Bank Examination for Country Risk and International Lending

ID-82-52: Published: Sep 2, 1982. Publicly Released: Sep 2, 1982.

Additional Materials:

Contact:

Allan I. Mendelowitz
(202) 512-4812
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

GAO assessed major aspects of the U.S. bank regulatory authorities' uniform examination system for evaluating and commenting on country risk to U.S. banks with relatively large foreign lendings. The system consists of identifying countries with actual or potential loan repayment problems, calling these loans to the attention of bank management, and evaluating bank internal country exposure management systems.

GAO found that the system's special comments concerning bank exposure and repayment problems have not been clearly communicated to bankers. The system has been effective in identifying countries with actual or imminent payments arrearages. However, many other countries are needlessly identified as having potential debt-servicing problems. If this continues, it could unduly inhibit international lending or increase its costs. Furthermore, although the system's examining practices are generally uniform, there are areas where inconsistencies are evident. The Office of the Comptroller of the Currency and Federal Reserve examiners address the key elements of bank country exposure management systems for most of the banks which they review, but the Federal Deposit Insurance Corporation examiners do so less frequently. GAO also found that documentation could be much improved. It appears that most banks with larger exposures have adequate bank country exposure management systems. However, for most banks with smaller exposures, lack of information in examination materials precludes an adequate evaluation system. It appears that special comments by bank examiners have had little impact on restraining the growth of bank exposures. GAO could not gauge the impact of the program on improving the systems of individual banks because of incomplete information. However, it is likely that bank systems would be enhanced if they were reviewed more often.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should require their examiners to use the same universe of banks (all banks reporting under the country exposure reporting system) for making comparisons. This would not preclude the agencies from establishing different categories for separately analyzing banks of different sizes.

    Agency Affected: Department of the Treasury: Office of the Comptroller of the Currency

  2. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should require their examiners to use the same universe of banks (all banks reporting under the country exposure reporting system) for making comparisons. This would not preclude the agencies from establishing different categories for separately analyzing banks of different sizes.

    Agency Affected: Federal Deposit Insurance Corporation

  3. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information..

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should require their examiners to use the same universe of banks (all banks reporting under the country exposure reporting system) for making comparisons. This would not preclude the agencies from establishing different categories for separately analyzing banks of different sizes.

    Agency Affected: Federal Reserve System

  4. Status: Closed - Not Implemented

    Comments: The agencies do not intend to implement the recommendations at this time. This will be reconsidered during the follow-up review.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should require their examiners to include such items as internal control questionnaires, memorandums of discussions with bank officials, sample country studies, and country limit and reporting documentation in supporting workpapers. When such items exist, it should be noted in the workpapers.

    Agency Affected: Department of the Treasury: Office of the Comptroller of the Currency

  5. Status: Closed - Not Implemented

    Comments: The agencies do not intend to implement the recommendations at this time. This will be reconsidered during the follow-up review.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should require their examiners to include such items as internal control questionnaires, memorandums of discussions with bank officials, sample country studies, and country limit and reporting documentation in supporting workpapers. When such items exist, it should be noted in the workpapers.

    Agency Affected: Federal Deposit Insurance Corporation

  6. Status: Closed - Not Implemented

    Comments: The agencies do not intend to implement the recommendations at this time. This will be reconsidered during the follow-up review.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should require their examiners to include such items as internal control questionnaires, memorandums of discussions with bank officials, sample country studies, and country limit and reporting documentation in supporting workpapers. When such items exist, it should be noted in the workpapers.

    Agency Affected: Federal Reserve System

  7. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should ask their representatives to better and more clearly communicate the objectives of special comments to bankers.

    Agency Affected: Department of the Treasury: Office of the Comptroller of the Currency

  8. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should ask their representatives to better and more clearly communicate the objectives of special comments to bankers.

    Agency Affected: Federal Deposit Insurance Corporation

  9. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should ask their representatives to better and more clearly communicate the objectives of special comments to bankers.

