Regulatory Exams and Covid-19: Are You Ready?

On June 23, 2020 per FIL-64-2020, Interagency guidance for assessing safety and soundness was issued. This guidance outlines how examiners should respond to Covid-19 when evaluating financial institutions.

Per this guidance, examiners will take into account the stresses caused by Covid-19 and to exercise flexibility in their supervisory response.


Examiners will continue assess an institution’s compliance with existing policies and procedures. Emphasis will be placed on their risk management systems and the ability to identify, monitor and control risk. Examiners will also review if appropriate actions are being taken in response to stresses caused by Covid-19 impacts.

The implication is that if you are not appropriately monitoring and managing risks with appropriate systems, your institution could have a composite or component downgrade.

A good Loan Portfolio Management (LPM) system and process will be critical to assess and have in place prior to your next exam. As outlined by the regulators, the following are key components when they assess LPM in your institution:

  • Oversight: Clearly defined the roles and responsibilities of management
  • Risk Identification: Risk rating each loan as part of timely credit evaluation
  • Policy Exceptions, Procedures and Underwriting Guidelines: A system is needed to identify, mitigate, and monitor.
  • Portfolio Segmentation and Risk Diversification: LPM includes reporting of concentrations by type, industry and customer.

Is your institution prepared to defend your commercial portfolio ahead of your next safety and soundness exam?

Solid underwriting and streamlined servicing can minimize future credit risk or losses. Find out how the Square 1 Credit Suite helps community banks and credit union MBLs work more efficiently.

Is it time to take another look?

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