, with the exception of the addition of the Director of the NCUA, and with the later the CFPB as a voting member of The Secure and Fair exception of the CFPB, conduct in the Council, effective July 2011. Enforcement for Mortgage accordance with EGRPRA. The Director of the former OTS Licensing Act of 2008 was removed from the Council, The EGRPRA requires that the and the agency’s functions were constituent agencies, at least The Secure and Fair Enforcement transferred to the OCC, FRB, once every 10 years, review all for Mortgage Licensing Act of FDIC, and CFPB.

3 4 RECORD OF COUNCIL ACTIVITIES

The following section is a chrono- additions that exceed a specific Explanation. The legislation estab- logical record of the official dollar amount. The Uniform lishing the Council requires that, actions taken by the FFIEC during Bank Performance Report (UBPR) not later than April l of each year, 2015, pursuant to the FIRIRCA, Budget Addition covered end-of- the Council publish an annual as amended, and the HMDA, as year costs associated with the 2014 report covering its activities dur- amended. relocation expenses for a newly ing the preceding year. hired UBPR Coordinator. January 27, 2015 April 2, 2015 March 10, 2015 Action. Approved recommenda- Action. Approved the Central tions and priorities contained in Action. Approved the Data Repository (CDR) Steering the Cybersecurity Risk Assess- appointment of six task force Committee’s Task Order #6. ment. chairs. Explanation. The Council is Explanation. The Council Explanation. The chairs for all six required to approve task orders approved the recommendations standing task forces are approved that exceed a specific dollar and priorities resulting from the annually and are drawn from amount. Task Order #6 provides pilot cybersecurity readiness management and staff of the funding for CDR enhancements to assessment conducted at more FFIEC members. Their terms run improve Call Report processing, than five hundred financial insti- April 1, 2015, through March 31, public distribution of Call Report tutions by FFIEC members in 2016. data, and UBPR processing. 2014. March 20, 2015 April 2, 2015 February 11, 2015 Action. Approved the Council’s Action. Approved re-appointment Action. Approved the issuance of 2014 annual report to the of SLC member, Karen Lawson, the Council’s annual interagency Congress. Director, Office of Banking within awards.

Explanation. The Council has an interagency awards program that recognizes staff of the FFIEC members who have provided outstanding service to the Council on interagency projects and programs during the previous year.

February 13, 2015

Action. Approved the Budget Addition to the 2014 Uniform Bank Performance Report Budget.

Explanation. The Council is required to approve budget The Federal Financial Institutions Examination Council in session.

5 by institutions is voluntary.

December 3, 2015

Action. Approved the 2016 Council budget.

Explanation. The Council is required to approve the annual budget that funds the Council's staff, programs, and activities.

December 14, 2015

Action. Approved a new HMDA Memorandum of FFIEC Chairman Tarullo addressing the Council at a 2015 meeting. Understanding (MOU) and related Addendum by and between the FFIEC member the Michigan Department of and three appendices. agencies, the FRB, and the CFPB Insurance and Financial Ser- regarding transfer of the HMDA vices. Explanation. In light of the data collection, processing, and increasing volume and production responsibilities. Explanation. The Council sophistication of cyber threats, appoints two of the SLC mem- the FFIEC developed the Explanation. The Dodd-Frank bers. The remaining three Cybersecurity Assessment Tool Act amended HMDA in various members are designated by to help institutions identify respects, including the transfer the Conference of State Bank their risks and determine their of HMDA rulemaking authority Supervisors (CSBS), the Ameri- cybersecurity maturity. The and certain other HDMA- can Council of State Savings content of the Cybersecurity related responsibilities from the Supervisors (ACSSS), and the Assessment Tool is consistent FRB to the CFPB. By this MOU National Association of State with the principles of the FFIEC and related Addendum the Credit Union Supervisors Information Technology (IT) FFIEC member agencies agreed (NASCUS). Ms. Lawson’s sec- Examination Handbook (IT that the HMDA data collection, ond full term on the SLC runs Handbook) and the National processing, and production May 1, 2015, through April 30, Institute of Standards and responsibilities currently 2017. Technology (NIST) Cybersecurity provided by the FRB will Framework, as well as industry- transfer to the CFPB beginning accepted cybersecurity practices. in 2018. June 16, 2015 The Cybersecurity Assessment Tool provides institutions of Action. Approved the Cyber- all sizes with a repeatable and security Assessment Tool and measureable process to inform supporting materials, which management of their institution's include the User’s Guide, Over- risks and cybersecurity view for Chief Executive Offi- preparedness. Use of the cers and Boards of Directors, Cybersecurity Assessment Tool

6 STATE LIAISON COMMITTEE REPORT

State Liaison Committee (from left to right): Caroline Jones (TX), Karen Lawson (MI), Lauren Kingry (AZ), David Cotney (MA), and Mary Hughes (ID).

The SLC consists of five the CSBS, and the NASCUS the SLC in 2015 were: representatives from state each designate a member. The regulatory agencies that members of the SLC serve as an • David Cotney, supervise financial institutions. important conduit to their state SLC Chairman The representatives are appointed colleagues and represent state Commissioner of Banks, for two-year terms. An SLC supervisory interests before Commonwealth of member’s two-year term may the Council. Each year, the Massachusetts Division of be extended by the appointing SLC elects one of its members Banks organization for an additional, to serve as chairman for 12 consecutive two-year term. The months, commencing May 1. • Mary Hughes Council elects two of the five Financial Institutions members of the SLC. The ACSSS, The five members serving on Bureau Chief, Idaho

7 Department of Finance provides staff support to the SLC Judith Dupre, Executive representatives and serves as the Secretary, FFIEC; and Rosanna • Caroline Jones primary liaison to the FFIEC staff Piccirilli, Senior Program Commissioner, Texas for all administrative matters. Coordinator, FFIEC. Department of Savings and Mortgage Lending In connection with its role on the State bank regulators, Council, the SLC meets in person represented by the SLC, • Lauren Kingry before each Council meeting to charter approximately 4,850 SLC Chairman discuss the agenda, task force banks with $5.0 trillion May 1 - December 1, 2015, projects, and topics of interest assets under supervision. In Superintendent, Arizona that may come before the Council. addition to commercial banks, Department of Financial The SLC invites leadership and state regulators supervise Institutions policymakers from the other other depository institutions FFIEC members and the FFIEC including credit unions, • Karen Lawson Executive Secretary’s office to savings banks, savings and loan Director, Office of Banking, meet with them during these institutions, bankers’ banks, Michigan Department of briefings to engage in informal credit card banks, industrial Insurance and Financial Services dialogue. Those who participated loan companies, foreign this year included Thomas Curry, banking organizations, and The SLC is represented on the Comptroller of the Currency, non-depository trust companies. Council’s task forces and working OCC; Jamal El-Hindi, Deputy A total of 52 state regulatory groups by state supervisors from Director, Financial Crimes agencies supervise 379 non- around the country. The CSBS Enforcement Network (FinCEN); depository trust companies.

8 ACTIVITIES OF THE INTERAGENCY STAFF TASK FORCES

Task Force on Consumer Compliance

The Task Force on Consumer Compliance (TFCC) promotes policy coordination, a common supervisory approach, and uni- form enforcement of consumer protection laws and regulations. The TFCC identifies and analyzes emerging consumer compliance issues and develops proposed policies and procedures to foster consistency among the agencies. Additionally, the TFCC reviews legislation, regulations, and poli- cies at the state and federal level that may have a bearing on the consumer compliance supervision responsibilities of the member Task Force on Consumer Compliance meeting. agencies.

During 2015, the TFCC relied aggregate, and publish the 2014 operations to the CFPB on January on the HMDA/Community CRA data and the 2014 HMDA 1, 2018. The FRB will administer Reinvestment Act (CRA) Data data. The CRA data, published and maintain the current HMDA Collection Subcommittee (HMDA/ on August 25, 2015, are available data operations system and CRA Subcommittee) and several on the FFIEC website, at www. continue to collect and process ad hoc working groups to carry ffiec.gov/press/pr082515.htm. HMDA data through December out its mission. The TFCC meets The HMDA data, published 31, 2017. monthly to address and resolve on September 22, 2015, are also common issues in consumer available on the FFIEC website, The 2016 budgets for CRA and compliance supervision. at www.ffiec.gov/press/pr092215. HMDA data processing and for Although significant issues or htm. In July, the FFIEC released a the first phase of the new HMDA recommendations are referred to new batch loan geocoding system data collection, processing, and the Council for action, the Council that is available to HMDA data publication system were reviewed has delegated to the TFCC reporters. The new geocoder and approved by the TFCC and the authority to make certain allows institutions to geocode were part of the overall budget decisions and recommendations. large numbers of loans in a single package approved by the Council submission. The FFIEC continues at its December 3, 2015 meeting. Initiatives Addressed in 2015 to maintain its prior geocoder, which geocodes a single loan at a Consumer Compliance Conference HMDA/CRA Data Collection time, for use by the public. Subcommittee Activities In 2015, the TFCC continued to Also in 2015, the HMDA/CRA collaborate with the Task Force on In 2015, the HMDA/CRA Subcommittee collaborated with Examiner Education (TFEE) and Subcommittee coordinated with the CFPB to establish a plan the FFIEC Examiner Education the FRB’s IT staff to collect, for the transfer of HMDA data Office (EEO) to develop, plan, and

9 deliver the Consumer Compli- to incorporate minor, technical on behalf of the Council. The ance Conference. The confer- updates. TFEE promotes interagency ence addresses supervisory education through timely, cost- updates and emerging issues Regulation P Examination efficient, state-of-the-art training for experienced examiners. The Procedures programs for federal and state program was originally offered examiners and agency staff. in January 2013, and after posi- The CFPB issued an October The TFEE develops programs tive feedback was offered again 2014 rulemaking that amended on its own initiative and in in October 2013, April 2014, and the requirements for financial response to requests from the September 2015. Planning is cur- institutions to provide annual Council, Council task forces, rently ongoing for a September disclosure of privacy practices to and suggestions brought forth 2016 session. customers. The TFCC convened by the EEO staff. The EEO also an interagency effort to draft maintains development groups Mortgage Rules Examination corresponding updates to the that have been established to Procedures Regulation P examination provide ongoing content guidance procedures. On September 14, for classes and conferences. The CFPB has issued new 2015, the TFCC approved the Development group members mortgage rules pursuant updated examination procedures, consist of subject matter experts to the Dodd-Frank Act. In which were also revised to from each FFIEC member response, the TFCC convened reflect the CFPB’s recodification entity designated by their TFEE an interagency effort, led by the in Regulation P of the privacy members. Development group CFPB, to draft corresponding regulations, as well as to clarify members help the EEO ensure updates to the Truth in Lending the rule’s requirements and to that the course content is relevant, Act (TILA)/Regulation Z and improve its readability. current, and meets the agencies’ the Real Estate Settlement examiner training needs. Procedures Act (RESPA)/ Task Force on Regulation X examination Each fall, EEO staff establishes Examiner Education procedures. In February 2015, a training schedule based on the TFCC approved updated demand from the FFIEC member TILA/Regulation Z and RESPA/ The TFEE oversees the FFIEC’s entities and state financial Regulation X examination examiner education program institution regulators, which is procedures that, among other changes, incorporate the CFPB’s final TILA-RESPA Integrated Disclosure Rule. The updated interagency TILA/Regulation Z examination procedures also incorporate changes associated with the interagency higher-priced mortgage loan appraisal rule and other minor revisions made pursuant to title XIV (Mortgage Reform and Anti-Predatory Lending Act) of the Dodd-Frank Act. The procedures were updated again in September 2015 to reflect the revised effective date of the TILA-RESPA Integrated Disclosure Rule and Task Force on Examiner Education meeting.

10 Interest Rate Risk

An intermediate-level course on IRR assessment and man- agement for examiners—IRR Workshop—was developed by subject matter experts selected by the TFOS in coordination with the EEO. The IRR Work- shop pilot was offered in 2015 and eight sessions are scheduled in 2016. In addition to this new course offering, two conferences that focus on capital markets issues included industry per- spectives on IRR management and modeling techniques for community financial institu- tions. Further, the Supervisory Updates and Emerging Issues Payment Systems Risk Conference at FDIC's L. William Seidman Center, Arlington, VA. for Community Financial Insti- tutions Conference included then approved by the TFEE. The 106 task force-sponsored training an IRR presentation from an EEO staff schedules, delivers, sessions and one pilot session agency capital markets special- and evaluates training programs of the Interest Rate Risk (IRR) ist. Among the topics addressed throughout the year. Workshop, with a total of 4,187 were industry trends, measure- attendees (see table on page 12 for ment systems, exposure limits Initiatives Addressed in 2015 attendee participation by program and mitigation strategies, inde- and entity). Highlights from this pendent reviews, and regula- The TFEE has continued to ensure year’s training initiatives include tory guidance. that the FFIEC’s educational the following: programs meet the needs of Annual Specialists Conferences agency personnel, are cost- Cybersecurity effective, and are widely available. In addition to the classes and The TFEE meets monthly with While cybersecurity has been a conferences designed to meet the EEO staff to discuss emerging standing topic covered in several the needs of generalist com- topics, to review feedback from training programs for many years, missioned examiners, the EEO each course and conference, specific efforts in 2015 ensured curriculum also includes several and to develop a framework for that all IT, Payment Systems annual specialists conferences future courses and conferences. Risk, and Supervisory Updates designed to address important The solid partnership between Conference programs included emerging topics and regula- the TFEE members and the EEO speakers from the Task Force on tory updates. These special- staff promotes open and regular Supervision’s (TFOS) CCIWG ist conferences address such communication that continues or IT Subcommittee. These same topics as the Bank Secrecy Act to result in high-quality, well- conferences often included seg- (BSA), consumer compliance, received training. ments with industry experts IT, capital markets and liquid- on cybersecurity to ensure that ity risk management, and asset In-Person Training Programs attendees are informed of the lat- management. These conferences est developments in this rapidly provide agency-designated In 2015, the EEO administered changing area. subject matter experts with the

11 2015 Participation in FFIEC Training by Program and Entity-Actual as of December 31, 2015

FRB FDIC NCUA State State State Spon- Spon- Spon- Program Title FRB sored FDIC sored NCUA sored OCC CFPB FCA FHFA Other Total

