Pre-exam Planning (PEP)_AC

Question 1

I. PEP

Answer 1

N/A

Question 2

What is the objective of the PEP process?

Answer 2

To collect necessary information to understand an institution and the risks of consumer harm prior to the start of an examination.

This information allows the (EIC) and the examination team to plan and conduct the examination, to develop the scope of the examination, and to accomplish supervisory objectives in an efficient and effective manner

Question 3

What are the three phases of PEP?

Answer 3

1. Information Package (IP)
2. Pre-Examination Planning Phase 1 (PEP-1)
3. Pre-Examination Planning Phase 2 (PEP-2)

Question 4

Information Package (IP)

Answer 4

N/A

Question 5

When must the IP be sent and who sends?

Answer 5

No less than 90 calendar days before the projected start date of the examination

Sent by the Field Supervisor (FS) or the Supervisory Examiner (SE)

Question 6

What exceptions are there to the timing of sending the IP letter?

Answer 6

Exceptions to this timing requirement can occur on a limited basis when the FS or SE is unable to contact institution management due to unforeseen difficulties. In such circumstances, the FS or SE should send the IP as soon as possible and document reasons for the delay.

Question 7

Purpose of the IP letter (3)?

Answer 7

to increase banker awareness of the examination process prior to the examination;

to promote open communication with examination staff; and

to ensure that the institution’s management team knows what to expect during the examination and where to go in the event their expectations are not met.

Question 8

T or F:

The FS, SE, or EIC or other exam staff can require written responses to the Pre-Exam Interview.

Answer 8

FALSE!

The bank may elect to provide written responses to the pre-examination interview, but the FDIC should not request/require written responses

Question 9

What to do if a bank is unwilling to use EFX?

Answer 9

The FS, SE, or designee should use an alternative delivery method (e.g., encrypted e-mail, express mail courier service) that meets the security measures discussed in the FDIC’s policies for the exchange, use, and storage of information.

Question 10

How is the IP Letter produced?

Answer 10

IP module in the PEP system

Question 11

The IP letter (standardized intro letter) contains what information (4)?

Answer 11

• provides an overview of the examination process;
• discusses various resources available that explain the examination process;
• identifies the appropriate communication channels for any concerns about the examination process or the resultant ratings;
  and
• provides contact information for the FS and/or the SE.

Question 12

If electronically submitting the IP Letter to the bank, what format should it be in?

Answer 12

Adobe PDF

SAME FOR ENTRY LETTER

Question 13

How can a supervisor sign an IP Letter?

Answer 13

Supervisor can either use his or her typed name as an electronic signature, using the same font as the body of the letter, or use Adobe’s “Fill & Sign” feature.

SAME FOR ENTRY LETTER (but the EIC signs)

Question 14

When should data validations and HMDA outlier reviews be conducted in advance of scheduled FL and CRA exams (i.e. prior to onsite)?

Answer 14

For largest HMDA reporters (over 500 LAR lines) and/or CRA reporters

Question 15

When will validation testing generally be conducted for all other typed of reporters?

Answer 15

During the exam

BUT- a field office has the option to perform a data validation prior to the examination start date for other institutions if the field office has sufficient resources to complete it.

Question 16

When do we provide a the HMDA/CRA Validation Letter to the bank?

Answer 16

When data validations occur prior to the any examination

STANDARDIZED data validation letter

This letter is either sent with or after the IP to allow sufficient time for the data validation process.

Question 17

Overall, what documents does the IP Package include?

Answer 17

IP Letter

Pre-exam (PEP) Interview Questions

HMDA/CRA Validation Letter (if applicable)

Question 18

PEP-1

Answer 18

N/A

Question 19

When does the risk-assessment of the institution begin?

Answer 19

During PEP-1

Question 20

What is the purpose of PEP-1?

Answer 20

Starts the process of identifying and documenting the bank’s inherent risk based on bank structure, supervisory history, financial performance, and market area.

Question 21

What activities are conducted during PEP-1 (4)?

Answer 21

• Gather info about the bank (internal and external sources);
• Contact the bank to conduct the pre-examination interview (PEP interview);
• Prepare and send the Entry Letter and CIDR

• Beginning Section 1 of the ARCH and Section 1 of the FLSC
*This activity is optional during PEP-1. The ARCH and FLSC can be started to the extent possible and when time or examination scheduling permits; however, most work on the ARCH will occur during PEP-2 and most work on the FLSC

Question 22

When should the EIC begin PEP-1?

Answer 22

No less than 45 calendar days prior to the scheduled start date of the exam

Question 23

How long MUST banks have to complete the CIDR and provide document requests?

Answer 23

30 calendar days

Question 24

What are the internal FDIC resources for gathering info during PEP (8)?

Answer 24

• DGT, RADD, SOURCE
• LX ARCH, FLSC, ROE (and responses to ROEs), CRA PE
• Supervisory plans (for large and/or complex institutions, or others, as available);
• Demographic data for CRA assessment area(s) or market area(s);
• UBPRs and Call Reports;
• FDIC monitoring reports;
• Complaint and correspondence files; and
• Applications in process.

Question 25

What are external resources to gather info from during PEP-1 (5)?

Answer 25

• Previous years’ HMDA and CRA data disclosure reports;
• Bank website
• Public records, such as securities filings;
• Newspaper or website articles that raise potential examination-related issues; and
• Community contacts (for CRA evaluations).

