FIMS: A New Financial Institutions Monitoring System for Banking Organizations

Abstract

One of the primary responsibilities of banking regulatory agencies is to minimize the financial loss to the bank to Bank Insurance Fund that results from the failure of insured depository institutions. To discharge this responsibility, bank regulators evaluate the financial performance and condition of depository institutions and initiate prompt corrective actions when they find signs of distress. In evaluation, regulators use a combination of on-site examinations and off-site monitoring systems. In 1993, the Federal Reserve instituted the Financial Institutions Monitoring System ("FIMS," also known as "SEER," or System for Estimating Examination Ratings), which is significantly more accurate that previous off-site systems in identifying financially trouble banking institutions. This article gives the background of FIMS, describes the new system, and explained how it improves on previous systems.

Keywords: bank, bank failure, bank supervision, CAEL, CAMEL, early warning system, EWS, Federal Reserve, SEER, UBSS

JEL Classification: G21, G28, E53