I am currently in the process of auditing our due from bank accounts. One of the things I came across was the issue of reviewing correspondent banks on a quarterly basis to determine they are in fact "adequately capitalized." Our policy states we will not do business with any correspondents that are not adequately capitalized. First, should these banks be reviewed quarterly? Second, for purposes of this audit, are Federal Home Loan Banks required to be reviewed quarterly? Are these even considered "correspondent banks." Or is an annual review sufficient? 12 CFR 206.5 is the reference I'm using. Any help would be appreciated!

Our CFO does a quarterly analysis of this. It is presented to the BOD.

The FHLB does not meet the definition of a bank in section 206.2(a), so you do not have to review its financials.

Quarterly reviews of the correspondent's capital levels is required by section 206.5(B). Also, don't forget to include banks that you sell Fed Funds to.

Great, thanks so much!