The FDIC released a special edition of its Supervisory Insights publication that focuses on corporate governance for community banks. The issue includes a summary of responsibilities for bank boards and senior management, commentary on the FDIC’s Pocket Guide for Directors and an overview of regulatory expectations when evaluating board effectiveness.
The publication discusses the board’s role in building a strong risk management culture, understanding the bank’s risk profile and assessing risk appetite and ensuring that appropriate policies, procedures and objectives are in place to appropriately manage risk and meet strategic goals. Boards must evaluate the organization’s strengths, opportunities, weaknesses and threats and develop measurable objectives to guide the direction of the organization as part of the strategic planning process, the FDIC said.
The FDIC also noted that board members should play an active role in the examination process, engaging with their regulators and thoroughly reviewing examination results and recommendations. The agency said it expects a higher level of board oversight when banks have lower regulatory ratings, enforcement actions, elevated concentrations, complex products, high growth rates, low liquidity or capital levels, business model changes, poor operating results and deterioration in local economies, among other concerns.
Read Supervisory Insights.