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Risk Management MERITs Attention

FDIC is expanding its risk-focused examinations, referred to as "Maximum Efficiency, Risk-Focused, Institution Targeted Examinations or "MERIT." Originally developed for small banks having assets of $250 million or less, the program is now being expanded to institutions with total assets of $1 billion or less. (Would this be a good time to suggest using the same size criterion for CRA?) The MERIT exam is risk focused and used only in institutions where risk management is strong.

To qualify for the MERIT exam, a bank must demonstrate stable management and effective loan grading systems. Recent changes that could adversely affect risk, such as changes in management, downturns in the market's economy, or the introduction of a new product line will disqualify institutions from the program. These institutions will undergo a more extensive examination.

Editor's note: The author's suggestion was a good one! The FDIC and other agencies have updated their CRA regulations to increase the "large bank" threshold to $1 Billion, creating a middle-ground for banks falling between $250 million and $1 Billion in total assets.

Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 1, 2/04

First published on 02/01/2004

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