National Bank Surveillance System (NBSS)

What Was the National Bank Surveillance System (NBSS)?

The National Bank Surveillance System (NBSS) was a computerized monitoring system developed to collect data and evaluate the financial performance of national banks. The off-site surveillance system was first established by the U.S. Office of the Comptroller of the Currency (OCC), a federal agency that oversees the execution of laws relating to national banks, in 1975. The OCC has phased out its use of the NBSS and replaced it with the Uniform Bank Performance Report (UBPR).

Understanding the National Bank Surveillance System

The National Bank Surveillance System (NBSS) acted as an early warning system. Its task is to identify banks displaying signs of financial trouble. It would alert regulators so they could take action and step in before the bank failed or experienced other trouble.

The National Bank Surveillance System's (NBSS) primary tool was its quarterly Bank Performance Report, which compared each bank to a group of its peers. This allowed regulators to develop an accurate picture of how banks were individually faring. Information was often sourced from Call Reports. These are financial health updates that banks are obligated to file on a quarterly basis.

The off-site surveillance system analyzed and predicted capitalization ratios, equity ratios, and other quantifiable pieces of information in order to understand which banks were in danger of failure. Ideally, the National Bank Surveillance System (NBSS) would notify the OCC of any red flags before it was too late.

The Office of the Comptroller of the Currency

The purpose of the OCC is to promote a safe and reliable national banking system in the United States. The OCC charters, regulates, and supervises all U.S. national banks, conducting on-site reviews and stringent oversight of their operations.

According to the OCC, banks are normally subject to a full-scope, on-site examination every 12 or 18 months. In theory, banks that were highlighted by the National Bank Surveillance System (NBSS) system as displaying signs of distress would have their on-site examinations pushed forward to an earlier date.

History of the National Bank Surveillance System

The National Bank Surveillance System (NBSS) made its debut after the failure of two national banks in the early 1970s. The OCC, facing considerable scrutiny for not foreseeing these shortcomings, commissioned a study from the accounting firm Haskins & Sells. The report, issued in 1975, recommended that banks provide more updates. The report also championed the creation of a computerized, off-site system, noting that the cost and difficulty of analyzing Call Reports via computer had dropped significantly over the past decade.

A decade after the report was issued, the savings and loan (S&L) crisis occurred. Between 1986 and 1995, more than 1,000 savings and loan associations in the United States collapsed. This devastating chain of events made it clear that off-site surveillance was not sufficient to accurately predict bank failure. It needed to be accompanied by frequent, periodic, on-site examinations.

Studies since the 1980s have found that frequent on-site examinations make for more accurate Call Reports, as they allow bank examiners to scrutinize loans closely and encourage banks to report loan losses in a timelier fashion.

Changes to the National Bank Surveillance System (NBSS) during the 1990s allowed regulators to more closely monitor banks between periodic on-site examinations. This allowed them to determine whether an additional, unscheduled examination was warranted to surveil a particular bank.

Eventually, the National Bank Surveillance System (NBSS) was transformed into the Uniform Bank Surveillance System (UBSS). The Bank Performance Report became the Uniform Bank Performance Report (UBPR).

The Bottom Line

The National Bank Surveillance System (NBSS) was a system that evaluated the financial performance of national banks through computer monitoring. It was created in 1975 by the U.S. Office of the Comptroller of the Currency (OCC).

The NBSS was an off-site system that allowed regulators to analyze data that banks reported and spot signs of financial trouble. It was paired with periodic on-site surveillance. Eventually, the NBSS became the Uniform Bank Surveillance System (UBSS).