The Financial Institutions Bureau is developing a program that will emphasize compliance with policies formally adopted by bank Boards of Directors. Rather than instructing bank examiners to criticize practices that are deemed improper for banks based on generally accepted industry standards, the Bureau will be placing more reliance in bringing to the attention of Boards of Directors practices which do not conform to their own established policies. Before this program can be put into effect, it is necessary that bank management, bank directors and bank examiners become aware of this new emphasis on examinations.

To begin implementation of this program the Bureau will, over the next eighteen months, periodically issue Bank Bulletins, each dealing with a specific policy area. (Bank Bulletin No. 8, dated February 3, 1975, dealing with "Short-term Money Market Funds" required the adoption of written Board policy.)

Each bulletin will require a written policy on a particular policy area. Each bulletin will also include a listing of key issues we feel the Board should address in arriving at its overall written policy on the subject matter of the bulletin.

These policies, as developed, should be maintained in a policy book of the Board that will be available for examiner reference and use during the course of an examination. A copy of all other written policies developed and adopted by the Board should also be maintained in this policy book.

Policy areas we intend to emphasize during the next year are:

- Lending
- Investments
- Conflict of interest
- Insurance
- Board
- Audit program
- Earnings and capital

Signed:	Richard J. Francis, Commissioner
	Gifford Knudsen, Director, Bank & Trust Division
Dated:	November 7, 1977