    Agency Affected: Federal Reserve System

  10. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should ask their representatives to the Interagency Committee on Country Exposure Review to request the Federal Reserve Bank of New York to experiment with alternative models to the present screens.

    Agency Affected: Department of the Treasury: Office of the Comptroller of the Currency

  11. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should ask their representatives to the Interagency Committee on Country Exposure Review to request the Federal Reserve Bank of New York to experiment with alternative models to the present screens.

    Agency Affected: Federal Deposit Insurance Corporation

  12. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should ask their representatives to the Interagency Committee on Country Exposure Review to request the Federal Reserve Bank of New York to experiment with alternative models to the present screens.

    Agency Affected: Federal Reserve System

  13. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should ask their representatives to the Interagency Committee on Country Exposure Review to request the Federal Reserve Bank of New York to experiment with alternative models to the present screens.

    Agency Affected: Interagency Committee on Country Exposure Review

  14. Status: Closed - Not Implemented

    Comments: The agencies do not plan to take any action on this recommendation. According to the agencies, country studies are supplemented by oral presentations during committee meetings. GAO believes that written documentation is needed to ensure consistency between presentations. This issue will be reconsidered during the followup review.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should ask their representatives to the Interagency Committee on Country Exposure Review to improve country studies by providing: (1) more discussion, analysis, and projections of key economic variables for the near future; (2) more intensive analysis of monetary and fiscal policies; (3) routine discussion of performance under the most recent International Monetary Fund loans; and (4) a consistent framework for evaluating political and social developments, including the assessment of internal stability, succession, external security threats, relations with the United States, and relations with other countries.

    Agency Affected: Department of the Treasury: Office of the Comptroller of the Currency

  15. Status: Closed - Not Implemented

    Comments: The agencies do not plan to take any action on this recommendation. According to the agencies, country studies are supplemented by oral presentations during committee meetings. GAO believes that written documentation is needed to ensure consistency between presentations. This issue will be reconsidered during the followup review.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should ask their representatives to the Interagency Committee on Country Exposure Review to improve country studies by providing: (1) more discussion, analysis, and projections of key economic variables for the near future; (2) more intensive analysis of monetary and fiscal policies; (3) routine discussion of performance under the most recent International Monetary Fund loans; and (4) a consistent framework for evaluating political and social developments, including the assessment of internal stability, succession, external security threats, relations with the United States, and relations with other countries.

    Agency Affected: Federal Deposit Insurance Corporation

  16. Status: Closed - Not Implemented

    Comments: The agencies do not plan to take any action on this recommendation. According to the agencies, country studies are supplemented by oral presentations during committee meetings. GAO believes that written documentation is needed to ensure consistency between presentations. This issue will be reconsidered during the followup review.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should ask their representatives to the Interagency Committee on Country Exposure Review to improve country studies by providing: (1) more discussion, analysis, and projections of key economic variables for the near future; (2) more intensive analysis of monetary and fiscal policies; (3) routine discussion of performance under the most recent International Monetary Fund loans; and (4) a consistent framework for evaluating political and social developments, including the assessment of internal stability, succession, external security threats, relations with the United States, and relations with other countries.

    Agency Affected: Federal Reserve System

  17. Status: Closed - Not Implemented

    Comments: The agencies do not plan to take any action on this recommendation. According to the agencies, country studies are supplemented by oral presentations during committee meetings. GAO believes that written documentation is needed to ensure consistency between presentations. This issue will be reconsidered during the followup review.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should ask their representatives to the Interagency Committee on Country Exposure Review to improve country studies by providing: (1) more discussion, analysis, and projections of key economic variables for the near future; (2) more intensive analysis of monetary and fiscal policies; (3) routine discussion of performance under the most recent International Monetary Fund loans; and (4) a consistent framework for evaluating political and social developments, including the assessment of internal stability, succession, external security threats, relations with the United States, and relations with other countries.

