Country Risk Management

Examination Procedures

General Procedures

These procedures are intended to determine the adequacy of the bank’s policies, procedures, and internal controls as they relate to country risk management. The extent of testing and procedures performed should be based upon the examiner’s assessment of risk. This assessment should include consideration of work performed by other regulatory agencies, internal and external auditors, internal compliance review units, formalized policies and procedures, and the effectiveness of internal controls and management information systems.

Objective: Determine the scope of the examination of the bank’s country risk management process and identify examination activities necessary to meet the needs of the supervisory strategy for the bank.

1.

  1. Review the following documents for any previously identified problems that require follow-up:

    • Supervisory strategy.

    • EIC’s scope memorandum.

    • Previous Report of Examination.

    • Working papers from the previous examination.

    • Internal and external audit reports and, if necessary, work papers.

    • Correspondence.

  2. Review the bank’s recent FFIEC 009 Country Exposure Reports and relevant internal bank reports for any apparent changes, trends, or areas of concern in the bank’s international activities.

  3. Review the “Canary” and “International” topic pages on the OCCnet for any information that may be relevant to the bank’s international activities.

  4. Obtain and review the following documents to determine the amount of oversight provided for the bank’s international activities:

    • A list of board and executive or senior management committees that supervise the bank’s international activities, including a list of members and meeting schedules. Also review copies of the minutes documenting the meetings of these groups since the last examination.

    • Reports related to the bank’s international activities and country exposures that have been furnished to the board of directors, country risk management committee, or any similar committee.

  5. Obtain and review policy and procedure manuals, reports, and any other tools used by management to supervise the bank’s international activities, including:

    • Organization chart.

    • Written policy and procedure manuals.

    • Strategic and business plans for international activities.

    • List of products, services, and business initiatives.

    • Country limit and exposure reports.

    • Country risk analysis and rating reports.

    • Concentration reports.

    • Exception reports.

    • Reports on the results of any financial modeling tools that may have been applied to the bank’s international portfolio.

    • ALLL analysis.

  6. Based on the material reviewed in the previous steps and discussions with management, identify any areas of significant change or possible concern in the bank’s international activities, including:

    • Any significant changes in policies, procedures, or personnel.

    • Any significant changes in the products offered, size of exposures, or market focus.

    • The level and trend in delinquencies and losses.

    • Any significant changes in the level of concentrations or the number of exceptions granted to established limits.

    • Any internal or external factors that could affect the level of risk associated with the bank’s international activities, including:

      • Changes in country exposure limits.

      • Economic conditions in the countries and regions in which the bank has exposure.

  7. Using the information obtained while performing these procedures and from discussions with the bank EIC, determine the scope of this examination and its objectives.

Select steps necessary to meet objectives from the following examination procedures. Seldom will every step be required.

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