Community Banking ADVISOR for April 2013
April 4, 2022
Here’s a brief glance at what you’ll find in the Spring issue…
Take the stress out of stress testing
Stress testing can be a powerful tool for evaluating the impact of adverse external events on a bank’s earnings, capital adequacy and other performance measures. It also can guide an institution’s risk management and capital planning efforts. But until recently, there’s been some confusion about regulators’ expectations for stress testing by community banks. This article discusses new OCC supervisory guidance on this topic, looking at a variety of stress testing methods. A sidebar notes the circumstances under which institutions are expected to employ enhanced risk management techniques, including stress testing.
Suspicious activity reports: Are you using “key terms”?
One detail that banks often overlook when filing suspicious activity reports is FinCEN’s list of key terms to include in the narrative section. Using these terms helps law enforcement officials detect fraud and money laundering more quickly, which, in turn, helps protect bank customers. This article describes a few examples of these terms.
Borrowers are not created equal
Use financial statement reconciliations to compare diverse customers
“Normalizing” reconciliations to the income statement and balance sheet is necessary when comparing diverse borrowers. A thorough knowledge of accounting helps lenders prepare dissimilar customers’ financial statements for apples-to-apples comparisons and to aid in underwriting decisions. This article offers a basic explanation of this accounting tactic, taking into account varied accounting methods, one-time events and related-party transactions.
BANK Wire
This issue’s “BANK Wire” discusses the Consumer Financial Protection Bureau’s final rule amending Regulation Z, requiring mortgage lenders to make a reasonable, good-faith determination of a borrower’s ability to repay the loan. It also looks at the OCC’s warning that banks’ efforts to increase profitability may lead to inappropriate risk-taking, and at an FDIC study that addresses structural change, the geography of community banking, comparative financial performance, balance sheet strategies and capital formation.
