oversight

Foreign Banks: Opportunities Exist to Enhance Supervision Program as Implementation Proceeds

Published by the Government Accountability Office on 1997-05-09.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                United States General Accounting Office

GAO             Report to the Chairwoman and the
                Ranking Minority Member,
                Subcommittee on Financial Institutions
                and Consumer Credit, House Committee
                on Banking and Financial Service
May 1997
                FOREIGN BANKS
                Opportunities Exist to
                Enhance Supervision
                Program as
                Implementation
                Proceeds




GAO/GGD-97-80
                   United States
GAO                General Accounting Office
                   Washington, D.C. 20548

                   General Government Division

                   B-272838

                   May 9, 1997

                   The Honorable Marge Roukema
                   Chairwoman
                   The Honorable Bruce F. Vento
                   Ranking Minority Member
                   Subcommittee on Financial Institutions
                     and Consumer Credit
                   Committee on Banking and Financial Services
                   House of Representatives

                   This report responds to your request for information on the oversight of
                   the U.S. operations of foreign banking organizations (FBO). The Foreign
                   Bank Supervision Enhancement Act of 1991 (FBSEA) gave the Federal
                   Reserve System (FRS) enhanced supervisory and regulatory authority over
                   foreign banks operating in the United States.1 Before FBSEA, each such
                   office was examined by a federal or state supervisor and treated as a
                   separate entity even if the FBO had multiple offices in the United States.
                   Although FRS had overall authority for supervising the foreign banks’ U.S.
                   presence, no formal mechanism existed to enable the various agencies to
                   share information about an FBO with offices in multiple states and to
                   coordinate supervisory activities. In keeping with its enhanced authority,
                   FRS has worked with other supervisory agencies to develop the Foreign
                   Banking Organization Supervision Program (FBO Program) with the intent
                   of improving and better coordinating supervision of FBO offices in the
                   United States.

                   As agreed with your subcommittee, the objectives of this report are to
                   (1) describe the FBO Program and (2) evaluate the banking supervisors’
                   progress in implementing this program.


                   The FBO Program focuses on integrating into supervisory procedures a
Results in Brief   common understanding of a given FBO in its entirety, including policies and
                   practices in the FBO’s home country as well as the overall condition of the
                   FBO’s combined U.S. operations. The program calls for coordinated
                   development and common use of five new products. We refer to two of
                   these as “the country reports.” One country report is to provide
                   information about the financial system and the supervisory and
                   governmental policies in the FBO’s home country, and the other is to



                   1
                    Foreign banks may operate in the United States through bank or nonbank subsidiaries and other types
                   of offices, including branches, agencies, and representative offices.



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provide information about significant accounting policies and practices in
the home country.

A third product, the Strength-of-Support Assessment (SOSA), which is to be
based on the country reports and other financial data, is to provide
analysis and a ranking to reflect the U.S. supervisors’ judgment about the
FBO’s ability to provide its U.S. operations necessary financial and
managerial support. SOSA reports are to be used along with other
information for reaching decisions regarding the scope and frequency of
exams and for other supervisory and enforcement matters.

A fourth product, the Summary of Condition and Combined Rating, is
designed to provide FBO management and U.S. supervisors with an overall
assessment of the FBO’s U.S. operations. The last new supervisory product,
an annual comprehensive examination plan, is intended to better
coordinate examinations of U.S. offices of FBOs with multiple U.S. banking
operations and/or significant U.S. nonbanking operations. This
examination plan is to be developed from information in the SOSAs, the
results of individual prior examinations, and the overall assessment of the
FBO’s combined U.S. operations.


In our review of the FBO Program, we found that banking supervisors had
made progress in implementing the program and had begun to realize
benefits from it. However, we also identified areas where improvements
could be made. As of December 31, 1996, about 43 percent of the required
SOSA reports and their related home country reports had been finalized.2
Supervisors identified some broad benefits of the program—particularly
increased communication and cooperation among supervisors and
improved access to information about FBOs and their home countries. At
the same time, comments of supervisory officials and staff indicated some
skepticism about how useful the information from the SOSA reports will be
in improving FBO supervision. However, they also said that the various
Federal Reserve Banks are developing different formats and strategies for
integrating the information into the supervisory process. In addition, we
identified a number of weaknesses in SOSA and country reports that could
limit the program’s effectiveness. These included inconsistent, incomplete,
or outdated information, as well as SOSA rankings that did not appear to be
justified by information in the report.




2
 Federal Reserve Board officials told us that, as of April 7, 1997, approximately 92 percent of the
SOSAs and their related home country reports were in final or draft form.



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                                            As of December 31, 1996, a total of 281 FBOs based in 59 countries had
Background                                  banking operations in the United States that were subject to the
                                            procedural requirements of the FBO program. FBOs operate in the United
                                            States through a number of types of offices with differing powers and
                                            oversight. The most common of these types of entities are described in
                                            table 1.


Table 1: Types of Offices FBOs Operate in the United States
Type of office               Description                                                                         Supervision
Branches and agencies        Branches are legal and operational extensions of their parent foreign bank          FRS and either Office of the
                             and have broad banking powers, including accepting limited uninsured                Controller of the Currency
                             deposits, lending, money market services, trade financing, and other                (OCC) if federal license or
                             activities related to the service of foreign and U.S. clients. Agencies have        states if state license.a
                             similar powers but may not accept deposits from U.S. citizens or residents.
Subsidiary bank              Separately capitalized legal entity chartered in the U.S. with shares owned OCC, or FDIC and state
                             or controlled by the parent foreign bank. Banking powers and legal or       regulators, or FRS and
                             regulatory restrictions are the same as those of any other domestic bank. states.
Representative office        A marketing office/liaison between the head office of the foreign bank and          FRS and states.
                             its customers and correspondent banks in a state or region. May engage
                             in representational and administrative functions, but may not make any
                             business decisions on behalf of the foreign bank.
Edge Act Corporation or      Edge Act Corporations are separate subsidiaries limited to international            Edge Act corporations: FRS.
Agreement Corporation        banking activities specified in the Edge Act. Domestic activities permitted         Agreement Corporations:
                             include receipt of deposits from foreign governments, financing of                  FRS, states.
                             contracts, projects performed abroad, financing imports and exports.
                             Agreement Corporations are limited to essentially the same powers as
                             Edge Act Corporations by agreement with FRS.
Commercial lending company Specialized nondepository institution authorized under state law. May                 FRS and states.
                           engage in borrowing and lending activities, including accepting deposits
                           at off-shore facilities.
Nonbank subsidiary           Nonbank subsidiaries of FBOs may engage in activities such as                       FRS, states, and other
                             underwriting or dealing in certain securities to the same extent that U.S.          federal regulators,
                             bank holding companies may engage in such activities.                               depending on activities.
                                            a
                                              There are also a limited number of insured branches that are supervised in part by the Federal
                                            Deposit Insurance Corporation (FDIC).



