{"id":"AIBD-1037","title":"The FDIC Inspector General finds that the SCOR, SCOR-Lag and GMS models flagged 67 of 244 well-rated banks downgraded from 2014 to 2017","summary":"The FDIC's Inspector General found that SCOR, SCOR-Lag and GMS had flagged 67 of the 244 banks rated 1 or 2 that were downgraded from late 2014 to late 2017.","date_observed":"2019-12-18","date_basis":"source publication","date_precision":"day","benefit_status":"mixed","source_collection":null,"source_entry":null,"account":"Between onsite examinations, the Federal Deposit Insurance Corporation (FDIC) lists banks rated 1 or 2 that may be weakening on an Offsite Review List. Three models build the list each quarter from banks' financial reports, called Call Reports. SCOR and SCOR-Lag flag banks with a 50 percent or higher probability of a downgrade within a year. GMS flags banks in the 98th percentile or higher of downgrade risk over three years. In an evaluation dated 18 December 2019, the FDIC Office of Inspector General (OIG) examined downgrades from 31 December 2014 to 31 December 2017. In that period the models had flagged 67 of the 244 banks downgraded from a 1 or 2 rating to 3 or 4. With regional additions and a supplemental list, the program identified 94, or 39 percent. The OIG found that many missed downgrades stemmed from weak management or credit administration, which these reports do not capture. Only 47 of 1,665 reviews prompted by the list, or 3 percent, changed the supervisory strategy. The OIG did not compare supervision with and without the models.","category":"aggregate result","unexpected":false,"purpose":"The FDIC built the SCOR, SCOR-Lag and GMS models to flag banks rated 1 or 2 whose quarterly financial data point to a likely downgrade before their next onsite examination.","system":"Statistical CAMELS Offsite Rating (SCOR), SCOR-Lag and Growth Monitoring System (GMS) offsite monitoring models","model_version":null,"developer":"Federal Deposit Insurance Corporation","deployer":"Federal Deposit Insurance Corporation, Division of Risk Management Supervision (Case Managers in six Regional Offices)","location":"United States (national)","domain":"Bank supervision","segment":null,"benefit_type":"Reduced Risk","work_activities":["4.A.1.a.2","4.A.2.a.4"],"taxonomy_note":null,"registry_ids":{},"ratings":[{"group":"organizational","depth":2,"reason":"The models flagged 67 of the 244 well-rated banks that were later downgraded, which gave supervisors early notice of about a quarter of them."}],"ai_role":{"status":"unassessed","statement":"The OIG counted how many later-downgraded banks the models had flagged and did not compare supervision with and without them. The report calls SCOR a statistical model that predicts ratings from Call Report data and does not describe any of the three as machine learning. In its response, the FDIC said that it would explore machine learning in early warning models."},"evidence":[{"kind":"audit report","citation":"Federal Deposit Insurance Corporation, Office of Inspector General. Offsite Reviews of 1- and 2-Rated Institutions. Evaluation Report EVAL-20-002, 18 December 2019. Background, pp. 2-3, and section 'Downgraded Institutions', pp. 8-9.","title":"Offsite Reviews of 1- and 2-Rated Institutions (EVAL-20-002)","url":"https://www.oversight.gov/sites/default/files/documents/reports/2023-06/20-002EVAL.pdf","date":"2019-12-18","written_by":"independent","quote":"From December 31, 2014 through December 31, 2017, 244 1-or 2-rated IDIs received composite downgrades to a 3- or 4-rating. Of these, SCOR, SCOR-Lag, and GMS identified 67 of the downgraded institutions at some point during this 3-year period."}],"replication":{"produced_by":["SCOR and SCOR-Lag scored quarterly Call Report data and flagged 1- and 2-rated banks with a 50 percent or higher probability of a downgrade within a year.","GMS flagged 1- and 2-rated banks in the 98th percentile or higher of downgrade risk over three years, based on rapid growth or noncore funding.","Case Managers reviewed each flagged bank within 3½ months after the Call Report date and could recommend a visitation or an earlier examination."],"must_hold":["The weakness must show in a bank's Call Report data, and the models missed downgrades driven by weak management, credit administration and board oversight.","Banks must file accurate Call Reports, and about 25 percent of the missed banks in the OIG's table filed amendments to correct errant data."],"echoes":[]},"paired_incident":null,"headline":"*SCOR* and two other FDIC models flag 67 of 244 banks later downgraded","metric":"67 of the 244 banks","comparator":null,"later":null,"value":null,"developer_country":"United States","deployer_country":"United States","unrated_because":null,"brief_notes":null,"brief":null,"revisions":[{"date":"2026-11-01","change":"Added the record from the finding of the FDIC Office of Inspector General.","source":"https://www.oversight.gov/sites/default/files/documents/reports/2023-06/20-002EVAL.pdf","editor":"AIBD"}],"confidence":"found","shade":"high","claim_status":"Found by an auditor","claim_basis":"Sources: one independent audit report. 