Dos and Don'ts of Interacting with Bank Regulators

Supervision is a daily fact of life for bank boards and management. Below, we offer strategies for how both board members and members of management can ensure that the supervisory process goes as smoothly as possible.

1. DON’T assume the exam team knows the details of a product or service the way you do. Examiners have line of sight into the activities across multiple banks, but they don’t have access to the same detailed information about your products or services that you do.

   Prior to the start of an examination, consider whether you have introduced any new products or services, entered new geographies, or changed your control structures in any way. If so, early in the exam cycle (or even before), brief the examiners on the changes you have made, the rationale for the changes, your assessment of the impact on the bank’s risk profile (and steps taken to mitigate any risks), and the governance process for approving the changes.



2. DO put it in writing. No one understands your business better than you do. When examiners return to their offices after an exam, they have to brief a variety of people at the agency on their findings. By providing written materials, you facilitate the process of communicating that information within the agency.


3. DO ask questions. Banks and examiners have a shared goal of ensuring that the exam team has an accurate understanding of the bank’s operations and risks. If you don’t understand why an examiner is asking a question, it’s hard to give them the information they need. Ask for the clarity you need.



4. If you are on a call or in a meeting with multiple people from the agency who are not part of your exam team, DO ask who they are and what their role is at the agency. The staff at the agencies typically fall into one of several groups: supervisors or examiners focused on the condition of a particular bank or a group of banks with similar asset sizes or business models; individuals responsible for the development of regulations and supervisory policy, including financial analysts and economists; and legal staff responsible for assessing whether a bank has complied with the law and for ensuring that the agency complies with the law in performing its own responsibilities.

   Key policy decisions are made at the agency’s head office, and if your local exam team is joined by staff from the head office, this can indicate that an issue presents policy concerns and/or is being escalated within the agency.




5. If you know there’s a problem, DON’T wait to let examiners discover it for themselves. By self-identifying and remediating issues early and sharing them with regulators, you show the strength of your controls and governance processes.



6. DO feel that it’s OK to disagree, respectfully. Faced with the same set of facts, different people can draw different conclusions. If you find yourself at an impasse with the exam team, you can raise your concerns with more senior management within the agency who are able to take into account a wider variety of concerns or issues. Let the exam team know you plan to do this. No one wants their boss surprised, and sharing your intent will allow the exam team to prepare their managers for the discussion.



7. DO show your appreciation for the significance of any exam findings and your commitment to promptly remediating any deficiencies identified by the exam team. The process of moving from an exam finding or matter requiring attention to an enforcement action is progressive and can often be averted if the bank demonstrates its commitment to addressing the underlying issues early in the exam process.

Goodwin’s Banking team stands at the ready to represent clients in preparing for bank regulator interactions, investigations, and examinations. Should you have any questions about the insights above, please reach out to any member of our team or your Goodwin contact.

About Goodwin’s Banking Team:

Goodwin’s accomplished Banking team regularly represents financial institutions before the Federal Reserve, OCC, FDIC, CFPB, various state banking regulators, and securities regulatory agencies, in addition to providing comprehensive regulatory and compliance advice. Our team has advised in hundreds of bank transactions, including whole bank M&A, branch acquisitions and dispositions, capital market transactions, and securities offerings, and is called upon by community, regional, national and international banking organizations as go-to outside counsel for corporate guidance and advice relating to complex bank products and services.

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee a similar outcome.