What is a bank examination?
Bank test includes a number of tests and reviews that ensure that the bank is healthy and is able to fulfill its duties. Government regulatory bodies are often institutions regulated by banks and perform banking tests that can be frequent or occasional. The most important information during this exam is the Bank's assets and liabilities. Other reviewed items include the Bank's ability to meet government regulations and function according to specific laws that protect the consumer from inappropriate actions. A third -party accounting company or an external government entity may be an organization that carries out a test. Items that are most often reviewed on a banking test may include adequacy of capital, asset quality, management and earnings for a given period, along with the liquidity of assets and sensitivity on the market risk. Each part of the review process most often has a specific set of control limits that regulators consider to be normal according to other observations and reviews. Banks that do notThey lift these instructions, they can receive from the government notification of their inability to operate. In some cases, the government may take over banks to maintain consumer assets.
The external agency that launches a bank test may first begin by papering provided by financial institutions. After reviewing a few months of historical data, the examiner can do notings for concern. For example, the adequacy of capital and the quality of assets can be determined through the review of paperwork. After this initial review, a visit to the banking investigator may be necessary to meet the management team of the financial institution. This on -site review can help confirm all expectations and potential pitfalls for the future years.
As the reviewer performs a bank examination, the financial institution can provide each section or item score. The score is usually on a scale like 1 to 10 nebo another scale that indicates the power of a particular item. The total number of ordered may result in the total score for the financial institution. This number can result in closer control or praise for how well the bank works and manages the means of its consumers. Either way, the test should improve the bank or stop it in operation dangerously.