WASHINGTON - The federal banking agencies plan to publish final safety and soundness guidelines today that will be used to identify problem banks.
The standards, which are required by the Federal Deposit Insurance Corporation Improvement Act of 1991, specify that regulators want banks to maintain adequate internal controls, to document loans effectively, to avoid excessive compensation, and to limit interest rate risk exposure.
The guidelines, which are to take effect Aug. 9, also give regulators the power to order problem banks to file safety-and-soundness compliance plans.
The four agencies also asked for public comment on two new guidelines. The first, an assets quality standard, coaches banks to identify and correct asset-quality problems as they arise. The second guideline, called the "earnings standard," tells banks to make enough money to maintain their capital levels.
Clearly, according to Ronald Glancz, a law partner at Venable, Baetjer, Howard & Civiletti, these are common-sense instructions that any well-run bank is already following.
The safety and soundness guidelines are far more palatable to the industry than the version first proposed in 1992.
"A lot of it is common sense," Mr. Glancz said. "It is safe-and-sound banking."