Question 26

What is the purpose of the PEP Interview?

Answer 26

To gather current information to understand the bank’s risk profile, size, complexity, and the types of products or services offered.

Question 27

T or F:

Banks can provide written answers to the PEP interview questions prior to the actual interview?

Answer 27

TRUE

However, the FDIC cannot require the bank to provide written answers in advance. And the EIC is still expected to conduct an interview to verify or clarify responses.

Question 28

Is Director involvement required during exams?

Answer 28

NO- it is purely voluntary and lack of participation will not be viewed negatively.

Question 29

What are the primary objectives to inviting Directors to participate in exam meetings (4)?

Answer 29

• improve communication with outside Directors,
• increase Director knowledge of the examination process
• provide an opportunity for Directors to discuss their views with examiners on bank matters
• give examiners the opportunity to gain further insight into the experience levels and leadership qualities of bank management

Question 30

What is used to produce the Entry Letter and CIDR?

Answer 30

C-PREP module in PEP system

Question 31

After conducting information gathering and the PEP interview, what should an EIC do?

Answer 31

Input the PEP interview responses into the PEP system to ensure CIDR is tailored to request on what is necessary to conduct the exam

C-PREP filters CIDR to make certain items available based on PEP interview responses

Question 32

What does the CIDR do?

Answer 32

Primarily requests information and documents to assess the CMS, as well as information and some documents to understand the characteristics of products or services offered.

Question 33

The bank’s responses to the CIDR help the EIC do what?

Answer 33

Properly scope the exam and identify PSRs on the ARCH that exhibit residual risk

Question 34

If electronically providing the Entry Letter- the EIC should convert it to what format?

Answer 34

Adobe PDF

Question 35

What is the purpose of the Entry Letter?

Answer 35

Instructs the institution on how to deliver the materials to the EIC or examination team and in what format.

Question 36

Institutions must have at least _____ days to complete the CIDR and provide requested documents.

Answer 36

30 calendar

Question 37

T or F:

The EIC may visit the institution prior to
the official start date either to pick up the documents or to review any documents that are confidential or too bulky to duplicate.

Answer 37

TRUE, with supervisory approval.

Question 38

What is the purpose of the ARCH (2)?

Answer 38

• Documents the scope of the examination
• Assists with prioritizing efforts, time, and resources toward those PSRs with the highest residual risk of consumer harm.

Question 39

What is the purpose of the FLSC?

Answer 39

Documents the fair lending review conducted in accordance with the Federal Financial Institutions Examination Council’s (FFIEC) Fair Lending Examination Procedures

Question 40

Several responses for Section 1 of the ARCH and FLSC will pre-populate based on what?

Answer 40

What is entered into C-PREP from the PEP interview.

but the EIC should review pre-populated questions to ensure they are correct

Question 41

PEP-2

Answer 41

N/A

Question 42

What is the purpose of PEP-2 (3)?

Answer 42

• EIC will conduct an initial assessment of the CMS to determine how effective the CMS is in identifying, addressing, and mitigating the potential for consumer harm.
• The EIC will continue to identify and document inherent risk based on the bank’s business model and operations.
• EIC will finalize the ARCH exam scope and establish areas for transaction testing.

Question 43

What activities are conducted during PEP-2 (4)?

Answer 43

• Reviewing the CIDR responses and requested items;
• Completing the ARCH and completing the majority of FLSC Section 1;
• Requesting additional documents for PSR transaction testing or the fair lending review (TT Request); and
• Getting the ARCH approved.

Question 44

When should PEP 2 start?

Answer 44

Early enough to provide sufficient time for the bank to gather documents for transaction testing and for examiners to scope the exam.

Question 45

What elements should be included in the Transaction Testing (TT) Request?

Answer 45

• Documents requested
• Timeframe for the review period (e.g., since the previous examination, in the past year, in the last two years)
• Sample sizes.

Question 46

Who should the completed ARCH be submitted to?

Answer 46

• FS

- All appropriate SEs

Question 47

T or F:

If the ARCH is changed to add a PSR subsequent to sending the TT Request to the institution, the EIC has the option to request necessary documents for the additional PSR(s) after the examination starts instead of sending another TT Request.

Answer 47

TRUE

Question 48

If information is discovered during the examination that requires material changes to the originally approved ARCH, what should the EIC do?

Answer 48

Describe the changes in a scope amendment that is submitted to the FS and SEs for review and approval.

Question 49

What are “material changes” to the ARCH?

Answer 49

PSR change

May occur when the EIC determines an approved PSR will not be reviewed or when the EIC identifies a new PSR not identified during PEP.

Question 50

PEP Record Retention

Answer 50

N/A

Question 51

Where should the IP, HMDA/CRA Validation, and Entry letters be stored?

Answer 51

Correspondence folder in RADD

Question 52

Where should the PEP interview Q&As be stored?

Answer 52

• Completed within C-PREP, and

- Completed document maintained as workpaper in RADD

Question 53

Where should the complete CIDR with bank responses be retained?

Answer 53

As a workpaper in RADD

Question 54

Where should the final, approved ARCH be stored?

Answer 54

As an exam document in SOURCE

Question 55

Where should the TT Request List be retained?

Answer 55

As an exam workpaper in RADD

Question 56

Where should the final, approved FLSC be stored?

Answer 56

An an exam document in SOURCE