Advanced BSA/AML Specialists Conference 28 12 39 20 7 3 42 0 0 2 18 171 Advanced Cash Flow Concepts and Analysis: Beyond the Numbers 29 9 60 5 14 0 22 0 3 0 1 143 Advanced Commercial Credit Analysis 27 14 38 6 5 2 20 0 1 0 2 115 Agricultural Lending 15 6 70 3 15 1 5 0 5 0 1 121 Anti-Money Laundering Workshop 13 20 60 11 4 4 0 0 0 2 5 119 Asset Management Forum 37 15 54 17 0 2 13 0 0 0 0 138 Capital Markets Conference 37 23 85 14 23 8 18 0 5 0 2 215 Capital Markets Specialists Conference 29 6 85 9 11 4 10 0 17 5 5 181 Cash Flow Construction and Analysis from Federal Tax Returns 62 26 81 15 27 9 52 0 5 0 2 279 Commercial Real Estate Analysis 52 18 115 25 10 16 20 0 1 3 0 260 Consumer Compliance Specialists Conference 20 5 88 4 11 1 26 62 3 0 0 220 Distressed Commercial Real Estate 28 4 65 8 7 1 14 0 1 0 0 128 Financial Crimes Seminar 26 32 140 13 22 5 34 0 0 0 0 272 Fraud Identification Training Online 2 0 15 0 6 0 8 0 0 0 0 31 Fraud Investigation Techniques for Examiners 5 5 7 4 5 6 1 0 1 2 0 36 Fundamentals of Fraud 11 22 103 5 8 4 20 1 1 5 5 185 Information Technology Conference 40 15 67 12 18 2 36 4 13 11 0 218 Information Technology Symposium 0 0 0 0 0 0 0 0 0 0 0 0 Instructor Training School 18 0 0 0 1 0 8 17 2 0 0 46 Interest Rate Risk Workshop 2 0 4 0 1 0 3 0 0 0 4 14 International Banking (Self-Study) 13 0 31 0 1 0 0 0 0 0 2 47 International Banking Conference 32 2 32 0 0 0 14 2 0 0 1 83 International Banking School 15 4 29 4 0 0 2 0 0 0 1 55 Payment Systems Risk Conference 30 20 57 4 14 3 27 3 0 3 5 166 Real Estate Appraisal Review Online 1 0 24 0 4 0 0 0 1 0 0 30 Real Estate Appraisal Review School 24 19 56 8 12 0 18 0 0 1 0 138 Structured Finance: Investment Analysis & Risk Management 32 4 54 2 10 3 8 0 0 2 1 116 Supervisory Updates & Emerging Issues for Community Financial Institutions 58 31 184 33 10 1 33 0 3 0 6 359 Supervisory Updates & Emerging Issues for Large, Complex Financial Institutions 45 11 115 7 14 0 33 4 7 11 3 250 Testifying School 0 0 17 0 0 0 6 0 0 0 0 23 Train the Trainer for Fundamentals of Fraud 4 0 10 0 5 0 2 0 0 0 7 28

Grand Total 735 323 1,785 229 265 75 495 93 69 47 71 4,187

Percentage 17.56 7.71 42.63 5.47 6.33 1.79 11.82 2.22 1.65 1.12 1.70 100

Combined Agency and Sponsored Percentage 25.27 NA 48.10 NA 8.12 NA 11.82 2.22 1.65 1.12 1.70 100

12 opportunity to network and share industry. The electronic delivery Alternative Delivery Training their observations and industry medium enables the content to developments with others in their be readily updated as needed in Alternative delivery training is specialty area, including those coordination with TFOS working offered on an as-needed basis. from other agencies and other groups and subcommittees. Currently, the FFIEC EEO offers parts of the country. The special- three alternative delivery courses. ists’ conferences feature knowl- The BSA/AML InfoBase contains The Basic International Banking edgeable and influential speakers, the examination manual and links Self-Study Course is available including senior level officials to relevant laws, regulations, to the public in addition to the from member agencies, policy- forms, and supervisory guidance. FFIEC members. The Real Estate makers, and industry experts. In 2015, the InfoBase was updated Appraisal Review Online Course to include the Spanish translation and the Fraud Identification Educational InfoBases of the 2014 edition of the BSA/ Online Course are available to AML Examination Manual. examiners and bankers through In addition to classroom collaboration with the CSBS. training, the TFEE implemented The IT Handbook InfoBase and annually approves the contains the current set of IT Continuing Education Credits maintenance of two InfoBases, examination booklets, agency (1) BSA/Anti-Money Laundering resource materials, reference Several FFIEC courses are (AML) and (2) IT Handbook. materials, a glossary, and assessed and approved annually These two InfoBases are online master table of contents. The for continuing education products that efficiently and InfoBase content is updated credits, evidencing the high- effectively centralize and facilitate on an as-needed basis. In 2015, quality content of the EEO’s prompt access to examination updates were made to both the programming. Accreditation of procedures, agency resources, "Business Continuity Planning" EEO training events provides and reference materials on topics and "Management" booklets of the examiners the opportunity to of interest to both financial IT Handbook. maintain their certifications, as institution regulators and the they would by attending industry- sponsored training, while still being able to hear from subject matter experts on topics of interest to examiners. Through a collaborative relationship between the FDIC and an FFIEC program sponsor, a number of classes and conferences are reviewed and approved for Continuing Professional Education credits, which are required for those examiners who are Certified Public Accountants. Other EEO accreditations are also available to examiners with industry- recognized designations, such as Certified AML Specialist, Certified Fraud Examiner, Certified Regulatory Compliance Manager, Certified Trust and Financial Advisor, and Chartered Financial International Banking School at FDIC's L. William Seidman Center, Arlington, VA. Analyst. EEO classes enable

13 examiners to better perform their address issues affecting the to technology development examination duties as well as quality, consistency, efficiency, (including the production and meet their greater professional and security of interagency development status of the development needs. information sharing. Provided interagency CDR). all TFIS members agree, the Facilities Council has delegated to the Initiatives Addressed in 2015 TFIS the authority to facilitate The FFIEC rents office space, among the FFIEC members the Technology Issues classrooms, and lodging facilities sharing of electronic information at the FDIC’s L. William Seidman to supervise, regulate, or insure The mission of the TFIS is Center in Arlington, Virginia. This depository institutions. to identify and implement facility offers convenient access to technologies to make sharing two auditoriums and numerous To the extent possible, the interagency data more classrooms. Regional sessions are members build on each other’s efficient and to accommodate provided on an as-needed basis as information databases to changes in agency databases requested by the agencies. minimize duplication of effort and technologies. The TFIS’s and promote consistency. In Technology Working Group Course Catalogue and accordance with each member’s (TWG) meets monthly to develop Schedule policy, the members participate technological solutions that in a program to share electronic enhance data sharing and to The course catalogue and versions of their examination coordinate the automated transfer schedule are available online at and inspection reports, and other of data files between the members. www.ffiec.gov/exam/education. communications with financial The group tracks weekly htm. institutions. The members also developments to provide timely provide each other with access resolutions of data exchange To obtain a copy, contact: to their regulated entities' issues. structure, financial data, and Karen Smith, Manager supervisory information. The The TWG continues to develop FFIEC Examiner Education TFIS and its working groups use necessary links and processes to Office a collaborative website to share exchange electronic documents, 3501 Fairfax Drive information among the Council develop an inventory of future Room B-3030 members. The TFIS maintains technology projects, and upload Arlington, VA 22226-3550 the “Data Exchange Summary,” information to the collaborative Phone: (703) 516-5588 which lists the data files website where documents and exchanged among the Council critical materials pertaining members and a repository of to interagency information Task Force on communications and documents exchanges are stored. Information Sharing critical to information sharing. Structure Data Reconciliation The Task Force on Information The TFIS has three working Sharing (TFIS) promotes and groups to address technology Structure data is non-financial in facilitates the sharing (collection, development issues, to perform nature and encompasses the finan- exchange, and access) of electronic interagency reconciliation of cial institution’s profile, including, information among the FFIEC financial institution structure but not limited to, its charter type, members in support of the data, and to develop interagency holding company information, supervision, regulation, and identity management. In addition, address, and contact information. deposit insurance responsibilities the TFIS receives demonstrations This non-financial data is used in of financial institution regulators. and reports on agency, FDIC, FRB, and OCC databases The TFIS provides a forum for financial industry, and other for business analyses, process- FFIEC members to discuss and Council initiatives pertaining ing, and reporting purposes. As

14 a result, the accuracy and consis- tency of this data must be assured. The Structure Data Reconcilia- tion Working Group (SDRWG) compares and reconciles data discrepancies between the FDIC, FRB, and OCC databases quar- terly to ensure their reliability. The SDRWG’s quarterly efforts have greatly resolved structure data discrepancies among the members.

Coordination with Other Interagency Information-Sharing Entities

The TFIS continues to coordinate with interagency information- sharing entities including the Financial Stability Oversight Task Force on Information Sharing meeting. Council (FSOC) and the Office of Financial Research (OFR). These coordination efforts enable the identifies event conditions and sequence, the TFOR is concerned TFIS to keep apprised of emerging criteria under which contingency with issues such as the review and issues and to monitor progress plan procedures would be implementation of proposed revi- on projects, such as the Global put into effect. The plan also sions to reporting requirements; Legal Entity Identifier initiative specifically outlines detailed the development and interpreta- and those identified by the Data procedures to ensure that critical tion of reporting instructions, Sharing Working Group. This communications among the including responding to inqui- latter group focuses on identifying FFIEC members continue until ries about the instructions from best practices for data and operations are restored. reporting institutions and the pub- information sharing among the lic; the application of accounting FFIEC agencies. standards to specific transactions; Task Force on Reports the development and application Collaboration Tools of processing standards; the moni- The law establishing the Coun- toring of data quality; and the The TFIS continues to coordinate cil and defining its functions assessment of reporting burden. with the Federal Reserve System’s requires the Council to develop In addition, the TFOR works with Interagency Collaboration Pro- uniform reporting systems for other organizations, including the gram to encourage knowledge federally supervised financial Securities and Exchange Com- sharing and collaboration capa- institutions and their holding mission, the Financial Accounting bilities among FFIEC members. companies and subsidiaries. To Standards Board, and the Ameri- meet this objective, the Council can Institute of Certified Public Contingency Planning established the Task Force on Accountants. The TFOR also is Reports (TFOR). The TFOR helps responsible for any special proj- The TFIS developed a contingency to develop interagency unifor- ects related to these subjects that plan for disaster events to restore mity in the reporting of periodic the Council may assign. and otherwise ensure continuity information that is needed for in data exchanges among the effective supervision and other To help the TFOR carry out its FFIEC members. The plan public policy purposes. As a con- responsibilities, working groups

15 are organized as needed to handle term regulatory or public policy Council advised institutions specialized or technical account- purpose by assisting the FFIEC’s that the Call Report revisions ing, reporting, instructional, and member entities in fulfilling their with a proposed effective date processing matters. In this regard, missions of ensuring the safety of December 31, 2015, had been the TFOR has established a CDR and soundness of financial insti- deferred until no earlier than Steering Committee to make busi- tutions and the financial system March 31, 2016. As of year-end ness decisions needed to ensure and the protection of consumer 2015, the TFOR was continuing the continued success of the CDR financial rights, as well as entity- to evaluate the proposed changes system, monitor its ongoing per- specific missions affecting national and possible modifications to formance, and report on its sta- and state-chartered institutions; them based on the comments tus. The CDR is a secure, shared (2) The data items to be collected received. To provide time for database for collecting, managing, maximize practical utility and institutions to prepare for the validating, and distributing data minimize, to the extent practicable Call Report revisions that the reported in the quarterly Consoli- and appropriate, burden on finan- TFOR decides to implement, dated Reports of Condition and cial institutions; and (3) Equivalent subject to Council approval, Income (Call Reports) filed by data items are not readily available the FDIC, the FRB, and the insured banks and savings asso- through other means. OCC (collectively, the banking ciations. The CDR also processes agencies) notified institutions on and distributes the UBPR under As one action under the Call January 8, 2016, that the effective the oversight of the Task Force on Report burden-reduction date for all reporting changes in Surveillance Systems (TFSS). initiative, on September 18, 2015, the September 2015 proposal has the banking agencies published been further deferred until no Initiatives Addressed in 2015 an initial Paperwork Reduction earlier than September 30, 2016. Act (PRA) Federal Register notice Community Bank Call Report requesting comment on a number As the second action, the TFOR Burden Reduction of proposed burden-reducing accelerated the start of the next changes and certain other review of the existing Call Report At the Council’s direction, the proposed Call Report revisions, data items, which the banking TFOR launched a formal initia- which had been approved by the agencies are required to perform tive in December 2014 to identify Council. As proposed, these Call by section 604 of the Financial potential opportunities to reduce Report revisions were targeted to Services Regulatory Relief Act burden associated with Call take effect as of December 31, 2015, of 2006 and otherwise would Report requirements for commu- or March 31, 2016, depending have commenced in 2017. Users nity banks. This initiative, which on the nature of the change. The of Call Report data items at responds to industry concerns burden-reducing changes included the Council’s member entities about the cost and burden of reg- as part of this proposal were not are participating in a series of ulatory reporting requirements, intended to be the only group of surveys being conducted over a comprises five actions, which are Call Report revisions designed 19-month period that began in discussed below. In addition, as a to lessen reporting burden for July 2015. As an integral part of foundation for these actions, the institutions and, in particular, for these surveys, users are asked to TFOR developed a set of guiding community banks. Additional fully explain the need for each principles for use in evaluating burden-reducing changes to the Call Report data item, how it is potential additions and deletions Call Report are expected to result used, the frequency with which of Call Report data items and from the other actions being taken it is needed, and the population other revisions to the Call Report, under the Council’s Call Report of institutions from which it is which were presented to the burden-reduction initiative. needed. Call Report schedules Council in March 2015. In general, have been placed into groups and any Call Report changes must The comment period for the prioritized for review, generally meet three guiding principles: proposal ended November 17, based on perceived burden (1) The data items serve a long- 2015. On December 3, 2015, the as cited by banking industry

16 are organizing a number of conference call meetings with small groups of community bankers in February 2016 in which the TFOR will participate. The trade groups will consider the discussion topics offered by the TFOR as they set the agendas for these banker meetings. The TFOR will use the information obtained from these outreach activities as a key input into the next action under this initiative, including whether and how reporting burden may be reduced.

