WASHINGTON — The Office of Inspector General at the FDIC found that while its Division of Supervision and Consumer Protection cited a number of banks for significant compliance violations last year, it did not "adequately" ensure corrective measures were taken and most still received a high rating.
FDIC's DSC identified and reported 9,534 significant compliance violations during 2005, OIG reported. Of the 1,945 financial institutions examined in 2005, 1,607, or 83%, had been cited with "significant" compliance violations. Also, 837 (43%) of the 1,945 financial institutions examined had repeat, significant violations, of which 708 (85%) institutions were rated "1″ or "2."
According to DSC officials, of the institutions examined in 2005, 96% were rated "1″ or "2." DSC officials stated that the FDIC's supervisory approach is to increase the level of attention as an institution's compliance position worsens, and during 2005, DSC downgraded 297 institutions' compliance ratings, issued 72 informal and 36 formal enforcement actions for compliance, and made 43 compliance referrals to the Department of Justice or other authorities. "However, DSC had not adequately ensured that the financial institutions in our sample had taken appropriate corrective actions for repeat, significant violations that had been cited during examinations," OIG wrote. "In many cases, consistent with the flexibility allowed by DSC guidance for '1′ or '2′ rated institutions, DSC waited until the next examination to follow up on repeat, significant compliance violations that had been identified in multiple examinations before taking supervisory action."
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Specifically, OIG found that:
oOf the 51 reports of examination (ROE) reviewed for 14 sampled institutions, DSC had cited 431 significant violations related to eight consumer protection laws and regulations;
o47 of the 51 ROEs reviewed identified significant compliance violations;
oFive of the 47 ROEs resulted in informal supervisory actions and prompted follow up activities, and one visitation for a new FDIC-supervised institution also prompted follow-up activities, but DSC did not follow up on the remaining 41 ROEs until the next examination;
o11 of the 14 sampled institutions had repeat, significant violations; and
oAll 14 sampled institutions had deficiencies and weaknesses noted in their compliance management system (CMS) in at least one ROE. Also, DSC had identified serious deficiencies and weaknesses in some of the institutions' CMSs that remained uncorrected for extended periods.
For example, DSC recommended that a memorandum of understanding with one bank be terminated despite a fourth consecutive violation of the same RESPA requirement and the third consecutive time for TILA and HMDA violations.
DSC's plans have been responsive to OIG's recommendations. –[email protected]
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