                                            As shown in table 2, branches and agencies are the most common types of
                                            FBO banking offices in the United States, and they account for about
                                            51 percent of the total foreign bank assets in the United States as of
                                            December 31, 1996.




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Table 2: U.S. Operations of FBOs as of
December 31, 1996                                                                                                         Total assets
                                         Type of office                                        Number of offices           (in billions)
                                         Branches and agencies                                                 498                $821
                                         Subsidiary banks                                                       90                 226
                                         Edge Act and Agreement Corporations                                    21                    2
                                         Other deposit-taking entitiesa                                         29                   25
                                         Total banking offices                                                 638               1,074
                                         U.S. nonbanking subsidiaries                                          672                 537
                                         Representative offices                                                138                  NA
                                         Total                                                               1,448              $1,611
                                         a
                                             Includes commercial lending companies, savings banks, and trust companies.

                                         Source: Federal Reserve System.



                                         An individual FBO may have a variety of these types of offices operating in
                                         the United States, and each individual office may be supervised by a
                                         different federal or state regulator, with FRS having overall authority.
                                         Figure 1 shows the organizational structure of the U.S. operations of a
                                         hypothetical FBO. It also shows the U.S. supervisor for each office.




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Figure 1: Organizational Structure of the U.S. Operations of a Hypothetical FBO



                                     Foreign banking
                                     organization




 U.S. operations a
                                                                                         State licensed
                            State chartered               Bank holding
                                                                                         insured branch
                            commercial                    company
                                                                                         (state and FDIC)
                            lending                       (FRS)
                            company
                            (state)

                                                                                          Federally
                                                                                          licensed agency
                                          Federally               Section 20              (OCC)
                                          chartered               securities
                                          Edge Act                subsidiary
                                          Corporation             (FRS)
                                          (FRS)                                            State licensed
                                                                                           representative
                                                                                           office (state)
                     Federally                        State chartered
                     chartered                        commercial
                     commercial                       bank
                     bank                             (state and
                     (OCC)                            FDIC)




                          Separately chartered and capitalized subsidiary
                          Legal and operational extension of the parent FBO




                                              a
                                                  FRS has overall authority for all U.S. operations of FBOs.

                                              Source: GAO example developed from FRS documents.




                                              To address the objectives of this report, we reviewed examination
Scope and                                     manuals, relevant laws, and guidance issued by the Board of Governors of
Methodology                                   FRS (Federal Reserve Board). We interviewed officials from the Federal
                                              Reserve Board and the Federal Reserve Banks of Atlanta, Chicago, New
                                              York, and San Francisco. We also interviewed state bank supervisors from




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California, Florida, Illinois, and New York, and officials from FDIC, OCC, and
the Institute of International Bankers—an association of foreign banking
organizations with U.S. operations. The Federal Reserve Banks and state
bank supervisors we interviewed are responsible for overseeing most FBO
operations in the United States.

In addition to our interviews, we developed a data collection instrument
(DCI) to help us systematically collect information from each of the FBO
products: the country reports, SOSAs, examinations, overall assessments of
U.S. offices, and the comprehensive exam plans. The type of information
we collected included basic financial information on the FBO and its U.S.
operations, results of past examinations of U.S. operations, and
information on the supervisory and financial system of the foreign
country, among other things. This DCI was designed to help us compare the
content of these reports and determine the extent of use of information
from SOSAs and country reports in comprehensive exam plans.

We used the DCI to review the FBO products from 18 different countries. We
chose countries located in Europe, Asia, and North and South America to
obtain variation in geographic location and levels of financial
development. For each country, we chose two FBOs, if two existed, and
reviewed their SOSAs, comprehensive exam plans, and overall U.S.
assessment, if available. We chose the FBOs included in our judgmental
sample to obtain variation in size, SOSA ranking, and types of offices they
had operating in the United States.

We obtained written comments on a draft of this report from the Federal
Reserve Board. These comments are discussed at the end of this letter and
are reprinted in appendix I. We did our work in Washington, D.C.; New
York; California; Illinois; and Florida in accordance with generally
accepted government auditing standards from September 1996 to
January 1997.




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                                The FBO Program was designed to provide the U.S. banking supervisory
The FBO Program                 agencies with a collective mechanism for supervising the U.S. operations
Was Designed to                 of FBOs in a highly coordinated, thorough, and efficient manner, according
Improve and Better              to the Federal Reserve Board. FRS began to implement the FBO Program in
                                March 1995, when it issued its initial guidance on the program. Federal
Coordinate                      Reserve Board officials told us that the program was scheduled to be
Supervision of FBO              implemented over a 3- to 5-year period, but that they hoped to have it fully
                                operational within 3 years.3 The interagency program—which consists of a
Operations in the               number of supervisory steps and assessments that each have their
United States                   individual requirements regarding content, procedures, and timing—calls
                                for the development and distribution of six supervisory products.4


The Six Supervisory             The six supervisory products of the FBO Program are to provide
Products Are to Provide a       information about the home countries of the FBOs, the FBOs themselves,
Wide Range of Supervisory       and the FBOs’ operations in the United States. The six products are
Information                 •   Review of Home Country Financial System,
                            •   Review of Significant Home Country Accounting Policies and Practices,
                            •   Strength-of-Support Assessment,
                            •   Individual Examination Plan,
                            •   Comprehensive Examination Plan, and
                            •   Summary of Condition and Combined Rating.

                                We refer to the first two products, which focus on a country’s financial
                                system and accounting policies and practices, as “the country reports.”
                                The contents of the six supervisory products are summarized in table 3.




                                3
                                 For the initial implementation phase of the FBO program, Federal Reserve Board officials said they
                                decided to apply the FBO program only to FBOs with a direct banking presence in the United States
                                through branches or agencies, Edge or Agreement Corporations, commercial lending companies, or
                                subsidiary banks. Once the program becomes fully operational, FRS will consider incorporating
                                foreign banks with a representative office presence only.
                                4
                                 These products include the five new products discussed earlier and the individual exam plan, which
                                the regulators have routinely used in the past.