As a fourth action, the TFOR is considering the feasibility Task Force on Reports at an Examination Council meeting. and merits of creating a less burdensome version of the Call Report for institutions that meet representatives. Based on the particular information. As an certain criteria, which may include results of each of the surveys, a initial step toward improving this an asset-size reporting threshold working group established by understanding, representatives or activity limitations. During the TFOR is identifying data from the FFIEC’s member 2015, in consultation with staff items that warrant consideration entities visited nine community from the FFIEC’s member entities, for elimination, less frequent institutions during the third a working group established collection, or new or upwardly quarter of 2015. Institution staff by the TFOR identified and revised reporting thresholds explained how they prepare their analyzed each Call Report data and will begin presenting its Call Reports, identified which item that is routinely completed recommendations to the TFOR in schedules or data items take a by only a limited number of 2016. The TFOR plans to pursue significant amount of time and/or small institutions to determine implementation of burden- manual processes to complete and which items may be candidates reducing reporting changes, as the reasons for this, and provided for elimination from a report for approved by the Council, during their suggestions on Call Report eligible small institutions. Such the review period rather than streamlining. In the fourth quarter a report also could exclude the waiting until the completion of 2015, the TFOR used the existing Call Report schedules and of the entire review and the feedback from these on-site visits items not applicable to institutions reporting of the results to the to prepare a set of discussion below the specified asset-size Council in late 2017. topics on Call Report burden and threshold. The TFOR reported streamlining that could serve to the Council in December 2015 A third action for the agencies as the basis for further dialogue on options for proceeding with a is to better understand, through with community bankers to less burdensome Call Report for industry dialogue, the aspects of determine whether the feedback eligible institutions and other Call reporting institutions’ Call Report is representative of the views Report streamlining methods. preparation processes that are of a broader cross-section of The additional feedback about significant sources of reporting bankers. Two bank trade groups, sources of Call Report burden and burden, including where manual the Independent Community these options from the TFOR’s intervention by an institution’s Bankers of America and the community banker outreach staff is necessary to report American Bankers Association, activities in February 2016 will

17 help inform a subsequent TFOR institution holding company with Schedule RC-R and the reporting recommendation to the Council consolidated total assets of $250 of securities borrowed in March regarding a streamlining proposal billion or more or consolidated 2015, and the banking agencies for eligible small institutions total on-balance sheet foreign implemented these reporting that can be issued for industry exposure of $10 billion or more, a changes as of March 31, 2015. comment in 2016. subsidiary of such an institution or holding company, or an entity Market Risk Regulatory Report As the fifth action, the TFOR will that elects to apply the advanced continue to offer periodic training approaches capital rules. In January 2015, capital policy to bankers via teleconferences experts from the banking and webinars that explain After approval by the Council, the agencies and the TFOR completed upcoming reporting changes and banking agencies published an modifications to a proposed new also provide guidance on areas initial PRA Federal Register notice market risk regulatory report of the Call Report bankers find in June 2014 requesting comment (FFIEC 102 report) which had challenging. The TFOR, together on proposed revisions to the been published in September with capital policy experts risk-weighted assets portion of 2014. The modifications addressed from the banking agencies, Call Report Schedule RC-R. The comments and technical questions held a banker teleconference on proposed revisions incorporated received on the proposed February 25, 2015, that included the standardized approach for report, which would apply to a presentation on the revised Call calculating risk-weighted assets insured depository institutions Report Schedule RC-R regulatory under the revised regulatory and holding companies subject capital reporting requirements capital rules. The proposal also to the market risk capital rule that became applicable to all included a related change to the incorporated in the banking institutions on March 31, 2015, reporting of securities borrowed agencies’ July 2013 revised followed by a question-and- in Call Report Schedule RC-L, regulatory capital rules (market answer session. On December Derivatives and Off Balance Sheet risk institutions). The report 8, 2015, the TFOR and capital Items. would collect key information policy experts from the banking from market risk institutions on agencies conducted a follow-up After the comment period how they measure and calculate banker teleconference, including closed in August 2014, capital market risk under the revised rule a question-and-answer session, policy experts from the banking that took effect on January 1, 2015. addressing several aspects of agencies and the TFOR modified revised Schedule RC-R and the the proposed risk-weighted After the Council approved the underlying regulatory capital assets portion of Schedule RC-R revised market risk regulatory rules that are continuing sources in response to comments and reporting proposal in February of questions from bankers. technical questions received. 2015, the banking agencies In January 2015, the Council published a final PRA Federal Regulatory Capital Reporting approved the final version of the Register notice for the FFIEC 102 Changes revised risk-weighted assets and report. OMB approved the market securities borrowed reporting risk regulatory report in March In July 2013, the banking agencies changes. The banking agencies 2015, and its initial collection approved revised regulatory published a final PRA Federal began as of March 31, 2015. capital rules that applied to Register notice for these reporting advanced approaches institutions changes on February 2, 2015. The Central Data Repository beginning January 1, 2014, and to Council notified all reporting all other institutions beginning institutions about these revised In December 2015, the banking January 1, 2015. In general, an reporting requirements. The U.S. agencies successfully deployed advanced approaches institution Office of Management and Budget enhancements to the CDR. The is an FDIC-insured depository (OMB) approved the revisions to 2015 CDR enhancement release institution or depository the risk-weighted assets portion of included improvements to UBPR

18 processing and UBPR online extensions of the authority for Instructional Guidance user guide functionality, thereby the FRB to collect the Report of enhancing the public interface Assets and Liabilities of U.S. The TFOR continued to conduct with the CDR’s data distribution Branches and Agencies of Foreign monthly interagency conference facility. The enhancement release Banks (FFIEC 002), the Report of calls during 2015 to discuss also added capabilities for Assets and Liabilities of a Non- instructional matters pertaining the CDR to collect the FDIC’s U.S. Branch that is Managed or to FFIEC reports and related Summary of Deposits (SOD) data Controlled by a U.S. Branch or accounting issues to reach series beginning in 2016, which Agency of a Foreign (Non-U.S.) uniform interagency positions on were funded by the FDIC. Bank (FFIEC 002S), and the these issues. Country Exposure Report for U.S. In the fourth quarter of 2015, Branches and Agencies of Foreign Task Force on Supervision the CDR team began analyz- Banks (FFIEC 019) in October ing and prioritizing open issues 2015. These approvals followed and requested modifications for the FRB’s publication of initial The TFOS coordinates and inclusion in a 2016 CDR enhance- and final PRA Federal Register oversees matters relating to ment release, which is planned notices, which had been approved safety-and-soundness supervision for implementation in December by the Council. The Federal and examination of depository 2016. In addition to enhancements Reserve System collects and institutions. It provides a to the CDR that will be shared by processes these reports on behalf forum for Council members to the banking agencies, the release of the banking agencies. promote quality, consistency, will include enhancements for the and effectiveness in examination SOD data series. During 2015, capital policy and other supervisory practices. experts from the banking agencies While significant issues and Other Activities and the TFOR began develop- recommendations are referred ing proposed modifications to to the Council for action, the In December 2015, OMB approved the supplementary leverage ratio Council has delegated to the TFOS several changes to the Foreign (SLR) data included in the Regula- the authority to make certain Branch Reports of Condition tory Capital Reporting for Insti- decisions and recommendations, (FFIEC 030 and FFIEC 030S) tutions Subject to the Advanced provided all TFOS members that the banking agencies had Capital Adequacy Framework agree. Meetings are held monthly first published for comment in (FFIEC 101), in response to the to address and resolve common July 2015. The revisions, which banking agencies’ September supervisory issues. The TFOS took effect as of year-end 2015, 2014 final rule revising the defi- also maintains supervisory included a change to the officer nition of the denominator of the communication protocols to declaration in these reports, the SLR. The proposed revised SLR be used in emergencies. These elimination of the requirement data would replace existing data protocols, established by the for a branch to submit the cover items pertaining to the SLR in the TFOS, are periodically tested page of the applicable report if it FFIEC 101 that currently are not through exercises with TFOS is consolidated into the report for collected because of the defini- members and key supervisory the institution’s principal branch tional changes made by the final personnel. in a country, and a new field on rule. Reporting of the proposed the cover page for an institution to revised SLR data in the FFIEC The TFOS has one subcommittee indicate whether the branch meets 101 is expected to take effect for and two permanent working the criteria for annual or quarterly advanced approaches institutions groups. It also establishes filing. No revisions were made to as of a quarter-end report date in ad hoc working groups to the financial information collected the second half of 2016 following handle individual projects and in these reports. appropriate notice and comment assignments, as needed. in accordance with the PRA and OMB approved three-year subject to approval by OMB. • The IT Subcommittee serves as

19 a forum to address information that pose significant risks sharing, enhancing financial systems and technology to financial institutions and institutions’ awareness of risk policy issues as they relate to their service providers. The issues, and examiner training. financial institutions and their CCIWG promotes coordination technology service providers across the FFIEC member • The BSA/AML Working Group (TSPs). The IT Subcommittee entities on cybersecurity and seeks to enhance coordination develops and maintains the critical infrastructure issues. of BSA/AML guidance, policy, FFIEC IT Handbook, which The group provides a forum and other issues related to consists of a series of topical for addressing policy issues consistency of BSA/AML booklets addressing issues such relating to cybersecurity and supervision. Working group as information security. This critical infrastructure security coordination includes ongoing resource is available through an and the resilience of financial communication among InfoBase on the FFIEC website. institutions and TSPs. Working representatives from federal In conjunction with the TFEE, group coordination includes and state banking agencies, the IT Subcommittee sponsors ongoing communications with the FinCEN, and periodically an annual FFIEC IT Conference the intelligence community, law with other federal agencies that for examiners and periodically enforcement, and homeland have BSA responsibility. The holds symposia on emerging security agencies. The CCIWG group’s responsibilities include information technology also serves as a forum to maintaining the FFIEC’s BSA/ and related risks. The IT build on existing efforts to AML Manual available through Subcommittee specifically support and strengthen the an InfoBase on the FFIEC coordinates with the TFOS’s activities of other interagency website. CCIWG. and private sector groups that promote financial services Initiatives Addressed in 2015 • The CCIWG was formed in sector cybersecurity and critical June 2013 in response to the infrastructure security and Cybersecurity Priorities increasing sophistication resilience. The working group’s and volume of cyber threats activities include information In March 2015, the FFIEC issued an overview of its cybersecurity priorities for 2015. The priorities included seven work streams that were identified during the FFIEC’s 2014 pilot assessment of cybersecurity readiness at more than 500 financial institutions.

FFIEC Cybersecurity Assessment Tool

In June 2015, the FFIEC released the Cybersecurity Assessment Tool (Assessment), based on the 2014 pilot, to assist financial institutions of all sizes with identifying their cybersecurity risks and evaluating their cybersecurity preparedness. Institutions may use the Assessment and other Task Force on Supervision. methodologies to perform a self-

20 assessment and inform their risk to alert institutions to the emerging IT issues and risks. In management strategies. Use of growing trend of cyber attacks February 2015, the FFIEC released the Assessment by institutions for obtaining online credentials a revised “Business Continuity is voluntary. In addition to the for theft, fraud, or business Planning” (BCP) booklet of Assessment, the FFIEC also disruption. The statement the IT Handbook. The update issued resources, including a addressed risk mitigation related included a new appendix, entitled User’s Guide, a mapping of the to such cyber attacks, including “Strengthening the Resilience of Assessment’s baseline statements the review of risk management Outsourced Technology Services.” to the FFIEC IT Handbook, a practices and controls over IT While many financial institutions mapping of the Assessment to the networks and authentication, depend on third-party service NIST Cybersecurity Framework, authorization, fraud detection, providers to perform or support a glossary, and an overview for and response management critical operations, they are not chief executive officers and boards systems and processes. relieved of their responsibility to of directors. ensure that outsourced activities In November 2015, the FFIEC are conducted in a safe and sound Cybersecurity Statements released the “Statement on Cyber manner. The new appendix Attacks Involving Extortion” highlighted and updated the BCP In March 2015, the FFIEC released in response to the increasing booklet in four specific areas: two statements about ways that frequency and severity of such third-party management, third- financial institutions can identify attacks. The statement addressed party capacity, testing with third- and mitigate cyber attacks that steps financial institutions party TSPs, and cyber resilience. compromise user credentials or can take to respond to and use destructive software, known mitigate the risks posed by such In November 2015, the FFIEC as malware. The “Statement attacks. The FFIEC members issued a revised “Management” on Destructive Malware” also encouraged institutions to booklet of the IT Handbook that was released in response notify law enforcement and their contains guidance for examiners to the increasing frequency primary regulator or regulators of and outlines the principles of and severity of cyber attacks a cyber attack involving extortion. sound governance, particularly involving destructive malware, IT governance. The updated which can compromise large Cybersecurity Brochure booklet also incorporated new quantities of data and render cybersecurity concepts as part supporting systems inoperable. In January 2015, the FFIEC of information security, as well The statement described steps posted to its Cybersecurity as other management-related financial institutions can take to webpage a new brochure entitled concepts from other booklets of address such attacks, including “Cybersecurity and Resilience the IT Handbook. conducting ongoing risk Against Cyber Attacks.” The assessments; securely configuring brochure addressed high-level In September 2015, the IT systems and services; reviewing themes and available resources Subcommittee sponsored its risk management practices and presented during a 2014 FFIEC annual FFIEC IT Conference for controls over critical systems; webinar on cybersecurity examiners, which highlighted reviewing, updating, and testing preparedness for chief executive current and emerging technology incident response and business officers and senior managers from issues affecting insured financial continuity plans; enhancing community institutions. institutions and their service awareness and training programs; providers. The conference and participating in industry Information Technology included presentations on a information-sharing forums. range of topics, such as emerging A major effort of the IT payment systems risk and The FFIEC members also released Subcommittee is maintaining controls, the NIST Cybersecurity the “Statement on Cyber Attacks the IT Handbook and providing Framework, and enterprise-wide Compromising Credentials” information to the industry on risk management.