    Agency Affected: Interagency Committee on Country Exposure Review

  18. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should have their examiners group countries together in the same way in examination reports.

    Agency Affected: Department of the Treasury: Office of the Comptroller of the Currency

  19. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should have their examiners group countries together in the same way in examination reports.

    Agency Affected: Federal Deposit Insurance Corporation

  20. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should have their examiners group countries together in the same way in examination reports.

    Agency Affected: Federal Reserve System

  21. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should require their examiners to include analysis beyond country writeups and portfolio compositions in special comments. Such analysis might include comparisons of present exposures, with country limits established by bank management, and with exposures of other banks.

    Agency Affected: Department of the Treasury: Office of the Comptroller of the Currency

  22. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should require their examiners to include analysis beyond country writeups and portfolio compositions in special comments. Such analysis might include comparisons of present exposures, with country limits established by bank management, and with exposures of other banks.

    Agency Affected: Federal Deposit Insurance Corporation

  23. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should require their examiners to include analysis beyond country writeups and portfolio compositions in special comments. Such analysis might include comparisons of present exposures, with country limits established by bank management, and with exposures of other banks.

    Agency Affected: Federal Reserve System

  24. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should ask their representatives to the Interagency Committee on Country Exposure Review to establish criteria for when specially commented exposures require highlighting.

    Agency Affected: Department of the Treasury: Office of the Comptroller of the Currency

  25. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should ask their representatives to the Interagency Committee on Country Exposure Review to establish criteria for when specially commented exposures require highlighting.

    Agency Affected: Federal Deposit Insurance Corporation

  26. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should ask their representatives to the Interagency Committee on Country Exposure Review to establish criteria for when specially commented exposures require highlighting.

    Agency Affected: Federal Reserve System

  27. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should ask their representatives to the Interagency Committee on Country Exposure Review to establish criteria for when specially commented exposures require highlighting.

    Agency Affected: Interagency Committee on Country Exposure Review

  28. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should require their examiners to routinely review bank country exposure management systems fully when they make country risk examinations.

    Agency Affected: Department of the Treasury: Office of the Comptroller of the Currency

  29. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should require their examiners to routinely review bank country exposure management systems fully when they make country risk examinations.

    Agency Affected: Federal Deposit Insurance Corporation

  30. Status: Closed - Implemented

    Comments: Please call 202/512-6100 for information.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should require their examiners to routinely review bank country exposure management systems fully when they make country risk examinations.

    Agency Affected: Federal Reserve System

  31. Status: Closed - Not Implemented

    Comments: The agencies do not intend to implement the recommendations at this time. This item will be considered during the follow-up review.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should require that examiners routinely follow up on all outstanding recommendations and criticisms with notations in subsequent examination reports.

    Agency Affected: Department of the Treasury: Office of the Comptroller of the Currency

  32. Status: Closed - Not Implemented

    Comments: The agencies do not intend to implement the recommendations at this time. This item will be considered during the follow-up review.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should require that examiners routinely follow up on all outstanding recommendations and criticisms with notations in subsequent examination reports.

    Agency Affected: Federal Deposit Insurance Corporation

  33. Status: Closed - Not Implemented

    Comments: The agencies do not intend to implement the recommendations at this time. This item will be considered during the follow-up review.

    Recommendation: The Comptroller of the Currency, the Chairman of the Board of Governors of the Federal Reserve System, and the Chairman of the Federal Deposit Insurance Corporation should require that examiners routinely follow up on all outstanding recommendations and criticisms with notations in subsequent examination reports.

    Agency Affected: Federal Reserve System

 

Explore the full database of GAO's Open Recommendations »

Jul 25, 2016

Jul 5, 2016

May 6, 2016

Apr 21, 2016

Apr 18, 2016

Apr 12, 2016

Mar 28, 2016

Mar 8, 2016

Feb 16, 2016

Jan 27, 2016

Looking for more? Browse all our products here