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Table 3: Supervisory Products of FRS’
FBO Program                             Product                       Summary of contents
                                        Review of Home Country        For each country with bank representation in the United
                                        Financial System              States, the assigned supervisor (usually a Federal
                                                                      Reserve Bank) is to describe the financial system
                                                                      structure, process of supervision and regulation,
                                                                      treatment of problem or failed institutions, and, if
                                                                      warranted by existing issues, current condition and
                                                                      operating performance of the financial system.
                                        Review of Significant Home    For each country with bank representation in the United
                                        Country Accounting Policies   States, the assigned supervisor (usually a Federal
                                        and Practices                 Reserve Bank) is to highlight accounting policies and
                                                                      practices that differ significantly from U.S. standards,
                                                                      including asset valuation, income and expense items,
                                                                      consolidation rules, off- vs. on-balance sheet items, tax
                                                                      considerations, and disclosure rules.
                                        Strength-of-Support           For each FBO, the assigned supervisor (usually a Federal
                                        Assessment (SOSA)             Reserve Bank) is to assess internal and external
                                                                      resources to give U.S. operations necessary (1) financial
                                                                      and (2) managerial support. Financial support
                                                                      assessment—summarized by A-E rankings—is to be
                                                                      based on available information on the financial and
                                                                      operational condition of the FBO in the context of the
                                                                      home country reports. Managerial support assessment
                                                                      requires placement of an asterisk (*) beside the letter
                                                                      assessment if actual or potential managerial or
                                                                      operational control risks are apparent.
                                        Individual Exam Plan          For each FBO office in the United States, U.S. federal or
                                                                      state supervisors are to develop examination plans for
                                                                      individual offices based primarily on the findings and
                                                                      scope of previous examinations, the results of any off-site
                                                                      surveillance, the latest assessment of the combined U.S.
                                                                      operations of the FBO and the role of the office in the
                                                                      context of the FBO’s overall U.S. business activities, and
                                                                      the evaluation of the FBO and the assigned SOSA.
                                        Comprehensive Examination     For all U.S. operations of an FBO except for commercial
                                        Plan                          banks, the assigned Federal Reserve Bank is to prepare
                                                                      comprehensive examination plans that describe the
                                                                      overall scope and frequency for the next series of
                                                                      examinations.
                                        Summary of Condition and      For all FBOs with multiple U.S. operations, an assigned
                                        Combined Rating               Federal Reserve Bank is to prepare a summary in the
                                                                      form of a letter to the FBO’s head office management that
                                                                      highlights areas of overall strength and any systemic
                                                                      weaknesses in the FBO’s U.S. operations. A rating of the
                                                                      FBO’s combined U.S. operations, based on a 1-5 scale, is
                                                                      to be included.

                                        The Federal Reserve has assigned responsibility for preparing the FBO
                                        products to the various Reserve Banks that have offices of foreign banks




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                           in their districts.5 Responsibility for the products is generally assigned
                           according to the location of the FBO offices in the United States. Given the
                           preponderance of FBO offices in New York, the Federal Reserve Bank of
                           New York was preparing the majority of products. Draft country and SOSA
                           reports are to be circulated to other relevant U.S. supervisors for
                           comment. Final versions of the reports are also to be provided to the
                           relevant U.S. supervisors.6 Based on FRS guidance issued in August 1996,
                           SOSA rankings are to be considered final only when they have been
                           formally reviewed and approved by a committee headed by officials of the
                           Federal Reserve Board’s international supervision function.


The Country Reports and    One of the principal goals of the SOSA is to identify FBOs that may pose
the SOSA Are Intended to   risks to their U.S. operations or to U.S. financial markets due to financial,
Improve U.S. Supervision   operational, or other concerns at the FBO as a whole. As table 3 shows, the
                           SOSA utilizes a two-component assessment ranking system for financial and
of FBO Operations in the   managerial support. Financial support is summarized by A to E rankings,
United States              with A representing the lowest level of supervisory concern and E the
                           highest. An asterisk is to be placed beside the letter assessment on an
                           as-needed basis to identify whether there are any factors that raise
                           questions about the ability of the FBO to maintain adequate internal
                           controls and compliance procedures at its U.S. offices, irrespective of the
                           overall financial condition of the FBO. The SOSA—which is supported by the
                           two country reports—is to provide information to the U.S. bank
                           supervisory agencies that they can take into account in reaching decisions
                           regarding the scope and frequency of examinations and whether other
                           supervisory initiatives may be appropriate.7 The SOSA assessment serves to
                           categorize all FBOs with U.S. banking operations by levels of supervisory
                           concern, highlighting those whose U.S. operations are thought to warrant
                           higher levels of supervisory attention.

                           An FBO’s SOSA, along with other information, is to be taken into
                           consideration in setting the examination plan for the FBO’s U.S. operations.
                           For example, the U.S. operations of FBOs whose assessments are marked

                           5
                           OCC also has responsibility for preparing products for nine FBOs in six countries that operate in the
                           United States only under a national charter or license.
                           6
                            For example, copies of draft and final country reports are to be provided to each state supervisor
                           responsible for a banking office of an FBO from the country, each Federal Reserve Bank in which an
                           FBO from that country has a banking presence in the district, OCC if an FBO from the country has a
                           federally licensed office, FDIC if an FBO from the country has an insured office, and the Federal
                           Reserve Board.
                           7
                            Any particular changes that need to be made to the supervisory strategy for the U.S. operations of an
                           FBO that arise from the SOSA analysis are to be presented in a separate supervisory implications
                           section of the SOSA. The SOSA is expected to include the specific implications for any examination
                           plan of a SOSA ranking of C or lower or when an asterisk is included in the ranking.


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                            by an asterisk, denoting potential internal controls or compliance risks,
                            may receive examinations in which supervisors investigate those risks.

