WASHINGTON — The Federal Reserve Board on Friday issued guidance to community bank examiners on what they should consider when upgrading an institution's supervisory rating.
The Fed's guidance will apply to state member community banks supervised by the central bank with total assets of $10 billion or less, but could include other types of community institutions.
"The guidance is being issued to ensure that upgrades occur in a timely manner when the banking organizations have made the requisite progress in addressing any supervisory concerns that had prompted lower ratings," the agency said in a press release.
Among the criteria that supervisors should use to evaluate an upgrade in a bank's supervisory rating include the level of capital, improvement in core earnings, a material decline in nonperforming assets, and liquidity and interest rate risk positions.
The Fed said banks will need to show an improved financial condition and risk management, as well as an ability to continuously get better in these areas.