Material Loss Review of First Republic Bank

Submitting OIG:

Federal Deposit Insurance Corporation OIG

Date Issued:

Tuesday, November 28, 2023

Agency Reviewed / Investigated:

Federal Deposit Insurance Corporation

Submitting OIG-Specific Report Number:

EVAL-24-03

Location(s):

Agency-Wide

Type of Report:

Review

Questioned Costs:

Funds for Better Use:

Number of Recommendations:

Report updated under NDAA 5274:

View Document:

Attachment	Size
EVAL-24-03.pdf	1.6 MB

Recommendation Number	Recommendation Status	Significant Recommendation
1	Open	No
Evaluate why large-bank examination teams may wait to issue CAMELS ratings downgrades until issuance of Reports of Examination (ROEs), rather than promptly when circumstances warrant it as required by the RMS Continuous Examination Process Procedures. Then, take corrective action as appropriate.
6	Open	No
In light of the unexpected uninsured deposit outflows experienced by First Republic, we recommend that the Director, Division of Risk Management Supervision comprehensively re-evaluate the Manual to determine whether updates to examination guidance are needed pertaining to the evaluation of banks’ deposit outflow assumptions for liquidity stress testing, including the magnitude and velocity of uninsured deposit outflows.
7	Open	No
Proactive horizontal identification and monitoring of similarities across banks – including like business characteristics and risks, and like reputational characteristics – that may result in similar behaviors amongst their depositors, including shared risk characteristics that may result in increased contagion risk between institutions.
8	Open	No
Incorporating shared risk characteristics that may result in increased contagion risk between institutions into the FDIC’s supervisory approach across large institutions.
9	Open	No
Explore potential processes and information sources for real-time monitoring of large bank reputational risk. Potential information sources could include bank share price tracking websites, short seller activity, and social media discussions.
11	Open	No
Engage with other federal regulators to evaluate the need for changes to rules under the safety and soundness standards, including the adoption of noncapital triggers that would require early and forceful regulatory actions tied to unsafe banking practices before they impair capital.

Recommendation Number

Recommendation Status

Significant Recommendation

Additional Details

Open

Evaluate why large-bank examination teams may wait to issue CAMELS ratings downgrades until issuance of Reports of Examination (ROEs), rather than promptly when circumstances warrant it as required by the RMS Continuous Examination Process Procedures. Then, take corrective action as appropriate.

Open

In light of the unexpected uninsured deposit outflows experienced by First Republic, we recommend that the Director, Division of Risk Management Supervision comprehensively re-evaluate the Manual to determine whether updates to examination guidance are needed pertaining to the evaluation of banks’ deposit outflow assumptions for liquidity stress testing, including the magnitude and velocity of uninsured deposit outflows.

Open

Proactive horizontal identification and monitoring of similarities across banks – including like business characteristics and risks, and like reputational characteristics – that may result in similar behaviors amongst their depositors, including shared risk characteristics that may result in increased contagion risk between institutions.

Open

Incorporating shared risk characteristics that may result in increased contagion risk between institutions into the FDIC’s supervisory approach across large institutions.