                            The FBO’s SOSA analysis and ranking are to be considered in implementing
                            supervisory follow-up action for the U.S. operations, although specific SOSA
                            rankings are not linked to mandatory supervisory actions. According to
                            procedural guidance for the program, an assessment of C or lower is
                            expected to imply a level of concern that would subject the FBO’s U.S.
                            offices to at least periodic monitoring of their net due to/due from
                            positions.8 Any additional supervisory step, such as imposing an asset
                            pledge or asset maintenance requirement,9 is to be implemented largely
                            based on the condition and nature of the U.S. operations. If an FBO is
                            accorded an assessment of D or lower, this is generally expected to
                            indicate a higher level of supervisory concern, with some presumption of
                            asset maintenance regardless of the condition of the FBO’s U.S.
                            operations.10

                            As part of the FBO Program, FRS is to maintain a database containing
                            information on the financial system and on significant accounting policies
                            and practices of each country with bank representation in the United
                            States. The information in the database is to be provided by FRS and other
                            supervisory agencies, and FRS is to make the information available to all of
                            the supervisory agencies.


The Comprehensive           The comprehensive examination plan and the overall assessment of an
Examination Plan and the    FBO’s U.S. operations—that is, the Summary of Condition and the

Overall Assessment Are to   Combined Rating—are designed to help coordinate agencies’ efforts in
                            supervising FBO offices in the United States. To ensure coordination of
Help Coordinate Agencies’   supervisory efforts and avoid duplication, the FBO Program calls for U.S.
Efforts in Supervising      banking supervisory agencies to increase interagency communications
FBOs                        regarding their examination plans, examination results, and any proposed

                            8
                             Net due to and from positions refer to the flow of funds between an office of the parent foreign bank
                            and the parent bank or other offices of the bank. For example, if the U.S. offices are in a net due from
                            position with the parent foreign bank, then once all the transactions between the U.S. offices and the
                            parent foreign bank are netted, the parent bank owes funds to the U.S. offices.
                            9
                             Asset pledges, also called capital equivalency deposits, are required cash deposits or eligible
                            securities deposits at an approved depository bank. Asset maintenance requirements are to ensure that
                            a branch or agency maintains “eligible” assets in excess of third party liabilities for protecting
                            creditors. Eligible assets usually include assets for which there is a reasonable expectation of
                            liquidation on a timely basis.
                            10
                              An assessment of A or B is generally expected to imply little if any concern relating to the ability of
                            the FBO to meet its obligations. If an FBO does raise liquidity or solvency concerns, the FBO should
                            not be accorded an assessment of A or B, according to the guidance.



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supervisory follow-up actions. Also, to fulfill its responsibilities for the
overall U.S. operations of individual FBOs, FRS is to prepare annually an
overall assessment of the combined U.S. operations of each FBO, based
largely on input from and discussions with the examining agencies. As
noted in figure 2, the comprehensive examination plan is to cover all U.S.
operations of an FBO with the exception of commercial banks, which are to
be treated as domestic institutions for the purpose of examination
planning during the initial implementation of the FBO Program.




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Figure 2: Coverage of FBOs and Their U.S. Offices by the FBO Products

 Foreign Country


            Country reports


            Strength-of-Support
            Assessment
            (SOSA)                               Foreign banking
                                                 organization




 U.S. operations a


 Summary             Comprehensive
 of condition        exam                State chartered                  Bank holding        State licensed
 and combined        plan                commercial                       company             insured branch
 rating                                  lending                          (FRS)               (state and FDIC)
                                         company
                                         (state)

                                                                                              Federally
                                                                                              licensed agency
                                                      Federally                Section 20     (OCC)
                                                      chartered                securities
                                                      Edge Act                 subsidiary
                                                      Corporation              (FRS)
                                                      (FRS)                                    State licensed
                                                                                               representative
                                                                                               office (state)




                                  Federally                        State chartered
                                  chartered                        commercial
                                  commercial                       bank
                                  bank                             (state and
                                  (OCC)                            FDIC)




                      Separately chartered and capitalized subsidiary
                      Legal and operational extension of the parent FBO


                      Shading indicates FBO program products




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a
    FRS has overall authority for all U.S. operations of FBOs.

Source: GAO example developed from FRS documents.


The FBO Program is to provide for the coordination of examination
schedules through the development of an annual comprehensive
examination plan for each FBO with banking offices licensed by more than
one supervisory agency and/or with significant U.S. nonbanking activities.11
Other U.S. supervisors of FBO offices in the United States are to provide
responsible Federal Reserve Banks with a copy of their preliminary
examination schedules. FRS is to use these, in conjunction with the
preliminary examination schedules of the Reserve Banks, to derive a draft
comprehensive examination schedule for all U.S. operations of individual
FBOs. This draft schedule, to be provided to all the supervisory agencies, is
designed to permit each agency to coordinate its own schedule with those
of other agencies. FRS is to provide the final comprehensive examination
schedule to all the supervisory agencies. Likewise, the various supervisors
are to provide individual examination plans to be used by FRS in drafting a
comprehensive examination plan.

According to FRS officials, FBOs that operate in the United States through
multiple offices often will have all offices examined using the same “as of”
financial statement date; this will provide the supervisory agencies with
increased information on the interrelationship among the various offices
and can enhance the examination of individual offices and the FBO’s
overall operations. The U.S. supervisory agencies have committed to
advising other agencies’ supervising offices of the same FBO of any critical
examination findings prior to the exit meeting with FBO officials for that
examination.

The overall assessment of an FBO’s combined U.S. operations is intended
to provide the FBO and the U.S. supervisory agencies with a view of the
overall condition of the FBO’s U.S. operations and help put into context the
strengths and weaknesses of individual offices. The assessment is to be
prepared by FRS for all U.S. offices supervised by more than one agency.
The assessment is to address all risk factors, including (1) all elements of
the ROCA rating system,12 (2) the quality of risk management oversight


11
 For FBOs that conduct all or substantially all of their U.S. operations through offices licensed or
chartered by one banking supervisory agency, the timing of the annual examination is to be
established by the licensing authority.
12
 The ROCA rating system is the system used to rate U.S. branches and agencies of FBOs and is an
assessment of Risk management, Operational controls, Compliance, and Asset quality.



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                                         employed by all levels of management in the FBO’s U.S. operations, and
                                         (3) the examinations of all offices of the FBO conducted during the year.

                                         The system for rating the FBO’s combined U.S. operations is to result in the
                                         assignment of a single-component rating between 1 and 5, with 1 being the
                                         highest. The rating system contains language describing the level of
                                         supervisory concern and required supervisory attention. See table 4 for a
                                         description of the ratings.

