What it is:
A bank examination is a regular process of ensuring that a bank or lending institution is financially stable and obeying regulations while avoiding excessive risk. Theis a system used to rate banks.
How it works/Example:
In order to ensure their financial strength, banks must undergo periodic examinations by a federal agency (usually the Office of the Comptroller of the loans and investments, how it manages its , the risk profile of the bank (that is, the liquidity and profitability of the bank), and the bank's compliance with consumer banking laws. OCC examiners also review the bank's internal controls and management ability.
Bank examiners numerical ratings to the bank as a result of the examination. Dubbed the system in the United States, examiners score each bank in six areas: capital level, quality, management, , liquidity, and sensitivity to . Banks score between 1 and 5 in each category, with 1 being the highest.
Why it matters:
Bank examinations have two parts: the objective national banks must submit a Report of Condition and Income each quarter to the Federal Deposit Insurance Corp. (FDIC), and this is available to the public.