STATE OF NEW YORKBANKING DEPARTMENT
ONE STATE STREETNEW YORK, NY 10004-1417
Date: July 16, 2007
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New York State Banking Department
The DepartmentEstablished in 1851Oldest bank regulatory agency in the U.S.Primary regulator for state-licensed and
state-chartered financial entitiesAssets of regulated institutions total nearly
$1.3 trillion
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The Department (con’t)
Employs over 500 full-time employees Approximately 70 % of staff are bank examiners or specialists Offices:
Main office at One State Street, NY, NY Syracuse, New YorkAlbany, New York
Website: http://www.banking.state.ny.us
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Supervision & Examination of FBOs
Risk-Focused Examination & SupervisionEmploy a risk-focused examinationExamination concentrates on areas that
pose the greatest risks to the institutionExamination Cycle14 months for the majority of branches
and agenciesContinuous supervision for larger, more
complex NY offices
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Examination Ratings
ROCA Ratings – for foreign branchesRisk Management, Operational Controls,
Compliance, Asset QualityComponents rated on a scale of 1 to 5,
with 1 being the strongest and 5 the weakest
Composite rating- also on a scale of 1 to 5
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Asset Quality Evaluation of Asset Quality
Assess the effectiveness of credit risk mgt
Determine the ability of the institution to pay liabilities and claims in liquidation
Assess assets & off-balance sheet exposure as of examination date
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Credit File
Original, secondary, and tertiary sources of repayment;
Purpose and underwriting of the credit relative to its purpose, terms & structure;
Overall financial condition and resources of borrower; and,
Credit history of borrower.
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Regulatory Classifications
Special Mention (SM) - potential weaknesses • Financial factors• Non-financial factors
Substandard (S/S) – well-defined weaknesses• Current or expected unprofitable operations• Inadequate debt service coverage• Inadequate liquidity• Repayment may depend on collateral
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Regulatory Classifications (con’t)
Doubtful (D) – S/S credit plus collection or repayment in full highly questionable or improbable.
• Borrowers are usually in default• Lack adequate liquidity or capital• Lack resources to remain an operating
entity
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Regulatory Classifications (Con’t)
Loss – Uncollectible; continuance as bankable assets is not warranted.
• Borrowers are often in bankruptcy• Formally suspended debt repayments• Ceased normal business operations
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Risk Assessment
Credit Risk Quantity of Credit Risk• Underwriting factors• Credit quality factors
Quality of Credit Risk Mgt• Policies, Processes, Credit Granting
• Credit Monitoring, Personnel
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Risk Assessment (con’t)
Credit Risk Evaluation Process
Consider the following:Borrower’s current & expected financial
conditionBorrower’s history of servicing debtCollateral pledgedQualitative factors
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Risk Assessment (con’t)
Examining Risk Rating Process Whether risk ratings are accurate & timelyEffectiveness of system
Credit Review – verification of loan ratings by independent third party
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Risk Assessment (con’t)
Internal Audit – should test integrity of risk rating data and review documentation
Risk Focused Examination Process
Steps: Understanding the institution/information
gatheringAssessing institutional risk
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Risk Assessment (con’t)
Risk Focused Examination Process (con’t)
Planning/scheduling supervisory workDefining examination activitiesPerforming On-Site examination and
reporting findingsConducting ongoing off-site supervision
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We hope our presentation has provided
you with some invaluable knowledge
and that you would benefit from it.
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References
Supervision ManualsFederal Reserve Boardhttp://www.federalreserve.gov
Federal Financial Institutions Examinations Councilhttp://www.ffiec.gov
Risk Management Associationhttp://www.rmahq.org
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Foreign and Wholesale Division
• Approximately 100 institutions maintaining a branch or agency with assets in excess of $1.1 trillion dollars
• 40 banks maintain representative offices and a number of foreign owned subsidiary institutions
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Foreign and Wholesale Division
• Different countries have different types of regulation
• NYSBD relies on FRB SOSA ratings and analysis of the home country supervision system
• Joint supervision arrangement with FRB
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Foreign and Wholesale Division
• The license to open an agency, branch or representative office is issued by NYSBD
• Asset pledge$2 million for the smallest branches and agencies$100 million for the largest banks
• Liquidity or asset maintenance in special circumstances
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Foreign and Wholesale Division
US relies on regular on site examinations
• Examination teams organized by global regionsField staffPortfolio managersCentral Point of contact (CPC)
• Alternate year or joint examinations with FRB
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Foreign and Wholesale Division
• Risk focused examinations
• ROCA components
• Increase importance and emphasis on BSA, AML, OFAC, Patriot Act, etc
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Foreign and Wholesale Division
Increased cooperation and communication
with other regulators:
“Tri-state group” : New York, Connecticut and New Jersey
Conference of State Bank Supervisors (CSBS)
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Foreign and Wholesale Division
Increased cooperation and communicationwith other regulators (Con’t):
International liaison
Information sharing agreements with other supervisors
Communication from the branch or agency in New York
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Foreign and Wholesale Division
Multiplicity of regulators, banking, securities,
insurance in the US
Gramm Leach Bliley
Financial Holding Company (FHC) status
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