Recently the parent company of our Holding Company has told us to start using the new NAICS Codes that replaced the SIC Codes. What purpose do these codes serve? Could we possibly be in violation of a regulation if we do not use these?

Thank you very much

I have not seen a regulation that requires the use of these codes.

Does your bank use the RMA Statement Studies for industry comparisons for your small business and commercial loans? RMA is converting to the new NAICS codes. Banks also use those codes to easily group similar borrowers together for industry concentration analysis. Over time, the SIC codes will become less and less useful and the NAICS codes become the more common code.

While I don't know of a regulation that would be violated - regulators require that you have adequate management information systems to review your portfolio, and manage it according to it's makeup. That means that you have to know what kinds of industries and borrowers you lend to. The easiest way to do this, and to validate that your Call Report categorization, is to assign NAICS codes to your loans.

If the regulators don't like your system, or want you to implement the codes, they'll criticize your MIS in the safety and soundness exam.

I had thought that the NAICS replaced the SIC codes and that was that. NAICS Site Whether this is the cure for a common code, only time will tell

There is actually a phase in process underway, particularly in banking. For example, from the RMA site under Annual Statement Studies, which has always been SIC code driven:

NAICS Conversion Time Table

Currently, the Annual Statement Studies is published with the industries sorted by Standard Industrial Classification (SIC) codes, with a reference to the North American Industrial Classification System (NAICS) codes.

On October 1, 2000, the U.S. Small Business Administration (SBA) adopted the NAICS, believing it would more accurately reflect the composition of today's small business sector, especially the newer portions like the fast-growing technology area.

In talking with our members, we know that many of them this year have converted, or have plans to convert, to the NAICS codes. Fortunately for banks, there is no required conversion date set by the banking regulators, but RMA does still plan to convert.

Following is a time line, which RMA has outlined for the planned conversion to the NAICS codes:

Fall 2001: SIC w/NAICS
Fall 2002: SIC w/NAICS
Fall 2003: NAICS w/SIC
Fall 2004: NAICS w/SIC
Fall 2005: NAICS only


Therefore, if you need to compare your customers against other similar firms, you will need to convert by 2005 in order to continue to use the RMA data.