About Supervision & Regulation
As part of its core mission, the supervision and regulation department is responsible for supervising and regulating state-chartered banks that are members of the Federal Reserve System, bank holding companies, financial holding companies, foreign banking organizations, and thrift holding companies. Organizations within the boundaries of the Seventh District are located within portions of Illinois, Indiana, Michigan, Wisconsin and all of Iowa.
The supervision of these institutions is conducted via a risk assessment process that is comprised of three basic elements — risk identification, risk analysis and risk resolution. Using this risk assessment process ensures that appropriate attention is given to the areas that pose the greatest risk to the institution, the Federal Deposit Insurance Funds, and the nation's payments system.
In addition to CAMELS and Compliance ratings, examinations also assess specialty risk areas including the institution’s Bank Secrecy Act (BSA), Trust, and Information Technology programs.
Supervision & Regulation Letters — SR Letters
SR letters are issued by the Federal Reserve Board of Governors' Division of Banking Supervision and Regulation, and typically direct the System's supervision staff and/or institution management to follow certain procedures to ensure compliance with laws, regulations or supervisory policy. The letters complement Federal Reserve regulations in this respect.
Congress has assigned to the Federal Reserve responsibility for implementing certain laws pertaining to a wide range of banking and financial activities. Those laws are implemented in part through regulations. These regulations are organized by alphabetical letter and occasionally are modified to meet the current needs of the financial community. The public is invited to provide input to proposed modifications via the comment letter process.
The Examination Process
Federal Reserve examinations are carried out in accordance with supervisory mandates that establish expectations about the frequency of institution examinations and rating standards that convey criteria to be used in determining a numerical indicator of the institution's overall condition.
State member bank examination results are summarized by an institution's confidential CAMELS and Compliance ratings. CAMELS ratings are explicitly considered in the Federal Deposit Insurance Corporation's deposit insurance pricing, with financially stronger institutions paying smaller insurance premiums and financially weaker institutions paying higher insurance premiums.
Bank holding companies' and financial holding companies' examination frequency requirements are established by policy, with examination results summarized by the confidential RFI/C(D) rating, or in the case of savings and loan holding companies, the indicative RFI rating.
The Fed's examination processes are described in a series of comprehensive examination manuals.
The Federal Reserve utilizes enforcement actions as supervisory tools to work with institutions to correct significant deficiencies in their risk management practices. The actions typically require institution management and boards of directors to take affirmative action to address weaknesses in an institution's operations.
Enforcement actions, including Written Agreements, Cease and Desist Orders, and Civil Money Penalties, are available to the public online.