Comptroller of the Currency
Administrator of National Banks

SUMMARY

The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision (agencies) are seeking comment on the attached proposed Interagency Guidance on Correspondent Concentration Risks. The proposed guidance outlines the agencies’ expectations for identifying, monitoring, and managing correspondent concentration risks among financial institutions.

BACKGROUND

Correspondent relationships may result in both asset (credit) and liability (funding) concentrations, each of which heightens the need for a strong risk management framework due to the lack of diversification. This proposed guidance emphasizes the importance of actively identifying, monitoring, and managing correspondent credit concentrations to both individual correspondent institutions and to their correspondent’s corporate families. Such credit risks include exposures from federal funds sold, due from banks, loans and investments. Similarly, an institution’s risk management framework should ensure that management is scrutinizing funding concentrations and is prepared to oversee and administer the heightened liquidity risks associated with this activity.

The proposed guidance was published in the Federal Register on September 25, 2009. The agencies are requesting comments on all aspects of the proposed guidance. Comments on the proposal are due on or before October 26, 2009.

FURTHER INFORMATION

You may direct questions or comments to Fred D. Finke, Liaison, Midsize-Community Bank Supervision, (202) 874-4468, or Kurt S. Wilhelm, Director, Financial Markets Group, (202) 874-4479.