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We once heard a banker compare bank examinations to going to the dentist: It has to be done, and you feel better when it’s over. It’s likely you also want examinations to finish as quickly as possible, and we want our examinations to be efficient so you can get back to banking. We view our relationship with bankers as a partnership that ensures a strong financial system. Through discussions with our examiners, we have identified some approaches that encourage efficient examinations. This article outlines the approaches you can take to help examinations finish in a timely manner. These include communicating openly and frequently, maintaining a good working relationship, telling your story, and providing timely and complete information. These are merely suggestions and observations that promote efficient examinations; they are not expectations.
Communication, communication, communication
Open and complete communication is the most critical factor in achieving an efficient examination. We recognize that communication is important for both parties, and we strive to do our part. Examination teams have found it helpful when bank management is responsive to questions and fills documentation requests promptly. This does not mean we expect bankers to drop everything to answer questions or immediately turn around documentation requests, but responsiveness is an important consideration that, with some planning, can help keep an examination on track. These are some suggestions:
- Establish consistent meeting (or available) times for examiners to ask questions and make information requests.
- Designate a primary contact for questions and documentation requests. If you designate more than one contact, it’s useful to specify which areas are best handled by each person.
- Notify examiners early when a key employee(s) will be out of the office and provide a substitute contact(s).
- Provide estimates of the time needed to fulfill documentation requests. This helps examiners focus on other priorities if a documentation request may take time to complete.
A good working relationship
Like your dentist, examiners have a job to do, and we recognize that you do too. We’ve found that it’s helpful to maintain good working relationships, assume positive intent from all parties, and remember that we have the same goal of promoting the long-term viability of your institution. It’s inevitable that there will be disagreements or misunderstandings on examinations (we even train examiners on how to work through these occasions). When they happen, we’ve found it’s best if discussions about misunderstandings or disagreements occur well before the end of the examination. Because these discussions are important for both parties, we expect our examiners to raise any findings or questions as soon as possible during an examination so that you have time to respond, and we can resolve the item and complete the examination promptly.
Tell your story
It also works well when bankers begin an examination by providing additional context about the institution’s financials, recent history, and future. Telling your story helps examiners understand the bank better before they spend time analyzing the financials, and it will expedite their review. This is especially useful when there is a one-off event that affects quarter-end numbers. Providing greater context does not need to be a formal exercise and can easily be handled as a discussion during the kickoff meeting with the examination team. This additional background might cover the institution’s condition, staffing changes, local economic conditions and the positive or negative impacts, any future plans and any material changes in strategy, and any unusual circumstances where numbers alone do not tell the full story.
Complete responses to information requests
Providing complete information in response to our first day letter and subsequent information requests considerably improves the efficiency of an examination. We recognize that we can sometimes ask for a lot of documentation prior to examinations, but the early information allows us to complete most of our work at the Reserve Bank, which results in fewer examiners on-site at your bank. Complete responses to our documentation requests promote timely completion of the work by providing examiners with a complete and accurate picture, and this limits the need to follow up when we’re on-site at your bank. Here are some suggestions for completing documentation requests:
- Reach out to your relationship manager or the examiner in charge if a request item isn’t clear. We tailor our request letters to each bank, but sometimes institutions use different terminology for the same thing.
- Include notes in your response that explain why a request item wasn’t provided or is incomplete. This way examiners won’t make incorrect assumptions about what is or isn’t provided and won’t need to ask additional questions.
- Have the document’s file name describe the contents and include the first day letter category and item number. This makes it easier for examiners to find and reconcile the items you provide.
- Include additional documentation if you know it might help the examination team assess an area although it wasn’t specifically requested.
Final thoughts
We’re not qualified to provide any tips for your next dentist appointment, but we know the tips above will promote an efficient experience at your next examination. We also are keenly aware that we are in a partnership with our banks, and we will continue to emphasize many of these points with our examiners, including promoting communication, good working relationships, and responsiveness to your questions.