21 In 2015, the IT Subcommittee also and consultants. The survey was TFSS’s principal objective is dedicated its resources to col- designed to inform examiners of to develop and produce the laborating with the CCIWG on the mechanics and underlying UBPR. UBPRs present financial developing the Assessment and assumptions of specific IRR mod- data of individual financial supporting materials. els with the goal of helping exam- institutions and peer group iners gain a better understanding statistics for current and historical BSA/AML of financial institutions’ rate sen- periods. These reports are sitivity modeling. Findings from important tools for completing Throughout 2015, the BSA/ the survey responses were shared supervisory evaluations of a AML Working Group continued across the FFIEC members for financial institution’s condition ongoing efforts to enhance internal use by examiners. and performance, as well as for coordination of BSA/AML planning onsite examinations. training, guidance, and policy. Student Loans with Graduated The federal and state banking The Working Group sponsored Repayment Terms agencies also use the data from its ninth FFIEC Advanced BSA/ these reports in their automated AML Specialists Conference In January 2015, the FRB, CFPB, monitoring systems to identify in July 2015, which included FDIC, OCC, and NCUA, in potential or emerging risks in presentations on a range partnership with the FFIEC’s insured financial institutions. of topics, such as emerging SLC, released “Guidance on payments, enforcement Private Student Loans with A UBPR is produced for each actions, cybersecurity, currency Graduated Repayment Terms insured bank and savings transporter and money at Origination.” The guidance association in the United States transmission, and trade finance. provided principles that financial that is supervised by the FRB, In October 2015, the FFIEC issued institutions should consider in FDIC, or OCC. UBPR data are the Spanish translation of the their policies and procedures also available to all state bank FFIEC BSA/AML Examination for originating private student supervisors. While the UBPR is Manual. The Working Group loans with graduated repayment principally designed to meet the continues to share information terms. Institutions are expected to examination and surveillance with FinCEN and the Office of prudently underwrite the private needs of the federal and state Foreign Assets Control. student loans consistent with banking agencies, the TFSS also safe and sound lending practices. makes the UBPR available to Interest Rate Risk Financial institutions also should financial institutions and the provide disclosures that clearly public through a public website, In 2015, the TFOS’s IRR Project communicate the loan’s terms and www.ffiec.gov/UBPR.htm. Group developed a new FFIEC- features. sponsored IRR Workshop for The TFSS has established examiners. Eight sessions are three working groups to Task Force on Surveillance scheduled throughout 2016. assist with carrying out its Systems The workshop will provide responsibilities. The Content non-specialist examiners Working Group reviews the with additional training on The TFSS oversees the content of the UBPR and makes IRR, including the types development and implementation recommendations to the TFSS of risks, modeling issues, of uniform interagency for potential enhancements. The and management oversight surveillance and monitoring Supplementary Analysis Working considerations. systems. It provides a forum Group provides a forum for for the members to discuss exchanging information about The IRR Project Group also com- best practices to be used in various analytical tools and pleted a voluntary survey of asset- those systems and to consider datasets currently used at the liability management software the development of new respective agencies. Once the vendors, both model developers financial analysis tools. The tools and datasets are identified,

22 tools and datasets, which will be demonstrated in 2016.

Technology Working Group

The Technology Working Group began discussing UBPR presentation options in mid-2015. The group will continue to meet on a regular basis throughout 2016 to discuss various options for presenting UBPR data.

UBPR Production and Delivery

During 2015, UBPRs for December 31, 2014; March 31, 2015; June 30, 2015; and September 30, 2015, were produced and delivered to federal and state banking Task Force on Surveillance Systems meeting. agencies. Additionally, the UBPR section of the FFIEC website was utilized to deliver the same data the group explores the potential in October 2015 and which will be to financial institutions and the for them to be shared, maintained, implemented in 2016. general public. The TFSS strives to or further developed under the deliver the most up-to-date UBPR purview of the TFSS to enhance In response to a request by data to all users. Thus, the data for the UBPR or create a new FFIEC the TFOR, the working group the current quarter are updated analytical tool. The Technology identified Call Report data nightly and the data for previous Working Group explores ways to used in the production of the quarters are updated regularly. improve the usability of the UBPR UBPR as part of an initiative Frequent updating allows the including the development of to reduce Call Report burden. UBPR to remain synchronized various presentation options (i.e., The working group continues with new Call Report data as it graphs, charts). its project activities in this area is being submitted by financial by identifying Call Report and institutions. Initiatives Addressed in 2015 UBPR data used in downstream surveillance systems of the UBPR Information on the Content Working Group various agencies. FFIEC Website

The Content Working Group Supplementary Analysis Working UBPR Availability recommended to the TFSS Group modifications to the UBPR capital To provide broad industry and pages addressing changes to the The Supplementary Analysis public access to information March 2015 Call Report Schedule Working Group worked with about the financial condition of RC-R, Part II, Risk-Weighted agency staff to coordinate a insured financial institutions, Assets, which the TFSS accepted demonstration of the FDIC’s the TFSS publishes UBPR data and implemented. The working Examiner View Application and for each institution shortly after group also recommended various industry reports used by the underlying Call Report is improvements to the UBPR credit the CFPB. The group has created filed in the CDR. The UBPR is pages, which the TFSS approved a list of other agency analytical frequently refreshed to reflect

23 amendments to underlying Call institution to the performance of a CDR, which contains all data Report data and to incorporate user-defined custom peer group. appearing on report pages for any content-based changes agreed all financial institutions, may be to by the TFSS. The online UBPR Custom Peer Group Tool downloaded as either a delimited is a dynamic report that is closely file or in XBRL format. The synchronized with the underlying The Custom Peer Group Tool service is free, and downloads are Call Report. allows industry professionals, typically fast. regulators, and the general Other UBPR Reports public to create custom peer Additional information about groups based on financial and the UBPR, including status, Web-based statistical reports sup- geographical criteria. The tool descriptions of changes, and the porting UBPR analysis are avail- can then display all UBPR pages UBPR User’s Guide, can be found able and are updated nightly with with peer group statistics and at www.ffiec.gov/UBPR.htm. the data for the current quarter percentile rankings derived The site also provides access to and regularly for previous quar- from the custom peer group. the reports described above. For ters. These reports (1) summarize The Custom Peer Group Tool questions about the UBPR, contact the performance of all UBPR peer can recompute the entire UBPR support by calling 1-888-237-3111, groups (determined by size, loca- using a custom peer group of up e-mailing [email protected], or tion, and business line); (2) detail to 2,000 financial institutions and writing the Council at: the distribution of UBPR perfor- deliver the results usually within mance ratios for financial institu- seconds. FFIEC tions in each of these peer groups; 3501 Fairfax Drive (3) list the individual financial Bulk Data Download Room B7081a institutions included in each peer Arlington, VA 22226-3550 group; and (4) compare a financial The UBPR database within the

24 THE FEDERAL FINANCIAL INSTITUTION REGULATORY AGENCIES AND THEIR SUPERVISED INSTITUTIONS

The FRB, FDIC, OCC, and that wish to operate entities in NCUA have primary federal the United States that accept supervisory jurisdiction over retail deposits must organize 12,463 domestically chartered under separate insured U.S. banks, savings associations, subsidiaries. Existing insured and federally insured credit retail branches may continue to unions. On December 31, 2015, operate as branches. The IBA these financial institutions held also subjects those U.S. offices of total assets of more than more foreign banks to many provisions than $19.5 trillion. The FRB has of the Federal Reserve Act of primary federal supervisory 1913. The IBA gives primary responsibility for commercial examining authority to the OCC bank holding companies (BHCs) for federal branches and agencies and for savings and loan holding and to the FRB in conjunction companies (SLHCs). with state authorities for state branches and agencies. The FDIC Three banking agencies on the also has authority, along with the Council have authority to oversee OCC and FRB, as appropriate, the operations of U.S. branches over those few remaining insured and agencies of foreign banks. branches of foreign banks. The The International Banking Act of IBA also gives the FRB residual 1978 (IBA) authorizes the OCC examining authority over all U.S. to license federal branches and banking operations of foreign agencies of foreign banks and banks. authorizes the FRB to approve applications for both federal and The Dodd-Frank Act provides state branches and agencies. Prior statutory authority to the CFPB to to the Federal Deposit Insurance conduct examinations of insured Corporation Improvement Act depository entities with total of 1991 (FDICIA), foreign banks assets over $10 billion and their could also have established affiliates (in addition to certain federal and state branches that nonbank entities) to ensure accepted retail deposits and were consumer financial products insured by the FDIC. However, and services conform to certain after FDICIA, foreign banks federal consumer financial laws.

25 Board of Governors of the Federal Reserve System member banks and Edge Act and agreement corporations; The FRB was established in 1913. and applications by foreign It is headed by a seven-member banks to establish or acquire Board of Governors; each member U.S. banks and to establish U.S. is appointed by the President, branches, agencies, or represen- with the advice and consent of the tative offices; and Senate, for a 14-year term, unless completing an unexpired term of • supervising and regulating: a departing member. Subject to confirmation by the Senate, the ——State member banks (i.e., state- President selects one Board mem- chartered banks that are mem- ber to serve a four-year term as bers of the Federal Reserve Chairperson and two members to System); serve as Vice Chairs; one serves in the absence of the Chairperson ——BHCs and SLHCs, including and the other is designated as Vice FHCs1; Chair for Supervision. The Chair- person also serves as a voting ——Edge Act and agreement member of the FSOC. One mem- corporations; select nonbank ber of the Board of Governors financial firms; serves as the Board’s representa- tive to the FFIEC. The FRB’s activ- ——International operations of ities most relevant to the work of banking organizations head- the Council are the following: quartered in the United States and the domestic activities of • overseeing the quality and foreign banking organizations, efficiency of the examination in conjunction with the respon- and supervision function of the sible licensing authorities; as 12 Federal Reserve Banks; well as,

• developing, issuing, implement- ——Nonbank financial firms des- ing, and communicating regula- ignated as systemically impor- tions, supervisory policies, and tant by FSOC. guidance, and taking appropri- ate enforcement actions appli- cable to those organizations that 1 The FRB’s role as supervisor of BHCs, FHCs, are within the FRB’s supervi- and SLHCs is to review and assess the sory oversight authority; consolidated organization’s operations, risk- management systems, and capital adequacy to ensure that the holding company and its non- • approving or denying applica- bank subsidiaries do not threaten the viability tions for mergers, acquisitions, of the company’s depository institutions. In this role, the FRB serves as the “umbrella and changes in control by state supervisor” of the consolidated organization. member banks, SLHCs, and In fulfilling this role, the FRB relies, to the full- BHCs (including financial hold- est extent possible, on information and analy- sis provided by the appropriate supervisory ing companies (FHCs)); applica- authority of the company’s depository institu- tions for foreign operations of tions, securities, or insurance subsidiaries.

26 Other supervisory and regulatory appointed by the Reserve Bank’s Insured state-chartered banks that responsibilities of the FRB include class B and class C directors, are not members of the Federal monitoring compliance by entities and other executive officers who Reserve System are regulated and under the Board’s jurisdiction report directly to the president. supervised by the FDIC. The FRB with other statutes (e.g., the AML Among other responsibilities, a also has overall responsibility for provisions of the BSA), monitoring Reserve Bank employs a staff of the supervision of foreign bank- compliance with certain statutes examiners who examine state ing operations, including both that protect consumers in member banks and Edge Act and U.S. banks operating abroad and credit and deposit transactions, agreement corporations, conduct foreign banks operating branches regulating margin requirements BHC and SLHC inspections, and within the United States. on securities transactions, and examine the international opera- regulating transactions between tions of foreign banks—whose The Dodd-Frank Act directs the banking affiliates. head offices are usually located FRB to collect assessments, fees, within the Reserve Bank’s Dis- and other charges that are equal Policy decisions are implemented trict. When appropriate, examin- to the expenses incurred by the by the FRB or under delegated ers also visit the overseas offices Federal Reserve to carry out its authority to the Director for the of U.S. banking organizations to responsibilities with respect to Division of Banking Supervision obtain financial and operating supervision of (1) BHCs and and Regulation, the Director of information to evaluate adher- SLHCs with assets equal to or the Division of Consumer and ence to safe and sound banking greater than $50 billion and (2) Community Affairs, and to the practices. all nonbank financial companies 12 Federal Reserve Banks—each supervised by the FRB. of which has operational respon- National banks, which must be sibility within a specific geo- members of the Federal Reserve Additionally, the Dodd-Frank graphical area. The Reserve Bank System, are chartered, regulated, Act created an independent Districts are headquartered in and supervised by the OCC. CFPB within the Federal Reserve Boston, New York, Philadelphia, State-chartered banks may apply System. Cleveland, Richmond, Atlanta, to and be accepted for member- Chicago, St. Louis, Minneapolis, ship in the Federal Reserve Sys- The FRB covers the expenses Kansas City, Dallas, and San Fran- tem, after which they are subject of the CFPB’s operations with cisco. Each Reserve Bank has a to the supervision and regulation revenue it generates principally president (chief executive officer) of the FRB, which is coordinated from assessments on the 12 who serves for five years and is with a state’s banking authority. Federal Reserve Banks.

