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Bank examination is an examination of the affairs and records of a bank by a state or federal bank examiner. In a bank examination, examination of the assets and liabilities is done to detect poor management, embezzlement, and fraud. The purpose of a bank examination is to ensure that the bank is solvent and is operating in conformity with banking laws and sound banking principles. The principal focus of a bank examination is an evaluation of the quality of the bank's loan portfolio with the hopes of averting a bank failure.