Single Course

Supervision of Bank & Financial Institutions

Banking and Financial Services

Course Summary:

The aftermath of the financial crisis has been characterized by renewed attention to bank supervision and regulation, especially in the context of the largest financial institutions. Supervisory practices for these firms have undergone major changes in response to a number of policy and legislative initiatives.

This Course will discuss the objectives of supervision of large, complex financial institutions and ways to measure the effectiveness of the supervision of these firms. Senior policymakers, supervisors, and prominent academics will provide their views about the goals and objectives of supervision, the distinction between supervision and regulation, and the approaches that can be taken to measure or assess supervisory success and effectiveness. The workshop will include presentations of empirical and theoretical research as well as panel discussions and broader discussions with the audience.

Course Objectives:

  • Identify key examination issues of each banking supervision and regulation function, including the rating systems used for the various types of examinations and inspections.
  • Identify the risk types reviewed in each examination specialty and areas of overlap among them.
  • Discuss how concerns identified in one specialty’s examination can affect another area.
  • Recognize how the components of a bank’s operations, lending function, information systems, and internal control affect banking products and the business of banking.
  • Discuss how the examination process identifies the potential risks present in the deposit, investment, and lending functions of a financial institution.
  • Describe the analytical process for evaluating an internal control system.
  • Identify weaknesses in a bank’s internal control structure.
  • Discuss the concept of risk as it applies to banking, including how risk is measured, reported, and analyzed.
  • Explain the importance of management information systems.
  • Apply financial analysis and bank accounting concepts.
  • Identify key supervisory issues related to integrated supervision

Course Outline

Asset Quality

  • Explain the importance of asset quality to a bank’s financial condition and its effects on earnings and capital
  • Define asset classification and criticism categories and list the assets that are typically classified in an examination
  • Classify a noncomplex problem loan
  • Explain the concepts of past due and nonaccrual
  • Calculate the examination-related asset quality ratios and discuss the level and trend of asset classifications
  • Identify and interpret the asset quality ratios in the UBPR
  • Discuss the purpose of the allowance for loan and lease losses and the factors considered when assessing its adequacy
  • Discuss additional key factors that affect a bank’s asset quality, including credit administration, lending policies, and internal credit review BHC Inspections
  • Identify activities in which bank holding companies (BHCs) engage;
  • Describe the risks inherent in BHC activities;
  • Recognize regulatory concerns common to BHCs; and
  • Define the rating systems used in BHC inspections and explain how the rating systems are applied.

Business Law

  • Identify and discuss business law concepts related to the regulation and supervision of financial institutions;
  • Describe common business organizational structures along with their advantages and disadvantages;
  • Identify legal issues related to contracts;
  • Explain the importance of adequate loan documentation; and
  • Describe common loan documents.


  • Define capital;
  • Identify sources of capital;
  • Describe the purpose of capital;
  • Discuss the concept of risk-based capital;
  • Identify elements of tier-one and tier-two capital;
  • Describe the methodology for risk-weighting assets;
  • Calculate risk-based and leverage capital ratios;
  • Describe regulatory minimum capital requirements;

Consumer Affairs

  • Describe a financial institution’s consumer compliance responsibilities.
  • Describe the System’s role in supervising an institution’s compliance with fair lending regulations and the CRA.
  • Describe the risks typically associated with fair lending and CRA.
  • Describe the consumer compliance and CRA rating systems.
  • Identify supervisory issues related to consumer compliance.
  • Explain how compliance issues relate to other examination specialties.


  • Explain the importance of earnings to a bank’s overall financial condition;
  • Identify the components of earnings;
  • Explain how a bank’s structure affects its earnings;
  • Identify and interpret the earnings ratios presented in the in the UBPR; and
  • Discuss additional factors that affect a bank’s earnings including budget planning, rate sensitivity and external market conditions.

Information Technology

  • Describe the risk fundamentals associated with information technology (IT) and identify IT risks;
  • Describe the IT examination rating system;
  • Explain the System’s supervisory role for IT examinations;
  • Explain the importance of internal control and audit concepts as they apply to information systems and technology;
  • Distinguish between management information systems (MIS) and IT.
  • Describe the importance of an adequate MIS program;
  • Explain how IT risks are incorporated into the risk assessment process;
  • Describe how IT deficiencies affect other examination areas; and
  • Describe the technology environment common in community banks.

Integrated Supervision

  • Discuss the concept of integrated supervision
  • Distinguish the various aspects of a financial institution's activities and describe the applicable supervisory process
  • Describe the risk management process, including identification, measurement, monitoring, and control of risk
  • Discuss the importance of assessing risk and identify the various risk components
  • Explain risk assessment as it pertains to examination structure, process, and ratings
  • List the risks relevant to each type of examination specialty
  • Identify common regulatory concerns and how they affect the various examination types
  • Identify the ratings used by each examination specialty
  • Discuss supervisory tools used for off-site monitoring

Internal Controls and Audit

  • Define internal controls;
  • List the five elements of an internal control system;
  • Discuss the relationship between internal controls and management responsibilities;
  • Identify the risk potential of an inadequate internal control system;
  • Identify actions that can reduce or eliminate the risk potential of inadequate internal controls;
  • Discuss what an examiner should look for when evaluating internal controls; and
  • Apply the concept of materiality to the review of internal controls.


  • Discuss the roles and responsibilities of an institution’s management and its board of directors,
  • Describe the effect of the CAMELS ratings on the management rating, and
  • List the significant areas considered when evaluating management.


  • Identify the major functions of a financial institution engaging in trust activities and the common types of trusts;
  • List an institution's duties and responsibilities related to its fiduciary activities;
  • Discuss the risks typically associated with fiduciary activities;
  • Explain the System's authority over a financial institution engaging in trust activities;
  • Describe the rating system applied to trust examinations;
  • Recognize supervisory issues relating to nondeposit investment products; and
  • Explain how risks arising from trust activities can affect other examination specialties.