27 Consumer Financial • collecting, investigating, and Protection Bureau responding to consumer complaints; The CFPB was created in 2010 by the Dodd-Frank Act and assumed • collecting, researching, transferred authorities from other monitoring, and publishing federal agencies, and other new information relevant to the authorities, on July 21, 2011. The identification of risks to CFPB is an independent agency consumers and the proper and is funded principally by functioning of financial transfers from the FRB up to a markets; limit set forth in the statute. The CFPB requests transfers from • issuing rules, orders, and the FRB in amounts that are guidance implementing federal reasonably necessary to carry out consumer financial laws; its mission. Funding is capped at a pre-set percentage of the total 2009 • taking appropriate enforcement operating expenses of the Federal action to address violations of Reserve System, subject to an federal consumer financial law; annual adjustment. The Director and of the CFPB serves on the FDIC Board of Directors and the FSOC. • supervising covered entities to assess compliance with federal The CFPB seeks to foster a consumer financial law, obtain consumer financial marketplace information about the activities where customers can clearly see and compliance systems or prices and risks up front and can procedures of such persons, easily make product comparisons; and detect and assess risks to in which no one can build a consumers and markets for business model around unfair, consumer financial products deceptive, or abusive practices; and services. and that works for American consumers, responsible providers, The CFPB has statutory authority and the economy as a whole. to, among other things, conduct To accomplish this, the CFPB examinations of and require works to help consumer financial reports from entities subject to its markets operate by making rules supervisory authority. The CFPB more effective, by consistently and has supervisory authority over: fairly enforcing those rules, and by empowering consumers to take • Insured depository institutions more control over their economic and credit unions with total lives. assets over $10 billion and their affiliates. These institutions The Dodd-Frank Act sets forth the collectively hold more than following functions for the CFPB: 75 percent of the banking industry’s assets. • conducting financial education programs; • Certain nondepository entities

28 regardless of size—mortgage (these entities have more than transfers); and companies (originators, brokers, $7 million in annual receipts and servicers, as well as related resulting from consumer ——automobile financing market, loan modification or foreclosure reporting); effective August 31, 2015 (these relief services firms), payday entities have at least ten thou- lenders, and private education ——consumer debt collection sand aggregate annual origina- lenders. The CFPB can also market (these entities have tions). supervise the larger players, or annual receipts of more than “larger participants,” as defined $10 million resulting from The CFPB’s supervisory and by rule, in consumer financial consumer debt collection); enforcement activities are markets, and certain nondeposi- conducted by the Division of tory entities that it determines ——student loan servicing market, Supervision, Enforcement, Fair are posing a risk to consumers effective March 1, 2014 (these Lending and Equal Opportunity. in connection with the offer- entities have account volume The Division is headquartered in ing or provision of consumer that exceeds one million); Washington, D.C., with regional financial products or services. offices in San Francisco (West), To date, the CFPB has published ——international money transfer Chicago (Midwest), New York final rules that allow it to super- market, effective December (Northeast), and Washington, vise larger participants in the 1, 2014 (these entities have at D.C. (Southeast). Examination least one million aggregate staff is assigned to each of the ——consumer reporting market annual international money four regions.

29 Federal Deposit Insurance Insurance: The FDIC maintains Corporation stability and public confidence in our nation’s financial system Congress created the FDIC in by providing deposit insurance. 1933 to promote stability and As insurer, the FDIC continually public confidence in our nation’s evaluates and effectively manages banking system. The FDIC how changes in the economy, accomplishes its mission by financial markets, and banking insuring deposits, examining and system affect the adequacy and supervising financial institutions viability of the DIF. When an for safety and soundness and insured depository institution consumer protection, making fails, the FDIC ensures that the large and complex financial financial institution’s customers institutions resolvable, and have timely access to their managing receiverships. In its insured deposits. unique role as deposit insurer, the FDIC works in cooperation with The FDIC, through its Division other federal and state regulatory of Insurance and Research (DIR), agencies to identify, monitor, provides the public with a sound and address risks to the Deposit deposit insurance system by pub- Insurance Fund (DIF) posed by lishing comprehensive statistical insured depository institutions. information on banking; identi- fying and analyzing emerging Management of the FDIC is risks; conducting research that vested in a five-member Board supports deposit insurance, bank- of Directors. No more than three ing policy, and risk assessment; board members may be of the assessing the adequacy of the same political party. Three of DIF; and maintaining a risk-based the directors are appointed by premium system. the President, with the advice and consent of the Senate, for The Dodd-Frank Act revised the six-year terms. One of the three statutory authorities governing appointed directors is designated the FDIC’s management of the by the President as Chairman DIF. As a result, the FDIC has for a five-year term and another developed a comprehensive, is designated as Vice Chairman. long-term management plan for The other two board members are the DIF to reduce the effects of the Comptroller of the Currency cyclicality and achieve moderate, and the Director of the CFPB. steady assessment rates The Chairman also serves as a throughout economic and credit member of the FSOC. cycles, while also maintaining a positive fund balance, even Operational Structure during a banking crisis. The plan sets an appropriate target fund The FDIC’s operations are size and a strategy for setting organized into three major assessment rates and dividends. program areas: insurance, The FDIC has also adopted a supervision, and receivership Restoration Plan to ensure that management. A description of the reserve ratio reaches the each of these areas follows: statutorily mandated level of 1.35

30 percent by September 30, 2020, as itself if it deems necessary. The paying off depositors, and creat- required by the Dodd-Frank Act. Dodd-Frank Act expanded the ing and operating temporary FDIC’s responsibilities pertain- bridge banks until a resolution Supervision: The FDIC has primary ing to systemically important can be accomplished. DRR main- federal supervisory authority over financial institutions (SIFIs) and tains personnel in its field opera- insured state-chartered banks that non-bank financial companies tions branch in Dallas; it also are not members of the Federal designated by the FSOC. RMS’s maintains staff in FDIC regional Reserve System and for state- Complex Financial Institutions offices. chartered savings associations. (CFI) Group conducts activities The FDIC’s supervisory activities relating to ongoing risk moni- In addition, the Office of Com- for risk management and con- toring of the largest, most com- plex Financial Institutions (OCFI) sumer protection are primarily plex banking organizations and oversees the FDIC’s systemic risk organized into two divisions: the backup supervision of their responsibilities under the Dodd- Division of Risk Management insured depository institutions, Frank Act, including resolution Supervision (RMS) and the Divi- as well as ongoing risk monitor- plan reviews, matters related sion of Depositor and Consumer ing of certain nonbank financial to the FDIC’s Orderly Liquida- Protection (DCP). RMS oversees companies. RMS’s Supervisory tion Authority, and promoting the safety and soundness of FDIC- Examinations Branch also con- cross-border cooperation and supervised institutions and carries ducts reviews of resolution plans. coordination with respect to out the FDIC’s backup examina- Global-SIFIs. OCFI coordinates tion and enforcement authori- RMS and DCP are further with DRR and RMS in reviewing ties. DCP administers the FDIC’s organized into six regional offices resolution plans. consumer protection supervisory located in Atlanta, Chicago, functions, including its examina- Dallas, Kansas City, New York, As a general matter, all insolvent tion and enforcement programs and San Francisco. There are two bank holding companies for FDIC-supervised institutions area offices located in Boston are expected to file for with assets of $10 billion or less. (reporting to New York) and reorganization or liquidation Under the Dodd-Frank Act, the Memphis (reporting to Dallas). under the U.S. Bankruptcy Code, FDIC also retains examination In addition to the regional just as any failed non-financial and supervisory authority for sev- and area offices, the FDIC company would. The Orderly eral laws and regulations, includ- maintains 86 field offices for risk Liquidation Authority gives the ing the CRA, without regard to management and 76 field offices FDIC an alternative to resolve a the size of an institution. for compliance. failing financial company when bankruptcy would have serious As deposit insurer, the FDIC has Receivership Management: Bank adverse effects on U.S. financial backup examination and enforce- resolutions are handled by the stability. This authority is ment authority over all FDIC- FDIC’s Division of Resolutions triggered after recommendations insured institutions. Accord- and Receiverships (DRR). In by the appropriate federal ingly, the FDIC can examine for protecting insured depositors, agencies and a determination by insurance purposes any insured the FDIC is statutorily charged the Secretary of the Treasury in financial institution, either inde- with resolving failed depository consultation with the President. pendently or in cooperation with institutions at the least possible The Orderly Liquidation state or other federal supervisory cost to the DIF. In carrying out Authority imposes accountability authorities. The FDIC can also this responsibility, the FDIC has on shareholders, creditors, and recommend that the appropri- several methods to resolve banks, the management of the failed ate federal banking agency take including arranging the pur- company, while mitigating enforcement action against an chase of assets and assumption systemic risk and imposing no insured institution and may do so of liabilities of failed institutions, cost on taxpayers.

31 National Credit Union borrowing authority from the Administration U.S. Treasury and assessment authority to resolve corporate The NCUA, established by credit union issues; and Congress in 1970 through section 1752a of the Federal Credit • manage the Central Liquidity Union Act, is the independent Facility, created to improve federal agency that supervises the financial stability of credit the nation’s federal credit unions by providing liquidity union system. A three-member to the credit union system. bipartisan board, appointed by the President for six-year The NCUA also has statutory terms, manages the NCUA. The authority to examine and President also selects one board supervise NCUSIF-insured, member to serve as the Chairman. state-chartered credit unions The Chairman also serves as a in coordination with state member of FSOC. regulators.

The NCUA’s main responsibilities The NCUA is headquartered in are as follows: Alexandria, Virginia, and has five regional offices across the • charter, regulate, and supervise United States to administer its more than 3,800 federal credit responsibilities for chartering unions in the United States and and supervising credit unions. its territories; Additionally, the Asset Management and Assistance • administer the National Credit Center located in Austin, Texas, Union Share Insurance Fund manages the recovery of assets (NCUSIF), which insures for liquidated credit unions. member share accounts in NCUA examiners conduct on-site almost 6,100 federal and state- examinations and supervision chartered credit unions; of each federal credit union and selected state-chartered credit • administer the Temporary unions. The NCUA is funded by Corporate Credit Union the credit unions it regulates and Stabilization Fund, which has insures.

32 Office of the Comptroller of programs include: the Currency • chartering banks and issuing The OCC is the oldest federal interpretations related to bank regulatory agency, estab- permissible banking activities; lished as a bureau of the Treasury Department by the National Cur- • establishing and communicat- rency Act of 1863. It is headed by ing regulations, policies, and the Comptroller of the Currency, operating guidance applicable who is appointed to a five-year to banks; and term by the President with the advice and consent of the Senate. • supervising the national system The Comptroller is also a director of banks and savings associa- of the FDIC and NeighborWorks tions through on-site exami- America, and a member of the nations, off-site monitoring, FSOC. systemic risk analyses, and appropriate enforcement activi- The OCC was created by ties. Congress to charter, regulate, and supervise national banks. On July To meet its objectives, the OCC 21, 2011, pursuant to the Dodd- maintains a nationwide staff of Frank Act, the OCC assumed bank examiners and other profes- supervisory responsibility for sional and support personnel. federal savings associations, Headquartered in Washington, as well as rulemaking DC, the OCC has four district authority relating to all savings offices, which are located in Chi- associations. The OCC regulates cago, Dallas, Denver, and New and supervises 1,070 national York. In addition, the OCC main- banks and trust companies, 416 tains a network of field offices federal savings associations, and 19 satellite locations in cities and 49 federal branches of throughout the United States, as foreign banks—accounting for well as core examiner teams in approximately 68 percent of the 23 of the largest national bank- total assets of all U.S. commercial ing companies and an examining banks, savings associations, and office in London, England. branches of foreign banks. The OCC seeks to ensure that national The Comptroller receives advice banks and federal savings on policy and operational issues associations (collectively “banks”) from an Executive Committee safely and soundly manage their comprised of senior agency offi- risks, comply with applicable cials who lead major business laws, compete effectively with units. other providers of financial services, offer products and The OCC is funded primarily by services that meet the needs of semiannual assessments on banks, customers, and provide fair access interest revenue from its invest- to financial services and fair ment in U.S. Treasury securities, treatment of their customers. and other fees. The OCC does not receive congressional appropria- The OCC’s mission-critical tions for any of its operations.

33 ASSETS, LIABILITIES, AND NET WORTH of U.S. Commercial Banks, Savings Institutions, and Credit Unions as of December 31, 20151 Billions of dollars

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

Total assets 19,527 10,152 2,356 2,411 2,354 679 371 628 576

Total loans and receivables (net) 10,218 5,298 1,150 1,640 718 363 266 403 380 Loans secured by real estate8 4,822 2,558 604 984 51 0 227 202 196 Consumer loans9 1,882 984 82 297 – 127 8 202 182 Commercial and industrial loans 2,234 1,202 296 275 392 33 28 3 5 All other loans and lease receivables10 1,407 629 181 106 275 210 6 0 0 LESS: Allowance for loan and lease losses 127 75 13 22 – 7 3 4 3 Federal funds sold and securities purchased under agreements to resell 436 158 50 8 218 1 1 0 0 Cash and due from depository institutions11 2,614 1,143 379 167 713 54 17 73 68 Securities and other obligations12 3,717 2,090 545 430 139 225 63 124 101 U.S. government obligations13 891 364 121 87 48 33 49 102 87 Obligations of state and local governments14 343 186 53 92 – 6 6 0 0 Other securities 2,483 1,540 371 251 91 186 8 22 14 Other assets15 2,542 1,463 232 166 566 36 24 28 27

Total liabilities 17, 592 9,007 2,100 2,122 2,354 608 326 560 515

Total deposits and shares16 14,311 7, 567 1,903 1,894 1,109 545 277 522 494 Federal funds purchased and securities sold under agreements to repurchase 676 190 39 30 406 5 5 1 0 Other borrowings17 1,458 781 94 165 285 47 40 31 15 Other liabilities18 1,147 469 64 33 554 11 4 6 6

Net worth19 1,935 1,145 256 289 - 71 45 68 61

Memorandum: Number of institutions reporting 12,463 1,041 839 3,543 213 403 403 3,764 2,257

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

34 INCOME AND EXPENSES of U.S. Commercial Banks, Savings Institutions, and Credit Unions for the Twelve Months Ending December 31, 20151 Billions of dollars

Savings Credit U.S. Commercial Banks2 Institutions4 Unions3

OCC FDIC Regu- Regu- State lated lated State Non- Federal State Federal State Item Total National Member5 Member Charter Charter7 Charter Charter

Operating income: 788 456 94 125 44 15 29 25 Interest and fees on loans 416 224 42 82 23 10 19 16 Other interest and dividend income 101 67 13 11 4 2 2 2 All other operating income 271 165 39 32 17 3 8 7

Operating expenses: 549 309 65 86 31 12 25 21 Salaries and benefits 213 121 30 31 7 5 10 9 Interest on deposits and shares 32 14 3 7 2 1 3 2 Interest on other borrowed money 20 11 2 3 1 2 1 0 Provision for loan and lease losses 41 24 2 7 4 0 2 2 All other operating expenses 243 139 28 38 17 4 9 8

