WASHINGTON - Foreign banks in the United States have a new performance rating system that is similar to U.S. banks' Camel ratings.
The program, designed to give foreign bankers more consistent exams and a lighter supervisory burden, will be implemented by the Federal Reserve over the next few years.
To help banks understand the new system's requirements, the Fed will publish guidelines in the next few weeks.
At the new examination's core is "Roca," a rating system whose name stands for risk management, operational controls, compliance, and asset quality.
Each bank will be rated by its primary regulator on a scale from one to five, with one being the best.
Each foreign bank also will receive a numerical assessment for its U.S. operations as a whole. That evaluation will combine the assessments on individual offices into a single report. Banks will receive a second rating, also on a one to five scale, for the composite report.
David Halvorson, deputy general counsel at the Institute of International Bankers, New York, said foreign banks support the new rating system. "Roca provides for a good deal of flexibility and individual analysis for banks," Mr. Halvorson said.
Under the Foreign Bank Supervision and Enhancement Act, part of the 1991 banking law, the Fed was ordered to step up supervision of foreign banks.
Federal and state regulatory agencies that oversee foreign bank activity in the U.S. have been working with the Fed on the new system since 1992.
William A. Ryback, an associate director of supervision at the central bank, said the new system is needed to avoid overlapping exams by different agencies and make regulators' expectations clearer.
"We had to come up with a product that eliminates confusion," Mr. Ryback explained at a Bankers Association for Foreign Trade conference here last week.
What many see as the most controversial part of the new system is a new Fed evaluation of the parent bank. Although the agency has been visiting parent banks since 1978, this will be a much more in-depth review, Mr. Ryback explained in an interview this week.
Some foreign banks have complained said that these parent exams will give the Fed too much power. But Mr. Ryback urged banks to cooperate with the exams. "We're going to do this whether you assist us or not," he said at the conference.
Examiners will concentrate on the comprehensiveness of banks' risk management policy as well as knowledge of and adherence to rules, said Robert H. McCormick, deputy superintendent of banks at the New York State Banking Department.
Training of personnel and timely and accurate reporting also will be stressed.
Mr. McCormick said the new rating system will take three to five years to fully implement.