Table 4: Definitions of Ratings of the
Combined U.S. Operations of FBOs         Numerical rating                Definition
                                         1                               The overall operations are fundamentally sound in every
                                                                         respect. They cause no supervisory concern and require
                                                                         only normal supervisory attention.
                                         2                               The combined U.S. operations operate in a basically
                                                                         sound manner, but may have modest weaknesses that
                                                                         can be corrected by management in the normal course of
                                                                         business. They do not require more than normal
                                                                         supervisory attention.
                                         3                               Overall U.S. operations are weak in risk management,
                                                                         operational controls, and compliance, or have numerous
                                                                         asset quality problems that, in combination with the
                                                                         condition of the FBO, cause supervisory concern. U.S.
                                                                         and/or head office management may not be taking the
                                                                         necessary corrective actions to address any weaknesses.
                                                                         This rating may also be assigned when either risk
                                                                         management, operational controls, or compliance is
                                                                         individually viewed as unsatisfactory. Generally, these
                                                                         operations raise supervisory concern and require more
                                                                         than normal supervision to address their weaknesses.
                                         4                               The combined U.S. operations have a significant volume
                                                                         of serious weaknesses. Serious problems or unsafe and
                                                                         unsound banking practices or operations exist, which
                                                                         have not been satisfactorily addressed or resolved by
                                                                         U.S. or head office management. These operations
                                                                         require close supervisory attention and surveillance
                                                                         monitoring and a definitive plan for corrective action by
                                                                         head office management.
                                         5                               The combined U.S. operations have so many weaknesses
                                                                         or unsafe and unsound conditions that they require urgent
                                                                         restructuring by head office management.
                                         Source: Federal Reserve Board guidance (SR95-22) issued March 31, 1995.



                                         This composite assessment is intended to apprise the various U.S.
                                         supervisory authorities of the overall condition of the U.S. offices of
                                         individual FBOs. These agencies can then factor this information and that in




                                         Page 14                                  GAO/GGD-97-80 Foreign Bank Supervision Program
                           B-272838




                           the Summary of Condition into their supervision of the U.S. offices under
                           their jurisdiction.


                           Banking supervisors have made progress in implementing the FBO
The FBO Program Has        Program. They have developed and distributed procedural requirements
Achieved Some              and guidance. As of December 31, 1996, about 43 percent of the SOSA
Benefits, but Has          reports and their related home country reports had been finalized, and
                           supervisors were just beginning to use the information in these reports in
Weaknesses That            developing comprehensive examination plans. Supervisors identified some
Could Limit Its            broad benefits of the program—particularly increased communication and
                           cooperation among supervisors and improved access to information about
Effectiveness              FBOs and their home countries. At the same time, supervisors told us that
                           determining how to use this information to improve their supervision was
                           clearly the biggest challenge they face as they move forward. In addition,
                           we identified a number of weaknesses in SOSA and country reports that
                           could limit the program’s effectiveness. These included inconsistent,
                           incomplete, or outdated information, as well as SOSA rankings that did not
                           appear to be justified by data in the report.


Supervisors Have Made      In late March 1995, the Federal Reserve Board distributed to the Reserve
Progress in Implementing   Banks initial guidance for implementing the FBO Supervision Program.
the FBO Program            Additional guidance was issued as implementation progressed from
                           March 1995 to August 1996. As of December 31, 1996, SOSA reports and
                           accompanying home country reports were completed for 120 (about
                           43 percent) of the 281 FBOs subject to the requirements of the program.13
                           We found only limited use of country and SOSA report information in the
                           comprehensive examination plans that we reviewed. However, at the time
                           of our review, supervisors had just begun to incorporate SOSA and country
                           report information into the supervisory process.


Supervisors Identified     Although the FBO Program has not been fully implemented, FRS staff and
Benefits of the Program    other banking supervisors told us of a number of benefits of the
                           program—most importantly, improved communication and cooperation
                           among supervisors and bank management, both domestic and foreign, and
                           improved access to information about FBOs and their home countries.

                           13
                             FRS is responsible for preparing 272 of the 281 SOSA and accompanying home country reports. FRS
                           officials told us that, as of April 7, 1997, approximately 92 percent of the SOSAs and their related home
                           country report were in final or draft form. OCC is responsible for 9 SOSAs, and an official from OCC
                           told us they had not completed any of these reports or the accompanying country reports as of
                           December 31, 1996.



                           Page 15                                        GAO/GGD-97-80 Foreign Bank Supervision Program
                             B-272838




Improved Communication and   Regulators reported many instances of increased coordination and
Cooperation Among            cooperation among federal and state supervisors. Supervisory officials
Supervisors and Bank         told us that implementing the FBO Program has, in some cases, required
Management                   supervisors from different agencies to coordinate with each
                             other—whereas before the program, they said coordination was more ad
                             hoc. For example, because an FBO may have subsidiaries or offices in
                             several locations across the United States, the development of a
                             coordinated examination strategy for a given FBO has required supervisors
                             to work cooperatively, sharing information about the subsidiaries or
                             offices they individually supervise. This is important because problems
                             identified at a particular office could manifest themselves at other offices
                             of an FBO. This improved coordination and communication is intended to
                             result in improved supervision of the U.S. operations of FBOs.

                             FRS officials also said preparing home country reports and SOSAs had
                             helped them develop valuable relationships with foreign regulators and
                             foreign central banks. These officials said such preparation has helped
                             them supervise the U.S. operations of foreign banks. They also said the
                             relationships they have developed with foreign regulators have helped
                             them obtain better information on how U.S. banks are doing abroad.

                             Finally, officials at a Federal Reserve Bank told us that providing foreign
                             bank management with a summary of the condition of the FBO’s U.S.
                             operations and a combined rating has helped them communicate more
                             effectively with foreign bank officials and has resulted in quicker and
                             better compliance by the foreign banks. These summaries are to be sent
                             directly to the foreign bank’s head office and are to highlight the issues
                             that need the most attention.

Improved Access to           Several supervisors stated that the program has been beneficial in
Information About FBOs and   centralizing information about an FBO and its home country. For example,
Their Home Countries         staff at one Federal Reserve Bank said the FBO Program helps examiners
                             by providing a single contact for information about an FBO. The SOSAs and
                             country reports also have provided a benchmark of information on FBOs
                             and home countries—so that all supervisors would have access to the
                             same information about a particular FBO or country. At another Reserve
                             Bank, staff said the reports have also provided a ready and complete
                             source of information for U.S. officials in their meetings with foreign
                             banks and officials from other countries.

