Five federal agencies today
requested public comment on a proposed statement describing internal controls
and risk management procedures that the agencies believe will assist financial
institutions that engage in complex structured finance activities to identify
and address the risks associated with such transactions.
As recent events have highlighted,
a financial institution may assume substantial reputational and legal risk if
the institution enters into a complex structured finance transaction with a
customer and the customer uses the transaction to circumvent regulatory or
financial reporting requirements, evade tax liabilities, or further other
illegal or improper behavior.
The interagency statement describes
the types of internal controls and risk management procedures that should help
financial institutions effectively manage and address the reputational, legal
and other risks associated with their complex structured finance activities and
operate in accordance with applicable law.
The statement, among other things, provides that financial institutions
engaged in complex structured finance activities should have effective policies
and procedures in place to:
·
Identify those complex structured finance transactions
that may involve heightened reputational and legal risk;
·
Ensure that these transactions receive enhanced
scrutiny by the institution; and
·
Ensure that the institution does not participate in
illegal or inappropriate transactions.
The statement also emphasizes the
critical role of an institution’s board of directors and senior management in
establishing a corporate-wide culture that fosters integrity, compliance with
the law, and overall good business ethics.
The proposed statement was issued
by the the Securities and Exchange Commission, Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, the Office
of the Comptroller of the Currency and the Office of Thrift Supervision. The statement would represent supervisory
guidance for institutions supervised by the four banking agencies and a policy
statement for institutions supervised by the Securities and Exchange
Commission.
Comment
on the interagency statement is requested within thirty days of publication in
the Federal Register, expected shortly.
The statement is attached.
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Attachment
Media Contacts:
Federal Reserve Dave
Skidmore (202) 452-2955
FDIC David
Barr (202) 898-6992
SEC John
Heine (202) 942-0022
OCC Kevin
Mukri (202) 874-5770
OTS Erin Hickman (202) 906-6677