Net operating income 239 147 29 39 13 3 4 4

Securities gains and losses 3 3 0 0 0 0 0 0

Extraordinary items 0 0 0 0 0 0 0 0

Income taxes 69 46 7 11 4 1 – –

Net income 173 104 22 28 9 2 4 4

Memorandum: Number of institutions reporting 12,250 1,041 839 3,543 403 403 3,764 2,257

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

35 36 APPENDIX A: RELEVANT STATUTES

Federal Financial Institutions (3) the term “financial of the Council. Thereafter the Examination Council Act institution” means a chairmanship shall rotate among commercial bank, a savings the members of the Council. 12 U.S.C. § 3301. Declaration of bank, a trust company, purpose a savings association, a (c) Term of office building and loan association, It is the purpose of this chapter to a homestead association, a The term of the Chairman of the establish a Financial Institutions cooperative bank, or a credit Council shall be two years. Examination Council which shall union. prescribe uniform principles and (d) Designation of officers and standards for the Federal exami- 12 U.S.C. § 3303. Financial employees nation of financial institutions by Institutions Examination Council the Office of the Comptroller of The members of the Council may, the Currency, the Federal Deposit (a) Establishment; composition from time to time, designate other Insurance Corporation, the officers or employees of their Board of Governors of the Fed- There is established the Financial respective agencies to carry out eral Reserve System, the Federal Institutions Examination Council their duties on the Council. Home Loan Bank Board, and the which shall consist of— National Credit Union Adminis- (e) Compensation and expenses tration and make recommenda- (1) the Comptroller of the tions to promote uniformity in Currency, Each member of the Council shall the supervision of these financial serve without additional compen- institutions. The Council’s actions (2) the Chairman of the sation but shall be entitled to rea- shall be designed to promote con- Board of Directors of the sonable expenses incurred while sistency in such examination and Federal Deposit Insurance carrying out his official duties as to insure progressive and vigilant Corporation, such a member. supervision. (3) a Governor of the Board 12 U.S.C. § 3304. Costs and expenses 12 U.S.C. § 3302. Definitions of Governors of the Federal of Council Reserve System designated by As used in this chapter— the Chairman of the Board, One-fifth of the costs and expenses of the Council, including the (1) the term “Federal finan- (4) the Director of the salaries of its employees, shall cial institutions regulatory Consumer Financial Protection be paid by each of the Federal agencies” means the Office of Bureau, financial institutions regulatory the Comptroller of the Cur- agencies. Annual assessments for rency, the Board of Governors (5) the Chairman of such share shall be levied by the of the Federal Reserve System, the National Credit Union Council based upon its projected the Federal Deposit Insur- Administration Board; and budget for the year, and additional ance Corporation, the Office assessments may be made during of Thrift Supervision, and the (6) the Chairman of the the year if necessary. National Credit Union Admin- State Liaison Committee. istration; 12 U.S.C. § 3305. Functions of (b) Chairmanship Council (2) the term “Council” means the Financial Institu- The members of the Council (a) Establishment of principles tions Examination Council; and shall select the first chairman and standards

37 The Council shall establish uni- agencies shall submit to the of any innovation devised by any form principles and standards Council, within a time period Federal regulatory agency. and report forms for the examina- specified by the Council, tion of financial institutions which a written statement of the (f) Annual report shall be applied by the Federal reasons the recommendation is financial institutions regulatory unacceptable. Not later than April 1 of each agencies. year, the Council shall prepare (c) Development of uniform an annual report covering its (b) Making recommendations reporting system activities during the preceding regarding supervisory matters year. and adequacy of supervisory The Council shall develop uni- tools form reporting systems for (g) Flood insurance federally supervised financial (1) The Council shall institutions, their holding compa- The Council shall consult with make recommendations nies, and nonfinancial institution and assist the Federal entities for uniformity in other subsidiaries of such institutions or for lending regulation, as such supervisory matters, such as, holding companies. The authority term is defined in section 4121(a) but not limited to, classifying to develop uniform reporting sys- of Title 42, in developing and loans subject to country tems shall not restrict or amend coordinating uniform standards risk, identifying financial the requirements of section 78l(i) and requirements for use by institutions in need of special of Title 15. regulated lending institutions supervisory attention, and under the national flood evaluating the soundness of (d) Conducting schools for insurance program. large loans that are shared examiners and assistant examin- by two or more financial ers 12 U.S.C. § 3306. State liaison institutions. In addition, the Council shall make The Council shall conduct schools To encourage the application of recommendations regarding for examiners and assistant exam- uniform examination principles the adequacy of supervisory iners employed by the Federal and standards by State and Fed- tools for determining the financial institutions regulatory eral supervisory agencies, the impact of holding company agencies. Such schools shall be Council shall establish a liaison operations on the financial open to enrollment by employ- committee composed of five institutions within the holding ees of State financial institu- representatives of State agencies company and shall consider tions supervisory agencies and which supervise financial institu- the ability of supervisory employees of the Federal Housing tions which shall meet at least agencies to discover possible Finance Board under conditions twice a year with the Council. fraud or questionable specified by the Council. Members of the liaison commit- and illegal payments and tee shall receive a reasonable practices which might occur (e) Affect on Federal regula- allowance for necessary expenses in the operation of financial tory agency research and devel- incurred in attending meetings. institutions or their holding opment of new financial institu- companies. tions supervisory agencies Members of the Liaison Commit- tee shall elect a chairperson from (2) When a Nothing in this chapter shall be among the members serving on recommendation of the construed to limit or discourage the committee. Council is found unacceptable Federal regulatory agency by one or more of the research and development 12 U.S.C. § 3307. Administration applicable Federal financial of new financial institutions institutions regulatory supervisory methods and tools, (a) Authority of Chairman of agencies, the agency or nor to preclude the field testing Council

38 The Chairman of the Council is such experts and consultants as the results of such study. authorized to carry out and to are necessary to carry out the delegate the authority to carry provisions of this chapter. 12 U.S.C. § 3310. Establishment of out the internal administration Appraisal Subcommittee of the Council, including the 12 U.S.C. § 3308. Access to books, appointment and supervision of accounts, records, etc., by Council There shall be within the Council employees and the distribution a subcommittee to be known as of business among members, For the purpose of carrying out the “Appraisal Subcommittee” employees, and administrative this chapter, the Council shall which shall consist of the desig- units. have access to all books, accounts, nees of the heads of the Federal records, reports, files, memoran- financial institutions regulatory (b) Use of personnel, services, dums, papers, things, and property agencies, the Bureau of Consumer and facilities of Federal financial belonging to or in use by Federal Financial Protection, and the Fed- institutions regulatory agencies, financial institutions regulatory eral Housing Finance Agency. Federal Reserve banks, and Fed- agencies, including reports of exam- Each such designee shall be a eral Home Loan Banks. ination of financial institutions or person who has demonstrated their holding companies from what- knowledge and competence con- In addition to any other authority ever source, together with work- cerning the appraisal profession. conferred upon it by this chapter, papers and correspondence files At all times at least one member of in carrying out its functions under related to such reports, whether the Appraisal Subcommittee shall this chapter, the Council may uti- or not a part of the report, and all have demonstrated knowledge lize, with their consent and to the without any deletions. and competence through licen- extent practical, the personnel, ser- sure, certification, or professional vices, and facilities of the Federal 12 U.S.C. § 3309. Risk management designation within the appraisal financial institutions regulatory training profession. agencies, Federal Reserve banks, and Federal Home Loan Banks, (a) Seminars 12 U.S.C. § 3311. Required review of with or without reimbursement regulations therefore. The Council shall develop and administer training seminars (a) In general (c) Compensation, author- in risk management for its ity, and duties of officers and employees and the employees of Not less frequently than once employees; experts and consul- insured financial institutions. every 10 years, the Council tants and each appropriate Federal (b) Study of risk management banking agency represented In addition, the Council may— training program on the Council shall conduct a review of all regulations (1) subject to the provisions Not later than end of the 1-year prescribed by the Council or by of Title 5 relating to the com- period beginning on August 9, any such appropriate Federal petitive service, classification, 1989, the Council shall— banking agency, respectively, and General Schedule pay in order to identify outdated or rates, appoint and fix the com- (1) conduct a study on the otherwise unnecessary regulatory pensation of such officers and feasibility and appropriateness requirements imposed on insured employees as are necessary to of establishing a formalized depository institutions. carry out the provisions of this risk management training chapter, and to prescribe the program designed to lead (b) Process authority and duties of such to the certification of Risk officers and employees; and Management Analysts; and In conducting the review under subsection (a) of this section, (2) obtain the services of (2) report to the Congress the Council or the appropriate

39 Federal banking agency shall— such action is appropriate. federally related transactions, including a code of profes- (1) categorize the regulations (e) Report to Congress sional responsibility; and described in subsection (a) of this section by type (such as Not later than 30 days after (B) for the registration and consumer regulations, safety carrying out subsection (d)(1) supervision of the operations and soundness regulations, of this section, the Council shall and activities of an appraisal or such other designations as submit to the Congress a report, management company; determined by the Council, which shall include— or the appropriate Federal (2) monitor the banking agency); and (1) a summary of any requirements established significant issues raised by by the Federal financial (2) at regular intervals, public comments received institutions regulatory agencies provide notice and solicit by the Council and the with respect to— public comment on a particular appropriate Federal banking category or categories of agencies under this section (A) appraisal standards regulations, requesting and the relative merits of such for federally related transac- commentators to identify issues; and tions under their jurisdiction, areas of the regulations that and are outdated, unnecessary, or (2) an analysis of whether unduly burdensome. the appropriate Federal (B) determinations as to banking agency involved is which federally related trans- (c) Complete review able to address the regulatory actions under their jurisdic- burdens associated with tion require the services of a The Council or the appropriate such issues by regulation, or State certified appraiser and Federal banking agency shall whether such burdens must be which require the services of ensure that the notice and addressed by legislative action. a State licensed appraiser; comment period described in subsection (b)(2) of this section (3) maintain a national Excerpts from Statute is conducted with respect to registry of State certified Governing Appraisal all regulations described in and licensed appraisers Subcommittee subsection (a) of this section not who are eligible to perform less frequently than once every 10 appraisals in federally related years. 12 U.S.C. § 3332. Functions of transactions; and Appraisal Subcommittee (d) Regulatory response (4) Omitted. (a) In general The Council or the appropriate (5) transmit an annual Federal banking agency shall— The Appraisal Subcommittee report to the Congress not shall— later than June 15 of each year (1) publish in the Federal that describes the manner in Register a summary of the (1) monitor the which each function assigned comments received under this requirements established by to the Appraisal Subcommittee section, identifying significant States— has been carried out during issues raised and providing the preceding year. The comment on such issues; and (A) for the certification report shall also detail the and licensing of individuals activities of the Appraisal (2) eliminate unnecessary who are qualified to perform Subcommittee, including the regulations to the extent that appraisals in connection with results of all audits of State

40 appraiser regulatory agencies, son or a majority of its members environment. and provide an accounting when there is business to be con- of disapproved actions and ducted. A majority of members (c) Construction of chapter warnings taken in the previous of the Appraisal Subcommittee year, including a description shall constitute a quorum but 2 Nothing in this chapter is of the conditions causing the or more members may hold hear- intended to, nor shall it be con- disapproval and actions taken ings. Decisions of the Appraisal strued to, encourage unsound to achieve compliance. Subcommittee shall be made by lending practices or the allocation the vote of a majority of its mem- of credit. (6) maintain a national bers. The subject matter discussed registry of appraisal in any closed or executive session * * * * * management companies that shall be described in the Federal either are registered with Register notice of the meeting. 12 U.S.C. § 2803. Maintenance of and subject to supervision of records and public disclosure a State appraiser certifying Excerpts from Home and licensing agency or are * * * Mortgage Disclosure Act operating subsidiaries of a Federally regulated financial (f) Data disclosure system; institution. 12 U.S.C. § 2801. Congressional operation, etc. findings and declaration of purpose (b) Monitoring and reviewing The Federal Financial Foundation (a) Findings of Congress Institutions Examination Council, in consultation with The Appraisal Subcommittee shall The Congress finds that some the Secretary, shall implement monitor and review the practices, depository institutions have some- a system to facilitate access to procedures, activities, and organi- times contributed to the decline data required to be disclosed zational structure of the Appraisal of certain geographic areas by under this section. Such system Foundation. their failure pursuant to their shall include arrangements for chartering responsibilities to pro- a central depository of data 12 U.S.C. § 3333. Chairperson of vide adequate home financing to in each primary metropolitan Appraisal Subcommittee; term of qualified applicants on reasonable statistical area, metropolitan Chairperson; meetings terms and conditions. statistical area, or consolidated metropolitan statistical area that (a) Chairperson (b) Purpose of chapter is not comprised of designated primary metropolitan statistical The Council shall select the Chair- The purpose of this chapter is to areas. Disclosure statements shall person of the subcommittee. The provide the citizens and public be made available to the public term of the Chairperson shall be officials of the United States with for inspection and copying at two years. sufficient information to enable such central depository of data them to determine whether for all depository institutions (b) Meetings; quorum; voting depository institutions are fill- which are required to disclose ing their obligations to serve the information under this section The Appraisal Subcommittee housing needs of the communities (or which are exempted pursuant shall meet in public session after and neighborhoods in which they to section 2805(b) of this title) notice in the Federal Register, but are located and to assist public and which have a home office may close certain portions of these officials in their determination of or branch office within such meetings related to personnel and the distribution of public sector primary metropolitan statistical review of preliminary State audit investments in a manner designed area, metropolitan statistical area, reports, at the call of the Chairper- to improve the private investment or consolidated metropolitan

41 statistical area that is not comprised of designated primary level, and racial characteristics. comprised of designated primary metropolitan statistical areas, metropolitan statistical areas. aggregate data by census tract for (b) Staff and data processing all depository institutions which resources * * * * * are required to disclose data under section 2803 of this title or The Board shall provide staff and 12 U.S.C. § 2809. Compilation of which are exempt pursuant to data processing resources to the aggregate data section 2805(b) of this title. The Council to enable it to carry out Council shall also produce tables the provisions of subsection (a) of (a) Commencement; scope of indicating, for each primary this section. data and tables metropolitan statistical area, metropolitan statistical area, (c) Availability to public Beginning with data for calendar or consolidated metropolitan year 1980, the Federal Financial statistical area that is not The data and tables required Institutions Examination Council comprised of designated primary pursuant to subsection (a) of this shall compile each year, for each metropolitan statistical areas, section shall be made available to primary metropolitan statistical aggregate lending patterns for the public no later than December area, metropolitan statistical area, various categories of census tracts 31 of the year following the or consolidated metropolitan grouped according to location, calendar year on which the data is statistical area that is not age of housing stock, income based.