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Offsite Reviews of 1- and 2-Rated Institutions. Evaluation Report EVAL-20-002, 18 December 2019. Background, pp. 2-3, and section 'Downgraded Institutions', pp. 8-9.","title":"Offsite Reviews of 1- and 2-Rated Institutions (EVAL-20-002)","url":"https://www.oversight.gov/sites/default/files/documents/reports/2023-06/20-002EVAL.pdf","date":"2019-12-18","written_by":"independent","quote":"From December 31, 2014 through December 31, 2017, 244 1-or 2-rated IDIs received composite downgrades to a 3- or 4-rating. Of these, SCOR, SCOR-Lag, and GMS identified 67 of the downgraded institutions at some point during this 3-year period."}]}},"provenance":{"kind":"legacy_record","basis":"Editorial assignment.","record_fields":["evidence"],"source_refs":[]},"review_state":"record_mapped","coverage":"partial"},"sources[].upstream_sources":{"state":"unresolved","provenance":{"kind":"curatorial","basis":"Editorial assignment.","record_fields":[],"source_refs":[]},"reason":"This is an explicit unresolved assignment: the sources on record do not settle this question.","review_state":"not_assessed","coverage":"partial"},"strategic_assessments[]":{"state":"unresolved","review_state":"not_assessed","coverage":"partial","family":"strategic assessments"},"summary":{"state":"value_present","value":{"kind":"record_fields","fields":{"summary":"The FDIC's Inspector General found that SCOR, SCOR-Lag and GMS had flagged 67 of the 244 banks rated 1 or 2 that were downgraded from late 2014 to late 2017.","account":"Between onsite examinations, the Federal Deposit Insurance Corporation (FDIC) lists banks rated 1 or 2 that may be weakening on an Offsite Review List. Three models build the list each quarter from banks' financial reports, called Call Reports. SCOR and SCOR-Lag flag banks with a 50 percent or higher probability of a downgrade within a year. GMS flags banks in the 98th percentile or higher of downgrade risk over three years. In an evaluation dated 18 December 2019, the FDIC Office of Inspector General (OIG) examined downgrades from 31 December 2014 to 31 December 2017. In that period the models had flagged 67 of the 244 banks downgraded from a 1 or 2 rating to 3 or 4. With regional additions and a supplemental list, the program identified 94, or 39 percent. The OIG found that many missed downgrades stemmed from weak management or credit administration, which these reports do not capture. Only 47 of 1,665 reviews prompted by the list, or 3 percent, changed the supervisory strategy. The OIG did not compare supervision with and without the models."}},"provenance":{"kind":"legacy_record","basis":"Editorial assignment.","record_fields":["summary","account"],"source_refs":[]},"review_state":"record_mapped","coverage":"partial"},"systems[].autonomy_permissions":{"state":"unresolved","provenance":{"kind":"curatorial","basis":"Editorial assignment.","record_fields":[],"source_refs":[]},"reason":"This is an explicit unresolved assignment: the sources on record do not settle this question.","review_state":"not_assessed","coverage":"partial"},"systems[].component_role":{"state":"unresolved","provenance":{"kind":"curatorial","basis":"Editorial assignment.","record_fields":[],"source_refs":[]},"reason":"This is an explicit unresolved assignment: the sources on record do not settle this question.","review_state":"not_assessed","coverage":"partial"},"systems[].deployment_configuration":{"state":"unresolved","provenance":{"kind":"curatorial","basis":"Editorial assignment.","record_fields":[],"source_refs":[]},"reason":"This is an explicit unresolved assignment: the sources on record do not settle this question.","review_state":"not_assessed","coverage":"partial"},"systems[].inputs_outputs":{"state":"unresolved","provenance":{"kind":"curatorial","basis":"Editorial assignment.","record_fields":[],"source_refs":[]},"reason":"This is an explicit unresolved assignment: the sources on record do not settle this question.","review_state":"not_assessed","coverage":"partial"},"systems[].model_name":{"state":"unresolved","provenance":{"kind":"curatorial","basis":"Editorial assignment.","record_fields":[],"source_refs":[]},"reason":"This is an explicit unresolved assignment: the sources on record do not settle this question.","review_state":"not_assessed","coverage":"partial"},"systems[].model_version":{"state":"unresolved","provenance":{"kind":"curatorial","basis":"Editorial