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FDIC Stands by Its Community Bank Examinations

After some community banks expressed concerns that FDIC examinations ""were being conducted without clear standards or consistent application of agency policies and procedures, which could discourage business growth and responsible lending,"" the ""FDIC"":http://www.fdic.gov/ conducted a ""report"":http://www.fdicig.gov/reports12/12-011AUD.pdf?source=govdelivery to review its examination process.

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The FDIC reviewed examinations conducted over the past five years, ending December 31, 2011.

Major findings of the recently-released report include that timelines for report completion often lengthens as institution ratings worsen, and while community banks can challenge the FDIC's findings, these challenges are rare and even more rarely sustained.

After completing its onsite work at a community bank or credit union, the FDIC generally takes between two and four weeks to submit an examination report for institutions rated one or two.

For institutions rated three, four, or five, the FDIC often takes anywhere from six to nine weeks.

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This variance is attributed to ""the additional complexity and volume of deficiencies associated with troubled institutions,"" the intricacies required to validate a lower rating, and time spent with bank managers and other officials to come to a consensus before issuing a final report, according to the FDIC's report.

Compliance reviews generally take about one month to complete after conducting onsite work, according to the report.

While the FDIC says it encourages questions throughout the examination process, institutions may request a formal review if they do not agree with the ultimate outcome of their examination report.

Over the five years reviewed, the FDIC received 41 requests for review. However, only one was sustained, and three were ""partially sustained.""

FDIC officials report ""few requests for review are sustained because the applicable Director usually finds that the initial determinations are consistent with FDIC policy.

If after a review, the institution still objects, it may appeal to the Supervision Appeals Review Committee. Community banks and credit unions filed a total of 23 appeals over the five-year period under review. Only one was sustained. The other 22 ""were either denied or lacked grounds for an appeal to the SARC,"" stated the FDIC in its report.

The FDIC established new timeline goals in 2010 and 2011 and reports that it has met its targets thus far. The range between 90 days and 180 days, depending on the type of review and whether the institution in question is rated favorably or unfavorably.

The FDIC also reports it has a framework in place to ensure consistency while considering the ""unique circumstances of each institution and the community in which it operates.""

About Author: Krista Franks Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.
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