42 APPENDIX B: 2015 AUDIT REPORT

March 2, 2016

Federal Financial Institutions Examination Council 3501 Fairfax Drive, B-7081a Arlington, VA 22226-3550

Dear Members of the Federal Financial Institutions Examination Council:

This letter transmits the Independent Auditors’ Report prepared by KPMG LLP (KPMG) on the Federal Financial Institutions Examination Council’s (FFIEC) financial statements. The Office of Inspector General contracted with KPMG to audit the financial statements of the FFIEC as of and for the year ended December 31, 2015. The accompanying financial statements as of and for the year ended December 31, 2014, were audited by a different independent audit firm.

The contract requires the audit to be performed in accordance with the auditing standards generally accepted in the United States of America and in accordance with the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. The Office of Inspector General reviews and monitors the work of KPMG to ensure compliance with Government Auditing Standards and the contract. KPMG is responsible for the accompanying Independent Auditors’ Report, the Report on Internal Control Over Financial Reporting, and the Report on Compliance and Other Matters, all dated March 1, 2016.

We do not express an opinion on the FFIEC’s financial statements. In addition, we do not draw conclusions on the Report on Internal Control Over Financial Reporting or the Report on Compliance and Other Matters.

Sincerely,

Mark Bialek Inspector General cc: Judith Dupre, Executive Secretary, FFIEC Scott Alvarez, Chairman, FFIEC Legal Advisory Group, and General Counsel, Legal Division, Board of Governors of the Federal Reserve System William Mitchell, Chief Financial Officer and Director, Division of Financial Management, Board of Governors of the Federal Reserve System

43 44 KPMG LLP Suite 12000 1801 K Street,Street, NW Washington, DC 20006

Independent Auditors’ Report

To the Federal Financial Institutions Examination Council:

Report on the Financial Statements We have audited the accompanying financial statements of the Federal Financial Institutions Examination Council (the “Council”), which comprise the balance sheet as of December 31, 2015, and the related statements of operations and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion on the Financial Statements In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Federal Financial Institutions Examination Council as of December 31, 2015, and the results of its operations and cash flows for the year then ended in accordance with U.S. generally accepted accounting principles.

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity.

45

Other Matter 2014 Financial Statements The accompanying financial statements of the Council as of December 31, 2014 and for the year then ended were audited by other auditors whose report, dated March 17, 2015, expressed an unmodified opinion on those financial statements.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 1, 2016 on our consideration of the Council’s internal control over financial reporting and our report dated March 1, 2016 on our tests of its compliance with certain provisions of laws, regulations, and contracts, and other matters. The purpose of those reports is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards in considering the Council’s internal control over financial reporting and compliance.

March 1, 2016

46 FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Balance Sheets

As of December 31, 2015 2014 ASSETS CURRENT ASSETS: Cash $ 532,824 $ 701,084 Accounts receivable from member agencies 1,299,861 705,340 Accounts receivable from non-members agencies—net 61,042 116,907 Prepaid Expense 735,000 —

Total current assets 2,628,727 1,523,331

NONCURRENT ASSETS:

Equipment leased—net 148,205 195,007 Central Data Repository software—net 710,992 997,178 Home Mortgage Disclosure Act software—net 230,389 603,172

Total noncurrent assets 1,089,586 1,795,357

TOTAL ASSETS $ 3,718,313 $ 3,318,688

LIABILITIES AND CUMULATIVE RESULTS OF OPERATIONS

CURRENT LIABILITIES: Accounts payable and accrued liabilities payable to member agencies $ 503,599 $ 564,199 Accounts payable and accrued liabilities payable to non-member agencies 771,419 438,056 Accrued annual leave 63,783 56,415 Capital lease payable 48,290 47,348 Deferred revenue 1,058,290 764,868 Total current liabilities 2,445,381 1,870,886

LONG-TERM LIABILITIES: Capital lease payable 107,998 156,288 Deferred revenue 618,090 835,480 Deferred rent (99) —

Total long-term liabilities 725,989 991,768

Total liabilities 3,171,370 2,862,654

CUMULATIVE RESULTS OF OPERATIONS 546,943 456,034

TOTAL LIABILITIES AND CUMULATIVE RESULTS OF OPERATIONS $ 3,718,313 $ 3,318,688 See notes to financial statements.

47 FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Statements of Operations

For the years ended December 31,

2015 2014 REVENUES:

Assessments on member agencies $ 819,935 $ 773,165 Central Data Repository 4,966,292 3,842,296 Home Mortgage Disclosure Act 3,357,402 4,063,765 Tuition 4,171,070 4,037,830 Community Reinvestment Act 1,012,801 1,104,290 Uniform Bank Performance Report 566,982 674,391

Total revenues 14,894,482 14,495,737

EXPENSES:

Data processing 3,997,421 4,611,282 Professional fees 6,511,069 4,836,412 Salaries and related benefits 2,497,502 2,282,907 Depreciation, amortization, and net gains or losses on disposals 705,771 1,499,745 Rental of office space 322,205 264,989 Administration fees 303,000 245,000 Travel 306,995 512,824 Other seminar expenses 49,326 55,455 Rental and maintenance of office equipment 38,518 34,840 Office and other supplies 36,443 46,217 Printing 31,943 15,405 Miscellaneous 3,380 23,924

Total expenses 14,803,573 14,429,000

RESULTS OF OPERATIONS 90,909 66,737

CUMULATIVE RESULTS OF OPERATIONS—Beginning of year 456,034 389,297

CUMULATIVE RESULTS OF OPERATIONS—End of year $ 546,943 $ 456,034

See notes to financial statements.

48 FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Statements of Cash Flows

For the years ended December 31,

2015 2014

CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES: Results of operations $ 90,909 $ 66,737

Adjustments to reconcile results of operations to net cash provided by operating activities: Depreciation 627,679 1,502,906 Net loss (gain) on disposal of property and equipment 78,091 (3,161) (Increase) decrease in assets: Accounts receivable from member agencies (594,521) 384,807 Accounts receivable from non-member agencies 55,865 12,948 Prepaid expenses and other assets (735,000) — Increase (decrease) in liabilities: Accounts payable and accrued liabilities payable to member agencies (60,600) (138,917) Other accounts payable and accrued liabilities payable to non-member agencies 333,288 (339,704) Accrued annual leave 7,368 13,312 Deferred revenue (current and non-current) 76,031 (690,917) Deferred rent (99) (6,783)

Net cash from (used in) operating activities (120,989) 801,228

CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:

Capital expenditures — (688,280)

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:

Capital lease payments (47,271) (38,011)

NET INCREASE (DECREASE) IN CASH (168,260) 74,937

CASH BALANCE—Beginning of year 701,084 626,147

CASH BALANCE—End of year $ 532,824 $ 701,084

See notes to financial statements.

49 FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL

Notes to Financial Statements as of and for The Subcommittee was created pursuant to expenses incurred related to the Community the Years Ended December 31, 2015 and 2014 Public Law 101–73, Title XI of the Financial Reinvestment Act (CRA) processing system Institutions Reform, Recovery, and Enforce- and the HMDA processing system. 1. Organization and Purpose ment Act of 1989. Although it is a subcom- The Federal Financial Institutions Examina- mittee of the Council, the Appraisal Subcom- Capital Assets—Equipment is recorded at cost tion Council (the Council) was established mittee maintains separate financial records less accumulated depreciation. Depreciation under Title X of the Financial Institutions and administrative processes. The Council is is calculated on a straight-line basis over the Regulatory and Interest Rate Control Act not responsible for any debts incurred by the estimated useful lives of the assets, which of 1978. The purpose of the Council is to Appraisal Subcommittee, nor are Appraisal range from three to five years. Upon the sale prescribe uniform principles and standards Subcommittee funds available for use by the or other disposition of a depreciable asset, the for the federal examination of financial Council. cost and related accumulated depreciation institutions and to make recommendations are removed and any gain or loss is recog- to promote uniformity in the supervision of 2. Significant Accounting Policies nized. The Central Data Repository (CDR) these financial institutions. The Council has and the HMDA processing system, internally six voting members. The five federal agen- Basis of Accounting—The Council prepares developed software projects, are recorded at cies represented on the Council during 2015, its financial statements in accordance with cost less accumulated depreciation; unique referred to collectively as Member Agencies, accounting principles generally accepted in useful lives are applied to these assets as are as follows: the United States (GAAP). appropriate.

• Board of Governors of the Federal Reserve Revenues—Assessments are made on member Deferred Revenue—Deferred revenue includes System (FRB) organizations to fund the Council’s opera- cash collected and accounts receivable from • Consumer Financial Protection Bureau tions based on expected cash needs and are member organizations to fund the develop- (CFPB) recognized as revenue in the period in which ment of CDR and the HMDA processing • Federal Deposit Insurance Corporation they are assessed. Amounts over- or under- system. Revenue is recognized over the useful (FDIC) assessed due to differences between assess- life of the software. • National Credit Union Administration ments and actual expenses are presented in (NCUA) the “Cumulative Results of Operations” line Deferred Rent—The lease for office and class- • Office of the Comptroller of the Currency item during the year and then may be used to room space contains scheduled rent increases (OCC) offset or increase the next year’s assessment. over the term of the lease. Scheduled rent Deficits in “Cumulative Results of Opera- increases must be considered in determining In accordance with the Financial Services tions” can be recouped in the following year’s the annual rent expense to be recognized. Regulatory Relief Act of 2006, a representa- assessments. The deferred rent represents the difference tive state regulator was added as a full voting between the actual lease payments and the member of the Council in October 2006. The Council provides training seminars in rent expense recognized. the Washington, D.C. area and at locations The Council was given additional statutory throughout the country for member organiza- Estimates—The preparation of financial state- responsibilities by Section 340 of the Housing tions, other federal agencies, and state orga- ments in conformity with GAAP requires and Community Development Act of 1980, nizations. The Council recognizes revenue management to make estimates and assump- Public Law 96-399. Among these responsi- from member agencies for the production and tions that affect the reported amounts of bilities is the implementation of a system to distribution of the Uniform Bank Performance assets and liabilities and the disclosure of facilitate public access to data that depository Reports (UBPR) through the FDIC. Tuition contingent assets and liabilities at the date institutions must disclose under the Home and UBPR revenue are adjusted at year-end to of the financial statements and the reported Mortgage Disclosure Act of 1975 (HMDA) and match expenses incurred as a result of provid- amounts of revenues and expenses during the the aggregation of annual HMDA data, by ing education classes and UBPR services. For reporting period. Actual results could differ census tract, for each metropolitan statistical differences between revenues and expenses, from those estimates. Significant items subject area. member agencies are assessed an additional to such estimates include useful lives of CDR amount or credited a refund based on each and the HMDA processing system. The Council’s financial statements do not member’s proportional cost for the Examiner include financial data for the Council’s Education and UBPR budget. The Council Allowance for Doubtful Accounts—Accounts Appraisal Subcommittee (the Subcommittee). recognizes revenue from member agencies for receivable for non-members are shown net Notes continue on the following page.

50 of the allowance for doubtful accounts. 09, Revenue from Contracts with Customers 2015 2014 Accounts receivable considered uncollectible (Topic 606). The guidance is applicable to all Office of the Comp- are charged against the allowance account in contracts for the transfer of goods or services troller of the the year they are deemed uncollectible. The regardless of industry or type of transaction. Currency 78,583 194,452 allowance for doubtful accounts is adjusted This update requires recognition of revenue $ 503,599 $ 564,199 monthly, based upon a review of outstanding in a manner that reflects the consideration Operations: receivables. that the entity expects to receive in return for the transfer of goods or services to custom- Council operat- ing expenses Prepaid Expenses —The Council books ers. In August 2015, the FASB issued 2015-14, reimbursed by expenses as prepaid for costs paid in advance Revenue from Contracts with Customers (Topic members $ 819,935 $ 773,165 that will be expensed with the passage of time 606): Deferral of the Effective Date. This update FRB-provided admin- or upon the occurrence of a triggering event is effective for the Council for the year ending istrative support $ 303,000 $ 245,000 in future periods. December 31, 2019 and is not expected to have FRB-provided data a material effect on the Council’s financial processing $ 3,997,421 $ 4,611,282 Commitments and contingencies — Liabilities statements since the Council reports annually for loss contingencies arising from claims, and satisfies all material performance obliga- Tuition revenue: assessments, litigation, and other sources are tions prior to year-end. Member tuition $ 4,019,020 $ 3,801,635 recorded when it is probable that a liability has been incurred and an amount can be 3. Selected Transactions with Member reasonable estimated. Legal costs incurred Agencies The Council does not directly employ per- in connection with loss contingencies are sonnel, but rather member agencies detail expensed as incurred. personnel to support Council operations. 2015 2014 These personnel are paid through the payroll Accounts receivable: Tax Exempt Status — The Council is not systems of member agencies. Salaries and subject to state or local income taxes, and Board of Governors fringe benefits, including retirement benefit of the Federal federal law does not impose tax on the plan contributions, are reimbursed to these Reserve System $ 297,539 $ 132,125 Council’s income. agencies. The Council does not have any post- Consumer Financial retirement or post-employment benefit liabili- Protection Bureau 2,589 12,364 Recently Issued Accounting Standards — In ties since Council personnel are included in April 2015, the FASB issued ASU 2015-05, Federal Deposit Insur- the plans of the member agencies. ance Corporation 539,340 330,290 Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40) - Customer’s National Credit Union Member agencies are not reimbursed for Accounting for Fees Paid in a Cloud Computing Administration 57,80 0 16,278 the costs of personnel who serve as Council Arrangement. The amendments in this update Office of the Comp- members and on the various task forces and provide guidance to customers about whether troller of the committees of the Council. The value of these a cloud computing arrangement includes Currency 402,593 214,283 contributed services is not included in the a software license. If a cloud computing $ 1,299,861 $ 705,340 accompanying financial statements. arrangement includes a software license, then Accounts payable and the customer should account for the software accrued liabilities: In 2014, the Council authorized the OCC to license element of the arrangement consistent Board of Governors contract with a third party on behalf of the with the acquisition of other software licenses. of the Federal Council to perform a cyber risk assessment If a cloud computing arrangement does not Reserve System $ 223,553 $ 221,749 related to financial institutions, and other include a software license, the customer Consumer Financial third parties and critical infrastructures upon should account for the arrangement as a Protection Bureau 4,331 4,905 which the financial services sector depends. service contract. This update is effective for Federal Deposit Insur- The OCC collected the cost of the cyber risk the Council for the year ending December 31, ance Corporation 164,650 117,666 assessment directly from the Council member 2016 and is not expected to have a material National Credit Union agencies. The Council’s financial statements effect on the Council’s financial statements. Administration 32,482 25,427 do not reflect any activity related to the cyber risk assessment or contract. In May 2014, the FASB issued ASU 2014- Notes continue on the following page.