                             Staff at another Federal Reserve Bank stated that the FBO Program has
                             given “more form” to their system of supervision. For example, this



                             Page 16                           GAO/GGD-97-80 Foreign Bank Supervision Program
                              B-272838




                              Reserve Bank has been monitoring the FBOs’ conditions in a particular
                              country since 1992. However, the staff were not sure whether other
                              supervisors were doing similar monitoring, and state supervisors told us
                              they did not have adequate resources for such monitoring. Reserve Bank
                              officials said the FBO program reduced the likelihood that problems would
                              fall through the cracks in the supervisory system.

                              According to supervisory officials, the new program’s products and
                              information have also helped supervisors get information about FBOs and
                              countries that is not commonly known. FRS has had long-standing
                              relationships with most of the central banks and bank regulators of the
                              major industrialized nations. Particularly for the G-10 countries,14 officials
                              told us that information sharing has occurred in the past, and that their
                              accounting standards and practices are generally similar to those in the
                              United States. FRS officials said such is not the case for other countries,
                              however, particularly many of the countries with developing financial and
                              supervisory systems that have banking presences in the United States. For
                              this reason, some supervisory officials said that the development of SOSAs
                              and home country reports—including reports on accounting and auditing
                              standards and practices—have been particularly useful.


Weaknesses Exist That         An important goal of the FBO Program is to enhance supervision by
Could Limit the               integrating the information in SOSAs and country reports into the
Effectiveness of the FBO      supervisory and enforcement processes. Officials told us that this phase of
                              the program was just starting at the time of our review. However, based on
Program                       our review of completed SOSA and country reports and our interviews with
                              supervisory officials and staff, we identified a number of concerns and
                              weaknesses that could limit the program’s effectiveness in improving
                              supervisory and enforcement processes in oversight of U.S. operations of
                              FBOs.


Supervisors Expressed         While supervisors and supervisory staff recognized a variety of benefits of
Concerns About Use of SOSAs   the FBO Program, as discussed earlier, they also expressed concern about
in Exam Planning and          the usefulness of information in the SOSA and country reports and about
Enforcement                   how this information could be integrated into the examination planning
                              process. Further, they expressed concerns about how to use this
                              information to help them make enforcement decisions.




                              14
                               The G-10 countries include the United States and the following foreign countries: Belgium, Canada,
                              France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, and the United Kingdom.



                              Page 17                                      GAO/GGD-97-80 Foreign Bank Supervision Program
                               B-272838




                               Regarding examination planning, some examiners told us that the SOSAs
                               were useful mainly for general background information, while others said
                               the information was not particularly useful. Officials from one Federal
                               Reserve Bank told us they had been experimenting with a new
                               comprehensive examination plan format that incorporated more
                               information from the SOSA and country reports, such as key strengths and
                               weaknesses related to the FBO’s lines of business. Officials from another
                               Reserve Bank said they were in the process of developing a strategy for
                               integrating the information from SOSA and country reports into the exam
                               planning process. They said they were also in the process of considering
                               how the SOSAs could be improved to make them more useful. They said
                               some possible improvements might include making the reports shorter
                               and more user friendly for examiners; updating the reports just before the
                               beginning of an exam cycle; and focusing the reports more on risk—for
                               example, analyzing the impact the FBO’s overall business strategy might
                               have on its U.S. operations.

                               Many supervisors told us that determining how to use information from
                               the SOSA and country reports to improve their oversight was clearly the
                               biggest challenge they face as they move forward. In order to help meet
                               this challenge, Federal Reserve Board officials told us they commenced
                               development of an FBO training seminar in late 1996 that will emphasize
                               that the FBO Program is a process directed towards ensuring an
                               appropriate supervisory strategy for the U.S. operations of each FBO.
                               Among other things, they said the seminar will place emphasis on creating
                               a greater linkage between the SOSAs and the comprehensive examination
                               planning process.

                               With regard to enforcement decisionmaking, some supervisors told us that
                               they would like to be able to use the SOSAs to some extent to adjust their
                               supervisory requirements, such as capital equivalency deposits. In order to
                               do this, SOSAs must be accurate, consistent, and up-to-date. However,
                               officials told us that they have concerns about whether this will be
                               possible in the future because of the difficulties involved in obtaining
                               consistent information from FBOs and home country regulators.

Information in an FBO’s SOSA   As we reviewed the 36 SOSAs, we found some examples of inconsistent
and Country Reports Was        information in individual country reports as well as examples of
Sometimes Inconsistent         inconsistency in information between SOSAs and their associated country
                               reports, as illustrated by the following:




                               Page 18                          GAO/GGD-97-80 Foreign Bank Supervision Program
                                  B-272838




                              •   A discussion of financial disclosure practices in a certain country report
                                  mentioned that nonperforming loan (NPL) ratios15 provide a limited
                                  indication of the country’s problem loan situation because public
                                  disclosure of substandard loans was not required. In addition, the report
                                  said the monetary authority’s manipulation of accounting practices to ease
                                  pressure on bank performance undermines reported financial figures and
                                  renders year-to-year analysis difficult. Yet, the final SOSA report for an FBO
                                  in that country stated that capital was adequate—with ratios slightly
                                  exceeding Bank for International Settlements (BIS)16 minimum
                                  standards—without providing a clear, explicit qualification of the
                                  statement.
                              •   One country report pointed out that external auditors had not yet
                                  developed the status or the degree of independence they had in the United
                                  States. The report said that qualified audit reports were virtually unheard
                                  of in this country and warned that the lack of independence may
                                  potentially hinder the reliability of audited financial statements. However,
                                  a SOSA for one of the FBOs in the country said that the financial statements
                                  were deemed reliable due to an unqualified opinion rendered by an audit
                                  firm.
                              •   Another report on home country supervision stated that banking
                                  supervision is considered relatively strong. Yet, the same report noted that
                                  reporting of certain key data—such as NPLs, hidden reserves, off balance
                                  sheet items, and risk-based capital ratios—was not a supervisory
                                  requirement in that country.

