Thank you for the opportunity to respond to your draft audit report, Capital Provision
Requirements Established Under Supervisory Corrective Actions. We agree with the overall
assessment that the Division of Supervision and Consumer Protection (DSC) has been successful
in using capital provisions in supervisory corrective actions. Further, we are gratified that you
found that bank examiners adhere to DSC policies regarding both the analysis of capital
adequacy and the implementation of capital provisions within supervisory corrective actions.
FDIC Inspector General Recommendation
The draft audit report contained one recommendation:
We recommend that the Director, DSC revise guidance to supervisory personnel to
discuss the use and consideration of Tier 1 Leverage Capital, Tier 1 Risk-Based Capital,
and Total Risk-Based Capital ratios in the formulation and recommendation of capital-
level provisions.
DSC Response:
We generally concur with the findings of the audit report. While we believe that we sufficiently
consider and address risk-based capital standards and Prompt Corrective Action capital standards
in implementing our supervisory corrective actions, we also agree there are benefits to clarifying
or enhancing our existing guidance. We will revise and issue any necessary guidance to
examiners by March 31, 2006.
