As part of the examination process, examiners reviewed the soundness of management practices, internal controls, and internal audit activities, but that review was not the examination’s primary focus. The Federal Reserve’s adoption of a risk-focused approach, however, reflects its view that examiners should target their work on individual banks’ specific risk profiles, including the traditional examination of loan quality and reserves.
This need for fundamental change in the traditional approaches of bankers and supervisors became evident in reviewing the lessons learned from the turmoil, stress, and change in the US banking system over the past decade.