Compliance Examination

What Is a Compliance Examination?

The term compliance examination refers to the periodic examination of banks to make sure they operate according to consumer protection laws, fair lending statutes, and the Community Reinvestment Act. Compliance examinations are typically focused on operational areas that pose the biggest compliance risks. They specifically focus on management processes and other procedures the institutions have in place to ensure compliance with regulations.

How Compliance Examinations Work

Banks are financial institutions that take deposits and make loans to their customers. While they are in business to make profits, they are also responsible to meet the best interests of their clients. As such, they are regulated to make sure they act in a fair manner, do not take advantage of customers, and don't take excessive risks. One way that the government keeps these institutions in check is through oversight activities, such as compliance examinations.

These exams are administered by government agencies, such as the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC). As noted above, these exams ensure that Americans have access to a fair and sound banking system.

Examinations generally take place during a supervisory period every 12 to 18 months. They are meant to determine bank management competence, the quality of the bank's assets, and whether banks are compliant with federal regulations. The process can also make sure that banks are following laws and guidelines regarding asset management, electronic recordkeeping, reporting requirements, and meeting the credit needs of their communities.

Examination Stages

Exams conducted by the FDIC generally take place in three distinct stages:

The FDIC publishes regular updates to its examination processes. According to the agency, roughly 98% of banks met their goals between the time fieldwork for examinations begin and the time that reports are disseminated to management in a 12-month period for the consumer compliance category as of Jan. 31, 2021.

The number of days for an exam turnaround in the consumer compliance category in a 12-month period as of Jan. 31, 2021.

Special Considerations

The compliance examination is one of three types of oversight activities carried out by the FDIC. Other activities include visitations and investigations. Visitations are usually conducted to review compliance for newly-chartered institutions and to review the progress on actions taken to correct previous infractions. Investigations, on the other hand, can be launched if problems are brought to the attention of the FDIC, such as consumer complaints.