Information in the SOSA and       Based on our review of Federal Reserve Board guidance17 and discussions
Country Reports Was               with staff at the Federal Reserve Board, Reserve Banks, OCC, and select
Sometimes Incomplete              state banking departments, we developed a basic list of information that
                                  most supervisors would expect in the SOSAs.18 We then reviewed 36 SOSAs
                                  and their corresponding country reports to determine whether this
                                  information was provided. In reviewing SOSA and country reports, we
                                  expected some variation in the types of information provided because of

                                  15
                                   Nonperforming loans are loans that are not performing according to the original terms of the
                                  borrower’s loan agreement. In the United States, loans 90 days or more past due are generally
                                  considered to be nonperforming.
                                  16
                                   BIS is an organization of central banks that is based in Basle, Switzerland. It is the principal forum for
                                  consultation, cooperation, and information exchange among central bankers.
                                  17
                                   Federal Reserve Board guidance describes general categories that must be addressed, but does not
                                  prescribe a list of specific required information.
                                  18
                                    Examples of the types of information we looked for in SOSAs include key activities of the FBO; the
                                  operating structure of the FBO; whether the FBO meets the BIS capital standards; financial
                                  information on the FBO’s earnings, asset quality, and liquidity; the likelihood of home country support;
                                  the level of disclosure; and external audit coverage.



                                  Page 19                                        GAO/GGD-97-80 Foreign Bank Supervision Program
                                  B-272838




                                  differences in (1) the availability of information and the financial and
                                  supervisory systems in various countries and (2) the weight that
                                  supervisors would place on different types of information.

                                  Although we expected some variation in the information provided, we
                                  found that nearly all of the SOSAs failed to provide all of the information on
                                  our basic list. Moreover, many seemed incomplete in ways that would
                                  reduce the reliability of the reports for supervisory use. For example,
                                  some of the SOSAs lacked information central to the purpose of the reports,
                                  such as statements of the likelihood of home country support.

                                  Important details that we found lacking in some SOSA and country reports
                                  were those to clarify

                              •   the date of the financial data;
                              •   whether the data were consolidated and, if so, at what level;
                              •   the date the reports were written and finalized;
                              •   whether the risk-based capital standards referred to the BIS standards, and
                                  if not, how the capital ratios related to the BIS standards.

                                  Our findings were consistent with statements of some supervisory officials
                                  we interviewed who expressed concern about the usefulness of the
                                  reports to supervisors. For example, an official from one banking
                                  supervisor told us reports lacked important detail. The same official also
                                  said that the reports lacked candor and did not always address
                                  controversial issues.

                                  A staff member of a federal supervisor also told us that relevant
                                  information for planning examinations of some U.S. operations of FBOs
                                  could be almost wholly lacking in the SOSA report. This staff member told
                                  us that the country reports and SOSAs for the banks he supervised were
                                  useless in preparing examination plans because the country and SOSA
                                  reports focused on credit and asset quality, while the primary business of
                                  the banks in this country is trading in financial products.

Information in the SOSA and       Some SOSAs and country reports contained outdated information on the
Country Reports Was               FBO’s financial condition or the economic or political condition of the FBO’s
Sometimes Outdated                home country. In our review, we found that a number of products
                                  completed in 1996 relied on December 1994 or March 1995 data. In
                                  addition, some products presented discussions of outdated political or
                                  economic conditions. In discussing these products and their usefulness,
                                  we found that supervisory officials we interviewed often agreed that



                                  Page 20                           GAO/GGD-97-80 Foreign Bank Supervision Program
                              B-272838




                              outdated information is a problem. Also, staff at a Federal Reserve Bank
                              identified as a problem the time lag between when the information was
                              being analyzed and receipt of the finished product.

                              To help correct this problem, the Federal Reserve Board is in the process
                              of pilot testing a program, called FBO Desktop, with the Federal Reserve
                              Bank of San Francisco. This program is designed to put all of the FBO
                              Program products on-line. The goal of the program is to make it more
                              efficient to share information and review FBO products.19 An official from
                              the Federal Reserve Board told us the pilot was nearly completed, as of
                              March 1997, and would be rolled out soon to the other Federal Reserve
                              Banks and then to the other state and federal supervisors. However,
                              Federal Reserve Board officials pointed out that, even though this system
                              is expected to help improve timeliness, timeliness will continue to be
                              impaired to some degree due to the fact that FBOs are required to file full
                              financial statements with FRS only on an annual basis, English translations
                              of such filings are often not available until mid-year, and disclosure
                              problems may continue to exist.

Some SOSA Rankings Did Not    During our review of SOSA reports, we found some cases where the SOSA
Appear to Be Supported by     rankings did not appear to be justified by the information in the SOSA
Information Provided in the   reports. For example, the program guidance states that an “A” SOSA
Report                        ranking would indicate an FBO with a financial profile that is regarded as
                              strong, with superior risk-based capital ratios, and that is comprehensively
                              supervised, among other things. Yet, several FBOs that received “A” SOSA
                              rankings were based in countries in which (1) banks were not required to
                              disclose asset quality in reports to supervisors and (2) the reports said that
                              the efficacy of supervision was questionable and that the supervisory
                              system lacked an effective early warning system to identify financially
                              weak institutions.

                              Many of the supervisors we interviewed told us that they expect that the
                              assignment of all SOSA rankings will eventually be consistent with the
                              criteria in program guidance. However, they said achieving this level of
                              consistency may be difficult because of the differences in financial and
                              supervisory systems and types of information available among countries.


                              Banking supervisors have made progress in implementing the FBO
Conclusions                   Program. Supervisors have identified a number of benefits of the

                              19
                               Federal Reserve Board officials said that data security procedures will be established so that certain
                              documents can only be reviewed on a “need to know” basis.



                              Page 21                                       GAO/GGD-97-80 Foreign Bank Supervision Program
                         B-272838




                         program—most importantly, improved communication and cooperation
                         among supervisors and improved access to information about FBOs and
                         their home countries. At the same time, supervisors have just begun to use
                         the information in SOSA and country reports to improve supervision and
                         enforcement, and some supervisors indicated some skepticism about how
                         useful the information from SOSA and country reports will be in improving
                         FBO oversight. The various Federal Reserve Banks are developing different
                         formats and strategies for integrating the information into the supervisory
                         process. In addition, we identified a number of weaknesses in SOSA and
                         country reports that could limit the program’s effectiveness, including
                         inconsistent, incomplete, or outdated information, as well as SOSA rankings
                         that did not appear to be justified by information in the report.

                         SOSA rankings that are unsupported or inconsistent with the ranking
                         system criteria and report information that is inconsistent, incomplete,
                         and out-of-date are obstacles to achieving a principal goal of the SOSA—to
                         identify FBOs that may pose risks to their U.S. operations or to U.S.
                         financial markets. Supervisory use of unreliable SOSA rankings could lead
                         to inefficient levels and types of monitoring and to unequal treatment of
                         FBOs’ U.S. operations in enforcement actions, as well as potentially leading
                         to ineffective oversight. The identified weaknesses could also cause
                         supervisors to doubt the credibility of SOSA rankings and reports and thus
                         limit supervisory use of the information resources the FBO supervision
                         program is designed to provide.