51 4. Central Data Repository (CDR) 2015 2014 depreciating asset. The FRB will continue In 2003, the Council entered into an agree- Depreciation processing the HMDA data through 2017 and ment with UNISYS to enhance the methods Depreciation for the as a result, in 2015 the Council has extended and systems used to collect, validate, process, CDR project $ 208,095 $ 900,515 the estimated useful life of the 2011 rewrite and distribute Call Report information used through December 31, 2017. The extension of by member organizations, and to store this CDR Financial Activity—The Council is fund- useful life decreases the depreciation expense information in CDR. CDR was placed into ing the project by billing the three participat- by $184,000. The Council also extended the service in October 2005. At that time, the ing Council member agencies (FRB, FDIC, period that the associated deferred revenue is Council began depreciating CDR on the and OCC). Activity for the years ended recognized over, which decreases the revenue straight-line basis over its estimated use- December 31, 2015 and 2014 is as follows: recognized by the same amount of deprecia- ful life of 63 months. In 2009, the Council tion; therefore, the extension does not affect reevaluated the useful life of CDR and 2015 2014 net income. Additionally, since the new asset decided to extend the estimated useful life by Deferred Revenue will be controlled and owned by the CFPB, an additional 36 months based on enhanced the new asset will be reflected on the CFPB’s Beginning balance $ 997,178 $ 1,131,321 functionality of the software. In 2013, the financial statements and not the Council’s. Additions and other Council again reevaluated the useful life of adjustments (78,091 ) 766,372 CDR and decided to extend the estimated 2015 2014 Less revenue useful life by an additional 12 months to recognized (208,095 ) (900,515) Capital Asset HMDA December 31, 2014. In 2014, the Council Beginning balance $ 2,783,868 $ 2,783,868 Ending balance $ 710,992 $ 997,178 added additional enhancements of $688,281 Total asset $ 2,783,868 $ 2,783,868 and extended the useful life of the asset, Current portion deferred revenue $ 208,095 $ 208,095 Less accumulated including the enhancements, for an additional depreciation (2,553,479) (2,180,696) 56 months. The Council similarly extended Long-term deferred HMDA the period of the associated deferred revenue. revenue 502,897 789,083 software—net $ 230,389 $ 603,172 The Council records depreciation expenses Total Deferred Depreciation and recognizes the same amount of revenue; Revenue $ 710,992 $ 997,178 Depreciation for the Total CDR Revenue therefore, the extension does not affect net HMDA Rewrite income. The Council also pays for hosting Total CDR Revenue $ 4,966,292 $ 3,842,296 project $ 372,782 $ 556,773 and maintenance expenses for CDR and Accounts payable recognizes the associated revenue from mem- and acccrued bers. Software in process represents non-cash liabilities related The Council records depreciation expenses activity excluded from the Statements of Cash to CDR: and recognizes the same amount of revenue Flows. Payable to UNISYS each year. The Council also pays for mainte- for the CDR $ 714,605 $ 346,284 nance expenses for the current HMDA pro- 2015 2014 cessing system and recognizes the associated 5. Home Mortgage Disclosure Act (HMDA) Capital Asset CDR revenue from the members and non-mem- bers. The financial activity associated with Beginning balance $ 21,917,947 $ 21,151,575 FRB provides maintenance and support for the processing system for the years ended Software placed in the HMDA processing system. In 2007, the December 31, 2015 and 2014 is as follows: use during the Council began a rewrite of the entire HMDA year — 688,281 processing system, which went into service in 2015 2014 Software in process 78,091 2011. At that time, the Council began depre- Deferred Revenue Loss on disposal (78,091) — ciating the system on the straight-line basis Beginning balance $ 603,172 $ 1,159,945 over its estimated useful life of 60 months. Additions — — Total asset $ 21,839,856 $ 21,917,947 Under the Dodd-Frank Wall Street Reform Less revenue Less accumulated and Consumer Protection Act of 2010 (Dodd- recognized (372,783) (556,773) depreciation (21,128,864) (20,920,769) Frank Act), responsibility for HMDA is Ending balance 230,389 603,172 Central Data transitioning to the CFPB which is developing Repository Current portion a new HMDA system to replace the currently software—net $ 710,992 $ 997,178 deferred revenue $ 115,195 $ 556,774

Notes continue on the following page.

52 2015 2014 $46,000 for 2015 and 2014, respectively. 7. Subsequent Events Long-term deferred Contingent rentals for excess usage of the revenue 115,194 46,398 printing equipment amounted to $17,000 and There were no subsequent events that require Total Deferred $14,000 in 2015 and 2014, respectively. adjustments to or disclosures in the financial Revenue $ 230,389 $ 603,172 statements as of December 31, 2015. Subse- Total HMDA Revenue The future minimum lease payments required quent events were evaluated through March The Council recog- under the capital leases and the present value 01, 2016, which is the date the financial state- nized the following of the net minimum lease payments as of ments were available to be issued. revenue from: December 31, 2015 are as follows: Member organiza- Years ending December 31, Amount tions for the pro- duction and distri- 2016 $ 72,821 bution of reports 2017 72,821 under the HMDA 2018 72,822 (includes the deferred revenue 2019 12,137 recognized) $ 2,847,101 $ 3,461,874 Total minimum lease payments 230,601 Department of Less amount representing Housing and maintenance (69,145) Urban Develop- Net minimum lease pay- ment's participa- ments 161,456 tion in the HMDA project 510,301 601,891 Less amount representing interest (5,168) Total HMDA Present value of net mini- Revenue $ 3,357,402 $ 4,063,765 mum payments 156,288 Less current maturities of capital In 2015, the Council entered into an agree- lease payments (48,290) ment with the U.S Census Bureau to replicate the Census 2000-based surnames table using Long-term capital lease obliga- the 2010 Census data. The project cost of tions $ 107,998 $735,000 was paid for in 2015 and the member agencies were assessed the same amount. Because the work will not be performed and Operating Leases—The Council entered into a completed until 2016, the transaction is recog- new operating lease with the FDIC in Decem- nized as a prepaid expense and is included in ber 2015 for a five year period with the option the current portion of deferred revenue. to extend for an additional five years to secure office and classroom space. Minimum annual 6. Leases payments under the operating lease having Capital Leases—The Council terminated initial or remaining non-cancelable lease term existing capital leases for printing equipment in excess of one year at December 31, 2015, are in February 2014, which is a non-cash event as follows: of $54,800 excluded from Statement of Cash Flows, and subsequently entered into new Years ending December 31, Amount capital leases in March 2014. Equipment 2016 $ 311,663 consists of $234,000 for the capital leases as of December 31, 2015 and 2014; the $234,000 is a 2017 315,689 non-cash event excluded from the Statement 2018 319,811 of Cash Flows. Accumulated depreciation 2019 324,029 was $86,000 and $39,000 for 2015 and 2014, 2020 328,342 respectively. The depreciation expense for Total minimum lease payments 1,599,534 the printing equipment was $47,000 and

53 KPMG LLP Suite 12000 1801 K Street, NW Washington, DC 20006

Independent Auditors’ Report on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards

To the FederalFederal Financial Institutions Examination Council:

We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Federal Financial Institutions Examination Council (the “Council”), which comprise the balance sheet as of December 31, 2015, and the related statements of operations and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated March 1, 2016.

Internal Control Over Financial Reporting In planning and performing our audit of the financial statements as of and for the year ended December 31, 2015, we considered the Council’s internal control over financial reporting (“internal control”) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Council’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Council’s internal control.

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

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

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

March 1, 2016

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity.

54 KPMG LLP Suite 12000 1801 K StrStreet,eet, NW Washington, DC 20006

Independent Auditors’ Report on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards

To the Federal Financial Institutions Examination Council:

We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Federal Financial Institutions Examination Council (the “Council”), which comprise the balance sheet as of December 31, 2015, and the related statements of operations and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated March 1, 2016.

Compliance and Other Matters As part of obtaining reasonable assurance about whether the Council’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, and contracts, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

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

March 1, 2016

KPMG LLP is a Delaware limited liability partnership, thethe U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity.

55 56 APPENDIX C: MAPS OF AGENCY REGIONS AND DISTRICTS

58 Board of Governors of the Federal Reserve System

59 Consumer Financial Protection Bureau

60 Federal Deposit Insurance Corporation

61 National Credit Union Administration

62 Office of the Comptroller of the Currency

57 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WA MT ME ND MN ID 1 OR 9 MI VT WI NY MI NH SD Minneapolis Boston WY 2 MA CT CA RI NV IA New York NE PA 3 UT 7 Philadelphia 12 Chicago IN Cleveland NJ CO DE OH 4 MO VA MD San Francisco KS Washington, DC 10 Kansas City WV Richmond St. Louis IL KY AZ 8 NC NM 5 OK TN TX AR SC GA MS AL Atlanta

LA 6 Dallas 11 FL

12

Hawaii

Alaska

58 CONSUMER FINANCIAL PROTECTION BUREAU

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

FL

West Northeast

Hawaii

Puerto Rico

Alaska

59 FEDERAL DEPOSIT INSURANCE CORPORATION SUPERVISORY REGIONS

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

Dallas Region FL

San Francisco Region New York Region

Hawaii

Virgin Islands

Guam Puerto Rico

Alaska

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

60 NATIONAL CREDIT UNION ADMINISTRATION

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

FL

Austin

V III

Hawaii

Virgin Islands

Guam Puerto Rico

Alaska

61 OFFICE OF THE COMPTROLLER OF THE CURRENCY

WA MT ME ND MN ID OR MI VT WI NY MI NH SD Northeastern WY MA Central District District CT CA RI NV IA New York NE PA UT Chicago IN NJ CO DE MO OH MD Western District Denver VA KS Washington, DC WV IL KY AZ NC NM OK TN TX AR SC GA MS AL Southern District LA Dallas FL

Western DistrictNortheastern District

Hawaii

Virgin Islands

Guam Puerto Rico

Alaska

62 APPENDIX D: ORGANIZATIONAL LISTING OF PERSONNEL

December 31, 2015

Members of the Council

Daniel Tarullo, Chairman Karen Lawson JeanMarie Komyathy (NCUA) Member Director Thomas Rollo (OCC) Board of Governors of the Office of Banking Wendy Spicher Federal Reserve System (FRB) Michigan Department of (SLC Representative/Pennsylvania) Martin Gruenberg, Vice Chairman Insurance and Financial Services Amol Vaidya (FRB) Chairman Task Force on Information Sharing Federal Deposit Insurance Council Staff Officer Corporation (FDIC) Jami Blume, Chairman (CFPB) Richard Cordray Judith Dupre Nida Davis (FRB) Director Executive Secretary John Kolhoff Consumer Financial Protection (SLC Representative/Michigan) Bureau (CFPB) Interagency Staff Groups Todd Roscoe (NCUA) Debbie Matz Robin Stefan (OCC)

Chairman Agency Liaison Group Terrie Templemon (FDIC) National Credit Union Task Force on Reports Administration (NCUA) Arthur Lindo (FRB) Thomas Curry Doreen Eberley (FDIC) Robert Storch, Chairman (FDIC) Comptroller of the Currency Steve Kaplan (CFPB) Douglas Carpenter (FRB) Office of the Comptroller Larry Fazio (NCUA) Ece Yolas Onat (CFPB) of the Currency (OCC) Jennifer Kelly (OCC) Virginia Phillips (NCUA) David Cotney Mary Beth Quist Cynthia Stuart Chairman (SLC Representative/CSBS) (SLC Representative/Vermont) State Liaison Committee (SLC) Rusty Thompson (OCC) Legal Advisory Group Commissioner of Banks Task Force on Supervision Commonwealth of Massachusetts Scott Alvarez, Chairman (FRB) Charles Yi (FDIC) Jennifer Kelly, Chairman (OCC) State Liaison Committee (SLC) Meredith Fuchs (CFPB) Doreen Eberley (FDIC) Michael McKenna (NCUA) Michael Gibson (FRB) David Cotney, Chairman Amy Friend (OCC) Steve Kaplan (CFPB) Commissioner of Banks Margaret Liu Karen Lawson Commonwealth of (SLC Representative/CSBS) (SLC Representative/Michigan) Massachusetts D. Scott Neat (NCUA) Task Force on Consumer Compliance Caroline Jones Task Force on Surveillance Systems Commissioner Carol Evans, Chairman (FRB) Banking and Securities Matthew Biliouris (NCUA) Robin Stefan, Chairman (OCC) Texas Department of Savings and Luke Brown (FDIC) Matthew Canzater (NCUA) Mortgage Lending Carmine Costa Jay Caver Mary Hughes (SLC Representative/Connecticut) (SLC Representative/Alabama) Financial Institutions Bureau Chief Grovetta Gardineer (OCC) Charles Collier (FDIC) Idaho Department of Finance Alice Hrdy (CFPB) Matt Mattson (FRB) Lauren Kingry (Resigned 12/1/2015) Andrew White (CFPB) Task Force on Examiner Education Superintendent Arizona Department of Philip Mento, Chairman (FDIC) Financial Institutions Joseph Arleth (CFPB)

63 Council Staff

Shown are the Council staff at the L. William Seidman Center in Arlington, Virginia, where they have their offices and classrooms for examiner education programs.

64