It & Trust

Front 1

Primary objective of IT exam

Back 1

Determine confidentiality, integrity, and availability of records produced by automated systems. Management's ability to identify risks and maintain appropriate controls.

Front 2

Components rated for an IT exam

Back 2

Development and acquisition

Support and delivery

Audit

Management

Composite

Front 3

IT

Composite 1

Back 3

• Strong performance in every respect
• Components 1 or 2
• Weaknesses are minor, easily corrected in normal course of business
• Comprehensive RM practices
• Identifies weaknesses promptly, takes appropriate action
• No supervisory concern

Front 4

IT

Composite 2

Back 4

• Safe & sound performance, may demonstrate modest weaknesses in operating performance, mgmt process or system development
• Generally correctable in normal course of business
  • Greater reliance on audit & regulatory intervention to identify & resolve concerns

Front 5

IT

Composite 3

Back 5

• Some degree of supervisory concern
• Weaknesses moderate to severe
• RM practices do not effectively identify risks
• Mgmt often has difficulty responding to changes in business, market, & technology needs
• Repeat concerns may exist, mgmt may lack ability or willingness to resolve
• Financial condition weak and/or negative trends
• Formal supervisory action may be necessary

Front 6

IT

Composite 4

Back 6

• Operates in unsafe & unsound environment, may impair future viability
• Operating weaknesses indicative of serious mgmt deficiencies
• Inability or unwillingness to correct audit & regulatory concerns
• Financial condition seriously impaired or deteriorating
• Failure may be likely unless IT problems are remedied
• Close supervisory action necessary, formal action warranted

Front 7

IT

Composite 5

Back 7

• Critically deficient operating performance, in need of immediate remedial action
• Operational problems and serious weaknesses may exist throughout organization
• RM practices severely deficient
• Board & mgmt provide little or no direction in IT initatives
• Mgmt unaware or attentive to technology needs
• Unwilling or incapable of correcting audit & regulatory concerns
• Financial condition poor & failure highly probable due to poor operating performance or financial instability
• Ongoing supervisory attention necessary

Front 8

Primary objective of Trust exam

Back 8

Determine whether its operations or administration of accounts have given rise to possible or contingent liabilities, or direct liabilities (estimated losses), which could reduce bank's capital.

Compliance with laws, adherence to fiduciary standards

Front 9

Statement of Principles of Trust Department Management

Minimum requirements:

Back 9

• Board involvement in establishing and providing continuing operation of trust dept
• Trust dept separate from every other banking dept, trust assets separate from other bank assets, assets of ea trust separate from other trusts
• Maintain separate books and records in sufficient detail to properly reflect all trust dept activities

Front 10

Statement of Principles of Trust Department Management

Board should:

Back 10

• Designate competent officer
  • Name Trust Committee w/ at least 3 directors, at least 1 outside director

Front 11

Statement of Principles of Trust Department Management

Trust Committee should:

Back 11

• Meet at least quarterly
• Approve & document operating of new trust accounts, purchases, sales, changes in trust assets, closing of trust accounts
• Provide comprehensive review of all new accounts promptly following acceptance
• Annual review of each trust account
• Keep minutes
• Report to Board periodically
• Provide written policies, counsel, audit, & internal controls

Front 12

Components rated for a Trust exam

Back 12

Management

Operations, internal controls, audits

Asset management

Earnings

Compliance

Composite

Front 13

Trust

Composite 1

Back 13

Sound in every respect

Components 1 or 2

Minor weaknesses, can be handled in a routine manner

Substantial compliance

No supervisory concern

Front 14

Trust

Composite 2

Back 14

Fundamentally sound

No component worse than 3

Moderate weaknesses, well within mgmt's capabilities & willingness to correct

Substantial compliance

No material concerns

Supervisory response limited & informal

Front 15

Trust

Composite 3

Back 15

• Some degree of supervisory concern in one or more components
• Combination of weaknesses moderate to severe
• No component worse than 4
• May lack willingness or ability to address weaknesses in appropriate time frame
• More than normal supervision required
  • May include formal or informal enforcement actions

Front 16

Trust

Composite 4

Back 16

• Generally exhibit unsafe & unsound practices or conditions resulting in unsatisfactory performance
• Problems severe to critically deficient
• May be centered around inexperienced or inattentive mgmt
• Weak or dangerous operating procedures
• May be in significant noncompliance
• Problems pose threat to acct beneficiaries and if left unchecked, could cause significant losses to institution
• Close supervisory attention required
• Formal enforcement actions necessary

Front 17

Trust

Composite 5

Back 17

• Activities conduced in extremely unsafe & unsound manner
• Admin critically deficient in numerous major respects
• Volume & severity of problems beyond ability or willingness of mgmt to control or correct
• Evidence of flagrant disregard for interests of beneficiaries
• May pose threat to institution
• Continuous close supervisory attention warranted
• May include termination of fiduciary activities