WASHINGTON - New exams for large national banks, due out Dec. 21, were previewed this week by a top regulator.

Susan Krause, senior deputy comptroller for bank supervision policy, in a speech on Monday detailed how examiners will use the agency's new "supervision by risk" program.

The new approach, unveiled by the Office of the Comptroller of the Currency in September, will be the foundation of new exam guidelines for national banks with more than $1 billion in assets.

Under the program, examiners will divide the risks facing banks into nine categories. The list starts with credit risk and ranks the eight others in this order: interest rate risk, liquidity risk, price risk, foreign exchange risk, transaction risk, compliance risk, strategic risk, and reputation risk.

Examiners will employ what Ms. Krause referred to as a "risk assessment system" to piece together a custom-tailored risk profile of each bank.

"The risk assessment system weighs the quantity of risk with quality of risk management to form a conclusion about the bank," Ms. Krause told commercial lenders attending a Robert Morris Associates conference. The system "allows examiners to summarize the risk profile of the institution."

Examiners will rate as high, moderate, or low a bank's exposure to each of the first seven risks. Banks also will receive a weak, acceptable, or strong rating for how well they monitor and control each risk.

To put these ratings in perspective, banks will get an "aggregate risk" rating that reflects how well examiners think the institution is managing each risk, Ms. Krause said.

Finally, examiners will rate the "direction of risk," or whether it is growing or ebbing, Ms. Krause said.

The two remaining risk categories - strategic risk and reputation risk - will not be scrutinized in the same manner, mainly because they cannot be quantified in dollars, Ms. Krause said.

Strategic risk stems from bad business decisions, and reputation risk is the result of negative publicity.

"They are not direct risks that the examiner can measure in an examination," Ms. Krause said. Examiners will report their concerns and indicate whether the risks are increasing or shrinking.

While a risk profile is essentially a bank's risk report card, it also will provide examiners with a blueprint for future exams, Ms. Krause said.

"The risk profile of the institution will help the examiner determine what areas or risks will be looked at and the amount or depth of procedures that will be used," Ms. Krause said.

Risk profiles will help reduce the burden on examiners and bankers by focusing supervision only where it is needed, Ms. Krause added.

"It will lead to more efficient examinations because examiners will focus on the risk or risks most critical to a bank, and they will not focus on areas of low risk," she said.

So far, bankers are impressed.

"This is a more holistic approach to subject of risk management," said Thomas F. Ripke, executive vice president of West One Bank, Boise, Idaho, and chairman of Robert Morris Associates. "It gives you a far more forward- looking picture of what all of your risks are."

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