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Summary: |
The FDIC's Division of Depositor and
Consumer Protection has revised the classification system for citing
violations identified during compliance examinations to better communicate to
institutions the severity of violations and to
provide more consistency in the classification of violations cited in Reports of
Examination. Violations identified during an
examination will be assigned to one of three levels based primarily on the impact to
consumers. The change is intended to
help focus the institution's attention on the most significant issues identified
during the examination and place violations
that are more technical in nature in the appropriate perspective. This new
three-level violation system replaces the current
two-level system and will be used in examinations started on or after October 1,
2012.
Statement of Applicability to Institutions with Total Assets under $1 Billion: This Financial Institution Letter applies to all FDIC-supervised financial institutions. |
Highlights:
Distribution:
Suggested Routing:
Note:
Background: The violations pages in the Compliance Report of Examination serve as the institution's official record of violations identified during an examination. Because different types of violations present different levels of risk to consumers and to institutions, a method of classifying violations is necessary to communicate the FDIC's level of concern regarding the violations identified. The FDIC has developed a new system of classifying violations that replaces the previous two-level system, which designated violations as "Significant" or "Other." New Classification System: The new classification of compliance violations is a three-level system that provides greater clarity to the institution regarding the severity of the violation. The three categories for violations are:
With this new classification system and its presentation in the Report of Examination, the FDIC seeks to address concerns raised by the industry in post-examination surveys and during regulatory outreach events about the focus and portrayal of violations within the context of the examination findings. Institution management should find the new approach helpful as they strive to focus on areas of greatest concern and take prompt and appropriate corrective action. Effective Date: The new violation classification system will become effective for all examinations started on or after October 1, 2012.
Mark Pearce
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