assignment.","record_fields":[],"source_refs":[]},"reason":"This is an explicit unresolved assignment: the sources on record do not settle this question.","review_state":"not_assessed","coverage":"partial"},"systems[].product_name":{"state":"value_present","value":{"kind":"record_fields","fields":{"system":"Statistical CAMELS Offsite Rating (SCOR), SCOR-Lag and Growth Monitoring System (GMS) offsite monitoring models"}},"provenance":{"kind":"legacy_record","basis":"Editorial assignment.","record_fields":["system"],"source_refs":[]},"review_state":"record_mapped","coverage":"partial"},"systems[].provider":{"state":"unresolved","provenance":{"kind":"curatorial","basis":"Editorial assignment.","record_fields":[],"source_refs":[]},"reason":"This is an explicit unresolved assignment: the sources on record do not settle this question.","review_state":"not_assessed","coverage":"partial"},"taxonomy_crosswalks[]":{"state":"unresolved","provenance":{"kind":"curatorial","basis":"Editorial assignment.","record_fields":[],"source_refs":[]},"reason":"This is an explicit unresolved assignment: the sources on record do not settle this question.","review_state":"not_assessed","coverage":"partial"},"title":{"state":"value_present","value":{"kind":"record_fields","fields":{"title":"The FDIC Inspector General finds that the SCOR, SCOR-Lag and GMS models flagged 67 of 244 well-rated banks downgraded from 2014 to 2017","headline":"*SCOR* and two other FDIC models flag 67 of 244 banks later downgraded"}},"provenance":{"kind":"legacy_record","basis":"Editorial assignment.","record_fields":["title","headline"],"source_refs":[]},"review_state":"record_mapped","coverage":"partial"},"version":{"state":"value_present","value":{"kind":"identifiers","identifiers":["57513ef5fd788712650f0a4cf20b82a26f73971b22ae25fd2064c01d96e433f5"],"role":"SHA-256 of the complete public record and its assessments"},"provenance":{"kind":"curatorial","basis":"SHA-256 of the public record, its assessments, and its displayed answers and notes, excluding its own identifier and the derived coverage summary.","record_fields":[],"source_refs":[]},"review_state":"record_mapped","coverage":"complete"},"workflow":{"state":"value_present","value":{"kind":"record_fields","fields":{"account":"Between onsite examinations, the Federal Deposit Insurance Corporation (FDIC) lists banks rated 1 or 2 that may be weakening on an Offsite Review List. Three models build the list each quarter from banks' financial reports, called Call Reports. SCOR and SCOR-Lag flag banks with a 50 percent or higher probability of a downgrade within a year. GMS flags banks in the 98th percentile or higher of downgrade risk over three years. In an evaluation dated 18 December 2019, the FDIC Office of Inspector General (OIG) examined downgrades from 31 December 2014 to 31 December 2017. In that period the models had flagged 67 of the 244 banks downgraded from a 1 or 2 rating to 3 or 4. With regional additions and a supplemental list, the program identified 94, or 39 percent. The OIG found that many missed downgrades stemmed from weak management or credit administration, which these reports do not capture. Only 47 of 1,665 reviews prompted by the list, or 3 percent, changed the supervisory strategy. The OIG did not compare supervision with and without the models.","replication":{"produced_by":["SCOR and SCOR-Lag scored quarterly Call Report data and flagged 1- and 2-rated banks with a 50 percent or higher probability of a downgrade within a year.","GMS flagged 1- and 2-rated banks in the 98th percentile or higher of downgrade risk over three years, based on rapid growth or noncore funding.","Case Managers reviewed each flagged bank within 3½ months after the Call Report date and could recommend a visitation or an earlier examination."],"must_hold":["The weakness must show in a bank's Call Report data, and the models missed downgrades driven by weak management, credit administration and board oversight.","Banks must file accurate Call Reports, and about 25 percent of the missed banks in the OIG's table filed amendments to correct errant data."],"echoes":[]}}},"provenance":{"kind":"legacy_record","basis":"Editorial assignment.","record_fields":["account","replication"],"source_refs":[]},"review_state":"record_mapped","coverage":"partial"}},"summary":{"total":91,"addressed":91,"known":28,"reviewed":2,"reviewed_complete":2,"reviewed_partial":0,"record_mapped":26,"review_not_assessed":63,"not_assessed":0,"complete":false,"by_state":{"value_present":28,"not_reported":0,"unresolved":63,"not_assessed":0,"not_applicable":0,"withheld":0,"source_unavailable":0}}},"presentation_version":"f409d8570b88ac9ec4416a4a4cc9bb177b140cc13974af367cc92b8711573f11"}