                         As FRS continues its implementation of the FBO Program, we recommend
Recommendations          that the Board of Governors of the Federal Reserve System

                     •   identify best practices for using the information in the SOSA and country
                         reports to improve supervision and enforcement, and disseminate these
                         best practices to all Federal Reserve Banks; and
                     •   monitor the report process to help ensure that SOSA and country reports
                         are consistent, complete, and timely, and that the SOSA rankings are
                         consistent with the ranking system criteria.


                         The Federal Reserve Board provided written comments on a draft of this
Agency Comments          report, and these comments and our responses are reprinted in appendix I.
and Our Evaluation       It also provided technical comments, which we incorporated where
                         appropriate.




                         Page 22                           GAO/GGD-97-80 Foreign Bank Supervision Program
B-272838




The Federal Reserve Board generally agreed with the conclusions reached
regarding the need for certain improvements in the content and use of the
SOSA reports. In a subsequent conversation, a senior Federal Reserve
Board official stated that the Federal Reserve Board had no objection to
the recommendations. In its written comments, the Federal Reserve Board
also noted that its work going forward will be largely concentrated on
refining certain areas of the FBO Program to enhance its overall
effectiveness, particularly in the areas of integration of the SOSA into
examination planning and ensuring that appropriate linkages are
established between all products in the program to promote the program’s
objectives. The Federal Reserve Board noted four steps that are being
taken to help achieve this program improvement, which we have
incorporated into the report.

The Federal Reserve Board also observed that our efforts were directed
principally toward a review of the SOSAs and emphasized that the SOSA is
one of several tools in the FBO Program designed to assist bank supervisors
in meeting the objectives of the program. While we did review a
judgmental sample of finalized SOSAs and discuss the weaknesses we
found, our efforts were not principally directed toward this review. The
report describes each of the products of the FBO program and their
interrelationships, and it discusses the benefits of all parts of the program
realized to date.


We are sending copies of this report to the Chairmen and Ranking
Minority Members of the Senate Committee on Banking, Housing, and
Urban Affairs and the House Committee on Banking and Financial
Services, the Chairman of the Federal Reserve Board, the Chairman of the
Federal Deposit Insurance Corporation, the Comptroller of the Currency,
and other interested parties. We will also make copies available to others
on request.




Page 23                           GAO/GGD-97-80 Foreign Bank Supervision Program
B-272838




Major contributors to this report are listed in appendix II. Please contact
me at (202)512-8678 if you or your staff have any questions.




Thomas J. McCool
Associate Director, Financial Institutions
  and Markets Issues




Page 24                           GAO/GGD-97-80 Foreign Bank Supervision Program
Page 25   GAO/GGD-97-80 Foreign Bank Supervision Program
Contents



Letter                                                                                               1


Appendix I                                                                                          28

Comments From the
Federal Reserve
Board
Appendix II                                                                                         32

Major Contributors to
This Report
Tables                  Table 1: Types of Offices FBOs Operate in the United States                  3
                        Table 2: U.S. Operations of FBOs as of December 31, 1996                     4
                        Table 3: Supervisory Products of FRS’ FBO Program                            8
                        Table 4: Definitions of Ratings of the Combined U.S. Operations             14
                          of FBOs

Figures                 Figure 1: Organizational Structure of the U.S. Operations of a               5
                          Hypothetical FBO
                        Figure 2: Coverage of FBOs and Their U.S. Offices by the FBO                12
                          Products




                        Abbreviations

                        BIS        Bank for International Settlements
                        DCI        Data Collection Instrument
                        FRS        Federal Reserve System
                        FBO        Foreign Banking Organization
                        FBSEA      Foreign Bank Supervision Enhancement Act of 1991
                        FDIC       Federal Deposit Insurance Corporation
                        NPL        Nonperforming loan
                        OCC        Office of the Comptroller of the Currency
                        SOSA       Strength-of-Support Assessment


                        Page 26                          GAO/GGD-97-80 Foreign Bank Supervision Program
Page 27   GAO/GGD-97-80 Foreign Bank Supervision Program
Appendix I

Comments From the Federal Reserve Board


Note: GAO comments
supplementing those in
the report text appear at
the end of this appendix.




                            Page 28   GAO/GGD-97-80 Foreign Bank Supervision Program
                 Appendix I
                 Comments From the Federal Reserve Board




See comment 1.



See comment 2.




See comment 3.




                 Page 29                             GAO/GGD-97-80 Foreign Bank Supervision Program
                 Appendix I
                 Comments From the Federal Reserve Board




See comment 4.




See comment 5.




See comment 6.




                 Page 30                             GAO/GGD-97-80 Foreign Bank Supervision Program
               Appendix I
               Comments From the Federal Reserve Board




               The following are GAO’s comments on the Federal Reserve Board’s
               April 28, 1997, letter.


               1. We added a footnote on page 19 that states that there is no prescribed
GAO Comments   list of required information for SOSAs.

               2. As we stated on page 19, we expect some variation in the information
               provided in SOSA reports and as these reports are updated annually for any
               material changes, we expect this variation will continue. However, this
               variation is not necessarily a problem provided that important
               information—such as the likelihood of home country support or other
               details necessary for accurate analysis—is included in the SOSA reports.

               3. We added a description of FRS’ training seminar on page 18.

               4. We added information on the supervisory implications section of the
               SOSAreport in footnote 7 on page 9.

               5. We added information on the procedures to review SOSAs on page 9.
               However, for the case of inconsistency between the country report and
               final SOSA we described on page 19, the SOSA had been approved through
               these new procedures, and this problem had not been corrected.

               6. We added information on the likelihood that some problems with the
               timeliness of information will continue on page 21.




               Page 31                             GAO/GGD-97-80 Foreign Bank Supervision Program
Appendix II

Major Contributors to This Report


                     Susan S. Westin, Assistant Director
General Government   Kristi A. Peterson, Evaluator-in-Charge
Division             Charles G. Kilian, Senior Evaluator
                     Desiree W. Whipple, Communications Analyst




(233499)             Page 32                       GAO/GGD-97-80 Foreign Bank Supervision Program
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