The Consumer Financial Protection Bureau (CFPB) has outlined its approach to supervision of large banks and other depository institutions whose total assets exceed $10 billion, and their respective subsidiaries and affiliates.

On July 21, 2011, CFPB will commence supervision of these larger institutions to ensure their compliance with federal consumer financial protection laws.  Currently, 111 depository institutions and their subsidiaries and affiliates--which collectively hold over 80% of the banking industry's assets--will fall within CFPB's supervisory jurisdiction.

CFPB will inherit much of its initial staff from other regulatory agencies through staff transition provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.  These new CFPB examiners will come from the Federal Reserve Board, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation.  According to the CFPB, it expects to have over 100 employees on its supervisory staff by the end of July, managed out of regional satellite offices in Chicago, New York, San Francisco, and Washington, DC.  CFPB expects to train examiners in workshops before deployment.  Ultimately, CFPB expects to have several hundred examiners from a variety of backgrounds, including state regulatory agencies and industry.

CFPB's supervision will be an on-going process consisting of pre-examination scoping and information review, data analysis, on-site examinations, regular communication with the institutions and prudential regulators, and follow-up monitoring.  Most depository institutions will receive periodic examinations; the largest and most complex institutions will receive year-round supervision which will be customized to reflect the consumer protection and fair lending risk profile of the institution.

Monitoring is intended to address consumer risks and to strengthen compliance programs.  Each institution's internal ability to detect, prevent and remedy violations of consumer financial protection laws will be assessed by CFPB's review of the institution's internal procedures and conducting interviews with personnel.  Where noncompliance is found, CFPB will seek corrective actions, including strengthening the institution's programs and processes to prevent recurrence and, where appropriate, instituting remedies through CFPB's enforcement staff.

Commencing July 21, 2011, CFPB will establish channels of communication with large depositories, introduce them to CFPB's supervision and examination process (including through informational roundtables starting in early August), learn more about the individual entities they will  supervise (including their structure, business strategies, operations and risks), and commence the first round of on-site examinations. CFPB has already been receiving and reviewing information from federal and state regulatory agencies about each large depository institution.  CFPB will also communicate and coordinate its supervision and enforcement efforts with other federal and state regulatory agencies.

In the future, CFPB will post the initial phase of its examination manual on its website.